CFD Markets News and Forecasts — 17-04-2022

• GBP/USD is consolidating in a narrow range of 1.3040-1.074 on hiatus in worldwide indices.
• A higher UK inflation print has triggered the fourth rate hike expectations by the BOE.
• The speeches from the Fed’s Powell and BOE’s Bailey hold significant importance this week.

The GBP/USD pair is auctioning in a narrow range of 1.3040-1.3074 and is expected to remain lackluster amid Easter Monday. The cable will be addressed by thin volumes and narrow ticks amid a holiday-truncated week.

Earlier, the cable posted a firmer rebound after hitting a yearly low of 1.2972 on Wednesday. Bulls got underpinned after the UK’s Office for National Statistics reported the yearly Consumer Price Index (CPI) at 7%, significantly higher than the market consensus of 6.7% and the previous print of 6.2%. This raised the fourth rate hike expectations by the Bank of England (BOE). Apart from that, Core CPI also landed higher at 5.7%, which hinted that the UK households are facing the heat of higher energy bills and food prices.

Meanwhile, the US dollar index (DXY) is holding above the psychological support of 100.00 and is expected to elevate gains after overstepping Thursday’s high at 100.76. The DXY is climbing higher backed by sky-rocketing US inflation and a tight labor market. This has not only bolstered the rate hike expectations but hawkish guidance from the Federal Reserve (Fed) in its May monetary policy.

Going forward, investors will focus on speeches from Fed Chair Jerome Powell and BOE’s Governor Andrew Bailey, which are due on Thursday. A highly uncertain market environment is going to be featured and the market participants will witness wider ticks and above-average volumes on the counter.

• XAU/USD eyes an upside to $1,980.00 amid uncertainty over a long weekend in global markets.
• The multi-decade print of US CPI has bolstered the odds of a jumbo rate hike by the Fed.
• The speech from Fed Chair Jerome Powell will keep investors busy this week.

Gold (XAU/USD) is hoping for significant bids attraction after a hiatus on Monday that will drive the gold prices to a high of $1,980.00. A long weekend in the global markets generally creates uncertainty, which forces the market participants to bank upon liquidity at hold or channelization into the safe-haven assets.

As quickly as we are inching towards the announcement of the monetary policy by the Federal Reserve (Fed), which will happen on May 3-4, gold investors will react largely upon the guidance by Fed policymakers. Considering the recent dictations by the Federal Open Market Committee (FOMC) members, an interest rate decision of 50 basis points (bps) rate hike has received tremendous bets. To combat the soaring inflation, think tanks of the Fed believe that an aggressive interest rate hike by the Fed is highly required. Also, the guidance from the Fed should be hawkish considering the multi-decade high inflation figures and proactive requirement of reversion to neutral rates.

Last week’s higher US Consumer Price Index (CPI) at 8.5% has cleared that the Fed is left with no other option than to feature a jumbo rate hike. This will keep the gold prices on the edge. Also, the aggressive rate hikes by the Bank of Canada (BOC) and Reserve Bank of New Zealand (RBNZ) have bolstered the chances of a similar gesture from the Fed.

In the American session, investors will focus on the speech from the St. Louis Fed President and FOMC member James Bullard, which will provide insights into the likely monetary policy action by the Fed. However, the mega event will be the speech from Fed Chair Jerome Powell, which is due later this week.

Gold Technical Analysis

On a daily scale, XAU/USD has tested the breakout of its previous critical level at March 24 high $1,966.18 multiple times. The 20- and 50-Exponential Moving Averages (EMAs) at $1.946.35 and $1,922.26 respectively are scaling higher, adding to the upside filters. The momentum oscillator Relative Strength Index (RSI) (14) has overstepped 60.00, which indicates a firmer bullish momentum going forward.

Gold daily chart

• USD/CAD is flat in holidays for Easter Monday in Australia and New Zealand. 
• Traders will look ahead to Canadian CPI data. 

At 1.2609, the price is flat for the open during holiday thin trade and consolidation of CAD's strongest level in more than one week. The currency touched its strongest intraday level since April 6 at 1.2522 last week with the move coming after the Bank of Canada on Wednesday raised interest rates by half a percentage point. That was its biggest single move in more than two decades.

However, the US dollar rose at the end of the holiday-shortened week due to more hawkish comments from Federal Reserve officials that reinforced expectations for faster US policy tightening. Additionally, domestic data for February showed that wholesale trade decreased 0.4% from the previous month, missing analyst estimates of a 0.9% gain, and that factory sale grew by 4.2%. However, one of the nation's top exports, oil, was up 2.6% at $106.98bbl a barrel on news that the European Union might phase in a ban on Russian oil imports, helping to keep a lid on the upside in USD/CAD.

For the week ahead, inflation data will be key. ''We look for Consumer Price Index to firm to 6.1% YoY in March, with prices up 0.9% MoM,'' analysts at TD Securities said. ''Energy will provide the main driver, led by an 11% increase in gasoline, alongside another significant contribution from food. Motor vehicles, clothing, and shelter should help drive strength in the ex. food/energy aggregate, while the BoC's core inflation measures should firm to 3.6% YoY on average.''

• EUR/USD in an area of consolidation for the open. 
• A big in French politics and the Ukraine crisis is ongoing. 

The euro fell to the lowest levels since May 2020 after the European Central Bank kept its policy stance broadly unchanged, sticking to plans to slowly unwind stimulus. Interest rates will, however, only go up "some time" after the end of bond buys and they will be gradual, the ECB added and the divergence between the Fed, expected to hike by 50bps, and the ECB coupled with the contagion risks on the Ukraine crisis is falling into the hands of the US dollar bulls. 

The markets will be closed for Easter Monday in much of the major financial hubs of the world, so activity in the FX space would be expected to be subdued. However, it will be a crucial week in French politics s well as the city of Mariupol, Ukraine, which is under siege and a potential red-line with regards to high-level peace talks.

Firstly, the presidential hopefuls Macron and Le Pen face off in a televised debate ahead of Sunday's second-round vote. ''Both are desperate to attract left-wing voters and are likely to pivot sharply in that direction through the week. Macron will aim to convince centre-left voters to show up, Le Pen will target the populist left and those affected most by the cost-of-living crisis,'' analysts at TD Securities said. The euro tends to be firmer when Macron is in poll-position. 

As for the Ukraine crisis, the 50th day of the invasion was marked by an escalation of tensions in the warnings by Ukraine to Russia that the elimination of the last Ukrainian forces in Mariupol would end the talks with Russia. 

Ukraine’s Foreign Minister Dmytro Kuleba has explained that he expects the “intensification of heavy fighting in eastern Ukraine, in Donbas, large scale offensive of Russia in that part of Ukraine.''

''And also desperate attempts of the Russian forces, as I said, and to- to finish with Mariupol at any cost. These are my expectations. And, of course, missile attacks on Kyiv and other cities across Ukraine seem to continue.”

• AUD/USD bears are in control and eye a break 0.73 the figure. 
• The price would be expected to take on 0.7350s in the final period of consolidation. 

AUD/USD is is a significantly strong downtrend and there is likely more to come from the bears in due course. However, given it is Easter Monday, there perhaps will not be much in the way of price action in the absence of a catalyst. Nevertheless, after a period of consolidation, the path of the least resistance is on the way for a test 0.73 the figure and potentially even lower in order to mitigate an imbalance of price left behind following the mid-March rally. 

AUD/USD daily chart (i)

AUD/USD H1 chart

Bears will be looking for the price to sink into this area of support and slowly but surely burn its way through to 0.7350. 

AUD/USD daily chart (ii)

In doing so, it sill clear the way for a test of the dynamic support for a breakout to test 0.73 the figure and lower with the 0.7280s eyed. 

Reuters reported that the Ukrainian Foreign Minister Dmytro Kuleba said there had not been any recent diplomatic communications between Russia and Ukraine at the level of their foreign ministries and that the situation in the port of Mariupol, which he described as "dire", may be a "red line" in the path of negotiations.

Russia offered to spare the lives of Ukrainian soldiers fighting in Mariupol if they laid down their arms Sunday, however, Reuters reports that ''Ukrainian soldiers resisted a Russian ultimatum to lay down arms on Sunday in the pulverized port of Mariupol, which Moscow said its forces had almost completely seized in what would be its biggest prize of the nearly two-month war.''

The offer, made “out of purely humane principles,” gave Ukrainian forces still fighting in the city until 6 a.m. Moscow time (11 p.m. ET) to surrender, according to a statement from the Russian military, reported by the TASS news agency.

Market implications

Traders will be on the lookout for developments surrounding Mariupol which have risk-off implications given the elimination of Ukrainian forces there could be a “red line” that stops peace efforts.