CFD Markets News and Forecasts — 18-03-2022

• The New Zealand dollar posted gains of 3% vs. the Japanese yen amid a risk-on market mood.
• The euro and the Japanese yen suffered losses against most G8 currencies.
• NZD/JPY Price Forecast: The bias is upward, but the steepness of the rally might spur a correction before resuming up.

The NZD/JPY extends its gains in the week, surging in tandem with global equities courtesy of a positive market mood, despite ongoing fighting between Russia – Ukraine. At the time of writing, the NZD/JPY is trading at 82.25

The market mood is positive, as Wall Street closed the trading session with gains. In the FX space, safe-haven peers, except for the Swiss franc, dropped whilst risk-sensitive currencies advanced.

Overnight, the NZD/JPY was subdued around the 81.64 area but jumped once European traders got to their desks, reaching 82.10, a daily high at the time. Late in the day, the market mood improved, lifting the NZD/JPY towards new YTD highs around 82.36.

 NZD/JPY Price Forecast: Technical outlook

NZD/JPY uptrend remains intact, despite that the 200-day moving average (DMA) is trapped between the 100 and the 50-DMAs. However, due to the steepness of the move, the cross-currency might aim for a correction before resuming upwards.

If the scenario plays out, the NZD/JPY first demand area would be 82.00. Once cleared, the next support would be 81.00, followed by March 14 daily high at 80.26. On the flip side, on the way north, the NZD/JPY’s first resistance would be September 2017, highs around 82.75, followed by the 83.00 mark, and the July 2017 high at 83.91.

• AUD/JPY’s stratospheric rise showed no sign of easing on Friday, with the pair surging to four-year highs above 88.00.
• That marks a fourth successive day of gains during which time AUD/JPY has rallied over 4.0%.
• The RSI suggests the pair has become overbought, so some consolidation or even technical pullback might be in order.

AUD/JPY’s stratospheric rise showed no sign of easing on the final trading of the week, with the pair surging a further near 1.0% to hit its highest level since the beginning of 2018 around 88.30. That marks a fourth successive day of gains during which time the pair has rallied more than 4.0% from underneath 85.00 and easily taken out 2021 highs in the low 86.00s.

Risk appetite was firmly on the front foot again on Friday, with global equities rallying, as has broadly been the case since Tuesday, lifting risk-sensitive yen crosses like AUD/JPY. But other important factors are also working in the AUD/JPY bull’s favour. Friday saw the BoJ release its latest monetary policy decision, with the bank sticking as expected to its ultra-dovish stance, thus maintaining its status as the most dovish G10 central bank alongside the SNB.

In a week where there was a lot of focus on central banks with the Fed and BoE also deciding on rates (and both lifting them 25bps), the BoJ’s dovish stance hurt the yen across the board. Separately, AUD continues to perform very well, as do other commodity-sensitive G10 currencies as traders and investors re-position themselves towards the currencies of nations that will benefit from recent geopolitics induced rallies in commodity prices.

Whilst most energy and other Russia-sensitive commodity prices continue to trade well above pro-Russia's invasion of Ukraine levels, many (like crude oil) have pulled back from last week’s highs and stabilised at slightly lower levels. AUD’s outperformance this week has confused some analysts, but others pointed out that Australia (and the likes of New Zealand and Canada) stand to benefit not just from higher general commodity prices, but also as major commodity buyers turn away from Russia and look to other major resource-producing economies for supply.

Looking ahead, some technicians might be getting concerned that the recent rally has become overstretched. Indeed, AUD/JPY’s 14-Day Relative Strength Index is blinking over-bought, having hit 78 on Friday, well above the 70 level most define as being in over-bought territory, and at its highest since October last year. If a pullback is in order, the bulls will be eyeing a retest of support in the 86.00 area to reload longs for a longer-lasting push higher.

• Silver prices sold off on Friday as risk appetite elsewhere continued to improve, with XAG/USD falling back under $25.00.
• But silver continues to trade well within recent ranges as traders monitor geopolitical developments.

A strong finish to a strong week for US (and global) equities has seen safe-haven silver come back under selling pressure on the final day of the week, despite the fact that long-term US yields are lower and the shape of the curve flashing recession warnings. Spot silver (XAG/USD) was last down nearly 2.0%, having dropped all the way back from the $25.40s to current levels around $24.90, meaning the precious metal is now back to the south of its 21-Day Moving Average.

Whilst geopolitics remains the major driving force in the market right now, as traders/market participants assess the prospect of a potential Russo-Ukraine peace deal, the Fed has also been a big talking point this week. Fed policymakers were out in force on Friday, with James Bullard and Christopher Waller throwing their support behind an aggressive hiking cycle that would see rates going well above so-called “neutral” by the end of the year, while other Fed speakers were a bit more measures.

The hawkish remarks from Bullard and Waller seemed to boost the market’s implied probability of a 50bps hike at the Fed’s next meeting, which might arguably have weighed on interest rate-sensitive precious metals like silver. It certainly did seem to push up short-end US yields, with the 2-year rallying 4bps to back above 1.95% and eyeing a test of earlier weekly multi-year highs at 2.0%. Higher yields can hurt demand for non-yielding precious metals by lifting the perceived opportunity cost of holding them.

But, as noted, the US curve is now flashing recession warning signals. 10-year yields fell 5bps no Friday taking the 2s10s spread to under 20bps. When the 2s10s spread turns negative, this has historically been a reliable indicator of an incoming recession with the next year or two, and fears about this might encourage some safe-haven demand, which could ultimately benefit silver.

Ultimately, from a technical perspective, the price action in spot silver on Friday hasn’t been very consequential. At current levels near $24.90, XAG/USD sits near the midpoint of the range $24.50-$25.50ish range that has prevailed over the past few days. A bearish break next week, perhaps if broad risk appetite continues to improve, would open the door to a run towards the 50 and 200DMAs, both of which reside close to $24.00.

According to a US administration official, talks between Chinese President Xi Jinping and US President Joe Biden on Friday, which lasted for nearly two hours, were direct, substantive and detailed, reported Reuters. Biden reportedly stressed to Xi that China providing material support to Russia would have consequences not just from the US but also from the wider world. Xi raised the issue of Taiwan and Biden reiterated the US position. 

Biden reportedly laid out in detail to Xi the unified response from governments and the private sector around the world being taken against Russia for its invasion. Biden did not make any specific requests of China, but laid out his view of the situation. Biden was candid and direct with Xi in discussing his assessment of the situation in Ukraine, the US official said, and expressed rock-solid support for Taiwan and the intention to continue providing this rock-solid support. 

• Pound's rebound from 1.6540 is capped at 1.6650.
• The sterling remains weak against the commodity-linked CAD.
• GBP/CAD seen appreciating towards 1.6950 – Scotiabank.

Sterling’s recovery attempt from multi-year lows at 1.6540 seen earlier today has been capped about 110 pips higher, at 1.6650, before pulling back to the 1.6620 area.

Higher oil prices are supporting the CAD

The pound has been unable to post a significant recovery as the Canadian dollar remains fairly strong with oil prices picking up from weekly lows.

The lack of progress in the talks between Russia and Ukraine and the warning from the International Energy Agency (IEA) that the decline in global demand caused by higher prices will not offset the shut-in of Russian supplies have renewed concerns about a crude shortage, which has boosted the commodity-linked CAD against its most majors.

Earlier today, the pound has been showing weakness, weighed by Thursday’s dovish statement by the Bank of England. The bank hiked interest rates as widely expected, although the tone of its monetary policy statement was considered tilted to the dovish side, which triggered a broad-based GBP weakness.

GBP/CAD expected to appreciate towards 1.6950 – Scotiabank

From a technical perspective, FX analysts at Scotiabank see the pair rallying towards 1.6950 over the coming months: “We remain of the view that GBP/CAD looks relatively ‘cheap’ here, near the base of the sideways range that has persisted since 2020, and we look for GBP gains through 1.6950 to trigger additional strength back to the low 1.70s.”

Technical levels to watch

• The British pound is climbing 0.75% as the New York session progresses on Friday.
• Investors’ market sentiment is upbeat, as reflected by Wall Street, trading with gains.
• GBP/JPY Price Forecast: Upwards but begins to face solid resistance around the 157.00-158.00 area.

During the New York session, the British pound is recording an outstanding rally in the week, so far up almost 3%. At the time of writing, the GBP/JPY is trading at 157.07.

Risk sentiment is positive in the markets. European equities recorded gains, while US stocks are set to finish the week in the green. In the FX space, risk-sensitive currencies are up, while the laggards are the EUR and the JPY, down 0.40% and 0.50%, respectively.

Factors causing sentiment shifts are the Russia – Ukraine conflict, alongside developments surrounding the conflict, meaning Russia requested China for military and financial aid, while the US is threatening to impose sanctions on the Asian dragon.

On Friday, US President Joe Biden and Chinese leader Xi Jinping held a videoconference in which Chinese President Xi assured that China did not want a war in Ukraine. Despite that, Xi criticized the sanctions imposed on Russia, saying that “the ordinary people are the ones who suffer.”

Overnight, the GBP/JPY opened around the 156.00 mark, though pushed through the Asian session highs, stalling later around the 156.50 area. Nevertheless, once the North American session began, the cross-currency pair extended its rally towards 157.00.

GBP/JPY Price Forecast: Technical outlook

The GBP/JPY is upward biased and reached a daily high near 157.22. Of late, it retreated under the 157.00 mark, but the presence of the daily moving averages (DMAs) in a bullish orderly way, well below the spot price, confirms the direction of the trend, which is upwards.

That said, the GBP/JPY first resistance would be 157.00. Breach of the latter would expose the confluence of a six-month-old downslope trendline and February 18 daily high at 157.29, followed by 158.00-06 area, which confluences with the YTD high.

• The euro appreciates for the sixth consecutive day to rest 131.90.
• The dovish BoJ is sending the yen lower across the board.
• EUR/JPY approaching year-to-date high at 133.15. 

The euro has gone through a sharp rally against the Japanese yen this week. The pair extended its recovery from early March lows at 124.40 to test 131.90 resistance level, with the year-to-date high, at 133.15, on sight.

A dovish BoJ sends the yen plummeting

The common currency is on track to a nearly 3% weekly rally, favored by broad-based yen weakness as the Bank of Japan’s dovish policy stance has helped the euro to retrace most of the ground lost in February.

The Bank of Japan has confirmed its ultra-expansive monetary policy at its latest monetary policy meeting on Friday. The bank pledged to maintain its huge stimulus program in spite of the increasing inflation trends. With most of the world’s major central banks shifting towards monetary tightening, the BoJ's stance is crushing yen demand.

Yen's weakness has been boosting the EUR/JPY to extend its rally for the sixth consecutive day, despite the sourer market mood on the back of the lack of progress on the Russia – Ukraine peace talks, which has increased negative pressure on the euro.

EUR/JPY: Above 131.90, next significant target is YTD high is 133.15

The pair seems to have found some resistance at 131.90 (February 16 high). If that level gives way, the next potential target would be 132.60 (February 11 high) ahead of a retest to the year-to-date high at 133.15.

On the contrary, a bearish reversal below the intra-day low at 131.15 and March 17 low at 130.70 might seek support at the 200=day SMA, at the 130.00 area.

Technical levels to watch

• US equities are higher for a fourth session, with the S&P 500 breaking to its highest levels since Russia invaded Ukraine.
• The index is trading in the 4430s, up 0.6% on the day and over 5.5% on the week.
• That would mark the best week of gains since November 2020.

US equities are on the front foot for a fourth successive session, with the S&P 500 breaking out to its highest levels since the day Russia initiated its invasion of Ukraine (on February 24) in the 4430s. The main US index is higher by about 0.6% on the day taking its weekly gain to more than 5.5% after a brief dip below 4200 was viewed as a buying opportunity for a second week running. That means the index is on course for its best weekly gains since November 2020. Crucially, the S&P 500 is no longer trading in “correction” territory as it was at the start of the week and is now only about 7.5% lower versus record highs printed at the start of the year.

The Nasdaq 100 index is up about 1.4% and on course to post weekly gains of about 7.5%, though remains about 15% below November’s record levels. The Dow was last up 0.25% and on course for weekly gains of just shy of 5.0%, taking it to within 6.5% of record levels printed at the start of the year. Strength in the equity space this week seemed initially to have been driven by optimism about alleged progress towards a Russo-Ukraine peace deal. Though the reporting in recent days on this has been much more mixed and conflicting, hope for a ceasefire remains and seems to be driving some optimism in the market.

Meanwhile, some traders might have been surprised by the way equities rallied in wake of a much more hawkish than expected Fed policy announcement on Wednesday, but, on reflection, investors seemed to take the view that a more aggressive stance regarding lifting rates is appropriate against the backdrop of high inflation and a tight labour market. So long as future hawkish Fed policy shifts are deemed as the appropriate policy to maximise long-term US growth prospects by investors, equities may continue to greet such announcements positively.

Moving on to Friday’s gains; traders attributed the strength to news that Russia had averted a historic default on a foreign bond payment. Other traders said the call between US President Joe Biden and Chinese President Xi Jinping was a positive for sentiment given both sides framed the discussion as constructive. The US is trying to persuade China not to provide military aid to the Russians, who have requested it.

• The yellow metal is set to finish the week with losses is down almost 3%.
• Russia-Ukraine talks stuck as postures of both sides stand unchanged.
• Fed’s Bullard and Waller favor 50-basis points increases at the bank’s benchmark rate.
• Fed’s Kashkari expects neutral rates at 2%, while the balance-sheet reduction would have to be at double of previously QT.

Gold (XAU/USD) drops for the third time in the week amid a mixed market mood courtesy of continuing talks between Russia-Ukraine, inflation woes, and central bank tightening, keeping investors leaning towards safety assets. At the time of writing, XAU/USD is trading at $1929 a troy ounce.

Market mood is fluctuating, though of late improved. European equities closed the session in the green, while its North American counterparts are recording gains. The greenback holds its reins, with the US Dollar Index above 98.19 up in the day 0.22%, a headwind for the non-yielding metal, despite that US Treasury yields are falling.

Russia-Ukraine peace talks continue, though hostilities remain. Given mixed signals from both sides, discussions appear to be stuck on a mid-point with no advancement. Although reports from Russia said that Russia – Ukraine’s posture regarding neutrality and not joining NATO are closely aligned, reports from Ukraine said that are intended to provoke tension in media, as Ukraine’s stance of a ceasefire, withdrawal of troops, and strong security guarantees are not negotiable.

Elsewhere,  in the middle of the week, the Federal Reserve hiked rates 25 basis points with an 8-1 vote, with St. Louis Fed President Bullard being the dissenter. On Friday, Bullard  said that he wanted the US central bank to implement a balance-sheet reduction plan while recommending the FOMC to “try to achieve a level of policy rate above 3% this year.” Later, Fed Governor Chris Waller said he favors 50 bps increases in the “near future” while emphasizing that current data “is screaming” for 50 basis points hikes.

Continuing the Fed speaking parade, Minnesota Fed’s Kashkari commented that he sees a neutral rate at 2%. If inflation persists, the US central bank would have to raise rates above neutral. Regarding the Quantitative Tightening (QT) he expected the Fed to tighten at double of the pace of previously reduction.

Meanwhile, the US economic docket featured Existing Home Sales for February came at 6.02M lower than the 6.1M foreseen, while the Consumer Board (CB) Leading Index rose by 0.3%, higher than the 0.2% estimated.

Technical levels to watch

• US dollar's recovery attempt fails at 1.2645. 
• The Canadian dollar appreciates amid higher oil prices and retreating US yields.
• USD/CAD expected to move lower in the coming weeks – Rabobank.

US dollar’s recovery from two-week lows at 1.2595 has been short-lived on Friday, as the pair was capped at 1.2645, before pulling back to the 1.2615 area.

Four-day sell-off for the US dollar

The USD is trading lower for the fourth day in a row against its Canadian counterpart, on track to its weakest weekly performance so far this year.

The lack of progress in the peace talks between Russia and Ukraine has triggered a pick-up on crude oil prices. Beyond that, the International Energy Agency (IEA) has warned earlier this week that the decline in global demand caused by higher prices will not offset the shut-in of Russian supplies, which has increased support to the commodity-linked CAD.

Beyond that, the lower US Treasury bonds yields, which have been retreating from multi-year highs after Wednesday’s Fed rate hike, have increased bearish pressure on the USD, which has lost ground against its main rivals this week.

USD/CAD to move lower for the coming weeks–  Scotiabank

FX analysts at Scotia Bank see the pair retreating below 1.2600 and point out to a key support area at 1.2575: “Seasonal trends reflect a typically soft Q1 performance for the CAD which turns more positive as we move into Q2/Q3. We expect limited scope for USD gains in the short run and look for more CAD improvement in the coming weeks (…) “We spot resistance at 1.2650 intraday and look for firm resistance to cap USD gains today. Key USD support remains 1.2575/85.”

Technical levels to watch

Richmond Fed President and FOMC member Thomas Barkin said on Friday that the interest rate path laid out by the Fed this week is a balancing act between fighting inflation and managing uncertainty around the post-pandemic economic recovery, reported Reuters. The Fed could move faster with half-point rate hikes if inflation expectations become unanchored, Barkin continued, though he noted that, so far, that does not seem to be the case. Barkin said that the rate path laid out this week should not lead to "economic decline", but instead represents a return to more normal conditions. US inflation and employment are still both being "heavily influenced" by pandemic effects, Barkin said, and it will take time to understand the new post-pandemic economy. 

• The pound bounces up to 1.3185, erases previous losses.
• Cable rushes higher ahead of the London closing time.
• GBP/USD, unlikely to rally significantly above 1.32/33 – ING.

The pound has erased previous losses during Friday’s American session. The pair has bounced up strongly from 1.3110 to reach intra-day highs at 1.3185 so far.

Cable turns positive on daily charts

The GBP/USD has rallied more than 0.5% in the last few hours, to erase the European trading session’s decline. In absence of significant macroeconomic releases, positions squaring moves ahead of the London closing bell might be behind the pound’s recovery.

The pound had been hitherto trading lower, weighed by the Bank of England’s dovish statement, after releasing its monetary policy decision on Thursday, while the sourer market mood, as hopes of progress in the Russia – Ukraine peace talks start to fade have favored the safe-haven USD, thus increasing negative pressure on the GBP.

Beyond that, investors have remained remain cautious, reluctant to take excessive risks ahead of the conference between Biden and Chinese President Xi Jinping, after the US warned China about important consequences if they decide to send military aid to Russia.

GBP/USD: levels near 1.32/33, the best case for some time – ING

From a longer-term perspective, currency analysts at ING are skeptical about a significant GBP rally over the coming months: “Unlike the Fed, the BoE delivered a cautious 25bp rate hike, with one dissenter voting for unchanged rates. The market removed roughly one 25bp hike from its expectations this year (Bank Rate now priced at 1.90% in December) (…) Given we strongly favor the dollar this summer, levels near 1.32/33 in the cable may be the best for some time.”

Technical levels to watch

• After a strong week, the euro is suffering from some profit-taking and EUR/USD has fallen back to the mid-1.10s.
• EUR/USD’s failure to press higher beyond the 1.1100 level was likely also due to hawkish Fed commentary.

Though not the worst-performing currency in the G10 on the day, the euro currently sits near the bottom of the relative performance table having dropped about 0.3% versus the US dollar amid profit-taking at the end of what has otherwise been a good week for the single currency. Indeed, while it was unable to hold above its 21-Day Moving Average (currently at 1.1093) for a second successive day, EUR/USD looks to end the week about 1.4% higher just to the north of 1.1050, having rallied from the low 1.0900s. That marks a first weekly gain for the pair in seven.

EUR/USD’s failure to press higher beyond the 1.1100 level likely has something to do with very hawkish commentary from the likes of Fed’s Christopher Waller and James Bullard, who both threw their support behind a faster pace of interest rate hikes (i.e. in 50bps intervals) this year. Both want to see rates moving above so-called “neutral” by the end of the year given high inflation and the tight labour market. Their commentary saw traders upping bets on a 50bps rate hike at the Fed’s next meeting and comes after the Fed announced earlier in the week that it is likely to lift interest rates at every remaining policy decision this year (in 25bps intervals), followed by a further four hikes in 2023.

Of course, the ECB has also been tilting in a more hawkish direction in recent weeks, as emphasised in last week’s policy meeting where the bank laid out plans to completely end its QE programme by the end of Summer to pave the way for a rate hike in Q4. This, alongside optimism/speculation about progress towards a Russo-Ukrainian peace deal, has likely been supporting the euro this week. Whether this can continue next week is the big question – if there were to be more positive news flow on Russo-Ukraine talks, a continued push higher would seem likely.

From a technical perspective, EUR/USD continues to find support at an uptrend from the earlier monthly lows and if the pair can push above resistance in the 1.1100-1.1130 zone, that could open the door to a run back towards pre-Russia invasion levels at 1.1300. But that’s a big if and markets are very likely to remain highly choppy/headline-driven for the foreseeable future.

Federal Reserve Bank of Minneapolis President Neel Kashkari said on Friday that inflation is way higher than any of us want it to be and, as a result, we have to normalise monetary policy to bring supply and demand back into balance, reported Reuters. Kashkari said that he is in favour of beginning to shrink the Fed's balance sheet as soon as the next meeting and that we should shrink the balance sheet at a much faster pace this time versus last. I would shrink the balance sheet at double the pace versus last time, he said. Every one of us is committed to the Fed's inflation goal, Kashkari noted, saying that we will keep inflation expectations anchored. 

• The Mexican peso posts its biggest weekly gain, 2.39%.
• Market sentiment is mixed; the greenback rallies but falls vs. risk-sensitive currencies.
• USD/MXN Price Forecast: Neutral, but a daily close under the 200-DMA would expose the pair under downward pressure.

The Mexican peso extends its weekly rally gains 2.39% vs. the US Dollar, despite a mixed market mood, on Friday’s New York session. At the time of writing, the USD/MXN is trading at 20.4218.

European and US equity markets fluctuate between gainers and losers. At the same time, the greenback remains bid, with the US Dollar Index, a gauge of the greenback’s value against a basket of peers, is up 0.34%, sitting at 98.31, faltering of weighing on the USD/MXN pair.

Overnight, the USD/MXN pair was subdued in the 20.50 area, without much movement, though as the North American session began, the pair drooped through European session lows around 20.4646, towards lows 20.40s area.

USD/MXN Price Forecast: Technical outlook

The USD/MXN is neutral biased and is probing the 200-day moving average (DMA), sitting at 20.4125. The Relative Strength Index (RSI) is at 41.50, beneath the 50-midline, aiming lower, suggesting the USD/MXN might be moving towards the February 23 YTD low at 20.1558, but it would find some hurdles on the way south.

If that scenario plays out, the USD/MXN’s first support would be the 200-DMA. Breach of the latter would expose 20.3117, which once cleared would pave the way towards February 23 daily low at 20.1558.

Upwards, the USD/MXX first resistance would be the 20.50 mark. A decisive break would expose the 50-DMA at 20.5667, followed by January 28 daily high at 20.9130 and then 21.00.

• The euro drops below 0.8400 after another rejection from 0.8455.
• The regains lost ground following the Post-BoE reversal.
• EUR/GBP seen at 0.8100 by year-end – Nordea.

The strong euro rally witnessed on Thursday, following BoE’s dovish hike, has been rejected at 0.8455 for the second time this week. The euro is losing ground on Friday returning to levels below 0.8400.

Euro bulls fade on renewed concerns about Ukraine

The common currency is trading lower across the board on Friday, with risk sentiment waning as hopes of a peace agreement between Russia and Ukraine start to whither in absence of any substantial progress.

The pair however is clinging to weekly gains and remains on track for the second positive week in a row, after bouncing from six-year lows at 0.8200 in early March.

The euro appreciated sharply on Thursday, with the GBP depreciating across the board following the Bank of England's monetary policy decision. The BoE met expectations with a 25 basis points hike although the dovish tone of the banks’ statement hammered demand for the cable.

EUR/GBP to plummet to 0.81 by year-end – Nordea

In the mid-term, FX analysts at Nordea Bank see the euro retreating further over the next months, to reach 0.81 by year-end: “The BoE did hike for a third meeting in a row and more hikes will come later this year. Hence, we favor sterling to restrengthen versus the euro and probably already during Q2 if or when we get a pause or a lasting solution between Ukraine and Russia (…) “We expect EUR/GBP to move towards 0.81 by the end of the year.”

Technical levels to watch

Gold is set to register its largest one-week loss since November. As FXStreet’s Eren Sengezer notes, technicals turn bearish after the weekly decline.

Bearish shift in the technical outlook

“In case next week’s developments point to a further escalation of the conflict, gold should gather strength and start erasing this week’s losses. On the other hand, the precious metal could come under renewed selling pressure if markets remain hopeful of a ceasefire.”

“$1,920 (Fibonacci 50% retracement of the latest uptrend) aligns as the first support. With a daily close below that level, gold is likely to test the $1,890/$1,900 area (Fibonacci 61.8% retracement, psychological level) before extending the decline to $1,880 (50-day SMA).”

“In case buyers manage to lift gold back above $1,950 (Fibonacci 38.2% retracement), next resistances could be seen at $1,975 (February 24 high) and $1,990 (Fibonacci 23.6% retracement).”

According to Russia's Chief Negotiator Vladimir Medinsky, Russia and Ukraine's views are most aligned on the latter's status as a "neutral" country and offer not to join NATO, reported Russia's state-run Interfax news outlet. Russia and Ukraine are currently discussing nuances linked to security guarantees for Ukraine should it refuse to joining NATO, Interfax reported. Moscow and Kyiv are "halfway there" on the issue of Ukraine's demilitarisation, the report added. 

Market Reaction

Reporting on the state of peace negotiations and alleged progress this week has thus far been mixed and conflicting, so traders are likely taking the latest commentary from Medinsky with a grain of salt. Markets have not reacted to the latest reports. 

• The dollar is attempting to set a bottom at 0.9330 on retreat from 0.9460.
• The sourer market sentiment is offering some support to the USD.
• USD/CHF is testing an important support level at 0.9330.

The US dollar is heading lower against the Swiss Franc for the third consecutive day, after peaking at 0.9460 earlier this week, although the pair seems to have found some support at 0.9330/45 area.

The USD attempts to bounce up as market sentiment deteriorates

The sourer market mood on Friday, as the peace talks between Russia and Ukraine fail to deliver any substantial progress, has undermined the market optimism observed in previous days which had weighed significantly on US dollar bets.

Beyond that, investors are adopting a cautious approach to risk, wary of the outcome of the US-China conference over Russia, after President Joe Biden warned Xi Jinping of serious consequences if China decides to offer military aid to Russia.

USD/CHF testing an important support at 0.9330

From a technical perspective, after breaking below the last two week’s upside trendline support, the pair is now testing support at 0.9330/40, where the 38.2% support of the March 4 – 16 rally meets the 200-hour SMA.

Below here, the next potential targets are likely to be the 50% Fibonacci retracement, at 0.9310, and March 11  low at 0.9290.

On the upside, immediate resistance lies at 0.9380/90 (intra-day high and the 100-hour SMA. Once above here, the pair might find resistance at the previous trendline support, now at 0.9430 before attempting another test to March highs at 0.9460.

USD/CHF hourly chart 

Technical levels to watch

Federal Reserve Bank of Minneapolis President Neel Kashkari said on Friday that he sees the Federal Funds target range rising to 1.75-2.0% by the year's end and that he sees the neutral rate of interest at 2.0%, reported Reuters. If inflation is enduring, the Fed will need to get modestly above neutral while inflationary dynamics unwind, he continued, adding that the Fed will need to act more aggressively if the economy turns out to be in a high-pressure, high inflation equilibrium. Kashkari said that over the course of the year as the Fed moves rates to neutral, we will get more information to determine how much further rates need to rise. 

• NZD/USD looks set to end the week firmly on the front foot and on course for a fourth successive session of gains.
• The pair is currently flirting with the 0.6900 level but remains capped by solid resistance (200DMA, annual high).
• A bullish breakout could open the door to a push towards 0.7000.

NZD/USD looks set to end the week firmly on the front foot and on course for a fourth successive session of gains. The pair has spent Friday’s session flirting with the 0.6900 level, but is for now being prevented from breaking higher by formidable resistance in the form of earlier monthly/annual highs in the 0.6925 area and the 200DMA at 0.6912. But NZD/USD still trades about 0.25% higher on the day and is up more than 2.5% versus earlier weekly lows in the 0.6730 area.

Earlier in the week, fears about lockdowns in China as the Omicron Covid-19 variant began spreading in various cities, challenging the country’s zero Covid policy, weighed on the NZD/USD and these fears appear to have ebbed somewhat, facilitating the rebound. Adding to that, the ongoing Russo-Ukraine war and subsequent harsh Western sanctions on Russian exports mean that other commodity-linked currencies like the kiwi remain in high demand. Meanwhile, the Fed’s hawkish policy announcement and subsequent hawkish commentary from two of the bank’s policymakers has failed to translate into US dollar upside, thus failing to prevent the recover over the last four session.

The kiwi also has the backing of a very hawkish central bank, with the RBNZ arguably the most hawkish G10 central bank right now (though the Fed is catching up). The suggestion is that NZD/USD can most certainly continue its recent rally. If it can muster a clean break above 0.6900 and above its 200DMA and earlier monthly highs, a rally back to 0.7000 is very much on the cards.

• Silver is set to finish the week with losses of almost 3%.
• The market sentiment dampened as peace talks between Russia and Ukraine remained stuck.
• Fed’s Bullard: Wants to implement a balance-sheet reduction and would like rates above 3% in 2022.
• Fed’s Waller: Current data “is basically screaming at us to go for 50 basis points.”

Silver (XAG/USD) slides as the weekend looms in the New York session, down 1.19% amid a risk-off mood that strikes the market, with European and US equities trading with losses, courtesy of mixed signals from peace talks between Russia and Ukraine. At $25.11, XAG/USD does not reflect the safe-haven status of the white metal.

The greenback is advancing in the day, as the US Dollar Index reflects it, sitting at 98.45, up 0.46%, a headwind for silver prices. Contrarily, US Treasury yields are falling, leading by the curve’s long-end, while 2s are rising, sitting at 1.950%.

Discussions in Eastern Europe stuck, Fed speaking grabs market attention

The Russia – Ukraine conflict extends for the third consecutive week as hostilities continue. Peace talks between both sides have reached a point of advance, though not at the speed hoped by market participants, meaning that going towards the weekend, a flight to safe-haven assets might be on the cards.

In the US, the Fed hiked rates on Wednesday 25 basis points. Now that the blackout period ended, the only dissenter which pushed for a 50 bps hike, St. Louis President Bullard, said that he wanted the Fed to implement a balance-sheet reduction and recommended the committee to achieve a level of rates above 3% in this year.

Late in the same tone, Fed Governor Christopher Waller said that he prefers greater rate hikes and would favor “50 basis points at one or multiple meetings in the near future.” Furthermore, he noted that current data “is basically screaming at us to go for 50 basis points,” though the Russia-Ukraine conflict calls for caution.

Meanwhile, the US economic docket featured Existing Home Sales for February came at 6.02M lower than the 6.1M foreseen, while the Consumer Board (CB) Leading Index rose by 0.3%, higher than the 0.2% estimated.

XAG/USD Price Forecast: Technical outlook

Silver is still upward biased as shown by the daily chart and the moving averages, with the 50-DMA about to cross over the 200-DMA, forming a golden cross with bullish implications. However, the RSI at 54.08, aiming low, suggests that XAG/USD might print another leg down before resuming the uptrend.

XAG/USD’s first resistance is the 50% Fibonacci level at $25.39. Breach of the latter would expose the 38.2% Fibonacci at $25.76, followed by the August 4, 2021 high at $26.00 and the YTD high at $26.94.

China has plans to invade Taiwan as soon as next fall, reported Al Jazeera in a tweet citing Newsweek on a Russian intelligence document. Traders are treating the report with skepticism. Many geopolitical analysts had viewed recent geopolitical events regarding Russia's invasion of Ukraine as likely to dissuade China from mounting an assault on Taiwan in the near term (i.e. the strong Western response, Russia's difficulties in achieving its military goals amid unexpectedly spirited resistance).  

• USD/TRY keeps the bid bias and adds to Thursday’s gains.
• The stronger note in the greenback lifts the pair to the 14.80 area.
• Renewed geopolitical concerns favour the demand for safer assets.

The Turkish lira loses ground vs. the greenback for the second session in a row and lifts USD/TRY to fresh peaks near 14.80 on Friday.

USD/TRY up on geopolitics, USD demand

USD/TRY adds to Thursday’s gains in response to the strong rebound in the US dollar, mainly following the deterioration of the Russia-Ukraine scenario after peace talks failed to yield some serious progress on Thursday.

In addition, the recent inaction by the Turkish central bank (CBRT) seems to be hurting the lira after it left the policy rate unchanged and announced no measures to tackle the current elevated inflation on Thursday’s event.

Against the ongoing backdrop of soaring energy prices and being Turkey a major energy-importer country, this could only exacerbate the upside pressure in consumer prices going forward, which can also be a prelude to a currency crisis.

What to look for around TRY

The lira eases some ground and trades closer to the area of YTD lows vs. the US dollar. In the very near term, price action in the Turkish currency is expected to gyrate around the performance of energy prices, the broad risk appetite trends, the Fed’s rate path and the developments from the Russia-Ukraine peace talks. Extra risks facing TRY also come from the domestic backyard, as inflation gives no signs of easing, real interest rates remain negative and the political pressure to keep the CBRT biased towards low interest rates remain omnipresent.

Eminent issues on the back boiler: Progress (or lack of it) of the government’s new scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Structural reforms. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is gaining 0.77% at 14.7886 and a drop below 14.5217 (weekly low Mar.15) would expose 13.7063 (low Feb.28) and finally 13.5091 (low Feb.18). On the other hand, the next up barrier lines up at 14.9889 (2022 high Mar.11) seconded by 18.2582 (all-time high Dec.20) and then 19.00 (round level).

• Australian dollar's recovery from 0.7160 lows loses steam at 0.7400.
• The Aussie remains moderately positive in a mixed market mood. 
• AUD/USD above 0.7400, year-to-date highs lie at 0.7440.

The Australian dollar seems unable to confirm above 0.7400 on Friday, although it remains moderately positive on the day, with downside attempts supported above  0.7380.

Aussie’s recovery losses steam as risk appetite falters

The pair remains 1.5% up on weekly charts after having retraced the previous week’s decline, yet the bullish momentum observed in the previous two days seems to have faded.

Market sentiment has deteriorated somewhat. The lack of substantial progress on the peace talks between Moscow and Kyiv while Russian artillery continues shelling Ukrainian cities is starting to weigh on market sentiment. Beyond that, investors seem to have taken a cautious stance awaiting the outcome of the US-China conference over Russia.

European stock markets are trading right below opening levels, with the German DAX Index and the French CAC both about 0.4% down. The US. Markets are mixed, with the S&P 500 and the Nasdaq Tech Index about 0.7% up and the Dow Jones down by 0.2% minutes after the opening bell.

The Aussie appreciated sharply earlier this week, buoyed by strong employment data in Australia, which boosted market hopes that the RBA might consider accelerating its monetary normalization plans and was supported further by the Chinese Government's pledge to roll out a new economic stimulus. 

AUD/USD consolidating right below 0.7400

The pair is now consolidating gains above 0.7380 following a 3% rally over the last three days. On the upside, immediate resistance lies at 0.7400 area (Intraday highs) which is defending 0.7440 (March 7 high). A successful break of that level would clear the path towards October 2021 highs at 0.7555.

On the downside, now 0.7380 previous resistance (March 10, 11 highs) is working as immediate support. The next bearish targets below here would be the 200-day SMA, now around 0.7300, and 0.7240 (March 8 low).

Technical levels to watch

• WTI has stabilised in a thin $102-$106ish range and at current levels in the $103.00s trades broadly flat.
• WTI has found a decent floor above $100 again after a rollercoaster week as traders mull Russia supply risk.
• More evidence of OPEC+ undershooting its output quotas (in February) are contributing to fears of a near-term shortage.

Front-month WTI futures have stabilised in a $102-$106ish per barrel range on Friday amid a comparatively quiet end to what has been a rollercoaster week. Prices were sent crashing as low as the $93.00s from near $110 amid China lockdown fears as the country’s zero-Covid approach struggles to contain Omicron, but has since regained a solid footing back above $100 amid continued worries about crude oil shortages as a result of Western sanctions on the Russian economy. Momentum towards a new nuclear deal between major Western powers and Iran also seems to have waned somewhat.

At current levels in the $103.00s, WTI is trading flat on the day but remains on course to post an on-the-week drop of more than $5.0, which would mark a second successive weekly loss. While prices do remain substantially lower versus last week’s highs in the $130 area, WTI currently still trades with a gain of more than $11.00 since Russia’s invasion of Ukraine. In the absence of an announcement of a Russo-Ukrainian peace deal, which still appears to be some way off, analysts suspect risks remain tilted to the upside for oil.

According to a Reuters report on Friday, OPEC+ continued to undershoot its output quota in February and by an even larger margin than in January. Meanwhile, the major OPEC nations with space capacity (Saudi Arabia and the UAE) haven’t shown signs this week of caving to pressure from major oil importers (like the US) to increase output at a faster rate, despite the fact that, according to the International Energy Agency, oil markets could lose as much as 3M barrels per day in supply from Russia from April. All signs point to WTI continuing to trade at elevated levels for the foreseeable future as supply adjusts higher from non-Russian sources, which will take time.

USD/CAD has tested the 1.26 area. Fundamental case for CAD strength is clear, therefore, economists at Scotiabank expect the USD/CAD to edge lower in the coming weeks.

Seasonals on the cusp of improvement

“Seasonal trends reflect a typically soft Q1 performance for the CAD which turns more positive as we move into Q2/Q3. We expect limited scope for USD gains in the short run and look for more CAD improvement in the coming weeks.”

“The economy has started the year with a bang; our Scotia Economics colleagues’ GDPNowcast is tracking growth well above 5% for Q1 so far.”

“We spot resistance at 1.2650 intraday and look for firm resistance to cap USD gains today.”

“Key USD support remains 1.2575/85.” 

After failing to close above 1.11 on Thursday, EUR/USD has broken a four-day positive streak with losses breaching the 1.1050 support zone. Next bearish target aligns at the 1.10 level, economists at Scotiabank report.

Failure to close the week above 1.11 to signal loss of momentum 

“The currency maintains a broad upward trend from last week’s lows near 1.08 but a failure to close the week above 1.11 may signal a clearer loss of momentum.” 

“Intraday price action has been clearly bearish for the EUR and a break under 1.1050 leaves the 1.10 mark as the next support marker.”

“Resistance after the figure is ~1.1120 and ~1.1135.”

US Existing Home Sales fell to 6.02M in February from 6.49M in January, larger than the expected drop to 6.10M, according to data released by the National Association of Realtors. That marked a 7.2% MoM drop versus January. The total inventory of homes for sale was 870K, which equates to roughly 1.7 months worth of homes, the data showed. The median price of homes sold was $357,300, 15% higher versus February 2021. 

As economists at Commerzbank note, USD/RUB and EUR/RUB exchange rates do not exist in the normal sense when the Russian Central bank itself cannot transact in USD or EUR. Their forecasts are ‘symbolic’ to reflect that the effect of sanctions will unfold over multiple years and is unlikely to be adequately priced-in already.

RUB is no longer a freely convertible currency

“USD/RUB and EUR/RUB exchange rates no longer exist in the normal sense, when Russia's central bank, itself, cannot transact in USD or EUR.” 

“The ruble is no longer a freely convertible currency, hence exchange rate numbers which we observe on our screens are a moot point. Granted, CBR still tries to produce a fix which attempts to better guide towards a balance between demand and supply of FX, but this is not really a market-driven exchange rate.”

“Our symbolic forecasts for the ruble are significantly weaker than today’s levels in order to portray that we see the impact of sanctions playing out over a much longer period of time, which is unlikely to be adequately priced in today (we do not think it will resemble a one-off shock pattern, where the maximum impact occurs immediately, followed by recovery over the medium-term).”

Chinese President Xi Jinping on Friday said US President Joe Biden that state-to-state relations cannot advance to the stage of confrontation, reported Chinese state media. Xi told Biden that conflicts and confrontations are not in the interests of anyone and that peace and security are the most cherished treasures of the international community. 

China's Xi said that the Ukraine crisis is not something that China wanted to see and said that China and the US should guide bilateral relations along the right track. China and the US must shoulder due international responsibilities and make efforts for world peace, Xi told Biden. 

• USD/CAD reversed an intraday dip to sub-1.2600 levels, or over a two-week low.
• Resurgent USD demand turned out to be a key factor that extended some support.
• Steady oil prices, upbeat Canadian data underpinned the loonie and capped gains.

The USD/CAD pair built on its steady intraday recovery move from over a two-week low and climbed to a fresh daily top, around the 1.2635-1.2640 region during the early North American session.

A combination of factors assisted the USD/CAD pair to attract some buying on the last day of the week and reverse the early dip to sub-1.2600 levels. A goodish pickup in demand for the US dollar acted as a tailwind for spot prices. Apart from this, an intraday pullback in crude oil prices undermined the commodity-linked loonie and provided modest lift to the major.

Investors turned caution amid the lack of progress in the Russia-Ukraine peace negotiations. In fact, Ukrainian Presidential aide Ihor Zhovkva said that talks with Russia are progressing very slowly. Russia accused Ukraine of slowing down peace talks and said that it wants to go at a faster pace, though the Ukraine delegation has not shown readiness to speed talks.

This, in turn, tempered investors' appetite for perceived riskier assets ahead of a meeting between US President Joe Biden and his Chinese counterpart Xi Jinping. The market nervousness was evident from a softer tone around the equity markets, which drove some haven flows towards the greenback. Apart from this, the Fed's hawkish outlook further underpinned the buck.

Apart from the anti-risk flow, concerns about reduced fuel demand - amid the resurgent of COVID-19 cases in China, Europe and New Zealand - weighed on crude oil prices. That said, the intraday downtick in the black liquid remained limited. This, along with better-than-expected Canadian macro data, benefitted the domestic currency and capped the USD/CAD pair.

According to the data released by Statistics Canada, the headline Retail Sales rose at a pace of 3.2% MoM in January as against the consensus estimate for a growth of 2.4%. This comes on the back of hotter-than-expected Canadian consumer inflation figures, which should further add pressure on the Bank of Canada to accelerate rate hikes.

The fundamental backdrop warrants some caution before confirming that the USD/CAD pair has bottomed out or positioning for any meaningful appreciating move. That said, bearish traders are likely to wait for sustained break below the 200-day SMA. Some follow-through selling below the monthly low, around the 1.2585 region, will set the stage for additional losses.

Technical levels to watch

• Gold prices remain capped under $1950 despite weaker equities as traders mull Russo-Ukraine peace talks, recent Fed developments.
• Some think the bank’s hawkish shift this week may be weighing on gold’s appeal and preventing a rebound.
• Gold is currently on course for its worst one-week performance in nearly four months.

Despite a modest end-of-week pullback in the global equity space as investors mull the Russo-Ukraine war, inflation and central bank tightening risks, spot gold (XAU/USD) prices are struggling to build on Thursday’s gains. Indeed, the $1950 mark continues to act as a ceiling for XAU/USD which, at current levels near $1940, trades with modest on the day losses of around 0.1%. As traders continue to assess the state of Russia/Ukraine peace negotiations (no signs of any breakthrough just yet), attention now turns to a call between the US and Chinese Presidents. US President Joe Biden will reportedly use as an opportunity to urge China President Xi Jinping not to offer military aid to Russia.

Though gold prices did find solid support in the $1900 around the middle of the week, prices remain on course for their worst week in nearly four months. At current levels, spot prices are down just under 2.5% on the week, with traders citing this week’s surprisingly hawkish Fed policy announcement as adding to reluctance on Friday to add to longs at or above $1950. To recap, the central bank hiked interest rates by 25bps for the first time in three years and signalled intentions to lift interest rates a further six times this year, followed by a further four in 2023, with Fed Chair Jerome Powell flagging rising inflation risks and the need to act.

Higher interest rates increase the opportunity cost of holding non-yielding precious metals and can therefore weigh on demand for gold. Meanwhile, though the current inflationary environment, which has been exacerbated in recent weeks by geopolitical developments between Ukraine and Russia, is keeping gold underpinned amid demand for inflation protection, it may continue to push the Fed in a more hawkish direction. Two of the Fed’s most hawkish policymakers James Bullard and Christopher Waller were both on the wires on Friday calling for an accelerated pace of tightening this year.

They have been ahead of the curve regarding Fed policy over the last year and there is a risk that if they can persuade the rest of the central bank’s policymakers to turn even more hawkish, rates could be moving up by more than the 150bps currently expected this year. That could be a headwind for gold. In the more immediate future, geopolitics remains the key factor to monitor amid hopes for Russo-Ukraine peace. More Fed speakers will be on the wires later with Michelle Bowman, Charles Evans and Thomas Barkin all slated to speak.

• GBP/USD witnessed some intraday selling on Friday amid strong pickup in the USD demand.
• A softer risk tone, hawkish Fed outlook turned out to be key factors underpinning the buck.
• The lack of follow-through selling warrants caution before placing aggressive bearish bets.

The GBP/USD pair remained on the defensive heading into the North American session and was last seen trading near the daily low, around the 1.3120 region.

The pair struggled to capitalize on its early modest uptick on Friday, instead met with a fresh supply near the 1.3180-1.3185 region and was pressured by a combination of factors. A dovish assessment of the Bank of England monetary policy decision on Thursday was seen as a key factor that acted as a headwind for the British pound. Apart from this, a goodish pickup in the US dollar demand prompted some intraday selling around the GBP/USD pair.

The lack of progress in the Russia-Ukraine peace negotiations kept a lid on the recent optimism and tempered investors' appetite for perceived riskier assets. Traders also seemed nervous ahead of a meeting between US President Joe Biden and his Chinese counterpart Xi Jinping. This was evident from a generally weaker tone around the equity markets, which, in turn, extended some support to traditional safe-haven assets, including the greenback.

Apart from this, the Fed's hawkish outlook, indicating that it could raise interest rates at all the six remaining meetings in 2022, further underpinned the buck. The combination of supporting factors, to a larger extent, helped offset a softer tone around the equity markets and did little to dent the intraday bullish sentiment surrounding the USD. That said, the lack of follow-through selling around the GBP/USD pair warrants caution for bearish traders.

This, along with the overnight bounce, makes it prudent to wait for a convincing break through the 1.3100 mark before positioning for any further depreciating move. Sustained weakness below will suggest that the recent strong recovery move from the lowest level since November 2020, has run its course. The GBP/USD pair might then turn vulnerable to accelerate the fall to challenge the 1.3000 psychological mark, or the YTD low touched earlier this week.

Market participants now look forward to the US economic docket, featuring the release of Existing Home Sales. The data might do little to influence the USD price dynamics as the focus remains on fresh developments surrounding the Russia-Ukraine saga. Apart from this, the headlines coming out of the Biden-Xi meeting might influence the broader market risk sentiment and produce some short-term trading opportunities around the GBP/USD pair.

Technical levels to watch

Fed Board of Governors member Christopher Waller said on Friday in an interview on CNBC that while the data is calling out for the Fed to move in 50bps increments, geopolitical events call for caution. The data is suggesting that we move in the direction of a 50bps hike at the coming meetings, Waller continued, adding that Europe will feel the impact of higher oil prices more than the US, but it will knock off half a point from US growth this year. 

I really want to front-load our hikes, Waller said, saying that would imply 50bps or more at coming meetings. I think we need to get rates up and any policy rule would tell you we need to be higher than we are right now, he said. If we need to continue, we'll keep going, Waller added, noting that we can remove liquidity from the system without doing much damage. 

We have the room to go sooner and to go faster the last time with the balance sheet, Waller noted, saying that as long as the Fed is clear in its communications and the market adjusts, there has't been much market turmoil. Getting to neutral or slightly above by the year's end should not be a concern for causing a recession, Waller said, though he did note that getting above neutral by the year's end would put pressure on demand. 

• Headline Retail Sales rose 3.2% MoM in January, above the expected 2.4%. 
• The loonie didn't react to the backward-looking data, with focus now much more on how the Russo-Ukraine war will impact things going forward. 

Headline Canadian Retail Sales rose at a pace of 3.2% MoM in January, much stronger than the expected 2.4% gain, marking a strong rebound from December's Omicron Covid-19 variant induced drop of 1.8% MoM, data released by Statistics Canada showed on Friday. Retail Sales excluding autos also saw stronger than expected growth of 2.5% MoM versus expectations for 2.4% growth. That came after a 2.5% decline in December. 

Market Reaction

The loonie has not reacted to the latest data release at all. It's not a surprise that Retail Sales rebounded strongly as Covid-19 infection rates/fears eased in Canada in January and focus is now much more on how the Russo-Ukraine war, which began in late February, will impact the global (and Canadian) economy going forward.   

• EUR/USD comes under pressure and retests the low-1.1000s.
• There is an initial support at the 10-day SMA at 1.0975.

EUR/USD faces some selling pressure and retreats from recent peaks past 1.1100 the figure on Friday.

In case sellers push harder, a breakdown of the 1.1000 mark carries the potential to spark a deeper pullback to, initially, the 10-day SMA at 1.0975 prior to the weekly low at 1.0900 (March 14).

The medium-term negative outlook for EUR/USD is expected to remain unchanged while below the key 200-day SMA, today at 1.1530.

EUR/USD daily chart

• USD/JPY caught fresh bids on Friday after the BoJ stuck to its accommodative policy stance.
• A goodish pickup in the USD demand provided an additional boost and remained supportive.
• A softer risk tone could benefit the safe-haven JPY and cap gains amid overbought conditions.

The USD/JPY pair extended its steady intraday ascent through the mid-European session and climbed to a fresh multi-year peak, around the 119.10-119.15 region in the last hour.

A combination of supporting factors assisted the USD/JPY pair to regain positive traction on the last day of the week and prolong its recent bullish trajectory witnessed over the past two weeks or so. The Bank of Japan stuck to its dovish stance and left its ultra-easy policy setting unchanged at the end of the March meeting. This, in turn, weighed on the Japanese yen and pushed the pair higher amid a goodish pickup in the US dollar demand.

The greenback made a solid comeback on Friday and reversed the previous day's slide to the one-week low, bolstered by the start of the policy tightening cycle by the Fed. It is worth recalling that the US central bank hike its target fund rate by 25 bps on Wednesday and indicated that it could raise interest rates at all the six remaining meetings in 2022. This, along with elevated US Treasury bond yields, underpinned the greenback.

The latest leg up now seems to have confirmed a near-term bullish breakout and might have already set the stage for a further near-term appreciating move for the USD/JPY pair. The divergence in the BoJ-Fed monetary policy outlook adds credence to the constructive outlook. That said, extremely overbought conditions on the daily chart could hold back traders from placing aggressive bullish bets, at least for the time being.

Moreover, a weaker risk tone, which tends to benefit the safe-haven Japanese yen, might further contribute to capping the USD/JPY pair. The lack of progress in the Russia-Ukraine peace negotiations tempered investors' appetite for riskier assets and led to a fresh leg down in the equity markets. Traders might also prefer to wait on the sidelines ahead of a meeting between US President Joe Biden and his Chinese counterpart Xi Jinping.

Nevertheless, the bias seems tilted firmly in favour of bullish traders, though the technical set-up makes it prudent to wait for some near-term consolidation or a modest pullback before the next leg up. Nevertheless, the USD/JPY pair seems all set to settle near the highest level since February 2016 and record strong gains for the second successive week.

Technical outlook

US President Joe Biden will urge Chinese President Xi Jinping in a call scheduled to begin at 1300GMT on Friday to use his influence over Russian President Vladimir Putin to end the war in Ukraine, reported Bloomberg. Separately, US Deputy Secretary of State Wendy Sherman reiterated that the US is collecting evidence of Russian war crimes in Ukraine. 

• DXY finally sees some light at the end of the tunnel.
• Next on the upside comes the 99.00 yardstick.

DXY regains the 98.00 mark and above following the earlier drop to the 97.80 region at the end of the week.

The continuation of the bid tone in the index carries the potential to extend to the next target of note at the 99.00 neighbourhood ahead of the weekly high at 99.29 (March 14) and the 2022 peak at 99.41 (March 7).

The current bullish stance in the index remains supported by the 6-month line, today near 95.90, while the longer-term outlook for the dollar is seen constructive while above the 200-day SMA at 94.51.

DXY daily chart

• EUR/JPY faces some selling pressure around 131.90.
• Extra gains look on the cards with the target at the YTD peak.

EUR/JPY looks offered after hitting fresh monthly highs in the 131.90 region on Friday.

The cross gathered extra upside traction following the recent breakout of the 200-day SMA (129.98). The surpass of the 131.90 area could likely allow EUR/JPY to attempt an assault of the 2022 top at 133.15  (February 10).

In the meantime, while above the 200-day SMA, the outlook for the cross is expected to remain constructive.

EUR/JPY daily chart

The Bank of Russia announced on Friday that it left the policy rate unchanged at 20% as expected.

Key takeaways from policy statement

"Proinflationary risks have considerably increased and are now prevailing over the entire forecast horizon."

"Over a longer horizon, the Russian economy faces considerable uncertainty."

"Annual inflation will return to 4% in 2024."

"Flash indicators, including the Bank of Russia’s business survey, suggest a deterioration of the situation in the Russian economy."

"GDP will reduce over the coming quarters."

"Monetary policy is set to enable a gradual adaptation of the economy to new conditions and a return of annual inflation to 4% in 2024."

"Will take into account actual and expected inflation movements relative to the target and economic developments over the forecast horizon."

"Will take into account risks posed by domestic and external conditions and the reaction of financial markets."

"Drastic change in external conditions for the Russian economy that occurred at the end of February has created threats to financial stability."

"Capital controls helped support the stable functioning of the Russian financial system."

"Weekly estimates show that inflation has significantly accelerated since early March."

"Economy is entering the phase of a large-scale structural transformation, which will be accompanied by a temporary but inevitable period of increased inflation."

Market reaction

The USD/RUB  pair edged higher with the initial reaction and was last seen rising 0.65% on a  daily basis at 103.80.

Economist at UOB Group Enrico Tanuwidjaja and Yari Mayaseti assess the latest interest rate decision by the BI.

Key Takeaways

“Bank Indonesia (BI) kept its benchmark rate (7-Day Reverse Repo) unchanged at 3.50% at its March MPC meeting. Consequently, BI maintained the Deposit Facility rate at 2.75% as well as the Lending Facility rate at 4.25%.”

“We keep our view for BI to start hiking in mid-2022 to reach 4.5% by the end of this year.”

• EUR/USD corrects lower from peaks above 1.1100.
• The dollar gathers some renewed traction on geopolitics.
• EMU trade deficit widened to €27.2B in January.

The single currency gives away some gains and forces EUR/USD to abandon the area of recent tops past 1.1100 and revisits the 1.1030 region on Friday.

EUR/USD weaker on risk aversion

EUR/USD trades on the defensive for the first time this week and comes under some pressure after hitting new 2-week peaks around 1.1140 on Thursday.

The knee-jerk in the pair comes in response to renewed concerns in the geopolitical landscape and after Russia-Ukraine peace talks appear to have stalled in past hours.

The resumption of the risk aversion among traders is also seen in the demand for bonds in money markets on both sides of the Atlantic, with the German 10y bund extending the decline to the 0.35% area and its US peer flirting with the 2.15% region.

In the docket, trade balance figures in the broader Euroland showed the trade deficit clinched a new record at €27.2B during January.

Data across the pond includes the CB Leading Index, Existing Home Sales and speeches by FOMC’s T.Barkin, C.Evans and M.Bowman.

What to look for around EUR

The European currency meets some fresh selling bias at the end of the week and fades the recent uptick to the 1.1140 region, all amidst the fresh bout of risk aversion stemming from the deterioration of the geopolitical arena. Pockets of strength in the euro, in the meantime, should appear reinforced by the speculation of the start of the hiking cycle by the ECB at some point by year end, while higher German yields, elevated inflation, the decent pace of the economic recovery and auspicious results from key fundamentals in the region are also supportive of a firmer currency for the time being.

Key events in the euro area this week: EMU Balance of Trade (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. Speculation of ECB tightening/tapering later in the year. Presidential elections in France in April. Impact of the geopolitical conflict in Ukraine.

EUR/USD levels to watch

So far, spot is retreating 0.48% at 1.1036 and faces the next up barrier at 1.1137 (weekly high Mar.17) followed by 1.1245 (55-day SMA) and finally 1.1294 (100-day SMA). On the other hand, a drop below 1.0977 (10-day SMA) would target 1.0900 (weekly low Mar.14) en route to 1.0805 (2022 low Mar.7).

• Silver witnessed some selling on Friday and snapped two successive days of the winning streak.
• Bulls struggled to capitalize on this week’s rebound and faced rejection near the 200-hour SMA.
• Sustained weakness below the $24.85 area is needed to support prospects for additional losses.

Silver edged lower on Friday and snapped two days of the winning streak, through the intraday downtick lacked follow-through selling. The XAU/USD remained on the defensive through the first half of the European session and was last seen trading around the $25.25-$25.30 region, down 0.40% for the day.

From a technical perspective, this week's goodish rebound from the $24.45 area faltered near the 200-hour SMA. The mentioned barrier, currently around mid-$25.00s, should act as a pivotal point, which if cleared decisively should set the stage for a further near-term appreciating move for the XAG/USD.

The momentum could then push spot prices beyond the $25.75-$25.80 intermediate hurdle and allow bulls to aim back to reclaim the $26.00 mark. The next relevant resistance is pegged near the $26.40 region, above which the XAG/USD could climb further towards the $27.00 round figure en-route mid-$27.00s.

On the flip side, the key $25.00 psychological mark, closely followed by the $24.85 region now seems to protect the immediate downside ahead of the $24.45 area amid slightly bullish oscillators. Some follow-through selling would make the XAG/USD vulnerable to accelerate the slide to test sub-$24.00 levels.

Silver 1-hour chart

Key levels to watch

• GBP/JPY regained positive traction on Friday after the BoJ announced its policy decision.
• A hawkish assessment of the BoE decision undermined sterling and capped the upside.
• Sustained move beyond the 156.70 area is needed to support prospects for further gains.

The GBP/JPY cross retreated a few pips from the daily peak and was last seen trading with modest intraday gains, around the 156.25-156.30 region.

Following the previous day's post-BoE turnaround from a near four-week peak, the GBP/JPY cross caught fresh bids on Friday amid the emergence of fresh selling around the Japanese yen. The Bank of Japan stuck to its accommodative policy stance and downgraded the overall assessment of the economy. In the post-meeting press conference, Governor Haruhiko Kuroda reiterated that the BoJ will ease further without hesitation as needed, which, in turn, undermined the JPY.

That said, the lack of progress in the Russia-Ukraine ceasefire negotiations tempered investors' appetite for perceived riskier assets and acted as a tailwind for the safe-haven JPY. In the latest development, Ukrainian Presidential aide Ihor Zhovkva said that talks with Russia are progressing only slowly. Separately, Russia accused Ukraine of slowing down peace talks and said that it wants to go at a faster pace, though the Ukraine delegation has not shown readiness to speed talks.

Apart from this, a dovish assessment of the Bank of England's decision on Thursday held back bulls from placing aggressive bullish bets around the British pound and capped gains for the GBP/JPY cross. In fact, the BoE raised its key rate for the third successive meeting, though the 25 bps rate hike disappointed some investors anticipated a more aggressive increase. Moreover, the UK central bank also softened its language around the need for future rate hikes.

Nevertheless, the GBP/JPY cross, so far, has managed to hold its neck above the 156.00 round figure and remains on track to post strong weekly gains. Bulls, however, are likely to wait for some follow-through buying beyond the overnight swing high, around the 156.70 region, before placing fresh bets. This will set the stage for an extension of the recent strong appreciating move from sub-151.00 levels, or the YTD low touched earlier this month.

Technical levels to watch

Various Russian media outlets are reporting headlines on a likely call between Russian President Vladimir Putin and Germany’s Chancellor Olaf Scholz.

TASS states that Putin told Scholz that Kyiv was trying to slow down Ukraine peace talks.

Meanwhile, RIA reports that Putin told Scholz Kyiv is making unrealistic proposals.

Related reads

• Kremlin: Russia has expressed readiness to work much faster but Ukraine not showing similar response

• Zelenskyy Aide Zhovkva: Ukraine-Russia talks are progressing only slowly

USD/CNH remains side-lined within the 6.3300-6.3900 range for the time being, commented FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our expectations for USD to ‘test 6.3450’ did not materialize as it traded sideways between 6.3555 and 6.3660. Momentum indicators are mostly neutral and further sideway trading seems likely. Expected range for today, 6.3530/6.3730.”

Next 1-3 weeks: “We continue to hold the same view as yesterday (17 Mar, spot at 6.3600). As highlighted, the recent upward pressure has eased and USD is likely to consolidate and trade within a broad range of 6.3300/6.3900 for now.”

• DXY picks up traction and bounces off lows near 97.70.
• US yields extend the corrective downside on Friday.
• Fedspeak, housing data next of note in the docket.

The greenback, in terms of the US Dollar Index (DXY), manages to regain some buying interest and moves beyond the 98.00 hurdle at the end of the week.

US Dollar Index looks to geopolitics, data

The index attempts a mild recovery after four consecutive daily retracements on Friday, as the risk complex gives away part of the recent strong advance and geopolitical concerns appear to have returned to the markets.

The perceived pick up in the risk aversion lends legs to the greenback and favours the demand for bonds, which in turn morph into another negative performance of US yields along the curve.

Later in the session, market participants are expected to closely follow the call between President Biden and China’s Xi Jinping regarding the war in Ukraine.

In the US data space, the CB Leading Index is due seconded by Existing Home Sales and speeches by Richmond Fed T.Barkin (2024 voter, centrist), Chicago Fed C.Evans (2023 voter, centrist) and FOMC Governor M.Bowman (permanent voter, centrist),

What to look for around USD

The index manages to bounce off recent sub-98.00 levels and trims part of the decline following the start of the tightening cycle by the Federal Reserve at its meeting on Wednesday. Concerns surrounding the geopolitical landscape seem to be propping up the demand for the buck along with the offered stance in the risk-associated complex. Looking at the broader picture, bouts of risk aversion – exclusively emanating from Ukraine - should prop up inflows into the safe havens and lent legs to the dollar at a time when its constructive outlook remains propped up by the current elevated inflation narrative, the Fed’s lift-off and the solid performance of the US economy.

Key events in the US this week: CB Leading Index, Existing Home Sales (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Futures of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is up 0.20% at 98.21 and a break above 99.29 (high Mar.14) would open the door to 99.41 (2022 high Mar.7) and finally 99.97 (high May 25 2020). On the flip side, the next down barrier emerges at 97.72 (weekly low Mar.17) followed by 97.71 (weekly low Mar.10) and then 97.44 (monthly high Jan.28).

“Russian delegation to Ukraine peace talks has expressed readiness to work much faster than now,” the Kremlin said in a statement on Friday.

The Kremlin added: “Ukraine delegation has not shown similar readiness to speed talks up but those negotiations continue.”

Read: Zelenskyy Aide Zhovkva: Ukraine-Russia talks are progressing only slowly

Market reaction

Risk remains in a heavy space amid dwindling peace talks between both the warring nations. The S&P 500 futures have accelerated declines, now down 0.66% on the day while the US dollar index is adding 0.21% so far.

The Bank of England (BoE) is continuing its cycle of interest rate hikes, which should support the pound for the time being. However, in the course of the year, the EUR should then benefit from the expectation that the European Central Bank (ECB) will also initiate the turnaround in monetary policy, as reported by Commerzbank.

ECB lift-off should support EUR/GBP

“In the short term, the pound should remain supported against the EUR since the Bank of England (BoE) has already started its rate hike cycle in December. Further rate hikes will follow this year. In the course of the year, however, the EUR should benefit from the expectation that the ECB will raise interest rates soon.”

“Since the ECB is likely to pause after three interest rate hikes, while the BoE will tighten its monetary policy further in 2023, the pound should be able to gain again against the EUR in 2023.”

“Against the USD, we expect more or less a sideways movement this year, as both the BoE and the Fed will become more restrictive.”

International Energy Agency (IEA) chief Fatih Birol warned Friday, “emergency in oil markets may get worse.

Additional takeaways

• AUD/USD struggled to preserve its modest intraday gains to a near two-week high.
• A softer risk tone helped revive demand for the safe-haven USD and capped gains.
• The mixed fundamental backdrop warrants caution for aggressive bullish trades.

The AUD/USD pair witnessed some selling during the early part of the European session and was last seen trading near the daily low, around the 0.7380-0.7375 region.

The Australian dollar continued drawing support from rising bets for an early rate hike move by the Reserve Bank of Australia, boosted by Thursday's upbeat domestic jobs report. Apart from this, hopes that China will deliver additional stimulus to complement its promise to support the economy and stabilize the financial markets boosted antipodean currencies, including the aussie.

The combination of supporting factors pushed the AUD/USD pair to a near two-week high on Friday, though bulls struggled to find acceptance or build on the momentum beyond the 0.7400 mark. The lack of progress in the Russia-Ukraine ceasefire talks tempered investors' appetite for perceived riskier assets. This, in turn, benefitted the safe-haven US dollar and capped gains for the major.

The greenback was further underpinned by the Fed's hawkish outlook, indicating that it could hike rates at all the six remaining meetings in 2022. Moreover, Fed Chair Jerome Powell said that the US central bank could start shrinking its near $9 trillion balance sheet as soon as the next meeting in May. This remained supportive of elevated US Treasury bond yields, which favours the USD bulls.

Traders might also refrain from placing aggressive bullish bets around the AUD/USD pair ahead of a meeting between US President Joe Biden and Chinese leader Xi Jinping. This, in turn, makes it prudent to wait for some follow-through buying before positioning for any further gains and an extension of this week's solid rebound from the 0.6165 region, or the monthly low.

Market participants now look forward to the US economic docket, featuring the release of Existing Home Sales data. The key focus, however, will remain on fresh developments surrounding the Russia-Ukraine saga. Traders will further take cues from the broader market risk sentiment and the US bond yields, which will influence the USD and provide a fresh impetus to the AUD/USD pair.

Technical levels to watch

• Gold price returns to the red, as the US dollar rebounds amid risk-aversion.
• Dwindling Russia-Ukraine peace talks sour mood, in the aftermath of Fed and BOE.
• Gold Price Forecast: XAU/USD bears have the upper hand below $1,960, or 38.2% Fibo.

With the Fed and the BOE policy meetings out of the way, the focus is back on the developments surrounding the Russia-Ukraine conflict. That said, peace talks between both sides are reportedly showing little progress, re-igniting risk-aversion. The US dollar is once again seeing fresh haven demand, which is exerting downward pressure on gold price. Additionally, the renewed upside in oil prices combined with the flattening of the yield curve is alarming markets, benefiting the dollar at gold’s expense.

Read: Zelenskyy Aide Zhovkva: Ukraine-Russia talks are progressing only slowly

Gold Price: Key levels to watch

Having tested the $1,950 level, as well predicted here, gold price is now heading south, challenging strong support at $1,929, per the Technical Confluences Detector.

That level is the intersection of the Fibonacci 23.6% one-month and the previous low four-hour.

The next stop for gold bears is seen at $1,926, where the pivot point one-day S1 aligns. Further south, the previous day’s low at $1,923 will be back in focus.

A sustained drop below the latter will fuel a sharp sell-off towards the pivot point one-day S2 at $1,912.

Alternatively, if bulls regain control, then the immediate upside hurdle at $1,937 will be probed. At that level, the pivot point one-week S1 and the previous high four-hour coincide.

The next significant resistance is seen at the Fibonacci 38.2% one-day of $1,940, above which the confluence of the Fibonacci 23.6% one-day and SMA5 one-day at $1,945 will get tested.

Should the renewed upside pick up momentum, gold buyers will then look to threaten the previous day’s high at $1,950.

Here is how it looks on the tool

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

The war in Ukraine changes everything for the oil market. Strategists at Danske Bank expect Brent Oil to hover around the $125 level in the second quarter and falling to $100 by the end of the year.

It will take a period of high prices to lure in new supply

“The war in Ukraine and subsequent sanctions (official and unofficial) has tightened the oil market. In our view, it will take time before the market rebalance and it will take a period of high prices to lure in new supply.”

“We now forecast Brent to average $125/bbl in Q2, fall to $100/bbl in Q4 and further to $95/bbl in 2023.”

Following the Russian invasion, EUR/PLN has seen huge swings first touching 5.0 but later falling back heavily to 4.68. Economists at Danske Bank expect the zloty to stay under pressure and forecast the EUR/PLN around the 4.70 level over coming months.

PLN hit by the war in Ukraine

“As our base-case is that the conflict will not be fundamentally resolved and sanctions will stay in place for a considerable period, we think that PLN will not fully recover its pre-war levels. Furthermore, we doubt the central bank will stay the course with monetary policy tightening when the economy weakens.”

“We see EUR/PLN moving sideways near-term but then move slightly higher over the next year. Our path for EUR/PLN is 4.68 in 1M (from 4.52), 4.68 in 3M (from. 4.54), 4.70 in 6M (from 4.58) and 4.74 in 12M (from 4.62).”

The euro has rallied against the Swiss franc from early March lows right below parity. Still, economists at Danske Bank expect the EUR/CHF pair to hover around the 1.00 level in the next 12 months.

CHF to appreciate against the EUR on the back of fundamentals

“Higher commodity prices, elevated geopolitical risk from the Russia-Ukraine war and sour risk sentiment weighed heavy on the cross. In the near-term, we expect these to continue to be the key drivers for the pair.”

“We maintain our base case of relative monetary policy convergence, as we expect the ECB to hike by the end of 2022 and the SNB to gradually follow suit.”

“We continue to expect CHF to appreciate against the EUR on the back of fundamentals and a move towards a global investment environment characterised by tighter economic policy and global liquidity conditions. We, therefore, continue to target the cross at 1.00 in 12M.”

• GBP/USD struggled to preserve modest intraday gains amid the emergence of some USD buying.
• A softer risk tone, along with the Fed’s more hawkish outlook acted as a tailwind for the buck.
• A dovish assessment of the BoE decision undermined sterling and contributed to the downtick.

The GBP/USD pair surrendered its modest intraday gains and dropped to a fresh daily low, below mid-1.3100s  during the early part of the European session.

The pair gained some positive traction during the early part of the trading on Friday, though the uptick ran out of steam near the 1.3180-1.3185 area amid a goodish pickup in the US dollar demand. The lack of progress in the Russia-Ukraine peace negotiations kept a lid on the recent optimistic move in the markets. This was evident from a generally softer risk tone, which drove some haven flows towards the greenback and acted as a headwind for the GBP/USD pair.

Apart from this, the buck was further underpinned by the Fed's hawkish outlook, indicating that it could hike rates at all the six remaining meetings in 2022. Moreover, Fed Chair Jerome Powell said that the US central bank could start shrinking its near $9 trillion balance sheet as soon as the next meeting in May. This, along with a dovish assessment of the Bank of England's decision on Thursday, should continue to cap the upside for the GBP/USD pair.

In fact, the BoE raised its key rate for the third successive meeting, though the 25 bps rate hike disappointed some investors anticipated a more aggressive increase. Moreover, the UK central bank also softened its language around the need for future rate hikes. Apart from this, the 8-1 MPC vote distribution adds credence to the bearish outlook. That said, the overnight rebound from sub-1.3100 levels warrants some caution for bearish traders.

The mixed fundamental/technical set-up makes it prudent to either wait for sustained strength beyond the 1.3200 mark or acceptance below the 1.3100 mark before placing aggressive directional bets. Nevertheless, the GBP/USD pair remains on track to post weekly gains for the first time in the previous four. Market participants now look forward to the US economic docket, featuring the release of Existing Home Sales data for a fresh impetus.

The focus, however, will remain glued to fresh developments surrounding the Russia-Ukraine saga. Traders will further take cues from a meeting between US President Joe Biden and Chinese leader Xi Jinping. The incoming headlines would drive the risk sentiment and influence the USD, allowing traders to grab short-term opportunities around the GBP/USD pair.

Technical levels to watch

Ihor Zhovkva, an aide to Ukrainian President, Volodymyr Zelenskyy, said on Friday, the Ukraine-Russia talks are progressing only slowly, per Bloomberg TV.

On Wednesday, Zhovkva, said negotiations had become “more constructive” and that Russia had softened its stand by no longer airing its demands that Ukraine surrender. 

The change of stance by Zhovkva on the peace talks is unlikely to go down well with the market, as risk-off trades dominate this Friday.

The European stocks are in a sea of red while the S&P 500 futures are down 0.55% on the day.

EUR/SEK initially continued its move higher on souring risk sentiment but has since completed a rather remarkable comeback on a repricing of the Riksbank. Strategists at Danske Bank revise their forecast for EUR/SEK lower on the outlook for Riksbank rate hikes and now expect a move to 10.10 in six months.

SEK supported by hawkish shift from Riksbank

“While FX has been much about risk sentiment and rebalancing recently, price action this week shows that monetary policy should clearly be part of the puzzle and now it seems to be an argument for lower EUR/SEK.” 

“Our new call with hikes in September and November will lend support to the SEK in the coming months even though one can argue that it is priced: buy the rumour, buy the fact.” 

“If the Riksbank delivers what is perceived as a final shot in February 2023, it could be accompanied by headwinds for the SEK as markets temper their expectations on how high the repo rate will go and also via slowing growth expectations, which limits the downside in EUR/SEK in the medium-term.”

The Norwegian krone has seen support the past month on notably rising energy prices and is currently trading below 9.80. Analysts at Danske Bank expect EUR/NOK to move slightly higher towards 10.00 on rising global recession risks but emphasise that 2022 ultimately could prove the turning point for NOK.

A tug of war significantly widens outcome space

“In a tug of war between rising global recession risks and a substantial positive terms of trade shock to Norway the outcome space for EUR/NOK has widened substantially. Our models indicate that EUR/NOK is now overvalued and we cannot rule out a regime shift in terms of a yearlong NOK rally eventually starting in 2022.” 

“We think global recession risks will dominate in the coming months and we think spring risks are skewed to the topside – albeit uncertainty is high.”

“In light of the substantial rise in energy price, we lower our profile but have the same trajectory. We forecast EUR/NOK at 9.80 in 1M (from 10.10), 10.00 in 3M (from 10.30), 10.00 in 6M (10.40) and 10.00 in 12M (10.40).”

Economists at Danske Bank revise down their EUR/USD forecast in 12 months from 1.08 to 1.05. 

USD can keep going higher still

“We revise our EUR/USD forecast down to 1.05 (from 1.08) in 12M.”

“Global manufacturing is slowing, valuations shows risks are to the downside for spot and the near-term consequences of the war in Ukraine will likely be a further strengthening of the USD. We thus continue to expect EUR/USD can drop further in this environment.”

“Sharp forex moves are undesirable, watching the impact on Japan’s economy carefully,” the country’s Chief Cabinet Secretary Hirokazu Matsuno said on Friday.

Additional quotes

Related reads

• USD/JPY steadily climbs to 119.00 mark, closer to multi-year peak post-BoJ
• BOJ’s Kuroda: No need for monetary tightening for transitory, unsustainable inflation

EUR/GBP has bounced back above 0.84. According to economists at Nordea the current fallback in sterling should be short-lived. Subsequently, the expect the EUR/GBP to plunge towards 0.81 by end-2022.

Bank of England to support sterling with further rate hikes

“The BoE did hike for a third meeting in a row and more hikes will come later this year. Hence, we favour sterling to restrengthen versus the euro and probably already during Q2 if or when we get a pause or a lasting solution between Ukraine and Russia.” 

“The BoE has shown that its will act quickly and that it is determined to fight inflationary pressures in the British economy. This ought to support sterling.”

“We expect EUR/GBP to move towards 0.81 by the end of the year.”

EUR/USD dipped towards 1.08 in early March but has since bounced back above 1.11. Economists at Nordea think the pair may have already bottomed, and forecast EUR/USD at 1.13 by year-end.

Dollar will see the upper hand slip away

“We expect the USD to remain well supported in Q2, but expect the EUR/USD to revisit 1.08 or lower levels only if we get another spell of severe risk aversion. Hence, we see EUR/USD in a range of 1.08-1.12 the next three months.”

“During the second half of the year, we expect to see the US economy cooling off and the dollar to trade with light headwind. We see EUR/USD heading towards 1.13 towards the end of the year.”

Any USD/JPY dip in response to USD weakness has been very shallow. Economists at OCBC Bank expect the pair to grind higher to test the 120 mark in the coming sessions.

Topside extension

“With the pair looking to consolidate between 118.50 and 119.00, the next multi-session target may well be the 120.00 psychological level.” Note front-end US-JP yield differentials remain stretched in the USD’s favour.” 

“The BoJ downgraded Japan’s growth outlook but is now positive on inflation. However, policy rates are still expected to ‘remain at current level or lower’, so no signs of the BoJ departing from the dovish baseline.”

• USD/CAD continued losing ground for the fourth straight day and dropped to over a two-week low.
• An uptick in crude oil prices underpinned the loonie and exerted downward pressure on the pair.
• Sustained weakness below the 1.2585 region will set the stage for a further depreciating move.

The USD/CAD pair maintained its offered tone through the early European session and was last seen trading near the 1.2600 mark, or over a two-week low.

The pair extended this week's sharp retracement slide from the 1.2870 region and witnessed some selling during the early part of the trading on Friday. The lack of progress in the Russia-Ukraine peace negotiations pushed crude oil prices to a multi-day high. This, in turn, underpinned the commodity-linked loonie and exerted some downward pressure on the USD/CAD pair.

That said, the resurgence of COVID-19 cases in China has raised concerns about reduced fuel demand. This, along with a softer risk tone, keep a lid on any meaningful gains for the black liquid. Apart from this, the emergence of some US dollar buying assisted the USD/CAD pair to find some support and defend the very important 200-day SMA support, at least for the time being.

The Fed's hawkish outlook, indicating that it could hike rates at all the six remaining meetings in 2022, acted as a tailwind for the USD. Moreover, Fed Chair Jerome Powell said that the US central bank could start shrinking its near $9 trillion balance sheet as soon as the next meeting in May. This supports prospects for the emergence of some dip-buying around the USD/CAD pair.

That said, acceptance below a technically significant moving average, leading to a subsequent break through the monthly low, around the 1.2585 region, will be seen as a fresh trigger for bearish traders. The USD/CAD pair might then accelerate the slide towards mid-1.2500s en-route intermediate support near the 1.2525 zone before dropping to the key 1.2500 psychological mark.

The market focus will remain glued to fresh developments surrounding the Russia-Ukraine saga. This, along with a meeting between US President Joe Biden and Chinese leader Xi Jinping, would drive the broader market risk sentiment and the USD demand. Traders will further take cues from oil price dynamics for some short-term opportunities around the USD/CAD pair.

Technical levels to watch

The greenback continued to weaken against its major rivals on Thursday but the negative shift in risk sentiment helped the currency shake off the selling pressure early Friday. Economists at ING think it is too early to be jumping back into undervalued EM currencies. Holding commodity currencies makes more sense while they are still fans of the dollar.

US dollar should stay bid on dips

“Thursday saw the dollar broadly offered in a typical 'risk-on' move. There is a camp arguing that the dollar typically sells off in the first six months of a Fed tightening cycle. What is different this time, is the aggressive front-loaded tightening about to be undertaken by the Fed and events in Ukraine which have damaged European growth prospects and will weigh on currencies in the region.” 

“We suspect the dollar will stay bid on dips against European FX and the JPY, while the commodity-exporting currencies can continue to outperform.”

“We see the 97.70/98.00 support area holding in DXY and would favour a move towards 100 into next week.” 

Gold is benefitting from safe-haven demand, though easing tension saw prices back to $1,900. Economists at ANZ Bank expect the yellow metal to remain supported amid geopolitical risks and soaring inflation.

Russian sanctions are intensifying the stagflation risk

“Investors are shifting towards gold as the Ukraine-Russia war worsens and uncertainties linger.”

“With Russia being a major commodity producer, sanctions are intensifying the stagflation risk.”

“We believe heightened geopolitical risks and higher inflation will support gold prices.”

EUR/USD has struggled to preserve its bullish momentum. Although the pair stays on the back foot early Friday, it could regain its traction as long as buyers continue to defend the 1.1040 support, FXStreet's Eren Sengezer reprots.

Euro to remain bullish as long as 1.1040 support holds

“In case the Russia-Ukraine headlines point to a further escalation of the conflict, investors are likely to stay away from risk-sensitive assets ahead of the weekend.”

“1.1040 (100-period SMA, Fibonacci 50% retracement of the latest downtrend) forms critical support for the pair. In case sellers manage to drag EUR/USD back below that level and hold it there, additional losses toward 1.10 (psychological level, Fibonacci 38.2% retracement, 50-period SMA) could be witnessed.”

“If EUR/USD steadies above 1.1080 (Fibonacci 61.8% retracement), it could target 1.1140 (Thursday high, static level) before turning its attention to 1.12 (psychological level, 200-period SMA).”

The Bank of England (BoE) hiked its policy rate by 25 basis points but he policy statement revealed a cautious stance on future rate hikes. Economists at ING expect the GBP/USD to stall ahead of the 1.32/33 area.

BoE blinks

“Unlike the Fed, the BoE delivered a cautious 25bp rate hike, with one dissenter voting for unchanged rates. The market removed roughly one 25bp hike from its expectations this year (Bank Rate now priced at 1.90% in December).”

“Given we strongly favour the dollar this summer, levels near 1.32/33 in cable may be the best for some time.”

“EUR/GBP stalled at 0.8450/80 resistance yesterday and we still prefer the pair trading back to 0.83.”

The Central Bank of Russia (CBR) meets to set interest rates today. Economists at ING do not expect any change and will be closely watching comments about real economy and financial sector.

CBR to leave rates unchanged at 20%

“After its emergency hike to 20% to support the rouble, no change is expected today in policy settings. Instead, the focus will be on what the CBR thinks about the real economy and the financial sector.”

“The offshore USD/RUB is now being quoted at 102, while the onshore closed at 103.15 yesterday. Implied rouble yields through the FX swaps are being quoted markedly lower today, although we read that as a function of very illiquid markets rather than any dramatic improvement in market functioning.”

The Ukraine war has led to significant USD strength and thus also to a surge in USD/JPY. Amid a global inflationary supply shock, economists at Commerzbank expect the Japanese yen to move downward.

Real interest rate in Japan to shift to the disadvantage of JPY

“In the event of a global energy price shock, the real interest rate in Japan is likely to shift significantly to the disadvantage of the yen – compared with other currency areas.”

“We assume that the yen will not recover and will tend to moderate weakness if the global inflation shock continues to unfold in H2/2022.”

“The BoJ is unlikely to be satisfied with the recent pace of yen depreciation. However, it is more likely to welcome a moderate pace of depreciation.”

The more nervous markets since the invasion of Ukraine bring increased CAD volatility. In the medium-term, the loonie should benefit from its status as a commodity currency and from the more active stance of the Bank of Canada compared to the European Central Bank (ECB), economists at Commerzbank report.

Uncertainty likely to dominate for now

“The nervousness on the markets since the invasion of Ukraine brings increased volatility. Since then, the loonie has gained against the EUR. The distance to the trouble spot and its status as a commodity currency give it a safe-haven glimmer as well. We expect these factors to weaken when the war comes to an end. The EUR recovery we expect from the summer onwards should therefore push EUR/CAD up.”

“The key factor for USD/CAD is how the market views the BoC's stance compared to the Fed. If it is perceived as more hawkish and rate hike expectations change correspondingly, the loonie should benefit - conversely, it should lose accordingly.”

“With the continued tightening of monetary policy in 2023, the BoC is likely to differ from the ECB. We expect the latter to end its rate hike cycle again early in 2023, which should contribute to renewed EUR weakness. Accordingly, we expect a more pronounced downward movement in EUR/CAD than in USD/CAD in 2023.”

“Canada is likely to benefit from the significant rise in commodity prices – which is also benefiting the CAD. At the same time, however, there is a risk that the loonie will have to give up at least some of its gains if there are downward corrections with regard to the drastic increases in commodity prices.”

• USD/JPY regained positive traction on Friday after the BoJ announced its monetary policy decision.
• The BoJ stuck to its ultra-accommodative policy stance and downgraded its economic assessment.
• The Fed’s more hawkish outlook underpinned the USD and supports prospects for additional gains.

The USD/JPY pair inched back closer to the multi-year peak during the early European session and is now looking to build on the momentum beyond the 119.00 mark.

Following the previous day's two-day/directionless consolidative price moves, the USD/JPY pair attracted fresh buying on Friday after the Bank of Japan announced its policy decision. As was expected, the BoJ stuck to its accommodative policy stance and also downgraded the overall assessment of the economy.

The Japanese central bank warned of a very high uncertainty over the economic fallout from the Ukraine crisis and signalled to keep its monetary policy ultra-loose for the time being. In the post-meeting press conference, Governor Haruhiko Kuroda reiterated that the BoJ will ease further without hesitation as needed.

Conversely, the Fed on Wednesday sounded more hawkish and announced the start of the policy tightening cycle. Moreover, the so-called dot-plot indicated that the Fed could raise rates at all the six remaining meetings in 2022 to combat high inflation. The divergent BoJ-Fed policy outlooks acted as a tailwind for the USD/JPY pair.

Bulls further took cues from elevated US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond held just below the highest level since June 2019 touched earlier this week. This, in turn, favours bullish traders and supports prospects for an extension of the USD/JPY pair's recent bullish trajectory.

That said, a generally weaker tone around the equity markets might drive some haven flows towards the Japanese yen and cap gains for the USD/JPY pair. The lack of progress in the Russia-Ukraine ceasefire talks turned out to be a key factor that weighed on investors' sentiment and benefitted traditional safe-haven assets.

Hence, it will be prudent to wait for sustained strength beyond the 119.00 mark before placing fresh bullish bets around the USD/JPY pair. Nevertheless, the major remains on track to record the highest weekly close since January 2016 amid a relatively thin US economic docket, featuring the release of Existing Home Sales data.

Technical levels to watch

Although the aussie is unlikely to profit from any further hawkish comments from the Reserve Bank of Australia (RBA), the links with commodity exports are set to benefit the Australian dollar, drifting the AUD/SDU pair towards 0.74 over coming months, economists at Rabobank report.

NZD potentially gaining an advantage over AUD from the relative caution of the RBA

“The market is already positioned for rates hikes from both the RBNZ and the RBA this year suggesting it may be hard for either currency to rally much further on hawkish commentary from their respective central bankers.”

“Given the links of both currencies to commodity exports, we see the potential for both to edge a little higher vs the USD though the course of this year.”

“Our three-month target for AUD/USD is 0.74 and for AUD/NZD 1.06, with the NZD potentially gaining an advantage over the AUD from the relative caution of the RBA.” 

More comments are crossing the wires from Bank of Japan Chief Haruhiko Kuroda, as he continues to speak at post-monetary policy decision press conference.

When asked about inflation possibly hitting 2% in April, Kuroda said he “doesn't think such situation would continue over the long term.”

“True that direct impact on households of weak yen isn't necessarily positive.”

“No need for monetary tightening for transitory, unsustainable inflation due to rise in global commodity prices.”

“Monetary easing is needed to support Japan economy halfway through recovery from pandemic.”

“Appropriate to take steps against fuel price hikes.”

“Thinking that weak yen is negative for Japan economy is wrong.”

Read: Forex Today: Dollar steadies amid souring market mood

The upside momentum in USD/JPY could pause ahead of further uptrend, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that ‘conditions are deeply overbought and USD is unlikely to strengthen much further’ and we expected USD to ‘trade sideways within a range of 118.45/119.10’. USD subsequently traded between 118.35 and 119.02. Further sideways appears likely, expected to be between 118.35 and 119.05.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (17 Mar, spot at 108.85). As highlighted, further USD strength is not ruled out but the recent rally may take a pause first. As long as 117.90 (no change in ‘strong support’ level) is not breached, there is room for USD to break clearly above 119.10. That said, the chance for USD to move to the next major resistance at 119.70 is not high for now.”

• EUR/GBP consolidate the previous day’s heavy gains above the key moving average.
• Fortnight-old support line restricts immediate declines ahead of fortnight-long support line.
• Convergence of the 200-DMA, February high appears a tough nut to crack for bulls.

EUR/GBP remains on the back foot around an intraday low of 0.8415 as sellers attack the 100-DMA heading into Friday’s European session.

In doing so, the cross-currency pair pares the previous day’s heavy gains that pierced the aforementioned key moving average.

However, the bullish MACD signals and the pair’s failure to break the 100-DMA level near 0.8415 keep EUR/GBP buyers hopeful.

Even if the quote drops below 0.8415, an ascending support line from March 07 and the 50-SMA, respectively near 0.8390 and 0.8360, will challenge the bears.

Meanwhile, 61.8% Fibonacci retracement (Fibo.) of December 2021 to March 2022 downside, around 0.8450 will restrict the EUR/GBP pair’s short-term upside.

In a case where the pair rises past 0.8450, February’s top and the 200-DMA will restrict any further upside near 0.8480.

EUR/GBP: Daily chart

Trend: Recovery expected

• NZD/USD gained traction for the fourth straight day and climbed back closer to the monthly peak.
• Chinese stimulus hopes turned out to be a key factor that benefitted the antipodean currency, the kiwi.
• A softer risk tone, modest USD strength warrants caution before placing aggressive bullish bets.

The NZD/USD pair climbed further beyond the 0.6900 mark during the early European session and was last seen trading just a few pips below the monthly peak.

The pair gained strong follow-through traction for the fourth successive day on Friday and has now rallied nearly 200 pips from the monthly low, around the 0.6730-0.6725 area touched earlier this week. Hopes that China will deliver additional stimulus to complement its promise to support the economy and stabilize the financial markets benefitted antipodean currencies, including the kiwi.

This, to a larger extent, helped offset a generally softer tone around the equity markets. The lack of progress in the Russia-Ukraine peace negotiations kept a lid on the recent optimistic move in the markets. This, along with the Fed's hawkish outlook, drew some haven flows towards the US dollar, though did little to hinder the NZD/USD pair's near one-week-old bullish trajectory.

It is worth recalling that the Fed kick-started the policy tightening cycle on Wednesday and indicated that it might raise rates at all the six remaining meetings in 2022 to combat high inflation. Adding to this, Fed Chair Jerome Powell said that the US central bank could start shrinking its near $9 trillion balance sheet as soon as the next meeting in May. This, in turn, underpinned the greenback.

Even from a technical perspective, the NZD/USD pair was seen flirting with a technically significant 200-day SMA, around the 0.6910 region. This further makes it prudent to wait for some follow-through buying before traders start positioning for a further near-term appreciating move. Nevertheless, the major remains on track to register its highest weekly close since mid-November 2020.

Thursday's US economic docket features the release of Existing Home Sales. The focus, however, will remain on fresh developments surrounding the Russia-Ukraine saga. Apart from this, a meeting between US President Joe Biden and Chinese leader Xi Jinping would drive the broader market risk sentiment. This, in turn, will influence the USD and provide some impetus to the NZD/USD pair.

Technical levels to watch

Gold struggles to regain its traction and trades below $1,940. As FXStreet’s Haresh Menghani notes, XAU/USD bears have the upper hand below $1,960.

Break under $1,895 support would be a fresh trigger for bearish traders

“The post-FOMC positive move faltered near the $1,950 region, which is closely followed by the 38.2% Fibonacci retracement level of the $1,780-$2,070 rally. The latter is pegged near the $1,960 area, which if cleared decisively will set the stage for additional gains. Gold might then accelerate the momentum back towards the key $2,000 psychological mark.”

“Weakness below the 50% Fibo. level, around the $1,925 zone, might find some support near the $1,918-$1,917 region. Some follow-through selling would expose the 61.8% Fibo. level, around the $1,895 area.”

Failure to defend the $1,895 support levels would be seen as a fresh trigger for bearish traders. The next relevant support is pegged near the $1,850 region, below which gold could slide further towards challenging the very important 200-day SMA, currently around the $1,815 region.”

Considering preliminary readings from CME Group for natural gas futures markets, open interest rose by around 9.4K contracts after two consecutive daily pullbacks on Thursday. Volume followed suit and increased by nearly 19K contracts, reaching the third daily build in a row.

Natural Gas now targets $5.20

Thursday’s uptick in prices of natural gas tested the key $5.00 mark along with rising open interest and volume. Against that, further upside remains on the cards with the next target at the monthly highs around $5.20 (March 7).

Here is what you need to know on Friday, March 18:

The greenback continued to weaken against its major rivals on Thursday but the negative shift in risk sentiment helped the currency shake off the selling pressure early Friday. January Trade Balance from the euro area and February Existing Home Sales data from the US will be featured in the economic docket but investors will remain focused on the headlines surrounding the Russia-Ukraine crisis. 

Earlier in the week, headlines surrounding the Russia-Ukraine talks suggested that sides were moving closer to a peace agreement. On Thursday, however, Ukrainian and Russian officials noted there was no significant progress in negotiations. Meanwhile, a western official told Reuters that there still was a very big gap between the positions of Ukraine and Russia. On a more concerning note, ''Russia may be contemplating a chemical-weapons attack,'' US Secretary of State Antony Blinken said. 

Reflecting the souring market mood, US stock index futures are down between 0.3% and 0.6% in the early European session. The US Dollar Index, which is down more than 1% on a weekly basis, stays relatively quiet near 98.00. 

EUR/USD reached its highest level in more than two weeks at 1.1138 on Thursday but seems to have lost its bullish momentum on Friday. The pair is moving sideways below 1.1100 in the European morning. 

The Bank of England (BOE) hiked its policy rate by 25 basis points as expected on Thursday but the GBP/USD lost more than 100 pips and fell below 1.3100. The policy statement revealed a cautious stance on future rate hikes and made it difficult for the British pound to find demand. Although the pair managed to erase a large portion of its daily losses in the second half of the day, it lost its momentum and went into a consolidation phase above 1.3150.

BOE Quick Analysis: GBP/USD buying opportunity? Three reasons see upside from here.

USD/JPY continues to fluctuate in a relatively narrow range below 119.00 after closing virtually unchanged on Thursday. In the early Asian session, the Bank of Japan (BOJ) announced that they let the monetary policy settings unchanged. Bank of Japan (BOJ) Governor Haruhiko Kuroda noted that it was too early to debate the specifics of how to exit the easy policy.

Gold stage a rebound on Thursday but failed to reclaim $1,950. Despite the risk-averse market environment, XAU/USD struggles to regain its traction and trades below $1,940 early Friday.

Following Wednesday's recovery, Bitcoin struggled to find direction on Thursday and closed the day unchanged. BTC/USD continues to trade in a tight channel above $40,000. Ethereum registered gains for the fourth straight day on Thursday but lost its momentum before testing $3,000.

“Japan's economy is picking up as a trend,” said Bank of Japan (BOJ) Governor Haruhiko Kuroda during a press conference following the monetary policy decision announcement on early Friday morning in Europe.

Additional comments

USD/JPY remains on the front foot towards 119.00

Following the comments from BOJ Governor, USD/JPY prices extend the early Asian run-up towards refreshing the daily top near 118.80. The yen pair initially rose on the US dollar’s rebound while paying a little heed to the BOJ inaction.

Read: USD/JPY: Poised to reclaim 119.00 as BOJ keeps interest rate unchanged at -0.1%

In opinion of FX Strategists at UOB Group, AUD/USD could push higher and test the 0.7440 area in the short-term horizon.

Key Quotes

24-hour view: “While our view for AUD to advance was correct, we underestimated the upward momentum as it easily cracked the major resistance at 0.7365 (high of 0.7392). Further AUD strength is not ruled out but deeply overbought conditions suggest that any advance is unlikely to break the next major resistance at 0.7440 (there is another resistance at 0.7410). On the downside, a breach of 0.7330 (minor support is at 0.7350) would indicate that the current strong upward pressure has eased.”

Next 1-3 weeks: “We noted the rapid build-up in momentum yesterday and we expected AUD to advance to 0.7365. We did not quiet expect AUD to move above 0.7365 so quickly (high of 0.7392 in NY). Momentum remains strong and AUD could rise towards the next major resistance at 0.7440. The strong upside pressure is intact as long as AUD does not move below 0.7300 (‘strong support’ level was at 0.7210 yesterday).”

• USD/TRY extends the previous day’s recovery moves, renews daily top of late.
• CBRT matched wide market expectations of status-quo, reiterated ‘Liralization’ despite challenges to inflation.
• Turkey brokers a Putin-Zelenskyy meeting but nothing concrete came out yet, Xi-Biden call will be important as well.
• Risk-off mood underpins USD rebound, light calendar limits moves.

USD/TRY rises for the second consecutive day, up 0.42% intraday around 14.75 heading into Friday’s European session.

The Turkish lira (TRY) pair rose for the first time in three days the previous day after the central bank of Turkey (CBRT) left the monetary policy intact, in line with market forecast, even as rising oil prices add to the nation’s inflation woes. It’s worth noting that Ankara’s push for TRY preference saved the nation from record inflation prices but February’s around 50% print and recently rising oil prices renew reflation fears and tease USD/TRY bulls.

Elsewhere, the US dollar’s first daily performance in three also favors the USD/TRY bulls of late. The US Dollar Index (DXY) snaps a three-day downtrend while defending 98.00 level of late.

The greenback gauge’s latest gains could be linked to the market’s risk-off mood amid lack of progress in Ukraine-Russia talks, as well as Western hints that Moscow may use nuclear weapons should the war drags. Additionally challenging the sentiment are concerns over a phone call between US President Joe Biden and his Chinese counterpart Xi Jinping, as well as fears of Russia’s default.

It should be noted, however, that a lack of major data/events limits the pair’s immediate moves while teasing the first negative weekly closing in five.

Technical analysis

An upward sloping trend line from late December joins February’s top to defend USD/TRY bulls around 14.70-65. The recovery moves, however, need a daily closing beyond 15.00 to keep reins.

Open interest in crude oil futures markets noted investors trimmed their open interest positions for the fifth straight session on Thursday, this time by around 21.8K contracts. Volume, instead, remained choppy an went up by around 23.2K contracts.

WTI remains supported by the $95.00 zone

Prices of the barrel of WTI rose sharply on Thursday. The move, however, was amidst diminishing open interest, which leaves the prospect for further rebound somewhat curtailed in the very near term. That said, another visit to the recent contention area around $95.00 per barrel should not be ruled out.

GBP/USD could extend the rebound to the 1.3220 area in the near term according to FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that ‘further GBP strength is likely but any advance is unlikely to challenge the major resistance at 1.3220’. Our view was not wrong as GBP rose to 1.3211, dropped sharply to 1.3088 before snapping back up. Despite the rapid swings, the underlying tone appears firm and we see chance for GBP to test 1.3220. However, a sustained rise above this level appears unlikely for now (next resistance is at 1.3280). Support is at 1.3145 followed by 1.3110.”

Next 1-3 weeks: “Yesterday (17 Mar, spot at 1.3150), we indicated that the recent weak phase has ended and we held the view that the rebound in GBP has scope to extend to 1.3220. GBP subsequently popped to 1.3211 before pulling back. There is no change in our view for now even though the chance for a sustained rise above 1.3220 has increased. The next resistance above 1.3220 is at 1.3280. Overall, GBP is expected to trade on a firm footing as long as it does not move below 1.3070 (‘strong support’ level was at 1.3040 yesterday).”

CME Group’s flash data for gold futures markets noted open interest shrank for the fourth consecutive session on Thursday, this time by just 931 contracts. In the same line, volume dropped for the second straight session, now by around 51.3K contracts.

Gold could retest $1900

Thursday’s uptick in gold prices was in tandem with shrinking open interest and volume, indicative that extra gains appear not favoured in the very near term. Against that, the precious metal could retest the recent support in the $1900 region per ounce troy.

In light of the recent price action, EUR/USD could now advance to the 1.1180 region in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We noted yesterday that ‘the underlying tone has firmed’ and we expected EUR to ‘edge higher’. While our view for a higher EUR turned out to be correct, we did not expect the ease by which it took out the 1.1080 resistance and the subsequent rapid rise to 1.1137. The pullback from the high has dented the upward momentum and EUR is unlikely to strengthen much further. For today, EUR is more likely to trade between 1.1055 and 1.1140.”

Next 1-3 weeks: “Yesterday (17 Mar, spot at 1.1030), we highlighted that shorter-term upward momentum has improved somewhat and EUR could rise above 1.1080. We added, ‘looking ahead, EUR has to break 1.1120 before a sustained advance is likely’. While our view was not wrong, we did not quite expect to EUR to break both 1.1080 and 1.1120 so quickly (high of 1.1137). The rapid improvement in momentum suggests EUR could advance to 1.1180, possibly 1.1200. Support is at 1.1055 but only a breach of 1.1025 (‘strong support’ level was at 1.0920 yesterday) would indicate that the current upward pressure has eased.”

• USD/CHF fades bounce off intraday low, stays down for the third consecutive day.
• Seven-week-old horizontal area joins 50-SMA to highlight 0.9340 as the key support.
• Fresh recovery will eye 2021 top, key Fibonacci retracements to add to the downside filters.
• Bearish MACD signals, trend line break keep sellers hopeful.

USD/CHF remains on the back foot around intraday bottom, down 0.08% on a day around 0.9360 heading into Friday’s European session.

In doing so, the Swiss currency (CHF) pair portrays a failure to keep the bounce off a short-term crucial support convergence, comprising tops marked during late January and 50-SMA.

Also favoring USD/CHF sellers is the downside break of the previous support line from March 06, as well as the bearish MACD signals.

That said, the latest declines eye 0.9340 re-test before directing the bears towards the 50% Fibonacci retracement (Fibo.) of February 21 to March 16 upside, near 0.9305.

Following that, the 61.8% Fibo level near 0.9270 may entertain the USD/CHF bears before directing them to the 0.9200 threshold.

Meanwhile, recovery moves remain elusive below the support-turned-resistance line, close to the 0.9400 round figure by the press time.

Following that, the monthly high and tops marked during the year 2021, respectively around 0.9460 and 0.9475 in that order, will lure the USD/CHF bulls.

USD/CHF: Four-hour chart

Trend: Further weakness expected

• Gold prices fade two-day rebound from monthly low amid mixed concerns over Ukraine-Russia.
• Fears of Russian default, anxiety ahead of Xi-Biden call weigh on market sentiment.
• Yields, stock futures remain pressured, DXY rebounds from weekly low.
• Will Russia have to invade its $130 billion pot of gold?

Gold (XAU/USD) bears keep controls while bracing for the worst week since late November, down 0.50% intraday around $1,932 during early Friday morning in Europe. In doing so, the yellow metal snaps the two-day recovery moves from the lowest level in a month.

The metal’s recent weakness could be linked to the US dollar’s rebound, as well as the risk-off mood, amid mixed headlines concerning the Ukraine-Russia crisis and China. Also contributing to the XAU/USD weakness could be the cautious mood ahead of today’s call between US President Joe Biden and his Chinese counterpart Xi Jinping.

The US Dollar Index (DXY) snaps a three-day downtrend while defending 98.00 level of late. Even so, the greenback gauge stays negative on a weekly basis. The risk-off mood could also be witnessed in the downbeat figures of S&P 500 Futures and mildly offered Asia-Pacific stocks.

Among the key catalysts is the absence of positive progress over the Ukraine-Russia peace talks and Western warnings that Moscow may use nuclear weapons during Kyiv’s invasion. Further, a fresh jump in China’s covid cases and a confirmation of security talks between Beijing and Russia by the China Foreign Ministry. Also, fears of Russia’s default and likely sour sentiment when Biden talks to Xi add strength to the risk-off mood.

It should be noted that the continuation of Kyiv-Moscow negotiations and Turkey’s push for a meeting between Russian President Putin and his Ukrainian counterpart Volodymyr Zelenskyy keep traders hopeful.

Even so, an absence of major updates and data keeps the traders guessing ahead of the key meetings.

Technical analysis

Gold prices take a U-turn from the 10-day EMA, amid bearish MACD signals and descending RSI line, to keep sellers hopeful.

However, a horizontal area comprising multiple levels marked since November 2021, around $1,880-77, appears a tough nut to crack for the bears.

That said, the $1,900 threshold and the latest swing low of $1,895 can restrict immediate declines of the metal.

On the contrary, an upside break of the 10-day EMA level of $1,948 isn’t a green card for the XAU/USD bulls as the previous support line from early February, near $1,973 by the press time, will challenge the further upside.

It should be noted, though, that gold’s clear run-up beyond $1,973 won’t hesitate to pierce the $2,000 psychological magnet.

Gold: Daily chart

Trend: Further weakness expected

• USD/RUB has eased a massive 38% from its recent high at 155.00.
• The greenback bulls have attracted some bids near 61.8% Fibo retracement at 105.10.
• The RSI (14) has shifted in a 40.00-60.00 range, which signals consolidation going forward.

The USD/RUB pair has attracted some significant bids at 96.00 on Wednesday after witnessing a bloodbath. The major has eased around 38% from March 7 high at 155.00.

On the daily scale, USD/RUB has sensed some buying interest near 61.8% Fibonacci retracement, which is placed from February 10 low at 74.25 to March 7 high at 155.00, around 105.10. The major has formed a ‘Bullish Harami’ candlestick pattern, which signals a bullish reversal after a steep fall but demands a few validations.

USD/RUB is auctioning below 10 and 20-period Exponential Moving Averages (EMAs), which are trading around 111.30 and 107.30 respectively.

The Relative Strength Index (RSI) (14) has shifted its trading range from 60.00-80.00 to 40.00-60.00, which indicates either a consolidation or a downside move going forward.

For an upside, bulls need to validate the ‘Bullish Harami’ candlestick pattern by violating Thursday’s high at 105.80 decisively. This will send the major towards 10-period EMA at 111.30, followed by 50% Fibo retracement at 114.70.

On the flip side, more weakness will be observed if the major slip below Wednesday’s low at 96.00. This will drag the pair towards February 25 high at 90.00, followed by January 26 high at 80.00.

USD/RUB daily chart

• WTI remains on the front foot for second consecutive day after bouncing off 50-DMA.
• Receding bearish bias of MACD, firmer RSI underpin the run-up towards 10-DMA.
• Ascending trend line from December appears tough nut to crack for bears.

WTI grinds higher around $104.00, up 1.80% intraday heading into Friday’s European session.

In doing so, the black gold keeps Wednesday’s bounce off 50-DMA while justifying firmer RSI. Adding to the upside bias is the rebound in the MACD line.

That said, WTI crude oil buyers are all set to challenge the 10-DMA level at around $105.30. However, 23.6% Fibonacci retracement (Fibo.) of December 2021 to March 2022 upside, near $112.50, will challenge the commodity’s further upside.

Following that, a run-up towards the latest peak of 126.15 and then to the year 2008 high near $135.00 can’t be ruled out.

Alternatively, the $100.00 threshold restricts the short-term downside of the energy benchmark ahead of the 50-DMA level of $92.85.

Should the WTI sellers conquer the $92.85 level, the 61.8% Fibo. and a 3.5-month-long support line, respectively around $86.80 and $85.00, will be in focus.

WTI: Daily chart

Trend: Further upside expected

• EUR/USD bulls pause around a fortnight top after four-day winning streak.
• ECB policymakers tried to tame inflation fears emanating from Ukraine-Russia crisis but failed.
• DXY part ways from downbeat Treasury yields as market sentiment dwindles.
• Xi-Biden call, second-tier data from the bloc may entertain pair traders.

EUR/USD remains pressured around 1.1085, printing the first negative daily performance in five during early Friday morning in Europe. The pair’s latest weakness could be linked to the market’s risk-off mood amid mixed signals from the Ukraine-Russia front, as well as escalating inflation fears.

Although diplomats from Ukraine and Russia haven’t yet left the negotiation table, despite tiring peace talks, Turkey’s efforts to have Russian President Putin and his Ukrainian counterpart Volodymyr Zelenskyy on the talks keep traders hopeful. On the contrary, the Western warning over Moscow’s likely usage of chemical weapons and China’s likely readiness to support the Russian invasion of Ukraine weigh on the market’s fear.

Elsewhere, the inflation woes renew with the firmer prices of oil, as well as upbeat inflation data from the Eurozone. On Thursday, final readings of the bloc’s headline inflation numbers for February crossed the initial forecasts. Even so, multiple policymakers from the European Central Bank (ECB), including President Christine Lagarde, tried to tame the fears of faster monetary policy tightening.

It’s worth noting that a fresh increase in China’s daily covid numbers, after a two-day reduction from record readings, joins fears of Russia’s default to weigh on the sentiment and the EUR/USD prices.

Amid these plays, the US Treasury yields remain downbeat and the stock futures also print losses by the press time. However, the US Dollar Index (DXY) snaps a three-day downtrend but stays negative on a weekly basis.

Looking forward, details of a call between US President Joe Biden and his Chinese counterpart Xi Jinping will be the key for the market’s moves and the EUR/USD. Also important will be Eurozone Labor Cost for the fourth quarter (Q4) Trade Balance for January.

Technical analysis

21-DMA challenges EUR/USD’s immediate upside around 1.1100 but major attention is given to the horizontal line comprising multiple levels marked since late January and a five-week-old descending resistance line, around 1.1120.

Given the firmer MACD and ascending RSI line, not overbought, EUR/USD prices are likely to cross the aforementioned key hurdles.

• A lackluster move from Platinum has been carry-forwarded on Friday.
• The asset is holding above 20-EMA but seeks more validation from other indicators.
• The RSI (14) is oscillating in a range of 40.00-60.00, which signals consolidation ahead.

Platinum (XPT/USD) is oscillating in a narrow range of $1,023.47-$1,031.56 in the Asian session. The asset has carry-forwarded the lackluster move of Thursday and is awaiting a trigger for a decisive move.

On an hourly scale, Platinum is auctioning in a neutral channel, which doesn’t reflect biases towards any direction but responses after the volatility contracts significantly. The upper end of the neutral channel is placed around Thursday’s high at $1,033.13 and the lower end is marked from Thursday’s low at $1,012.45.

The precious metal is stabilized above the 20-period Exponential Moving Average (EMA), which is trading around $1,023.5. While the 200-period EMA is much above the Platinum prices around $1,060.

The Relative Strength Index (RSI) (14) is oscillating in a range of 40.00-60.00, which signals a directionless move ahead.

For the upside, bulls need to violate Thursday’s high at $1,033.13, which will drive the asset towards Monday’s average traded price at $1,050.00. Breach of the latter will send the precious metal to the 200-period EMA at $1,060.00.

On the contrary, bears can dictate the levels if Platinum slips below Thursday’s low at $1,012.45. This will drag the asset towards the psychological figure of $1,000.00, followed by Tuesday’s low at $985.20.

Platinum (XPT/USD) hourly chart

• Asia-Pacific markets drift lower amid mixed concerns over Russia-Ukraine.
• BOJ couldn’t please Japanese traders despite extending easy-money policy.
• China’s covid numbers renew upside, west warns over Russia’s usage of chemical weapon.
• US President Biden, Chinese leader Xi will hold a telephone call, Turkey pushes for Putin-Zelenskyy meet.

Global market sentiment wanes during early Friday, after nearly three days of upbeat performance, as anxiety over Ukraine’s peace talks with Russia intensifies. Also challenging the sentiment could be western statements over the Kyiv-Moscow tussle and fresh increase in Chinas’ COVID-19 numbers.

Above all, cautious mood ahead of a telephone call between US President Joe Biden and his Chinese counterpart Xi Jinping challenge the bulls.

That said, the MSCI’s index of Asia-Pacific shares outside Japan drops near 2.0% whereas Japan’s Nikkei 225 rises around 0.30% intraday during the early morning in Europe.

Japanese equities fail to cheer the Bank of Japan’s (BOJ) status-quo, as well as readiness to offer more subsidies to counter inflation due to the Ukraine crisis.

Read: BOJ keeps monetary policy steady, leaves guidance intact

China takes Hang Seng down as Reuters reports an uptick in the daily virus infections following a two-day reduction from record top. Earlier in the day, reports of factory production restart in five districts of Shenzen kept buyers hopeful.

It should be noted that the shares in Australia and New Zealand remain firmer whereas markets in India are off due to Holi.

On a broader front, the US Treasury yields remain downbeat and the stock futures also print losses while the US Dollar Index (DXY) snaps a three-day downtrend but stays negative on a weekly basis.

Looking forward, a light calendar may test momentum traders but geopolitical headlines and any updates on Turkey’s efforts to have a personal meeting of Russian President Putin and his Ukrainian counterpart Volodymyr Zelenskyy will be important to watch.

Read: S&P 500 Futures contradict Nikkei 225’s mild gains, US Treasury yields remain softer amid sluggish session

“An immediate EU-wide embargo on Russian oil and gas imports would send economic shockwaves throughout Europe and cause at least £70 billion of damage to the British economy,” said UK Chancellor Rishi Sunak per the Financial Times (FT).

Key quotes

His warning comes after prime minister Boris Johnson urged western allies to follow the lead of the UK and US and ban imports of Russian hydrocarbons.

At the same time, the UK announced it would cut all Russian oil imports to zero by the end of the year but has yet to make its position clear on Russian gas.

The EU did not follow suit and instead unveiled a plan to cut Russian gas imports by two-thirds within a year. But last week, more than 100 MEPs signed a letter calling for an EU ban to kick in immediately, despite the huge dependence of countries including Germany on Russian imports.

The chancellor is already struggling to address a looming cost-of-living crisis — including inflation and higher prices for food and petrol — with rising energy prices alone set to impose a £38 billion burden on households by the end of the year.

FX implications

GBP/USD traders paid a little heed to the news while trading sideways around 1.3160, up 0.09% intraday during Friday’s Asian session.

Read: GBP/USD: Bulls look to recapture 1.3200 as BOE raises the interest rate to 0.75%

• USD/CAD treads water around two-week low, pauses three-day downtrend.
• Risk appetite weakens as US alleges China for helping Russia ahead of Xi-Biden talks.
• Fears of Russian default, fresh covid woes in China add to the sour sentiment.
• DXY pares weekly losses despite downbeat yields, stock futures, Canada Retail Sales eyed as well.

USD/CAD bears take a breather around 1.2615-20 after declining during the last three consecutive days as market sentiment dwindles amid Friday’s sluggish Asian session. In doing so, the Loonie pair ignores firmer prices of Canada’s main export item, WTI crude oil.

That said, WTI crude oil prices print 1.5% daily gains around $104.00 while extending the previous day’s recovery moves. The comments from the International Energy Administration (IEA) and hopes of a deal between the US and Iran seem to jostle with the fresh geopolitical fears from Russia to propel the oil prices.

Read: WTI surpasses $100.00 as IEA renews supply shortage worries

Russia’s recently easy tone in peace talks fails to underpin any optimism as the nation continues its invasion of Ukraine, ignoring the International Court of Justice’s (ICJ) order. Recently, the west has been flashing alarms over Moscow’s likely usage of chemical weapons. On the same line could be the comments from China’s Foreign Ministry that solidify the US allegations suggesting Beijing’s readiness to back Russia with military power in its invasion of Kyiv.

Additionally, a surprise uptick in China’s covid numbers, following a two-day reduction from record top, joins the market’s anxiety ahead of a telephone call between US President Joe Biden and his Chinese counterpart Xi Jinping to add to the risk-off mood.

On the positive side, Turkey is brokering a meeting between Russian President Putin and his Ukrainian counterpart Volodymyr Zelenskyy while the peace talks are also on, which in turn keeps the markets hopeful.

Amid these plays, the US Treasury yields remain downbeat and the stock futures also print losses while the US Dollar Index (DXY) snaps a three-day downtrend but stays negative on a weekly basis.

Looking forward, Canada’s Retail Sales release for January, expected 2.4% MoM, versus -1.8% prior, will be important for the USD/CAD traders after the Fed’s rate-hike strengthened hopes for the Bank of Canada’s another rate-hike. Additionally, the risk catalysts and oil price moves are important too.

Technical analysis

A clear downside break of 50-DMA and 100-DMA, as well as the bearish MACD signals, direct USD/CAD sellers towards the 200-DMA and an upward sloping support line from June 2021, respectively around 1.2605 and 1.2585.

Alternatively, a convergence of the 50-DMA and 100-DMA, around 1.2685-90, restricts short-term upside moves of the USD/CAD prices.

• USD/INR has slipped near 76.00 despite a decent pullback in oil prices.
• The DXY is licking its wounds after easing on Fed’s policy announcement.
• FIIs are returned to Dalal Street amid ease-off in the volatility.

The USD/INR pair has witnessed a steep fall from March 8 high at 77.17 and is eyeing more downside despite the oil prices having jumped around 9% overnight.

West Texas Intermediate (WTI), futures on NYMEX, has attracted some significant bids after recording a low of $92.37 on Tuesday. The oil prices jumped after the International Energy Agency (IEA) said three million barrels per day (bpd) of Russian oil and products could be shut in from next month. That loss would be far greater than an expected drop in demand of one million bpd from higher fuel prices. The oil has reacted positively to the statement but it is important to understand that the black gold has already discounted the expected supply concerns in its previous rally. Therefore the reaction is merely a potential pullback, not a reversal. India, being a major importer of oil possesses an inverse relationship with oil prices.

The OPEC cartel has already announced that the members will pump more oil by using their unused capacity and will reduce the gap in the demand-supply mechanism. Therefore, oil is not likely to boil further and may fall against, other things remaining constant.

Adding to that, the return of Foreign Institutional Investors (FII) on the Indian bourses amid ease-off in volatility has supported the Indian rupee. The rising odds of a ceasefire between Russia and Ukraine have boosted the market sentiment and FIIs are pumping money into Indian equities.

Meanwhile, the US dollar index (DXY) is licking its wounds after falling from Monday’s high at 99.30 as Fed’s monetary policy dictation is disliked by the DXY investors.

• AUD/USD remains depressed inside a choppy range around two-week top.
• Market sentiment turns sour amid mixed concerns over Russia-Ukraine.
• China headlines, cautious mood ahead of Xi-Biden call also challenge bulls.

AUD/USD snaps three-day rebound from a monthly low during Friday’s Asian session, recently sidelined near the intraday low of 0.7370.

In doing so, the Aussie pair portrays the market’s anxiety ahead of the key telephone call between US President Joe Biden and his Chinese counterpart Xi Jinping, over multiple issues including the Ukraine-Russia crisis.

Ahead of the meeting, China’s Foreign Ministry confirmed that China and Russia met on March 17 to discuss security cooperation. It’s worth noting that Beijing previously denied the US allegations of readiness to help Moscow in the battle with Ukraine.

On a different page, Reuters mentioned that China reported 2,416 new confirmed coronavirus cases on March 17, the country's national health authority said on Friday, compared with 1,317 a day earlier.” It’s worth noting that the COVID-19 daily infections were easing in the last two days from the record top. On the contrary, reports of factory production restart in five districts of Shenzen keep buyers hopeful.

Elsewhere, Turkey is also trying to connect Russian President Putin and his Ukrainian counterpart Volodymyr Zelenskyy but hasn’t got any confirmation. Adding to the risk-off mood are the fears of Russian default.

However, the continuation of the talks and upbeat Aussie jobs report, coupled with the softer USD due to the downbeat yields, put a floor under the AUD/USD prices.

Moving on, geopolitical updates will be crucial for the AUD/USD prices amid a light calendar ahead.

Technical analysis

Should the AUD/USD prices drop below the 0.7370 immediate range support, a downward trajectory towards the 200-DMA level near 0.7300 can’t be ruled out. Alternatively, an ascending trend line from January 13, close to the 0.7400 threshold by the press time, challenges the pair’s upside moves.

• BOJ has kept the interest rate unchanged at -0.1%.
• USD/JPY has shown a minor correction post the announcement but is likely to rebound amid the overall bullish picture.
• Japan’s yearly National CPI has been recorded at 0.9% well below the upside cap of 2%.

The USD/JPY is hovering around 118.70 after claiming a fresh six-year high at 119.12 and is eyeing to recapture the latter as the Bank of Japan (BOJ) has kept the interest rate unchanged at -0.1%. The decision of maintaining the status quo is very much in-line with the expectations of the markets participants. A minor correction has been witnessed in the asset post the announcement, which may be recovered soon amid the overall positive picture.

BOJ Governor Haruhiko Kuroda has preferred to stick to an unchanged policy led by capped inflation print in Japan. The Statistics Bureau of Japan has reported the yearly National Consumer Price Index (CPI) at 0.9%, much higher than the previous print of 0.5% and market consensus of 0.3%. Despite the elevated print, Japan’s inflation is well below the upside cap of 2%. Meanwhile, the National CPI ex-fresh food has landed at 0.6% in line with the street estimates but higher than the previous figure of 0.2%.

Meanwhile, the US dollar index (DXY) is trying to stabilize around 98.00 after a steep fall of 1.5% this week. The elevation of interest rate by 0.25% from the Federal Reserve (Fed) has weighed pressure on the greenback. Investors were expecting an aggressive interest rate hike to corner the inflation mess but a gradual approach to contain the galloping inflation failed to cheer the market participants.

Japan's economy picking as a trend.

Global markets showing unstable moves in wake of Russia’s invasion in Ukraine.

Exports, output increasing as a trend, though getting affected by supply constraints.

Pick-up in consumption moderating.

Inflation expectations heightening gradually.

Trend inflationary pressure likely to heighten ahead.

There is very high uncertainty on how Ukraine developments affect Japan’s economy, prices via markets, raw material prices, overseas economies.

Will purchase cp, corporate bonds at about the same pace as before pandemic in order for amounts outstanding to gradually return to pre-pandemic levels.

developing story ....

The Bank of Japan (BOJ) board members decided to keep the monetary policy settings unadjusted amid the ongoing Russia-Ukraine war, as they conclude their two-day meeting on Friday.

Key takeaways

Market reaction

In an initial reaction to the BOJ decision, USD/JPY is little change, keeping its range around 118.75, up 0.15% on the day.

• GBP/USD is looking to reclaim 1.3200 on subdued performance from the DXY.
• BOE raised the interest rates by 0.25% for the third time in a row.
• Fed’s gradual approach of raising interest rates has downgraded the greenback.

The GBP/USD pair has been offered around 1.3200 after the Bank of England (BOE) raised the interest rates by 25 basis points on Thursday. The interest rate in Britain has reached 0.75%.

It is worth noting that the BOE has increased their interest rates consecutively for the 3^rd time on Thursday. Also, the BOE was the first central bank, which raised the interest rates first since the pandemic of Covid-19 when all central banks were operating on the lowest interest rates. The BOE has preferred not to take the bullet and stick to interest rate expansion amid January’s inflation print at 5.5%, which is near a 30-year high. Moreover, the interest rate is likely to rise further in wake of the war between Russia and Ukraine.

The cable has witnessed a decent upside move in the last three trading sessions after remaining vulnerable on negative impulse in the market amid Russian military activity in Ukraine.

Meanwhile, the US dollar index (DXY) has sensed some buying interest near 97.70 and is oscillating around 98.00 after the carnage. Interest rate expansion from the Federal Reserve (Fed) brought a selling pressure on the greenback as Fed Open Market Committee (FOMC) preferred a gradual rate expansion rather than going aggressive.

Going forward, the headlines from the Russia-Ukraine war will remain a major trigger for the market. While, investors will also focus on Federal Reserve Bank Gov. Michelle Bowman’s speech, which is due on Friday.

• GBP/JPY picks up bids to reverse the previous day’s pullback from monthly top.
• Sustained trading beyond key SMA, horizontal area keeps buyers hopeful.
• Overbought RSI challenges further upside, multiple level to challenge bulls below 157.00.

GBP/JPY regains upside momentum, after taking a U-turn from a three-week top the previous day. That said, the yen cross rises to 156.25, up 0.20% intraday heading into the Bank of Japan (BOJ) monetary policy announcement during Friday’s Asian session.

Read: USD/JPY Weekly Forecast: Federal Reserve and the Bank of Japan head for different exits

Although overbought RSI conditions test the latest upside momentum, the pair’s successful trading above 200-SMA, as well as a horizontal area from early February, keep buyers hopeful.

That said, the recent high near 156.70 and the late February’s top close to 156.80 restricts the quote’s immediate upside ahead of the 157.00 threshold.

Following that, 157.30 and February’s peak of 158.06 will challenge the GBP/JPY upside.

On the contrary, 61.8% Fibonacci retracement of February-March downside, around 155.35, offers immediate support to the pair ahead of the aforementioned horizontal area surrounding 155.10-20.

Following that, the 200-SMA level surrounding 155.00 will be in focus.

It’s worth noting that trend lines from early March add to downside filters around 155.40 and 154.35.

GBP/JPY: Four-hour chart

Trend: Further upside expected

• USD/CNH dribbles after bouncing off one-week low, indecisive on weekly as well.
• China witnesses increase in covid numbers after the previous declines, allows factory production in Shenzen.
• Mixed concerns over Ukraine-Russia talks join markets anxiety ahead of Xi-Biden call, light calendar to restrict immediate moves.

USD/CNH remains directionless around 6.3650 amid Friday’s sluggish Asian session.

In doing so, the offshore Chinese yuan (CNH) pair struggles to justify covid-linked optimism at home as indecision for the Ukraine-Russia crisis intensifies ahead of today’s phone call between US President Joe Biden and his Chinese counterpart Xi Jinping.

As per the latest virus updates from China, conveyed by Reuters, “Mainland China reported 2,416 new confirmed coronavirus cases on March 17, the country's national health authority said on Friday, compared with 1,317 a day earlier.” It’s worth noting that the COVID-19 daily infections were easing in the last two days from the record top. On the contrary, reports of factory production restart in five districts of Shenzen keep buyers hopeful.

Elsewhere, China’s Foreign Ministry confirmed that China and Russia met on March 17 to discuss security cooperation. Beijing previously denied the US allegations of readiness to help Moscow in the battle with Ukraine. Hence, the issue will be important and can add to the USD/RUB upside should it produce negative headlines during today’s call between US President Joe Biden and his Chinese counterpart Xi Jinping.

It should be noted that looming fears of Russia’s default and the continuation of the peace talks between Moscow and Kyiv keep traders confused amid a light calendar day.

Looking forward, updates over the Russia-Ukraine stand-off will be the key for near-term directions.

Technical analysis

A daily closing beyond the 100-DMA level surrounding 6.3650 becomes necessary to confirm further upside targeting the late January tops surrounding 6.3865.

• EUR/USD rallies on a softer US dollar following the Fed. 
• Russian sanctions remain a risk for markets. 

The euro rose on Thursday with investors closely watching for developments in talks between Russia and Ukraine, while the Federal Reserve's monetary policy decision failed to affect the market as the bar for a hawkish surprise was high. In Asian markets on Friday, the single currency is flat and off the highs of 1.1118 trading near 1.1087 at the time of writing and near the lows of the session. 

The Fed kicked off its monetary policy tightening with a 25 basis point increase on Wednesday. However, despite the increased dots, the US dollar needed a more hawkish outcome to prevent the unwind as US treasuries fluctuated. The US dollar index is down 0.8% on the day overnight and remains heavy in Asian markets as it takes on the 98 figure to the downside, testing  the 97.80s.

In data on Thursday, the Eurozone Consumer Price Index for February was finalised slightly higher at 5.9%y/y (prior 5.8%YoY). The core was unchanged. US industrial production in February rose 0.5% MoM (as expected). US Weekly initial jobless claims were close to expectations at 214k and continuous claims at 1.419m.

Russian sanctions dig in

Meanwhile, global markets are keeping a close eye on Russia's capacity to repay its debt. Investors were reassured on Thursday that Russia may, at least for now, have averted what would have been its first external bond default in a century.

''This was because creditors received payment, in dollars, of Russian bond coupons which fell due this week,'' two market sources told Reuters on Thursday. Dmitry Peskov, a spokesperson for the Kremlin, said the country has all the resources it needs to avoid default.

As for sanctions, the saga continues. The US House of Representatives decisively decided to cease regular trade relations with Russia, allowing the US to sharply raise tariffs on Russian goods entering the nation. On Friday, US President Joe Biden and Chinese President Xi Jinping will discuss Russia.  Secretary of State Anthony Blinken told reporters that Biden will make it clear to Xi that if China backs Russia, the US will impose "costs."

• USD/RUB holds onto previous day’s bounce off 13-day low.
• Russian coupon payment update, cautious optimism in the market underpinned previous recovery.
• S&P cuts Russia’s credit rate, cites default fears.
• Bank of Russia is widely expected to keep benchmark interest rate unchanged at 20%.

USD/RUB stays defensive around 103.00 during Friday’s Asian session, keeping the previous day’s rebound from a two-week low in a tight range ahead of the Bank of Russia interest rate announcement.

The Russian ruble (RUB) pair rose the previous day amid mixed concerns over the Kyiv-Moscow peace talks. Also propelling the quote were the looming fears of Russia’s default.

No clear progress on the negotiations targeting a ceasefire in Kyiv keeps markets on tenterhooks despite the absence of a halt in talks favor optimists.

Recently, China’s Foreign Ministry confirmed that China and Russia met on March 17 to discuss security cooperation. Beijing previously denied the US allegations of readiness to help Moscow in the battle with Ukraine. Hence, the issue will be important and can add to the USD/RUB upside should it produce negative headlines during today’s call between US President Joe Biden and his Chinese counterpart Xi Jinping.

Read more:

Elsewhere, global rating giant S&P cut Russia’s credit rating from ‘CCC-‘ to ‘CC’ while citing the default fears, despite some on the floor confirmed receiving coupon payment due this week in the USD.

On a broader front, the US Treasury yields remain pressured and challenge the US dollar bulls while the S&P 500 Futures drop 0.70% intraday losses to portray the market’s dull mood by the press time.

Looking forward, the Bank of Russia isn’t expected to alter the benchmark rate of 20% but any surprises can’t be ruled out, which in turn could propel the USD/RUB prices. Additionally, Turkey is brokering a meeting between Russian Russian President Putin and his Ukrainian counterpart Volodymyr Zelenskyy to discuss the 15-point peace plan in detail, which in turn keeps the markets hopeful and may weigh on the ruble pair.

Technical analysis

USD/RUB bulls need validation from the 21-DMA level surrounding 106.80 to reject the odds of a downside targeting the monthly support line, near 96.10 at the latest.

A Chinese foreign ministry official has been reported across the worse to have met with Russia's ambassador to China on March 17 to exchange views on bilateral relations, the Chinese foreign ministry said in a statement on Friday.

Cheng Guoping, Commissioner for Foreign Affairs and Security Affairs at China's foreign ministry, met with Andrey Denisov of Russia.

Views have been exchanged on bilateral counter-terrorism and security cooperation, according to a statement.

Meanwhile, US Secretary of State Antony Blinken on Thursday said he is concerned China is considering directly assisting Russia with military equipment.''

Says he ''hasn’t seen any meaningful efforts by Russia to bring the war to a conclusion through diplomacy.''

• ''Biden will make clear to Xi, China bears responsibility for any actions it takes to support Russia's aggression.''
• ''The US will not hesitate to impose costs on China.''
• ''China is refusing to condemn Ukraine's aggression, seeking to ‘portray itself as a neutral arbiter’.''
• ''China has the responsibility to use its influence on president Putin to defend international rules and principles.''
• ''We will not hesitate to impose costs on China.''

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.3425 vs. the estimate of 6.3359 and the previous 6.3406.

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.

• Rising odds of a delay in a ceasefire between Moscow and Kyiv may underpin the DXY.
• Seven out of eight members favored a 25 basis point (bps) rate hike in FOMC.
• A bearish crossover by 20 and 200-period EMAs is indicating more pain ahead.

The US dollar index (DXY) has attracted some bids around 97.73 after a four-day losing streak. The index has eased around 1.5% this week. The renewed fears of an escalation in geopolitical tensions between Russia and Ukraine have brought a minor pause in the demand for risk-perceived assets, which eventually has resulted in a minor pullback for the DXY.

Earlier, the statement from Ukrainian officials that peace talks with Moscow are progressing boosted the sentiment in the market. However, Kremlin has reported that news pointing to progress in Ukraine-Russia peace talks was “wrong,” as per Reuters. This has brought minor ease in the optimism and investor are waiting for fresh developments from Ukraine’s land for further guidance.

Fed’s monetary policy

The DXY is still facing the hangover of the monetary policy in which a gradual approach adopted by the Federal Reserve (Fed)’s Chair and his colleagues has brought an intensified selling in the dollar counter. Seven out of eight members favored a 25 basis point (bps) rate hike while only one member backed the 50 bps elevation.

Major events on Friday: Existing Home Sales and Federal Reserve Bank Gov. Michelle Bowman’s speech.

Eminent issues on the back boiler: Russia-Ukraine peace talks, monetary policy from Bank of Japan (BOJ).

DXY Technical Analysis

On an hourly scale, the DXY has sensed support near March 10 low at 97.72. The 20-period and 200-period Exponential Moving Averages (EMA) have given a bearish crossover at 98.47, which adds to the downside filters.

DXY hourly chart

• NZD/USD grinds higher at weekly top, up for the fourth consecutive day.
• Monthly peak, 61.8% Fibonacci retracement add to the upside filters.
• Pullback remains elusive beyond 50-DMA, MACD favors buyers.

NZD/USD remains on the front foot around 0.6900 while printing a four-day winning streak during Friday’s Asian session.

In doing so, the Kiwi pair justifies the early-week bounce off the 50-DMA, as well as the following run-up beyond the 100-DMA, amid bullish MACD signals.

However, the 200-DMA level of 0.6915 challenges the NZD/USD bulls of late.

Also acting as the key upside hurdle is the monthly peak and 61.8% Fibonacci retracement (Fibo.) of October 2021 to January 2022 downside, respectively around 0.6930 and 0.6955.

Meanwhile, pullback moves may aim for the 50% Fibo. surrounding 0.6870 before dropping back to the 100-DMA level of 0.6810.

It should be noted, however, that an upward sloping trend line from late January and the 50-DMA, respectively around 0.6750 and 0.6730, will challenge the NZD/USD bears afterward.

In a case where the quote drops below 0.6730, it becomes vulnerable to test 2022 low near 0.6530.

NZD/USD: Daily chart

Trend: Further upside expected

Russia’s invasion of Ukraine has entered the fourth week, as increasingly harsh rhetoric from Western powers towards Russian President Vladimir Putin has done nothing to halt attacks in several cities. However, there are some logistical problems that continue to beset Russia's faltering invasion of Ukraine, the UK's Ministry of Defence stated in an intelligence update on Thursday. 

Additionally, there has been some cautiously positive optimism over peace talks, although they said their positions remained far apart. The Financial Times published a ‘15-point plan’ on Wednesday that was allegedly close to being agreed upon that included Ukraine being a neutral state like Switzerland or Austria and having security guarantees from the US, UK, and Turkey.

However, as analysts at Rabobank said, ''this was then almost immediately rejected by Ukraine. Indeed, a spokesperson said that plan reflected only the Russian position.'' Moreover, the analysts highlighted troubling tones and rhetoric from Russia's president, Vladimir Putin, who gave a national speech.

''He claimed Russia was ‘being cancelled’ and spoke of “fifth columns”  and “national traitors” who “cannot do without oysters, foie gras, and gender freedoms,” who “by their very nature are located exactly there, not here, not with our people, not with Russia. This is, in their opinion, a sign of belonging to a higher caste, a higher race. Such people are ready to sell their own mother… The collective West is trying to split our society, speculating on the combat losses, on the socio-economic sanctions… and there is only one goal… the destruction of Russia. But I am convinced that… the Russian people will be able to distinguish true patriots from scum and traitors and simply spit them out like a midge that accidentally flew into their mouths. Spit them out on the pavement. I am convinced that such a natural and necessary self-purification of society will only strengthen our country, our solidarity, cohesion, and readiness to respond to any challenges.”''

''Does this sound like a man looking to deescalate, or one who is going to double down to get better terms?,'' Rabobank questioned, pointing to darker days to come for both the ruble, financial markets and world peace in general. 

Meanwhile, Turkey has now positioned itself as the go-between with Russia and Ukraine. On Thursday afternoon, President Vladimir Putin rang the Turkish President, Recep Tayyip Erdogan and put down all of the demands Russia wants for a peace deal with Ukraine.

BBC lays out the peace talk progress 

Afer an interview with Turkish representatives familiar with the negotiations, the BBC states that the Russian demands fall into two categories.

''The first four demands are not too difficult for Ukraine to meet,'' the BBC wrote.

''Chief among them is an acceptance by Ukraine that it should be neutral and should not apply to join Nato. Ukraine's President Volodymyr Zelensky has already conceded this. There are other demands in this category that mostly seem to be face-saving elements for the Russian side. Ukraine would have to undergo a disarmament process to ensure it wasn't a threat to Russia. There would have to be protection for the Russian language in Ukraine. And there is something called de-Nazification.

This is deeply offensive to Mr Zelensky, who is himself Jewish and some of whose relatives died in the Holocaust, but the Turkish side believes it will be easy enough for Mr Zelensky to accept. Perhaps it will be enough for Ukraine to condemn all forms of neo-Nazism and promise to clamp down on them.''

For the markets, this would be perceived as a long term peace treaty and one that would pave the way for diplomacy between global states, settling uncertainties for investors. 

However, the BBC states that the ''second category is where the difficulty will lie.

In his phone call, Mr Putin said that it would need face-to-face negotiations between him and President Zelensky before an agreement could be reached on these points.

The BBC said that Mr Zelensky has already said he's prepared to meet the Russian president and negotiate with him one-to-one.

The BBC explained that these issues involved the status of Donbas, in eastern Ukraine, parts of which have already broken away from Ukraine and stressed their Russianness, and the status of Crimea.

The BBC presumed that Russia will demand that the Ukrainian government should give up territory in eastern Ukraine. 

The other assumption that the BBC notes is that Russia will ''demand that Ukraine should formally accept that Crimea, which Russia illegally annexed in 2014, does indeed now belong to Russia. If this is the case, it will be a bitter pill for Ukraine to swallow.''

''President Putin's demands are not as harsh as some people feared and they scarcely seem to be worth all the violence, bloodshed and destruction which Russia has visited on Ukraine. Given his heavy-handed control over the Russian media, it shouldn't be too hard for him and his acolytes to present all this as a major victory.

For Ukraine, though, there are going to be serious anxieties. If the fine details of any agreement aren't sorted out with immense care, President Putin or his successors could always use them as an excuse to invade Ukraine again.''

Market implications and related updates

In summary, the BBC states that a ''peace deal could take a long time to sort out, even if a ceasefire stops the bloodshed in the meantime.''

A ceasefire would be hugely positive for risk appetite although much of the near term inflation pressures would possibly leave prices in the commodities well elevated. In forex, currencies such as the Australian dollar stand to gain on both risk-on sentiments due to their high beta status as well as due to their link to the commodity sector.

With that being said, until the fine details are sorted out, there are bound to be stop-starts in momentum and the volatility of the process will play out as volatility in financial markets, most probably for a drawn-out length of time. 

Meanwhile, investors were reassured on Thursday that Russia may, at least for now, have averted what would have been its first external bond default in a century.

''This was because creditors received payment, in dollars, of Russian bond coupons which fell due this week,'' two market sources told Reuters on Thursday.

In other news, keeping the pressures on and markets on edge, Australia says it has now covered the majority of Russia's banking assets with sanctions. Additionally, the Australian government has slapped sanctions on two Russian oligarchs with business interests in Australia, after initially leaving them off of Australia's official sanctions list. 

• Global markets remain mixed during a likely first quiet day in the volatile week.
• S&P 500 Futures, US T-bond yields print losses but Nikkei 225 rises for the fourth consecutive day.
• Mixed concerns over Russia-Ukraine, light calendar restricts market moves of late.
• Biden-Xi call, updates over Putin-Zelenskyy meeting will be important to follow for fresh impulse.

Having witnessed multiple volatile days in the week, global financial markets remain mostly quiet during Friday’s Asian session. In doing so, the markets portray the traders’ inaction amid a light calendar and mixed updates over the Russia-Ukraine issue.

While portraying the mood, the S&P 500 Futures drop 0.40% whereas the US 10-year Treasury yields drop for the second consecutive day after rising to a three-year high on Wednesday. On the positive side, Nikkei 225 and ASX 200 print mild gains by the press time.

Continued peace talks between Ukraine and Russia fail to provide any strong outcome and weigh on the market sentiment. On the same line is the Western warning that Moscow may contemplate the use of nuclear weapons, as well as fears of Russia’s default despite paying bond coupons to a few investors.

Furthermore, China’s step back from previously hawkish comments to ease regulatory crackdown on the property and IT companies joined downbeat comments from the Organisation for Economic Cooperation and Development (OECD) to add to weigh on the market sentiment. “The global economic growth will be more than 1% lower this year due to the Ukraine crisis,” said the OECD.

On the positive side, a continuation of the talks and today’s phone call between US President Joe Biden and China’s President Xi Jinping keep traders hopeful of overcoming the grim conditions. Also keeping the buyers positive is the downbeat US Treasury yields and softer US dollar performance.

That said, the mixed sentiment can continue to weigh on the US dollar and help commodities, as well as the Antipodeans.

Moving on, qualitative catalysts will be crucial for market directions amid a light calendar day ahead.

Read: Forex Today: Dollar fights back amid talks about chemical weapons

• Aussie bulls are advancing towards fresh yearly highs around 0.7500.
• Bulls are firmer above 20-EMA but hope 200-EMA to scale higher.
• The RSI (14) is set to breach 60.00, which will unfold a fresh rally ahead.

The AUD/USD pair is hovering near Thursday’s high at 0.7394 and is likely to continue its three-day winning streak amid upbeat sentiment in the market. Aussie bulls have witnessed an up-sided decisive move after recording a fresh monthly low at 0.7165.

On a daily scale, AUD/USD is auctioning in a rising wedge in which every pullback towards the lower end is considered as a buying opportunity by the market participants and a fresh impulse wave initiates towards the upper end. The upper end of the rising wedge is placed from January 13 high at 0.7315 and the lower end is marked from January 28 low at 0.6966.

The 20-period Exponential Moving Average (EMA) at 0.7276 is scaling higher while the 200-period EMA is flat around 0.7300.

The Relative Strength Index (RSI) (14) is on the verge of surpassing 60.00 and may trigger a fresh rally. The oscillator is not indicating any sign of divergence and overbought.

For more upside, the aussie bulls need to surpass Friday’s high at 0.7395. The violation of Friday’s high will drive the pair towards an 8 November 2021 high at 0.7432, which will be followed by the psychological level of 0.7500.

On the flip side, bears can dictate levels if the pair slip below March 8 high at 0.7348 decisively, which will send the major to 20-EMA at 0.7276. Breach of the latter will drag the asset towards February 18 high at 0.7229.

AUD/USD daily chart

• USD/CAD remains pressured for the fourth consecutive day, eyes key supports.
• Bearish MACD, sustained break of 50 and 100-DMA favor sellers.
• Corrective pullback needs validation from 1.2700 to convince buyers.

USD/CAD sellers attack intraday low surrounding 1.2615 during four-day downtrend amid Friday’s Asian session.

In doing so, the Loonie pair justifies the clear downside break of 50-DMA and 100-DMA, as well as the bearish MACD signals.

However, the 200-DMA and an upward sloping support line from June 2021, respectively around 1.2605 and 1.2585, will challenge the pair’s further downside.

In a case where the USD/CAD bears manage to conquer the 1.2585 support, the pair becomes vulnerable to revisit January’s low of 1.2450.

Alternatively, a convergence of the 50-DMA and 100-DMA, around 1.2685-90, restricts short-term upside moves of the USD/CAD prices.

Following that, the pair buyers will need validation from the 1.2700 threshold ahead of targeting the tops marked during September 2021 and so far in March 2022, around 1.2900.

Overall, USD/CAD is near to the key support levels, a break of which will magnify the bearish bias for the pair.

USD/CAD: Daily chart

Trend: Further weakness expected

• USD/JPY bounces off intraday low but prints the second consecutive daily fall from multi-month top.
• Yields keep post-Fed weakness, US stock futures drop amid mixed concerns over Ukraine-Russia.
• BOJ is expected to keep benchmark interest rate unchanged, less likely to turn hawkish despite inflation fears poke policymakers.
• BOJ, qualitative factors will direct short-term USD/JPY moves.

USD/JPY seesaws around 118.50 on Friday’s Tokyo open, following the first daily negative closing in nine days.

While softer yields weigh on the USD and triggered the quote’s pullback from the highest levels since 2016 the previous day, the yen pair’s latest weakness could be linked to the market’s anxiety ahead of today’s Bank of Japan (BOJ) monetary policy meeting.

The US Treasury yields couldn’t cheer the Fed’s rate-hike and snapped an eight-day winning streak on Thursday, down 3.5 basis points (bps) near 2.15% at the latest. The reason could be linked to Fed Chair Jerome Powell’s speech that turned the cold water on the face of traders expecting prolonged reflation fears.

In addition to the yields, mixed concerns over the Russia-Ukraine crisis and the resulting challenges for Japan’s economy, as it imports most of its oil, also weigh on the USD/JPY prices recently. As per the latest updates, Ukraine brokers a top-tier gathering of Russian President Putin and his Ukrainian counterpart Volodymyr Zelenskyy to discuss the 15-point peace plan in detail. However, the Western warning that Moscow may contemplate the use of nuclear weapons dims the optimism. Also challenging the market’s mood are the fears over Russia’s default, as cited by the global rating agency S&P, even if some on the floor confirm receiving coupon payment due this week in the USD.

Elsewhere, China steps back from previously hawkish comments to ease regulatory crackdown on the property and IT companies while the Organisation for Economic Cooperation and Development (OECD) also fears more than 1.0% global economic loss due to the Ukraine crisis. The same weigh on the risk appetite and USD/JPY prices, resulting in the latest downside of the S&P 500 Futures.

Talking about data, Japan’s National Consumer Price Index (CPI) for February rose to 0.9% YoY versus 0.3% expected and 0.5% prior.

Looking forward, strong inflation data from Japan may push BOJ policymakers to rethink their easy-money bias, which in turn can exert additional downside pressure on the USD/JPY.

Read: USD/JPY Weekly Forecast: Federal Reserve and the Bank of Japan head for different exits

Technical analysis

Unless declining below the previous resistance line from November 2021, around 117.80 by the press time, USD/JPY buyers keep eyes on the 120.00 psychological magnet, with the latest peak of 119.12 acting as an intermediate halt.

• Gold prices look for a corrective pullback near $1,929.37 on softer DXY.
• The expectation of a ceasefire is losing steam after Russia remarked peace-talks progress ‘wrong’.
• Bulls attack 200-EMA after surpassing 20-EMA decisively.

Gold (XAU/USD) witnessed a juggernaut upside move from the recent lows of $1,895.15 on Wednesday. The precious metal bounced sharply after the Federal Reserve (Fed) dictated the interest rate decision on Wednesday. Investors gung-ho for the gold after the Fed announced an interest rate hike by 25 basis points (bps).

Usually, an interest rate hike by the Fed results in weak gold prices but a 25 bps interest rate hike was already announced by Fed Chair Jerome Powell in his March's testimony. Therefore, investors found activation of the ‘buy on the rumor and sell on news’ indicator and pressed the buy button for gold. The street was expecting an interest rate hike by 50 bps. Should this occur the precious metal might go through intensified selling pressure.

Apart from the Fed’s monetary policy, renewed fears of ceasefire delay between Russia and Ukraine have underpinned the gold prices. The Kremlin reportedly said that news pointing to progress in Ukraine-Russia peace talks was “wrong,” as per Reuters. The statement from Moscow has raised questions over the credibility of progressing peace-talks headlines from the Ukraine officials. Earlier, Ukraine announced that the nations are inching towards a tentative 15-point peace plan, which inculcates a ceasefire clause, swiftly. The headline brought optimism to the market but considering the response from Moscow, the optimism may fade away and risk-sensitive assets will face the heat of souring sentiment again.

Meanwhile, the DXY has witnessed a pullback near 98.00 after plunging around 1.5% from Monday’s high at 99.30.

Gold Technical Analysis

On an hourly chart, XAU/USD has attacked the 200-period Exponential Moving Average (EMA) at $1,950.00 after overstepping the 20-period EMA at $1,918.50 decisively. The Relative Strength Index (RSI) (14) has shifted in a bullish range of 60.00-80.00 after sensing barricades near 60.00 multiple times. After entering in a bullish range, a pullback seems likely towards 40.00 and eventually, the gold prices will also fall near Wednesday’s high at $1,929.37.

Gold hourly chart