CFD Markets News and Forecasts — 20-03-2022

• USD/CAD remains pressured around two-week low after declining for the last four days.
• Geopolitical tussles between Russia and Ukraine recently escalated over Mariupol.
• WTI crude oil consolidates two-week losses as news from Saudi oil plants joins Ukraine-Russia headlines.
• Qualitative catalysts will be the key to watch, Fed’s Powell, Biden’s NATO meet will be crucial events.

USD/CAD sellers attack 1.2600 during Monday’s Asian session, after posting the biggest weekly loss since late December 2021. In doing so, the Loonie (Canadian dollar) cheers firmer prices of Canada’s key export item, WTI crude oil, amid supply crunch fears due to the latest geopolitical tensions.

Among them, escalated geopolitical tensions in Mariupol of Ukraine and the recent attack on Saudi Arabian oil facilities by Yemeni Houthis were the major catalysts.

As per the latest headlines from Kyiv Independent, “Ukraine rejects Russia's demand to surrender Mariupol.” During the weekend, Ukrainian President Volodymyr Zelenskyy appealed to Israel for help in pushing back the Russian assault on his country, per Reuters.

It’s worth noting that the telephonic talks between US President Joe Biden and his Chinese counterpart Xi Jinping couldn’t offer any positives over the Ukraine-Russia issue. On the contrary, mentioning Taiwan raised fresh geopolitical fears.

On the other hand, Saudi oil plants were attacked by Yemen’s Houthis during the weekend. However, no major challenges to oil supplies could be known.

Elsewhere, the US Federal Reserve’s (Fed) rate-hike couldn’t help the US dollar bulls as Fed Chairman Jerome Powell tried placating reflation woes.

Amid these plays, S&P 500 Futures pause four-day uptrend and the US 10-year Treasury yields pick-up bids near 2.15% of late. Further, WTI crude oil prices rise 1.20% intraday while flashing $104.50 as a quote by the press time.

Looking forward, risk catalysts are likely to remain on the driver’s seat with Ukraine-Russia tensions likely escalating. As a result, the oil prices may witness further upside and can keep USD/CAD sellers hopeful.

Technical analysis

Although the monthly low around 1.2585 challenges USD/CAD sellers, the 200-DMA and 61.8% Fibonacci retracement of January-March upside, respectively near 1.2615 and 1.2625, restricts the short-term upside of the pair.

“There is no question of surrendering Mariupol,” said Ukraine's Deputy Prime Minister Iryna Vereshchuk, per Ukrainska Pravda said Reuters, during early Monday morning in Asia.

While giving details, Kyiv Independent mentioned comments from Ukraine’s Vereshchuk are in response to the letter from Russia’s Defense Ministry saying it would only establish a humanitarian corridor if Mariupol surrenders.

S&P 500 Futures pause four-day uptrend

The news weighs on the market’s risk appetite while signaling additional geopolitical tensions between Ukraine and Russia. As a result, S&P 500 Futures snap the four-day winning trajectory around 4,450 by the press time.

Read: Ukraine's Zelenskiy presses Israel for missile defence help, fighting rages in Mariupol

• USD/JPY has surged sharply as the yen weakens on unchanged BOJ’s monetary policy.
• Yearly Japan’s National CPI has landed at 0.9%, well below the upside cap of 2%.
• This week Fed Powell’s speech and Biden-NATO meet will remain in focus.

The USD/JPY has witnessed a bullish open-test drive session on Monday, which usually denotes a carry-forwarded buying from the previous trading session. The pair opened at 119.12, witnessed a minor amount of offers. Later, the major bounced back sharply and breached the opening price decisively, which sent the pair towards 119.30, at the time of writing.

The Bank of Japan (BOJ) kept the interest rate unchanged at -0.1%. The decision from the policymakers was very much in-line with the market consensus. BOJ Governor Haruhiko Kuroda preferred to stick to an unchanged policy led by capped inflation print in Japan. The Statistics Bureau of Japan reported the yearly National Consumer Price Index (CPI) at 0.9% on Friday, much higher than the previous print of 0.5% and market consensus of 0.3 but well below the upside cap of 2%. This has underpinned the greenback against the Japanese yen.

On the dollar front, the US dollar index (DXY) is oscillating in a narrow range of 98.13-98.30 as investors await the first speech from Federal Reserve (Fed)’s Chair Jerome Powell after raising the interest rates for the very first time post the pandemic of Covid-19. The speech from Fed’s Powell will provide guidance for the likely monetary policy action going forward. Apart from that, investors will also focus on US President Joe Biden's meeting with the NATO allies. The central spotlight of the meeting will be the diplomatic solution to bring a ceasefire in the Russia-Ukraine war. Moreover, the Russian economy may face more sanctions post the Biden-NATO meet.

“The latest NZIER Consensus Forecasts show an upward revision to the near-term growth outlook for the New Zealand economy, but softer growth is forecast for the subsequent year,” said the New Zealand Institute of Economic Research (NZIER) in its latest report published during early Monday morning in Asia.

It should be noted that NZIER revised up 2021-22 GDP forecast to 5.2% from 4.3% (expected in December) but anticipated 2022-23 growth to ease from 4.6% previous forecast to 3.6%.

Additional quotes

NZD/USD drops

The news exerts additional downside pressure on the NZD/USD prices as the quote drops back towards the intraday low of 0.6888.

Read: NZD/USD begins the week on a back foot around 0.6900 on mixed NZ trade data, Ukraine woes

• EUR/USD stays depressed after the first positive week in six.
• Bearish MACD signals, failure to cross five-week-old resistance line keep sellers hopeful.
• Short-term support line holds the key to further weakness, 200-SMA adds to the upside filters.

EUR/USD begins the trading week on a back foot around 1.1045, after snapping the five-week downtrend.

The major currency pair’s latest weakness takes clues from Thursday’s failure to cross a downward sloping resistance line from February, as well as bearish MACD signals.

However, the 100-SMA and a two-week-old rising trend line, respectively around 1.1030 and 1.0990, challenge short-term downside.

In a case where EUR/USD prices drop below 1.0990, the odds of witnessing the quote’s south-run towards the mid-month bottom surrounding 1.09000 can’t be ruled out.

Meanwhile, recovery moves will initially aim for the aforementioned resistance line, at 1.1105 by the press time.

Following that, the 200-SMA level of 1.1200 will be crucial to watch for the EUR/USD pair’s further upside momentum.

In a case where the pair rises past 1.1200, a horizontal area from early February, near 1.1270-80 will challenge the bulls.

EUR/USD: Four-hour chart

Trend: Further weakness expected

• The cable is consolidating ahead of the announcement of the UK’s CPI.
• The BOE has raised its interest rates despite the intensifying fears of stagflation in Europe.
• The first Powell’s speech after raising the interest rates will hold significant importance.

The GBP/USD is trading lackluster in a narrow range of 1.3170-1.3177 in early Tokyo as investors are limiting their positions ahead of the announcement of the UK’s Consumer Price Index (CPI) numbers by the Office for National Statistics, which is due on Wednesday. A preliminary estimate for the yearly UK’s CPI is likely to land at 5.9% against the previous print of 5.5%.

It is worth noting that the Bank of England (BOE) raised its interest rates by 25 basis points (bps) on Thursday. This was the third time that the BOE raised their benchmark rates by a quarter to the percent consecutively. Also, the BOE is the first central bank that raised its interest rates after the pandemic of Covid-19 when all economies were keeping their interest rates near zero to bring their economic growth near the pre-Covid levels.

To tame the soaring inflation, the BOE has been aggressively tightening its liquidity despite the intensifying fears of stagflation in Europe. The escalation of the Ukraine crisis post the Russia's invasion of Ukraine has raised concerns over the growth of the European economy. The consequences of supply chain bottlenecks and roaring commodity prices may halt the economic growth in addition to rising prices of the products.

Meanwhile, the US dollar index (DXY) is trading subdued on Monday as investors await a speech from the Federal Reserve (Fed)’s Chair Jerome Powell, which is due on Wednesday.

“Russian and Ukrainian forces fought for control of the port city of Mariupol on Sunday, local authorities said, while Ukrainian President Volodymyr Zelenskyy appealed to Israel for help in pushing back the Russian assault on his country,” said Reuters during early Monday morning in Asia.

Key quotes

Market reaction

The news probed Antipodeans during the week-start trading, weighing NZD/USD to sub-0.6900 after an upbeat week.

Read: NZD/USD begins the week on a back foot around 0.6900 on mixed NZ trade data, Ukraine woes

Latest comments from various European Central Bank (ECB) policymakers highlight indecision over the market’s rate-hike expectations.

ECB Vice President Luis de Guindos told a German newspaper, “The European Central Bank will take action if it sees second-round inflation effects and a de-anchoring of medium-term inflation expectations,” per Reuters.

On the same line were comments from Governing Council member Klaas Knot who mentioned, “Market expectations of an interest-rate increase ‘later this year’ are ‘quite realistic’,” according to an interview with Les Echos per Bloomberg.

It’s worth noting ECB policymaker Robert Holzmann was quoted by Austrian news as saying, “The bank could send a clear message about fighting inflation by raising interest rates before ending its stimulus programme of bond purchases.” The policymaker adds, “The system of bond purchases is difficult for the population to understand. An interest rate increase would have been a signal that everyone would have understood.”

FX implications

EUR/USD begins Monday’s trading mostly unchanged around 1.1050 after witnessing the first positive week in six.

Read: EUR/USD Weekly Forecast: Corrective advance over?

• Gold prices are likely to remain positive amid the uncertainty over the Biden-NATO meet.
• The speech from Fed’s Chair Jerome Powell will hold significant importance.
• A confluence of the trendline, 50% Fibo retracement and oversold RSI may fetch bids near $1,920.

Gold (XAU/USD) has found significant bids on Monday amid the uncertainty over the outcome of the meeting between NATO allies and US President Joe Biden in Brussels, which is due on Thursday. The agenda of the meeting is to take further steps necessary to bring a ceasefire in the Russia-Ukraine war. The outcome of the meeting may bring fresh sanctions for Moscow. Also, US President Joe Biden will attend the European Union (EU) summit on the same day.

The uncertainty over the Biden-NATO meet will hold the nerves of the market participants and a firmer risk-on impulse may pause till the outcome of the meet.

The recent meeting between Biden and XI on Russia’s invasion of Ukraine is ended with the confirmation of no financial aid to Russia from China that could help it to ease out the impact of recent sanctions from the Western leaders. The central spotlight remained on the Russia-Ukraine war and both nations favored a diplomatic solution. Apart from that, Biden warned that Beijing would face ‘consequences’ if it provide material support to Moscow.

Meanwhile, the US dollar index (DXY) has opened flat on Monday ahead of the speech from the Federal Reserve (Fed)’s Governor Jerome Powell, which is due on Wednesday. The speech may provide fresh insights into the current economic position and possible monetary action.

Gold Technical Analysis

On an hourly scale, XAU/USD is trading near 50% Fibonacci retracement (placed from March 16 low at $1,895.15 to March 17 high at $1,949.18) at $1,923.05. The precious metal may find a pullback near the trendline placed from March 10 high at $2,009.26. The Relative Strength Index (RSI) (14) shifted in a bullish range of 60.00-80.00 after sensing barricades near 60.00 multiple times. Now, the RSI (14) has turned oversold after slipping below 40.00, which will come out as a buying opportunity for the market participants.

Gold hourly chart

• NZD/USD struggles to keep weekly gains on risk-aversion, mixed data.
• New Zealand’s Exports improved, Imports ease while trade deficit widened in February.
• Ukraine-led woes escalate, Russia pushes for surrendering Mariupol.
• PBOC interest rate decision, second-tier US data will entertain traders but risk catalysts are the key for fresh impulse.

NZD/USD fails to extend the weekly gains while flashing a downtick to 0.6890, around 0.6900 during early Monday morning in Asia. In doing so, the Kiwi pair justifies an increase in the yearly trade deficit while also bearing the burden of the recent challenges to market sentiment from the Ukraine-Russia front.

New Zealand Trade Balance dropped to $-837B from $-7.77B prior but improved on MoM to $-385M versus $-1126M previous readouts. The Imports and Exports data, however, also came in mixed as Imports declined to $5.88B from $5.92B prior whereas Exports rose past $4.88B previous readings to $5.49B.

Elsewhere, talks between US President Joe Biden and his Chinese counterpart Xi Jinping failed to offer any positive headlines over Ukraine. On the contrary, mentioning the Taiwan issue added to the risk-off mood.

It’s worth noting that geopolitical conditions in Mariupol worsened on Sunday with Ukraine and the Russian military using higher forces. “Russian and Ukrainian forces fought for control of the port city of Mariupol on Sunday, local authorities said, while Ukrainian President Volodymyr Zelenskyy appealed to Israel for help in pushing back the Russian assault on his country,” said Reuters.

On the other hand, RIA News quoted Russian Defense Military as saying, “Ukraine has until early hours of March 21 to give its answer on surrendering Mariupol.”

It should be observed that Friday’s downbeat US housing data and the Fed’s action in the last week kept equities firmer and weighed on the US Treasury yields, as well as the US Dollar Index (DXY).

That said, the latest bout of sour sentiment can weigh on the NZD/USD prices while the monetary policy meeting by the People’s Bank of China (PBOC) will also be eyed as an immediate catalyst. Following that, the US Chicago Fed Manufacturing Index for February will be important to watch.

Technical analysis

NZD/USD pair’s latest pullback from the 200-DMA, around 0.6915 by the press time, directs the quote towards the 100-DMA re-test, near 0.6805 at the latest. However, any further declines will be challenged by an upward sloping support line from January, close to 0.6750, as well as the 50-DMA level of 0.6738.

Meanwhile, recovery moves beyond the 200-DMA level of 0.6915 will be challenged by an upward sloping resistance line from January 13, at 0.6935 by the press time.

• AUD/USD braces a positive start following the firmer performance of last week.
• Speeches from Fed Chair Jerome Powell and RBA’S Governor Philip Lowe will hold significant importance.
• The risk-on impulse will keep the aussie underpinned against the greenback.

The AUD/USD pair is likely to carry-forward the last weeks’ decent performance amid a risk-on impulse in the FX domain and may open on a positive note on Monday. The Aussie found a firmer buying interest after displaying a subdued performance in the first trading session of the last week.

This week the investors will keep an eye over the interest rate decision from the People’s Bank of China (PBoC), which is due on Thursday. It is worth noting, that the PBoC kept its policy rate unchanged at 3.7% despite a resurgence of Covid-19 in the Chinese economy. Australia, being a leading exporter to China may find some decent buying interest if PBoC reduces their rates.

Adding to that, the speech from the Reserve Bank of Australia (RBA)’s Governor Philip Lowe will remain a major driver for the spot. The speech from the RBA’s Chair Philip Lowe will guide the investors about the likely monetary policy action from the RBA in April.

Meanwhile, Australia’s administration has decided to ban alumina exports to Russia. Russian economy addresses 20% of its alumina needs from Australia and on that Australian government has claimed that the move will limit Russia's capacity to produce aluminum, which is a critical export for Russia, as per Reuters. On the contrary, the antipodean has announced that it will donate at least 70,000 tonnes of thermal coal to Ukraine hat will help the nation in meeting its energy needs.

On the dollar front, the US dollar index (DXY) is likely to remain subdued after the announcement of an interest rate hike by the Federal Reserve (Fed) last week. This week the speech from the Fed’s Chair Jerome Powell will keep the DXY investors on their toes, which is due on Wednesday.