CFD Markets News and Forecasts — 15-04-2022

• The GBP/USD is gaining up some 0.18% in the week amidst a thin liquidity trading session.
• A buoyant US dollar and risk-aversion weighed on the British pound in the week.
• GBP/USD Price Forecast: To remain downward biased but a double bottom looms.

The British pound remains defensive, trading below the 1.3100 mark, on the back of a buoyant US dollar amidst a dull trading session as financial markets are closed In the observance of Easter Friday. The GBP/USD is trading at 1.3061 at the time of writing.

The GBP/USD has remained under pressure in the week. A stronger US dollar and diminished risk appetite spooked GBP bulls, as the GBP/USD is about to end the week with modest gains of 0.18%. Contrarily, the US Dollar Index, a gauge of the greenback’s value against a basket of its rivals, edges up 0.68%, sitting at 100.519, underpinned by high US Treasury yields throughout the week.

During the week, the UK’s mixed economic data kept the GBP/USD trading around 1.3000-1.3160. UK inflation rose above the 7% threshold, higher than the 6.7% estimated, opening the door for a subsequent 25 bps rate hike by the Bank of England. Meanwhile, the Gross Domestic Product (GDP) for February disappointed, increased by 0.1% m/m, lower than the 0.3% estimations, giving a signal that the UK’s economy is slowing. Regarding labor figures, data came mixed, with Employment Change for January disappointing, with just 10K new jobs vs. 50K foreseen, while the Unemployment Rate for February came at 3.8%, aligned with estimations.

In the meantime, the US economic docket revealed that consumer inflation in March rose above the 8% threshold, at 8.5% y/y, the highest since 1981, while excluding volatile items, the so-called core, increased 6.5%, lower than the 6.7%, a signal that inflation was about to peak. Nonetheless, on Thursday, the Producer Price Index (PPI) sent the previous day’s expectations over the board, showing that prices paid by producers rose by 11.2% vs. 10.6% estimations. In comparison, core PPI increased by 9.2%, higher than 8.4%.

• Also read: GBP/USD Weekly Forecast: For how long can 1.3000 support hold?

In the week ahead, the economic calendar will feature tier 2 data. In the UK, March’s Retail Sales are expected to show a contraction of 0.3%. On the US front, the docket will unveil the Fed Beige Book and S&P Global Manufacturing and Services PMIs.

GBP/USD Price Forecast: Technical outlook

The GBP/USD depicts a double bottom formation around the 1.3000 area, but the daily moving averages (DMAs) located above the spot price suggest the pair is downward biased. In line with the aforementioned is the Relative Strength Index (RSI) at 42.60, though it is worth noting the horizontal slope of the oscillator, which means the pair might consolidate around the 1.3050s area before resuming downwards.

The GBP/USD first support would be 1.3000. Once cleared, the next support would be 1.2900, followed by November 2020 cycle low at 1.2853.

However, to confirm the double bottom scenario, the GBP/USD needs to lift towards March 23 swing high at 1.3299. Once accomplished, the GBP/USD first resistance would be the 100-day moving average (DMA) at 1.3358, followed by 1.3400, and then the 200-DMA at 1.3518.

• Risk-aversion keeps the Australian dollar under pressure, down in the week by 0.86%.
• Mixed Australian economic data, a headwind for the AUD/USD.
• Hot US inflation boosts the prospects of a higher US dollar as the Fed prepares for a 0.50 bps increase.
• AUD/USD Price Forecast: A weekly close below 0.7400 would open the door to 0.7165.

The Australian dollar slides below 0.7400 amidst a slow trading session as financial markets remain shut due to the observance of Easter Friday. At the time of writing, the AUD/USD is trading at 0.7392.

The AUD/USD extended its fall on mixed US economic data featured on Thursday. However, the dovish stance adopted by the Reserve Bank of Australia (RBA), pushing back hiking rates, favors the greenback. In the meantime, despite a dull session, the US Dollar Index, a measurement of the buck’s value against its peers, is up 0.69%, sitting at 100.525.

Data wise in the week, the Australian docket witnessed some mixed results, led by the disappointment in the Employment Change report. Even though it showed the creation of 17K new jobs in the economy, it was lower than the  40K estimated. At the same time, the Unemployment Rate uptick to 4%, though in line with RBA’s target. On the positive side, NAB Business Confidence March’s survey came at 16 higher than the previous month, while Consumer Confidence for April fell to 95.7 from 96.6 in March.

Meanwhile, the US economic docket revealed that consumer inflation in March rose above the 8% threshold, at 8.5% y/y, the highest since 1981, while excluding volatile items, the so-called core, increased 6.5%, lower than the 6.7%, a signal that inflation was about to peak. Nevertheless, on Thursday, the Producer Price Index (PPI) sent the “positive” expectations of consumer inflation over the board, showing that prices paid by producers rose by 11.2% vs. 10.6% estimations, while core PPI increased by 9.2%, higher than the 8.4%.

Now that data is in the rearview mirror, it’s worth noting what the next week would bring for AUD/USD traders. The Australian docket will feature RBA Minutes and the Consumer Price Index. Across the pond, the US docket will reveal US Building Permits, Housing Starts, Existing Home Sales, and Flash PMIs.

AUD/USD Price Forecast: Technical outlook

The AUD/USD remains upward biased, but a daily close below 0.7400 might exacerbate a fall towards March’s 15 cycle low around 0.7165. Nevertheless, as long as it remains above March 21 low at 0.7373, it would stay in the 0.7373-0.7500 range.

Upwards, the AUD/USD’s first resistance would be 0.7400. Once cleared, the next resistance would be the April 13 daily high at 0.7474, followed by 0.7500. A decisive break would send the AUD/USD towards the confluence of October 2021 and March 28 around the 0.7535-55 area.

On the flip side, the AUD/USD first support would be the April 13 cycle low at 0.7391, which, once broken, would expose the March 21 daily low at 0.7373, followed by an upslope trendline around the 0.7330-45 area.

• The euro is barely down in choppy trading as financial markets remain closed.
• A dovish European Central Bank plummets the EUR/USD towards new YTD lows at 1.0757.
• The US Dollar Index to finish the week with gains of 0.68%.
• EUR/USD Price Forecast: A weekly close below 1.0806 might open the door toward 1.0636.

On Friday, the EUR/USD slides amidst a dull trading session due to Easter Friday. The common currency is trading at 1.0808, down some 0.18%, at the time of writing.

The euro fall continues after the European Central Bank (ECB) failed to deliver a hawkish tilt on Thursday’s monetary policy decision, which could have lifted the shared currency against its counterparts. Meanwhile, the US Dollar Index, a gauge of the greenback’s value vs. a basket of six currencies, is almost flat, though up 0.03%, at 100.507.

ECB kept rates unchanged and eyes to finish APP by Q3

On Thursday, the ECB unveiled its monetary policy decision, keeping rates intact, and announced the last three bond purchases of the Asset Purchasing Program (APP). The ECB said that the monthly net purchases under the APP would amount to €40 billion in April, €30 billion in May, and €20 billion in June.

EUR/USD traders perceived the monetary policy statement as dovish amid the lack of commitment towards a future tightening. The pair dipped towards 1.0757, a new YTD low, last seen in April 2020.

Mrs. Lagarde’s press conference did not give any hints regarding raising rates, though she emphasized that finishing the bond-buying program is required before rate increases. Christine Lagarde stated that risks to the inflation outlook are tilted to the upside in the near term and added that the APP is very “likely” to end in Q3. The ECB’s President stated that inflation is being driven by energy prices and has intensified across many sectors. She foresees that growth would have remained weak in Q1 2022.

In the meantime, an ECB survey reported that the Harmonised Index of Consumer Prices (HICP), the index for measuring inflation in the EU, is seen at 6% in 2022 and 2.4% in 2023. The same poll also reported expectations of growth. People surveyed forecast the Gross Domestic Product (GDP) to end at 2.9% in 2022, 2.3% in 2023, and 1.8% by 2024.

Also read:

• EUR/USD Forecast: What’s next after testing 1.0760?
• Lagarde: Inflation Oui, rate hikes Non, growth N’est-ce Pas

The Eurozone economic docket featured France and Italy’s inflationary figures for March. French inflation was aligned with the consensus, while Italy’s one showed that prices increased less than expected. Across the pond, US Industrial Production for March rose by 0.9%, higher than the 0.4%, while the New York Empire State Manufacturing Index jumped sharply to 24.6, smashing the 0.5 estimations.

EUR/USD Price Forecast: Technical outlook

The EUR/USD weekly chart depicts that the downtrend might extend further,  though a close below 1.0806 might open the door towards March 2020 lows at 1.0636. That said, the EUR/USD first support would be 1.0757. A breach of the latter would expose April 2020 cycle low at 1.0727, followed by the 1.0636 aforementioned.

The People's Bank of China (PBOC) announced on Friday that it will cut the reserve requirement ratio (RRR) for all banks by 25 basis points (bps) effective from April 25.

The PBOC further noted that it will cut RRR by an additional 25 bps for some smaller banks and noted that it will release about 530 billion yuan in long-term liquidity with this decision.

Additional takeaways 

"Will keep prudent monetary policy."

"Will not resort to flood-like stimulus, will keep liquidity reasonably ample."

"Weighted average RRR for financial institutions at 8.1% after the new cut."

"Will guide financial institutions to use funds released to support industries and small firms affected by COVID."

"Will closely watch changes in inflation, keep prices stable."

"Will closely watch monetary policy adjustments by major economies."

According to a recently conducted European Central Bank (ECB) survey, the Harmonised Index of Consumer Prices (HICP) in the eurozone is seen at 6% in 2022 and 2.4% in 2023.

The HICP is expected to decline to 1.9% and average 2.1% in the "longer term."

According to the survey, the Gross Domestic Product in the eurozone is forecast to expand by 2.9% 2.3% and 1.8% in 2022, 2023 and 2024, respectively.

Market reaction

The EUR/USD pair continues to fluctuate in a tight range slightly above 1.0800 in the European session.

Russia's Ministry of Defence said on Friday that the number and scale of missile attacks on facilities in Kyiv will increase in response to Kyiv's forces committing sabotage on Russian territory, Reuters reported, citing Ifax news agency.

"Ilyich plant in Mariupol has been completely liberated from Ukraine's forces," the ministry added. "The detachment of up to 30 mercenaries from the Polish private military unit has been liquidated in the Kharkiv region."

Market reaction

Markets showed no reaction to this headline as trading conditions remain thin on Easter Friday.

The Bank of Japan (BOJ) is likely to stress its resolve to keep monetary policy ultra-loose despite expected upward revision to inflation forecasts, Reuters reported on Friday, citing three sources familiar with the matter.

Sources further noted that the BOJ is expected to raise its fiscal 2022 inflation forecast to above 1.5% from the current 1.1% at the April meeting while downgrading the fiscal-2022 growth forecast from the current 3.8% expansion.

Market reaction

The USD/JPY pair trades at its highest level in two decades above 126.50 following this headline.

Here is what you need to know on Friday, April 15:

Following Wednesday's retreat, the US Dollar Index (DXY) rose sharply on Thursday and touched its highest level since March 2020 at 100.76 boosted by rising US Treasury bond yields and safe-haven flows. With markets turning quiet on Easter Friday, the DXY consolidates its weekly gains. Ahead of the weekend, the US Federal Reserve will release the March Industrial Production data, which is unlikely to trigger a noteworthy market reaction.

The European Central Bank (ECB) announced on Thursday that it left its policy settings unchanged following the April meeting. In the press conference, ECB President Christine Lagarde reiterated that the QE will end in the third quarter and that the first rate hike would come sometime after asset purchases are concluded. Although Lagarde acknowledged that risks to the inflation outlook were tilted to the upside in the near term, her overall dovish tone triggered a heavy euro selloff.

Lagarde: Inflation Oui, rate hikes Non, growth N'est-ce Pas.

With the ECB's policy stance highlighting the widening policy divergence with the Fed, the benchmark 10-year US T-bond yield surged beyond 2.8% on Thursday. Moreover, the S&P 500 Index fell more than 1%, reflecting a negative shift in risk sentiment.

EUR/USD slumped to its weakest level since April 2020 at 1.0757 on Thursday before staging a rebound amid profit-taking in the late American session. The pair trades in a relatively tight range above 1.0800 early Friday.

GBP/USD seems to have gone into a consolidation phase above 1.3050 after having lost 50 pips on Thursday. The sharp decline witnessed in EUR/GBP suggests that the British pound has managed to capture some of the outflows from the shared currency.

Gold closed the sixth straight day in positive territory on Wednesday but rising US T-bond yields limited the yellow metal's upside. XAU/USD registered small losses on Thursday to end the week in the green above $1,970. 

USD/JPY touched its highest level in nearly 20 years above 126.50 early Friday. Japanese Prime Minister Fumio Kishida said on Friday that the Bank of Japan's monetary policy is aimed at achieving its 2% inflation target, not at manipulating currency rates.

Bitcoin fell nearly on Thursday amid risk-aversion but seems to have found support near $40,000. Ethereum fell sharply on Thursday and erased the gains it recorded on Tuesday and Wednesday. ETH/USD was last seen testing $3,000.

• A sheer upside after a double bottom formation has advocated a strong reversal.
• A loud move displayed by the RSI (14) is expressing a shift in the dominance.
• Pound bulls are offering a bargain buy to investors after a pullback at 20-EMA.

The GBP/USD pair is facing corrective action after a juggernaut rally from Wednesday’s low at 1.2973. The cable has been corrected to a near 20-period Exponential Moving Average (EMA) and is providing an optimal opportunity for the pound investors to enter a firmer reversal.

A double bottom formation on a four-hour scale seems lucrative for the cable bulls. The pair has displayed a sheer upside after retesting March’s lows at around the psychological support of 1.3000. The double bottom chart pattern signifies a bullish reversal amid the absence of high-volume sellers while r-testing the critical bottom. The trendline placed from March 3 high at 1.3418, adjoining the March 23 high at 1.3299 will continue to act as a major barricade.

A loud move in the momentum oscillator, Relative Strength Index (RSI) (14) is indicating a shift from the dominance of bears.

A corrective pullback towards the 20-EMA at 1.3068 looks like an optimal buy for investors. This will drive the asset towards the round level resistance at 1.3100, followed by the 200-EMA at 1.3165.

On the flip side, a drop below the April 8 low at 1.2982 will trigger the greenback bulls, which will send the asset towards the 2 November 2020 low and the round level support at 1.2854 and 1.2800 respectively.

GBP/USD four-hour chart

• AUD/JPY is oscillating in a tight range after an upside move in early Tokyo.
• Investors have shrugged off poor performance from the Aussie’s labor market.
• BOJ’s Kuroda is still inclined to further stimulus in Japan despite higher commodity prices.

The AUD/JPY pair is displaying back and forth moves in a narrow range of 93.50-93.60 in the Asian session amid lower volumes due to the holiday-truncated week. The cross is inching higher swiftly in the Asian session as the market participants shrugged off the poor Unemployment data reported by the Australian Bureau of Statistics on Thursday.

The Australian Unemployment Rate landed at 4%, higher than the market consensus of 3.9% but similar to the prior figure of 4%. This indicates that the Australian administration needs more time to push jobless rates below 4%. Unless a consistency in lower Unemployment Rate gets achieved, an interest rate hike will be less likely. Meanwhile, the Australian labor market added only 17.9k new jobs against the expectation of 40K. This indicates that a loose labor market is going to persist longer and the Aussie economy may need more stimulus in achieving full employment levels.

On the Tokyo front, Bank of Japan (BOJ)’s Governor Haruhiko Kuroda in his speech on Wednesday focused on rising inflation and declining households’ real income. Advancing energy bills and food item prices are impacting the household’s income. Also, the surging commodities prices are affecting the corporate margins. However, stimulus from the BOJ will continue to inject into the economy as Japan’s growth has yet not reached its pre-pandemic levels.

• NZD/USD eyes more weakness on rising odds of an interest rate hike by the Fed.
• The RBNZ has hiked its OCR by 50 bps to reduce the risks of inflation.
• FOMC member John Williams advocated a 50 bps interest rate elevation by the Fed.

The NZD/USD pair is hovering around Thursday’s low at 0.6767 and is likely to extend losses after tumbling below the previous trading session. The asset has remained vulnerable over the past few trading sessions after failing to sustain above the psychological resistance of 0.7000.

The pair have been dropping continuously since Wednesday after the announcement of the Official Cash Rate (OCR) decision by the Reserve bank of New Zealand (RBNZ). The RBNZ hiked its OCR by 50 basis points (bps) considering the risks of soaring inflation due to higher energy and food items bills. Formally, the OCR rate has been elevated to 1.5%.

Also, the modest performance from the Business NZ Purchase Managers Index (PMI) failed to underpin the kiwi against the greenback. Business NZ reported the PMI at 53.8, minutely higher than the market consensus of 53.7 and the previous print of 53.6.

Meanwhile, a solid rebound in the US dollar index (DXY) has pushed it above 100.00 on Thursday. Uncertainty amid the long weekend in the broader markets advocated liquidity channelization into the safe-haven assets. Also, the hawkish speech from the Fed President and Federal Open Market Committee (FOMC) member John Williams supported the sheer bounce in the DXY. Fed’s Williams stated that the Fed should consider a 50 bps interest rate hike. Also, containing higher inflation will be difficult in tight labor market conditions.

Reuters reported that China's central bank kept the interest rate unchanged on Friday as it rolled over maturing medium-term policy loans, matching market expectations, despite Beijing calling for more monetary stimulus to cushion an economic slowdown.

''The People's Bank of China (PBOC) said it was keeping the rate on 150 billion yuan ($23.52 billion) worth of one-year medium-term lending facility (MLF) loan of some financial institutions unchanged at 2.85% from the previous operation.''

''With 150 billion yuan worth of MLF loans maturing on Friday, the operation resulted in zero net cash injection into the banking system.''

''The central bank also injected 10 billion yuan through seven-day reverse repos while keeping the borrowing cost unchanged at 2.1%, according to an online statement.''

• EUR/JPY bounces from 136.20 but seeks a potential trigger for further direction.
• ECB policymakers voted in favor of an unchanged interest rate policy.
• An interest rate hike by the ECB will take place after concluding the APP.

The EUR/JPY pair has been bounced after a minor pullback towards 136.20 in early Tokyo. The asset has been oscillating in a range of 135.50-137.20 the whole week. The cross has failed to find any direction despite the monetary policy announcement by the European Central Bank (ECB) on Thursday.

ECB President Christine Lagarde has preferred to continue with a neutral stance for now. The majority of ECB policymakers voted in favor of maintaining the status-quo and left the interest rates unchanged. However, the dovish guidance by the ECB has dampened the broader demand for the shared currency. The postponement of interest rate elevation till the time ‘Asset Purchase Program’ (APP) gets concluded sounds like an interest rate hike may be in the last quarter of this year.  As per the comments from ECB’s Lagarde, APP will conclude in June.

It wouldn’t be wrong to say that the stagnant growth rate in the eurozone amid the Ukraine crisis has put the ECB in dilemma. The ECB seems in trouble between tackling the soaring inflation and supporting the overall growth.

Next week, investors will focus on Japan’s yearly National Consumer Price Index (CPI) numbers, which are likely to land at 1.3% against the previous figure of 0.9%. On the Euro front, Eurostat will report Core CPI, which is expected to print at 3%.

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.3896 vs. the last close of 6.3788. 

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day closing level and quotations taken from the inter-bank dealer.

• USD/CAD holds in the 1.26 area on a firm US dollar. 
• The dovish ECB has seen the divergence between the Fed and ECB send flows into the greenback. 

At 1.2606, USD/CAD is up 0.10% on the day, little changed although in recovery mode from its weakest level in nearly four weeks and the US dollar has printed another fresh cycle high in the DXY. The index rose to a fresh cycle high of 100.761 with the euro falling to a low of 1.0757 on the back of a dovish European Central Bank.

Also supportive of the US dollar, New York Fed President John Williams said on Thursday that the US Federal Reserve should reasonably consider raising interest rates by a half percentage point at its next meeting in May. 

Meanwhile, at Thursday's meeting, the ECB reconfirmed a decision taken five weeks ago, in a broadly unchanged decision statement. ''That means that APP purchases will be conducted at a pace of EUR40bn/EUR30bn/EUR20bn in April/May/June, respectively, and net purchases to end in Q3, without a pre-specified purchase level for Q3,'' analysts at Danske Bank said.

''Christine Lagarde conveyed a message of not being in a rush to tighten policies as the economic activity (which is set to become weaker amid high uncertainty) outweighs the concerns about the outlook for extended high inflation, even though Lagarde seemed concerned about medium-term inflation expectations in particular surveys,'' the analysts at Danske Bank went on to explain. ''Therefore, we are slightly surprised about the messages sent during the press conference in light of its primary mandate.''

As for the Bank of Canada, it accelerated its tightening cycle this week, building on March’s 25 bp rate hike with a larger, 50 bp move that lifts the overnight rate to 1%. The bank also said it will begin shrinking its balance sheet by ceasing reinvestment of maturing GoC holdings. 

Elsewhere, being one of Canada's major exports, the price of crude oil ended at around $104.15 spot a barrel as Russian oil production fell to 2020 lows. OPEC also warned the prior day that it would be impossible to replace potential supply losses from Russia. 

• USD/CHF is set to reclaim last month’s high at 0.9460 amid firmer DXY.
• Rising energy bills are hurting the households and henceforth supporting the bets of a 50 bps rate hike.
• Fed President John Williams sees postpone of balance sheet reduction later this year.

The USD/CHF pair is inching towards the March high at 0.9460 on an adrenaline rush in the US dollar index (DXY). The firmer rebound in the DXY and eventually in the US Treasury yields came after hawkish comments from the Federal Reserve (Fed) policymakers, which has directed the asset towards the north.

Fed President and Federal Open Market Committee (FOMC) member John Williams in his interview on Bloomberg TV cited that the Fed should approach a 50 basis point (bps) interest rate hike in May. Fed’s Williams dictated that bringing down the inflation in a tight labor market environment would be challenging for the Fed. Also, he stated that a balance sheet reduction may postpone from June if the Fed announces a jumbo interest rate hike in May.

The 10-year US Treasury yields have recovered the losses of the last two trading sessions and recaptured a three-year high at 2.83% backed by a continuous increase in inflation expectations. On the macro data front, the elaboration of monthly US Retail Sales has cleared that gas bills are impacting the households and inflation is not going anywhere soon. Gas stations recorded the largest percentage increase from February, posting an 8.9% increase while the E-Commerce posted a decline of 6.4% and auto dealers’ sales drop 1.9% amid supply chain disruptions.

Further guidance on the asset will be provided by the Swiss docket, which will report the yearly Real Retail Sales later this month. Earlier, the 12-month Swiss Real Retail Sales were recorded at 12.8%.