CFD Markets News and Forecasts — 21-03-2022

• Oil prices are firmer on the bull cross of 50 and 200-period EMAs, indicating more gains ahead.
• The RSI (14) is juggling in a bullish range of 60.00-80.00, which adds to the upside filters.
• WTI is hovering in the mid of 50% and 61.8% Fibo retracement.

West Texas Intermediate (WTI), future on NYMEX, is trading around $111.00 after a juggernaut rally from March 16 low at $92.69. The oil prices have boiled significantly from the last week and a gain of almost 17% has been recorded.

On the hourly scale, oil prices have surpassed the 50% Fibonacci retracement (placed from March 8 high at $126.51 to March 15 low at $92.37), which is placed at $109.55. The trendline placed from March 16 low at 92.69, adjoining the March 18 low at $100.85 will continue to act as major support for the oil counter.

A bull cross, represented by the 50 and 200-period Exponential Moving Averages (EMAs) crossover, placed at $102.46, points to more gains ahead.

The Relative Strength Index (RSI) (14) is oscillating in a bullish range of 60.00-80.00, which signals more upside ahead.

Should the asset violate the March 10 high at $111.90, the placement of significant bids will push the oil prices higher to 61.8% Fibo retracement at $113.50. Breach of the latter will send the black gold to the round level at $115.00.

On the contrary, bears may lose control if the asset skids below Tuesday’s low at $110.00, which will drag the oil prices to the above-mentioned trendline at $108.60, followed by a 50-period EMA at $106.66.

WTI hourly chart

• GBP/JPY remains on the front foot for the third consecutive day around five-week top.
• Clear upside break of five-month-old resistance line, bullish MACD favor buyers.
• Short-term bull cross adds to the upside bias, 10-DMA restricts immediate downside.

GBP/JPY holds onto the week-start gains around 157.50, the highest levels since early February, as bulls stay firmer beyond the key hurdle during Tuesday’s Asian session.

The cross-currency pair rallied past a downward sloping resistance line from October 2021 the previous day, now support around 157.30.

The trend line breakout takes clues from the bullish MACD signals and the 10-DMA’s piercing off the 21-DMA, known as a bull cross, to suggest the quote’s further upside.

That said, February’s high near 158.10 gains the immediate attention of the GBP/JPY bulls ahead of the October 2021 peak of 158.22.

In a case where the pair rallies past 158.22, June 2016 high near 160.15 will gain the market’s attention.

Alternatively, pullback moves remain less worrisome until staying beyond the resistance-turned-support line near 157.30.

Following that, the 10-DMA and the 21-DMA levels, surrounding 155.00 and 154.35 respectively, will act as the last defenses for the GBP/JPY bulls.

GBP/JPY: Daily chart

Trend: Further upside expected

• USD/CAD remains sidelined after refreshing multi-day low the previous day.
• WTI crude oil prices rise to fresh high since March 10 following an upbeat week-start.
• Market sentiment remains sour as yields rally on Fedspeak.
• Second-tier data, Canada’s Annual Budget Release may entertain traders but risk catalysts, Fedspeak are the key for clear directions.

USD/CAD struggles to overcome the eight-week low, flashed the previous day, by taking rounds to 1.2600 during Tuesday’s initial Asian session.

The loonie pair dropped for the fifth consecutive day at the latest as prices of Canada’s key export item, WTI crude oil, renewed weekly high. However, hawkish comments from the Fed policymakers and firmer US dollar challenged the sellers afterward.

That said, WTI crude oil prices extend the previous four-day uptrend around $111.00, up 0.25% at the latest.

The black gold’s latest recovery could be linked to the geopolitical risks emanating from Ukraine and Saudi Arabia. Recently, Ukraine President Volodymyr Zelenskyy recently mentioned that no immediate decision is possible on occupied Ukrainian territory per Interfax. Additionally, US President Joe Biden also cited fears of a cyberattack against the US.

Elsewhere, the US dollar took clues from the Treasury yields that rallied on upbeat Fedspeak. Atlanta Fed President Bostic and Richmond Fed’s Barkin initially promoted the US central bank’s ability to restrain inflation, indirectly signaling a faster pace of the rate hike. The comments got additional back up from Fed Chair Jerome Powell who said, “The Fed will raise rates by more than 25bps at a meeting or meetings if necessary.”

It’s worth noting that the US 10-year Treasury yields rallied to the fresh high since May 2019 after rising almost 15 basis points (bps) to 2.32% at the latest. The firmer yields weighed on the Wall Street benchmarks after the best week since November 2020.

Looking forward, comments from Fed Chair Jerome Powell will be eyed closely for fresh impetus while Canada’s Industrial Production Price and Raw Material Price Index for February will also direct short-term moves. However, major attention will be given to the Russia-Ukraine headlines and Fedspeak for a clearer view.

Technical analysis

A daily closing below the 200-DMA, around 1.2615 by the press time, directs USD/CAD bears towards an upward sloping support line from late October 2021, close to 1.2560 at the latest.

• EUR/USD struggles to defend the corrective pullback from 200-HMA, fortnight-long support line.
• Downbeat RSI joins short-term descending resistance line, 50-HMA to keep sellers hopeful.
• Bulls need validation from monthly high, sellers may aim for a mid-March swing low under 1.1010.

EUR/USD bears take a breather around 1.1020 during the initial Asian session on Tuesday, following a U-turn from short-term key support a few hours back.

The major currency pair’s rebound from a convergence of the 200-HMA and an upward sloping trend line from March 07 failed to gain support from the RSI, which in turn suggests another attempt to conquer the 1.1010 crucial support levels.

Following that, Friday’s bottom surrounding the 1.1000 psychological magnet may act as a validation point for the EUR/USD south-run targeting the March 14 swing low near 1.0900.

Meanwhile, the pair’s further recovery will aim for the 1.1050 resistance level comprising the 50-HMA and descending trend line from Thursday.

That said, the EUR/USD bull’s ability to cross the 1.1050 hurdle isn’t a guarantee to the pair’s rally as the early March’s top near 1.1120 and the monthly peak surrounding 1.1140 will act as additional filters to challenge the upside momentum.

Overall, EUR/USD prices are likely to consolidate the previous week’s recovery moves.

EUR/USD: Hourly chart

Trend: Further weakness expected

• USD/JPY has inked a fresh six-year high at 119.50 as DXY strengths on six more rate hikes in 2022.
• An unchanged BOJ’s policy has weighed pressure on the Japanese yen.
• This week: Fed Powell’s speech, Biden-NATO meeting, and Japan’s CPI will hold significant importance.

The USD/JPY pair has printed a fresh six-year high at 119.50 as DXY strengthens amid rising bets over six more rate hikes by the Federal Reserve (Fed) this year and souring market mood on uncertainty over the US President Joe Biden meeting with NATO allies on Thursday.

To corner the galloping inflation, Fed has been ‘loud and clear that the market participants should start bracing aggressive policy tightening this year. Fed policymakers have increased their interest rates by 25 basis points (bps) last week and are drawing an action plan to put forward six more rate hikes this year. This has underpinned the greenback against the Japanese yen. On the contrary, the Bank of Japan (BOJ) has kept its interest rate policy unchanged on Friday, which has also contributed to driving the asset higher.

The US dollar index (DXY) has overstepped 98.00 amid souring market sentiment. US President Joe Biden will meet other NATO allies on Thursday for a diplomatic solution to the Russia-Ukraine war. This may also lead to additional sanctions on the Russian economy and henceforth escalation in the tensions between the nations. Meanwhile, the 10-year US Treasury yields have surged near 2.3% as the US economy is shifting out from the new normal of grounded interest rates.

Although the headlines from the Russia-Ukraine war will remain a major drive, investors will also focus on Fed’s Chair Jerome Powell's speech, which is due on Wednesday. While the Japanese docket will report Consumer Price Index (CPI) numbers on Thursday.

• AUD/USD seesaws around two-week top after the week-start advances.
• Aussie Treasury yields rallied to three-year high, US bond coupons jumped as Fed speakers uttered faster rate hikes, inflation fears.
• Ukraine President Zelenskyy said no immediate solution possible on occupier territory.
• Speech from RBA’s Lowe will provide immediate direction, Fed’s Powell, risk catalyst eyed as well.

AUD/USD remains sidelined around the highest levels in two weeks, despite the recently sluggish moves near the 0.7400 threshold. That said, the quote snapped a four-day uptrend on Monday before trading mostly sluggish during Tuesday’s early Asian morning.

The Aussie pair witnessed a softer start to the week, after witnessing the bull’s play in the last, as comments from the Federal Reserve (Fed) policymakers and geopolitical fears from Ukraine, as well as anti-risk moves in China, challenge the bulls. Also testing the pair’s immediate moves is the cautious sentiment ahead of the Reserve Bank of Australia’s (RBA) Governor Philip Lowe at the Walkley Awards for Business Journalism.

Atlanta Fed President Bostic and Richmond Fed’s Barkin initially promoted the US central bank’s ability to restrain inflation, indirectly signaling a faster pace of the rate hike. The comments got additional back up from Fed Chair Jerome Powell who said, “The Fed will raise rates by more than 25bps at a meeting or meetings if necessary.”

It’s worth noting that the hopes of faster monetary policy normalization propelled the US Treasury yields and weighed on the Wall Street benchmarks, also fueling the Aussie bond coupons to refresh multi-month high around 2.7% of late.

However, the US dollar failed to cheer the comments despite posting the second positive daily close.  It’s worth noting that February’s Chicago Fed National Activity Index rose past 0.29 expectations to 0.51, versus 0.59 prior (revised).

Elsewhere, the People’s Bank of China (PBOC) announced no change in the monetary policy and parted ways from the global bankers, which in turn joined firmer gold prices to help the AUD/USD battle with the bears. On the contrary, record high daily covid infections from China and fresh geopolitical fears from Saudi Arabia exert additional downside pressure on the quote.

In the case of the Ukraine-Russia crisis, Kyiv Leader Volodymyr Zelenskyy recently mentioned that No immediate decision is possible on occupied Ukrainian territory per Interfax. Additionally, US President Joe Biden also cited fears of a cyberattack against the US.

Despite multiple challenges to the sentiment, AUD/USD traders await comments from RBA Governor Philip Lowe amid hopes of witnessing any changes in the bias from the RBA Minutes that backed no rate hike.

Technical analysis

Unless declining back below 0.7370, AUD/USD remains on the way to challenge a horizontal resistance area from October 2021 around 0.7430-40.

US President Joe Biden crossed wires, via Reuters, late Monday while warning the CEOs to protect their companies against cyber attacks and invest in cybersecurity.

Also read: Ukraine President Zelenskyy: No immediate decision possible on occupied Ukrainian territory – Interfax

Additional comments

Putin's back is against the wall and he is talking about new false flags such as biological weapons.

That is a clear sign Putin is considering using both biological and chemical weapons.

FX reaction

The news adds to the Western hard stand against Russia and flagging of risk-off mood ahead. In a reaction, the Wall Street benchmarks closed in the red while Antipodeans remain pressured during the early Asian session on Tuesday.

Read: AUD/JPY struggles at 88.50 ahead of RBA’s Lowe speech

• The Australian dollar finished its four-day rally vs. the JPY.
• US equity indices finished with losses on a risk-aversion session.
• AUD/JPY Price Forecast: Upwards, but might consolidate ahead RBA’s Lowe.

The AUD/JPY rally lasted for four days as the cross-currency pair slid 0.10% on Monday, caused by a dampened market mood as hostilities between Russia and Ukraine persisted. As the Asian Pacific session begins, the AUD/JPY is trading at 88.35.

On Monday, US equity indices trading day ended in the red, reflecting risk-aversion in the financial markets. Meanwhile, in the FX space, the only gainer was the Canadian dollar, with the JPY being the laggard, followed closely by the EUR.

In the case of the Australian dollar, an absent economic docket left the pair adrift to pure market sentiment. With that said, the AUD/JPY overnight was subdued in a narrow 40-pip range, something worth noting due to the “normal” Average Daily Range (ADR) of 95-pips.

Late in the Asian session, at 01:00 GMT, the Reserve Bank of Australia (RBA) Governor Philip Lowe will talk at the Walkley Journalism awards. AUD/JPY traders need to be aware of it, as money market futures show that the investors expect RBA’s rates to finish around 1.46% by the end of 2022.

Due to the central bank policy divergence, the Bank of Japan’s (BoJ) staying dovish, while the RBA’s tilted neutral-hawkish, would favor the Australian dollar. That said, any Lowe’s “hawkish” comments could lift the AUD/JPY higher.

AUD/JPY Price Forecast: Technical outlook

The AUD/JPY is upward biased, as depicted by the daily chart. Nevertheless, Monday’s price action formed a dragonfly-doji right around the highs, so the pair might correct before resuming upwards, but the news could spur another leg-up as traders wait for RBA’s Lowe.

Upwards, the AUD/JPY first resistance would be 88.50. A decisive break upwards would expose the first resistance level, the R1 daily pivot point at 88.65. Once cleared, it would expose the R2 daily pivot at 88.90, followed by the 89.00 mark.

On the flip side, the AUD/JPY first support would be the daily pivot at 88.24. Breach of the latter would expose the S1 daily pivot at 87.98, followed by Monday’s low 87.88.

• GBP/USD juggles around 1.3160 ahead of UK’s CPI numbers.
• A higher CPI print may force the BOE to elevate the interest rate fourth time in a row.
• Risk-off impulse is barricading the cable to surpass 1.3200.

The GBP/USD pair is juggling in a narrow range of 1.3156-1.3170 as the market participants are waiting for the unfolding of the UK’s Consumer Price Index (CPI) numbers, which are due on Wednesday. A preliminary estimate for the UK’s CPI is 5.9%, much higher than the previous print of 5.5%.

The UK’s CPI numbers on Wednesday hold significant importance as the Bank of England (BOE) has increased its interest rates by 25 basis points (bps) last week. The BOE has elevated its borrowing rates for the third time in a row to corner the roaring inflation. Also, the BOE was the first central bank that raised its interest rates after the pandemic of Covid-19. So UK’s inflation print on Wednesday will dictate the likely monetary policy action by the BOE in its next policy announcement.

Apart from that, the British domain will also report the monthly and yearly Producer Prices Index (PPI) Core Output on Wednesday. A preliminary estimate for the monthly PPI Core Output is 0.9%, lower than the previous print of 1.1% while the yearly PPI Core Output is likely to land higher at 10% against the prior figure of 9.3%.

Meanwhile, the US dollar index (DXY) has reclaimed 98.00 decisively on rising bets over the six more interest rate hikes by the Federal Reserve (Fed) this year. Apart from that, the negative tone in the market amid uncertainty over the meeting between US President Joe Biden and NATO allies on Thursday has restricted the cable in a narrow territory.

Adding to the UK’s inflation, investors will also focus on speech Fed’s Chair Jerome Powell to get some more insights about the likely strategy of the Fed policymakers to tackle inflation, which is due on Wednesday.

“A meeting with Kremlin leader Vladimir Putin is necessary to determine Russia's position on ending the war he launched in Ukraine,” Interfax Ukraine news agency quoted President Volodymyr Zelenskyy as saying in a television interview, per Reuters.

The news cites Ukraine President Zelenskyy as adding, “It would not be possible to take a decision at such a meeting on what should be done with occupied territories in Ukraine.”

On the same line were headlines from S&P Global Ratings that said on Monday it will withdraw all of its outstanding ratings on Russian entities to comply with a ban from the European Union, per Reuters.

Market reaction

Given the risk-negative nature of the news, market sentiment remained sour following the announcements. Wall Street closed in the red after posting the best weekly advances since November 2020.

Read: Forex Today: Dollar surges with Powell’s comments

• Kiwi bulls have failed to record a fresh yearly high above 0.6926, have resulted in double top formation.
• A range shift in the RSI (14) to 40.00-60.00 indicates a consolidative activity further.
• Bulls are hopeful above 0.6923, which will send the asset towards 0.7000.

The NZD/USD pair is oscillating in a ted narrow range of 0.6866-0.6923 since Thursday after failing to print a fresh yearly high above 0.6926. The kiwi bulls have attracted some significant offers near 0.6923 on Monday, which signals a corrective pullback going forward. Moreover, the asset needs to wait a little more to resume rallying again.

On an hourly scale, NZD/USD has witnessed decent selling pressure after the successful test of March 7 high at 0.6923. Usually, a failure to print fresh highs signifies that investors have sensed it as an expensive bet and have gone for inventory distribution. The trendline placed from February 24 low at 0.6630, adjoining the March 15 low at 0.6729 will remain major support for the asset.

It is worth noting that the Relative Strength Index (RSI) (14) has shifted in a range of 40.00-60.00 from a bullish range of 40.00-60.00, which signals either a consolidation or a downside move in coming trading sessions.

Should the asset drops below the minor trendline around 0.6866, which is placed from March 17’s average traded price at 0.6865, the asset will slip near March 10 low at 0.6811, followed by the broader trendline line placed from February 24 low of 0.6630 at 0.6785.

For the upside, bulls need to overstep March 7 high at 0.6923, which will drive the kiwi bulls higher to 23 November 2021 high at 0.6965. Breach of the latter will push the pair towards the psychological barricade at 0.7000.

NZD/USD hourly chart

• The shared currency began on the wrong foot the week, 0.05% down.
• Risk-sentiment is off at the beginning of the week, as Russia-Ukraine talks stagnate.
• EUR/JPY Price Forecast: Upward biased but in consolidating.

The common currency rally against the Japanese yen stalled on Monday, courtesy of risk-aversion in the financial markets spurred by the Russia-Ukraine peace talks unable to progress amid global central bank tightening. At 131.61, the EUR/JPY reflects the abovementioned, as the safe-haven yen appreciates.

Wall Street’s finished the day with losses between 0.04% and 1%. Meanwhile, in the FX space, the Loonie rallied against most G8 currencies, while the JPY slightly gained vs. the euro.

Overnight, the EUR/JPY was subdued in the 131.60 area, but in the European session, it jumped towards the 132.00 area, only to find more sellers, which pushed the pair to the 131.40s area.

EUR/JPY Price Forecast: Technical outlook

Daily chart

The EUR/JPY is upward biased, though it faced strong resistance at the 132.00 mark. However, the EUR/JPY might consolidate, as the 78.6% Fibonacci level lies just at 131.28, meaning that the pair might trade in a narrow range before resuming upwards.

Hourly chart

The EUR/JPY 1-hour chart portrays the pair in consolidation, between the 131.00-132.00 range. Above the exchange rate lies the 50-simple moving average (SMA) at 131.61, while the 100 and the 200-SMA lie at 131.09 and 129.86, respectively. The EUR/JPY is upward biased, though downside risks remain.

If the cross-currency pair is going upwards, the first resistance would be the 50-SMA at 131.61. Breach of the latter would expose 132.00, followed by 132.50. On the flip side, the EUR/JPY first support would be the 78.6% Fibonacci level at 131.28. Once cleared, the next support could be the 100-SMA at 131.09, followed by the 131.00 mark. A sustained break would expose the area of the 200-SMA at 129.86 and the 130.00 mark.

• GBP/JPY advanced above 157.00 on Monday despite a somewhat risk-off market feel and is eyeing annual highs near 158.00.
• The pair was lifted by a surge in UK yields in tandem with their global peers.
• With dovish vibes expected from BoE’s Bailey later this week and fragile risk appetite, further upside may be more limited.

GBP/JPY’s post-dovish BoE policy announcement weakness last Thursday is now well in the rearview mirror, with the pair confidently pushing to the north of the 157.00 level and eyeing a test of annual highs around 158.00. It was a slightly risk-off session on Monday, with US equities falling as energy prices rose sharply, keeping inflation fears alive, while hawkish remarks from Fed Chair Powell stocked fears about the pace of US monetary policy tightening. That might typically weigh on GBP/JPY, but another key feature of Monday trade was a big rally in global (non-Japan) bond yields, led by a move higher in US yields.

The yen is sensitive to rising rates internationally as the Bank of Japan keeps yields fixed around zero all the way up to 10 years out with its Yields Curve Control policy. The fact that UK yields were up more than 10bps all the way across the curve has thus contributed to a significant widening of UK/Japan rate differentials, thus encouraging yen to sterling flows. After breaking above all of its major moving averages in the last few weeks, GBP/JPY still looks very much odds on to test annual highs around 158.00.

But traders would be wise not to count on rising UK yields pushing the pair ever higher as, say, has been the case with US yields and USD/JPY as of late. While this week’s UK Consumer Price Inflation data out on Wednesday might well further spice up, BoE Governor Andrew Bailey is likely later in the day to remind markets that only “modest” further tightening “might” be likely. Indeed, the BoE sounded much more worried about growth risks and the hit to real incomes over the coming months than it did about containing inflation.

Against the backdrop of a BoE likely to underwhelm the market’s tightening expectations, the prospect for a sustained break above 158.00 in the near term isn’t great. Not unless there is a massive further spurt in risk appetite (i.e. global equities recovering ground like they did last week). Amid seemingly stagnant Russo-Ukraine peace talk progress and a Western coalition likely to continue toughening Russia sanctions (the chatter now is of an EU embargo on Russian oil), plus also rising recession fears as the Fed warns of faster tightening ahead, the prospect for a continued risk appetite rally isn't good.

• Spot gold has advanced on Monday despite the US dollar and yields rising in wake of hawkish Powell commentary.
• XAU/USD is in the $1940 area and eyeing recent highs around $1950 as inflation and geopolitical concerns linger.

Spot gold (XAU/USD) has mostly been trading on the front-foot during US trading hours, despite the latest remarks from Fed Chair Jerome Powell, which struck market participants as far more hawkish than expected and boosted the US dollar/yields. Gold has rallied from early session sub-$1920 per troy ounce lows to current levels in the $1940 region, where it trades about 1.0% higher on the day. Last Thursday and Friday’s higher in the $1950 area are for now capping the price action.

Powell said that the Fed needs to move expeditiously to get interest rates back to neutral, warning that could mean rate hikes of greater than 25bps intervals and said that the Fed might need to take rates above neutral. Some analysts said his remarks were nothing more than a reiteration of his post-Fed policy announcement remarks from last week, but markets responded by further upping the implied probability of a 50bps move in May to above 60% (from around 50% prior to his commentary).

The subsequent move higher in the US dollar (DXY +0.25%) and US bond yields (2s +17bps, 10s +15bps) would typically weigh on gold demand by making it more expensive for the holders of non-US dollar currency and via a higher “opportunity cost” of holding non-yielding assets. But risk-off market conditions (US equities are a little lower across the board) seem to be spurring some safe-haven demand, while a sharp upside in crude oil markets is keeping inflation fears alive and thus spurring some safe-haven demand. Oil prices have flown around $8.0 higher (in WTI) on the session as momentum towards an EU-wide embargo on Russian oil exports build.

Another bullish factor for gold is the fact that Russo-Ukraine peace talks appear to have largely stagnated, with no progress seen over the weekend, all while the brutality of the Russian assault on various Ukrainian cities rises. Hence, the momentum towards ever-stricter sanctions against the Russian economy remains strong. The calculation right now for gold appears to be that there is still plenty enough reason to continue adding to longs on any pullback to the $1900 area.

• The common currency slides some 0.34% as the New York session is about to expire.
• Risk-aversion keeps market players underpinning the greenback as US Treasury yields rise.
• EUR/USD Price Forecast: Downwards and a break below 1.1000 would exacerbate a renewed test of the YTD low around 1.0806.

The shared currency retraces from daily highs around 1.1070s, reflecting the risk-aversion of market players, as peace talks between Russia-Ukraine languish, as Fed and ECB speakers crossed the wires amid an absent economic docket. At 1.1017, the EUR/USD portrays the US dollar strength.

Fed Chair Powell, send 5s above 10s on hawkish remarks

Late in the New York session, the EUR/USD dropped as Federal Reserve Chief Jerome Powell spoke at NABE annual conference. At the same time, the US Dollar Index, a gauge of the greenback’s value vs. a basket of six majors, advances 0.27%, sitting at 98.502, while US Treasury yields rise sharply, with the 5-year sitting at 2.336%, higher than the 10-year T-note yield at 2.319%.

Jerome Powell said that the Fed would take the “necessary steps” to tame inflation towards the bank’s target of 2%, even if it needs to hike rates more than 25 basis points at a meeting or meeting. Furthermore, Powell added that “if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”

Aside from this, some ECB speakers crossed the wires earlier in the European session. Vice President Luis de Guindos said that inflation is to stay firm longer than seen before. At the same time, ECB’s Klaus Knot noted that a hike this year is “realistic” in the same tone as ECB’s Holzmann, who said that a rate rise could send a clear message that the ECB is committed to tackling inflation, even before ending the QE.

Meanwhile, ECB’s President Madame Lagarde said that bottlenecks, energy, and food were pushing short-term inflation and added that the Ukraine war would have growth consequences in the Euro area.

Read more:

• Fed Chair Powell: Reiterates expectations that at the coming meeting will begin balance sheet reduction
• Fed Chair Powell: I don’t see an elevated likelihood of a recession in the next year

EUR/USD Price Forecast: Technical outlook

The EUR/USD bias is downwards, as shown by the daily chart. Even though in the last week, the common currency recovered some ground, the uptrend stalled at the mid-parallel line between the central and top Pitchfork’s parallel lines, around the 1.1100 mark, retreating to the 1.1000 area, as EUR/USD bears aim to push the pair towards the 1.1000 figure.

The euro’s first support would be 1.1000. A sustained break would expose the confluence of Pitchfork’s central line and the 1.0900  mark, and then the YTD low March 7 low at 1.0806.

What you need to take care of on Tuesday, March 22:

The greenback started the American session on the back foot but strengthened following comments from US Federal Reserve chief Jerome Powell. Speaking about the economic outlook at the National Association for Business Economics Annual Economic Policy Conference, Powell said that if they need to raise fed funds rate by more than 25 bps at a meeting or meetings, they will do so, adding that in times when circumstances change swiftly, Fed predictions might become out of date soon.

Also, he noted that the central bank is focused on restoring price stability while maintaining a healthy labor market.  However, he added that “inflation is much too high” and that a reduction of the balance sheet could come as soon as the May meeting, but no decision has been made.

Fed Funds Futures imply traders see a 60.7% chance of the Fed raising rates 50 basis points in May, up from about 52% before Powell's comments.

Wall Street edged lower while government bond yields soared. The yield on the 10-year Treasury note peaked at 2.30%, while that on the 2-year note hit 2.12%. Among US indexes, the S&P posted a tepid decline, while the DJIA was the worst performer, down over 300 points.

Also, other Fed officials came out with hawkish comments.  Richmond Fed President Thomas Barkin said the US economy is no longer in need of aggressive Fed support and that supply chains, the virus and now the war are all still impacting inflation. On the other hand, Raphael Bostic said that the increased uncertainty has reduced confidence and is now appropriated to move into a highly aggressive rate path. He predicted six rate hikes for this year and two more in 2023.

The EUR/USD pair hovers around 1.1010, while the GBP/USD pair trades at around 1.3150. AUD/USD battles around 0.7400 while USD/CAD trades near a fresh low of 1.2564, helped by rising gold and oil respectively.

Meanwhile, the Eastern Europe war is keeping west leaders on their toes. Concerns gyrate around the European dependence on Russian energy affects economic growth in the Union, with massive sanctions in the middle. Government bond yields are on the rise as speculative interest fears inflation will heat up further on the back of soaring oil and gas prices. The German government said it maintains its position that the country cannot function without Russian oil imports.

At the same time, Russia’s Deputy PM Novak said that crude oil price might rise to $300 a barrel if Russian oil is shunned, but that's unlikely. The commodity soared, with WTI now trading at around $110.00 a barrel.

Gold started the day with a soft tone but managed to post modest gains, now changing hands at around $1,930 a troy ounce.

XRP price swallows sellers as Ripple marches higher

• The USD/CHF is advancing so far in the week, some 0.10%.
• Risk-aversion in the financial markets boosts the greenback as low-yielder peers drop.
• USD/CHF Price Forecast: Neutral-upwards if it remains above 0.9250.

USD/CHF incurred earlier losses during the North American session amid a risk-off market mood due to Russia-Ukraine woes while Fed’s Chair Powell crossed the wires. However, jumped of those lows, and at the time of writing, the USD/CHF is trading at 0.9326.

The market sentiment is downbeat, as portrayed by US equities, dropping. The US Dollar Index, a gauge of the greenback’s value against a basket of its rivals, gains some 0.16%, sits at 98.30, underpinned by Jerome Powell’s remarks.

Read more:

• Fed Chair Powell: Reiterates expectations that at the coming meeting will begin balance sheet reduction
• Fed Chair Powell: I don’t see an elevated likelihood of a recession in the next year

Overnight, the USD/CHF began the week near last Friday’s close and jumped near the 200 and 50-hourly simple moving averages (SMAs), falling afterward near the S1 daily pivot at 0.9292 amidst a risk-off market mood which favored the Swiss franc.

USD/CHF Price Forecast: Technical outlook

The USD/CHF bias is neutral-upwards. In the last four days, the pair underwent a correction from around 0.9470s (a new YTD high) towards February 10 daily high, previously resistance-now-support at 0.9296. Further, as portrayed by the daily chart, the USD/CHF appears to be ready to resume the uptrend. Monday’s candlestick price-action is forming a doji after a downtrend, meaning “indecision” of USD/CHF traders.

That said, upwards, the USD/CHF first resistance would be January 31 daily high at 0.9343. A decisive break would expose November 24, 2021, a daily high at 0.9373, followed by 0.9400. On the flip side, the USD/CHF first support would be the 0.9300 mark, followed by 0.9296, followed by an eleven-month-old downslope trendline, previous resistance-turned-support around the 0.9260-75 area.

Fed Chair Jerome Powell remarked in a speech on Monday that he doesn't see an elevated likelihood of a recession in the next year, reported Reuters. 

Additional Remarks:

"It's hard to say what the economy will look like in wake of recent events, but no one is sitting around waiting for the old regime to come back."

"Climate change policy could affect relative price changes."

"It's a strong economy."

"The economy can handle less-accommodative monetary policy."

"This is a labor market that is out of balance."

"It is a great labor market for workers, but we need it to be sustainably tight."

"The strong labor market could be more sustainable if demand was brought back into line with supply."

"You could make a case that labor shortage will trigger more investment... I do think that will happen in the service industry."

"That could boost productivity and make high wage increases more sustainable."

"Financial conditions have tightened since late last year."

"We want to get back to a place that's away from highly accommodative conditions."

"In the medium term, I don't see a conflict between employment and inflation goals."

"The best thing we can do to keep a strong labor market is to stabilize prices."

"I tend to look at shorter part of the yield curve, not 2s to 10s."

Fed Chair Jerome Powell reiterated on Monday his expectations that at the upcoming Fed meeting, the central bank will begin the process of balance sheet reduction, a process to last three years. Monetary quantities are not an important part of the inflation story at this time, Powell noted, saying that having a strong labour market is important and a big focus. The current labour market is much tighter and hotter than before the pandemic, Powell added. 

• The New Zealand dollar retreats from last week’s highs due to a downbeat market mood.
• Fed’s Powell: If needed, the fed would raise rates more than 25 bps at a meeting or meetings.
• NZD/USD Price Forecast: Neutral-upwards, a daily close above the 200-DMA is required to extend the uptrend further.

The NZD/USD begins the week with losses as it drops during the New York amid a risk-off market mood, due to the continuation of Russia’s invasion of Ukraine, as peace talks stagnate. At the time of writing, the AUD/USD is trading at 0.6892.

Fed speaking and geopolitical jitters grab headlines

Meanwhile, US Federal Reserve Chair Powell is crossing newswires. He said that economic projections could become outdated at times like this. Furthermore, he said that Fed’s actions and balance sheet reductions would bring inflation at the bank’s target of 2% in three years. Powell added that the central bank would set policy looking at the actual progress on inflation and emphasized that the Fed would hike more than 25 basis points if needed.

Elsewhere, the Russia – Ukraine conflict extends for the fourth consecutive week. Over the weekend, Ukraine’s President Zelensky said that he was ready to negotiate with Russian President Vladimir Puttin, but Turkish officials said Putin was not. Moreover, Moscow said the progress of talks with Ukraine is not as big as it should be, backpedaling on what they said to the Financial Times last week

Aside from this, in the last week, the US central bank hiked rates for the first time in three years while also signaling that it is ready to raise rates six more times through 2022, per the dot-plot shown. The markets have started to price in expectations, while Fed speaking dominates the US economic docket.

On Monday, Atlanta’s Fed President Raphael Bostic said that he predicts six hikes In 2022 and expressed that he would be “comfortable” if the Fed needs to hike aggressively. Bostic added that inflation would return to 2% by 2024 while hitting 4.1% by the year-end.

NZD/USD Price Forecast: Technical outlook

The NZD/USD is neutral-upwards but facing solid resistance at 0.6910, the 200-day moving average (DMA). Nevertheless, the NZD/USD broke above the 50 and 100-DMAs since last Wednesday, but a daily close above the 200-DMA is required to extend the uptrend further.

That said, the NZD/USD first resistance would be 0.6900. Breach of the latter would expose the 0.7000 mark, followed by the top-trendline of a descending channel around the 0.7050-70 area, and then the 0.7100 psychological level.

Fed Chair Jerome Powell said in a speech on Monday that there is an obvious need to move expeditiously to a more neutral level and even more restrictive levels if needed to restore price stability, reported Reuters. The risk is rising that there could be an extended period of high inflation that could push longer-term expectations uncomfortably higher, Powell added, noting that the Fed needs to move expeditiously to combat that. 

Action on the balance sheet could come as soon as the next Fed meeting, but no final decision has yet been made, he continued, adding that if we need to tighten beyond the common measure of the neutral rate into a more restrictive stance, then we will do so. If we need to raise the Fed funds rate by more than 25bps at a meeting of meetings, we will do so, he warned, hinting towards a potential 50bps move. 

As the outlook evolves, Powell continued, the Fed will adjust policy to restore price stability while preserving a strong labour market. Powell said that we are headed once again into more Covid-related supply disruptions from China, meaning that the timing and scope of supply-side relief remain highly uncertain. Russia's invasion of Ukraine may have significant effects on the US and world economies, he added, noting that the magnitude and persistence of these effects are highly uncertain.

Moreover, Powell continued, the war in Ukraine is likely to restrain economic activity abroad and further disrupt supply chains, creating spillovers to the US economy. The Fed must set policy based on actual progress on inflation and not assume significant near-term supply-side relief, Powell said, predicting that the Fed's actions on interest rates and the balance sheet will help bring inflation down to near 2.0% over the next three years. 

History can provide grounds for optimism that the Fed can achieve a "soft landing", said Powell, though he warned that the Fed's projections can quickly become outdated at times like these with events developing rapidly. 

Market Reaction

Powell's comments are largely a reiteration of his remarks in the post-meeting press conference last week. Still, it's a reminder of his new hawkish view that 1) rates could be lifted in 50bps intervals and 2) rates could be lifted above so-called "neutral" (seen by most between 2.0-2.5%) if needed to tame inflation. Thus, equities saw a bit of a drop, the US dollar saw a slight jump and US 2-year yields saw about a 4bps jump while 10-year yields were up about 3bps. 

• US equity markets saw a choppy, indecisive start to the week against a backdrop of mostly negative Russo-Ukraine updates.
• The S&P 500 is trading a tad higher as investors await remarks from Fed Chair Jerome Powell from 1630GMT.
• The index managed to hit its highest level since mid-February.

US equity markets saw a choppy, indecisive start to the week, but, at the time of writing, have mostly been able to erase modest pre-market gains. Despite arguably negative news flow over the weekend – a lack of progress in Russo-Ukraine peace talks, chatter about an EU embargo on Russian oil exports – the S&P 500 is trading about 0.1% higher in the 4470 area after a dip back towards 4450 earlier in the session was bought into. The index managed to hit its highest level since mid-February at 4480. Directionless trade immediately ahead of remarks from Fed Chair Jerome Powell at 1630GMT isn’t too surprising – the Fed lifted interest rates by 25bps from near-zero for the first time in three years last Wednesday and new rate guidance suggested similar-sized hikes at every remaining meeting this year.

Powell is unlikely to deviate from this script, meaning there aren’t likely to be any meaningful trading opportunities in response to his comments. Nonetheless, the big man might give some more details on things like the Fed’s ideas about how it might conduct Quantitative Tightening, so will be worth keeping an eye on. Otherwise, a series of summits between European leaders are taking place this week, with the US President also showing his face, meaning geopolitics and, more specifically, Western sanctions on Russia will be a key theme this week.

In terms of the other major US indices, the Nasdaq 100 is currently flat in the 14,400 area, after a dip back to 14,250 earlier in the day was bought. The Dow is an underperformer as a result of steep downside in Boeing’s (-3.8%) share price, which makes up just under 4.0% of the index’s weighting after a 737-800 jet crashed in China. The index is currently trading about 0.5% lower, though for now remains well supported above the 34,500 level. The S&P 500 Volatility Index or VIX was last down at its lowest level in more than one month in the 23.00s, down about half a point on the day.  

Richmond Fed President and FOMC member Thomas Barkin said on Monday that the US economy is no longer in need of aggressive Fed support, and that supply chains, the virus and now the war, are all still impacting inflation, reported Bloomberg. Interest rates are still far below the rate level that constrains the economy and we can move at a 50bps clip again to tame inflation, he added. Inflation expectations seem to have remained stable, Barkin added. 

• The bulls are back in control and have pushed WTI back to the $110 area.
• Bullish catalysts include building expectations for an EU embargo of Russian oil and stagnant Russo-Ukraine peace talks.

The bulls are firmly back in control of global oil markets following a series of bullish catalysts over the weekend which have sent the front-month WTI future nearly $5.0 higher on the session to test the $110 per barrel area. As the Russian invasion of Ukraine rumbles on and Ukrainian officials defiantly reject Russian demands for its forces in the besieged city of Mariupol to surrender, EU governments are mulling whether to impose a blanket ban on Russian oil imports.

European leaders are convening with US President Joe Biden at a series of summits this weak aimed to forge agreement on strengthening of Western sanctions against Russia. News flow on the state of peace talks between Russia and Ukraine has also broadly been downbeat and, when combined with fears of restrictions on Russian oil exports, it's not too surprising to see oil prices making decent strides higher. Traders are also citing a weekend attack by Yemen’s Iran-aligned rebel Houthi militia against a Saudi Aramco refinery that caused a temporary drop in output as adding bullish impulses.

At current levels in the $109.00s, WTI is trading more than $15 higher versus last week’s lows in the $93.00 area but is still around $20 below earlier monthly highs near $130 per barrel. The significant distance that thus resides between WTI at current levels and major areas of support/resistance suggests that, from a technical perspective, choppy trading conditions are set to continue. The fundamentals back this up – as fears rebuild about how embargoed Russian oil is going to be replaced, all while global oil reserves sit at their lowest levels in years, the recipe for large swings (as already seen in March) is there.

ECB Governing Council member and Bundesbank President Joachim Nagel said on Monday that the ECB should raise interest rates if the price outlook required it and, if bond-buying ends in Q3 as now planned, rates could rise this year, reported Reuters. Nagel said the risks of tightening policy too late have increased and any delay could require sharper rate rises at a later date. A low inflation environment is unlikely to return, he continued, saying that the risks of second-round effects from the current high inflation are on the rise. The war in Ukraine is to weigh on Eurozone economic growth via lower consumption, confidence and trade, he concluded. 

• The Australian dollar falls 0.12% in the North American session.
• Russia-Ukraine talks stall as fighting in Mariupol increases.
• AUD/USD Price Forecast: The bias remains upwards, confirmed by an upbreak of a falling-wedge and the 200-DMA.

The AUD/USD begins the week on the wrong foot as it falls in the North American session amid a risk-off market mood, due to the extension of Russia’s invasion of Ukraine, as peace talks stall. At the time of writing, the AUD/USD is trading at 0.7409.

Russia – Ukraine tussles update

The Russia – Ukraine conflict extends and aims to continue for the fourth week. Ukraine President Zelensky said he is ready to negotiate with Russian President Vladimir Puttin, but Turkish officials said Putin is not ready. Furthermore, Moscow said the progress of talks with Ukraine is not as big as it should be, backpedaling on what they said to the Financial Times last week.

A burst of negative market mood impacted the market when the Russian Foreign Ministry summoned the US ambassador on Monday and handed over a note of protest over “unacceptable” comments about Russian President Vladimir Putin by US President Joe Biden.

Fed speaking would increase in the week

Aside from this, in the last week, the US central bank hiked rates for the first time in three years while also signaling that it is ready to raise rates six more times through 2022, per the dot-plot shown. The markets have started to price in expectations, while Fed speaking dominates the US economic docket.

On Monday, Atlanta’s Fed President Raphael Bostic said that he predicts six hikes In 2022 and expressed that he would be “comfortable” if the Fed needs to hike aggressively. Bostic added that inflation would return to 2% by 2024, while it would hit 4.1% by the year-end.

Late in the early Tuesday Asian session, the Reserve Bank of Australia (RBA) Governor Philip Lowe would cross the wires.

AUD/USD Price Forecast: Technical outlook

The AUD/USD bias is upwards, after breaking a falling-wedge on March 17, but it faces solid resistance at 0.7441 on March 7 daily high. Furthermore, the same day, the AUD/USD left the 200-day moving average (DMA) below the spot price, two bullish signals on the AUD, alongside some procyclical currencies bid, with commodity-linked peers soaring due to higher commodity prices.

That said, the AUD/USD first resistance would be 0.7441. Breach of the latter would expose September 3 daily high at 0.7478, followed by October 28, 2021, daily high at 0.7555.

Worth noting; the 50-DMA is about to roll over the 100-DMA.

• EUR/USD extends the leg lower to the 1.1020 area.
• Immediately to the downside emerges the 1.1000 zone.

EUR/USD adds to the bearish note seen on Friday, although the pair trades mostly within the familiar range on Monday.

In case sellers push harder, the 1.1000 neighbourhood should offer decent contention. This area is also underpinned by the temporary support at the 10-day SMA at 1.0997 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 1.1525.

EUR/USD daily chart

The price of a barrel of Brent oil reached almost $140 at the beginning of March. The price then fell back to $100 but is now trading above $110 again. Strategists at Commerzbank expect Brent to trade above the $100 level before falling back in the second half of 2022 towards $90.

Oil prices temporarily near all-time high

“Oil demand is more robust than expected at the beginning of the year, despite high Corona infection numbers, and is expected to return to pre-covid pandemic levels as the year progresses.”

“The oil market is likely to remain tight for the time being if there are prolonged supply disruptions due to the Ukraine war and sanctions against Russia. However, Iranian oil exports could return to the market in the course of the year.”

“The price of a barrel of Brent oil should continue to trade above $100 for the time being, but fall back again in the second half of the year and trade at $90 at year-end.” 

EUR/CHF has found a cap at the 55-day moving average (DMA) at 1.0375/77. Analysts at Credit Suisse look for the development of a broad range below this level and above parity.

Risks to turn back lower

“EUR/CHF is now turning back lower and breaking below near-term support at 1.0292, which completes a small intraday top. We, therefore, stay biased toward 1.0375/0404 capping the market for the development of a broad range between this level and parity.”

“Shorter-term, next supports are seen at 1.0258. Below 1.0186/77 would then turn the short-term risks lower within the broad range for a fall back to support at 1.0159, then 1.0112.” 

“Should strength extend through 1.0377/0404, we see resistance next at the 38.2% retracement of the March-21/March-22 fall at 1.0423, then another retracement resistance at 1.0483/84.”

The Bank of England (BoE) hiked key rates by 25 bps but showed hesitance in its future tightening plans. As economists at Scotiabank expect the “Old Lady” to disappoint markets in the coming months, cable is at risk of falling to the 1.30 level.

GBP/USD seems on track for a test of the 1.31 zone

“We ultimately think the BoE will disappoint even current expectations (~5 more hikes by year-end) so a push higher in the GBP on increased hikes confidence offers another opportunity to sell, anticipating a renewed decline that we expect to re-test the 1.30 mark.”

“Following a failure to convincingly break past 1.32 on both of Thursday and Friday, the GBP now seems on track for a test of the 1.31 zone – although this area also provided solid support late last week. A firm drop below the figure would leave the GBP more likely to re-test 1.30 and extend its sharp downtrend since mid/late-Feb.”

The Russian Foreign Ministry summoned the US ambassador on Monday and handed over a note of protest over "unacceptable" comments about Russian President Vladimir Putin by US President Joe Biden. Biden was recorded saying he thinks Putin is a war criminal last week, reported Reuters. Russia informed the US that ties are on the verge of being severed. 

EUR/JPY has surged above its 200-day moving average (DMA) at 130.04. Analysts at Credit Suisse look for strength to extend to the 10-month downtrend at 132.79.

Support is seen at 131.19

“We look for a fresh challenge on the 10-month downtrend, now seen at 132.79. Our bias would be for this to then cap again and for a retracement lower to emerge. A close above 132.79 though and then importantly the 133.16 YTD high would mark a more notable break higher with resistance seen next at 133.49 ahead of the 2021 high at 134.14.” 

“Support is seen at 131.57 initially, with 131.19 ideally holding to keep the immediate risk higher. Below can see a pullback to 130.72, potentially the 200 and 55-DMA at 130.04/129.83, but with better buyers expected here.”

• EUR/USD is a little weaker below 1.1050 in a quiet start to the week, amid a lack of fresh catalysts.
• The pair is currently caught between support and resistance as it awaits remarks from Fed’s Powell and further geopolitical developments.

EUR/USD is a touch weaker just below the 1.1050 level in a quiet start to the week, amid a lack of pertinent, market-moving fundamental catalysts regarding the Russo-Ukraine war or other major themes (central banks and economics). For now, EUR/USD price action remains capped by the 21-Day Moving Average which is currently around 1.1080, as has been the case for the past three sessions. But to the downside, an uptrend from the earlier March lows in the 1.0800 area continues to offer support ahead of last Thursday and Friday’s lows just above 1.1000.

Technically speaking then, continued contained price action on Monday seems a good bet, though investors will be monitoring a speech from Fed Chair Jerome Powell, with the big guy slated to speak from 1600GMT. Powell isn’t likely to deviate from his remarks at last week's post-Fed policy announcement press conference when the bank lifted interest rates by 25bps for the first time in three years and signaled plans to lift rates at every remaining meeting this year. That means FX market trading opportunities are likely to remain fairly limited for the rest of the day.

Geopolitics is the wild card as Russo-Ukraine peace talks continue (no signs of progress towards a ceasefire just yet) and with EU leaders reportedly mulling a Russian oil import embargo. There is an EU Foreign Affairs Meeting on Monday that could produce some headlines on the matter that traders should be aware of; an EU embargo of Russian oil is a downside risk for the Eurozone economy and thus the euro. Looking ahead to the rest of the week, aside from geopolitics, the main catalysts will be Fed speak (with policymakers appearing every day) and US and Eurozone flash PMIs for March.

Hawkish commentary from Fed policymakers James Bullard and Christopher Waller last week spurred increased bets that the Fed might hike interest rates by 50bps at its next meeting, so traders should be on notice for further hawkish remarks that could provide downside risk to EUR/USD. Flash PMIs, meanwhile, will give an early indication as to how the Ukraine war is impacting sentiment. Should a bearish combination of negative Russo-Ukraine updates, weaker than expected Eurozone PMIs and hawkish Fed commentary spur a downside break of EUR/USD’s recent uptrend and a move back under 1.1000, the door would be opened to a retest of last week’s 1.0900ish lows.

USD/IDR is expected to trade within the 14,260-14,400 range for the time being, suggested Quek Ser Leang at UOB Group’s Global Economics & Markets Research.

Key Quotes

“Last week, we expected USD/IDR to trade between the two major levels of 14,240 and 14,410. USD/IDR subsequently traded within a narrower range than expected (14,250/14,345).”

“The price actions offer not many clues and we expect USD/IDR to trade sideways this week, likely between 14,260 and 14,400.”

USD/CAD trends are relatively flat on the session, with the pair trading narrowly around the 1.26 point. Positive underlying fundamentals, tighter Bank of Canada policy and positive seasonal trends suggest growing downside risk for USD/CAD, economists at Scotiabank report.

Clear move under 1.2565/75 to open up further downside

“We do think that firm domestic growth trends, rising interest rates, and firm commodity prices point towards the CAD remaining firm – and strengthening a bit more obviously – in the coming months when seasonal trends tend to be more positive for the CAD.” 

“We note that Friday’s close for the USD was the lowest weekly close for spot since late Jan, suggesting that the recent, sideways range trade around the 1.2750 point may be showing signs of breaking down (bearishly for the USD).”

“A clear move under 1.2565/75 would signal more immediate downside risk for the USD.” 

“USD rallies remain a sell.”

• DXY adds to Friday’s gains in the 98.30 region on Monday.
• Bulls initially target the weekly top at 99.29 (March 14).

DXY picks up some traction and advances to the 98.40/45 band at the beginning 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), all ahead of the 2022 peak at 99.41 (March 7).

The current bullish stance in the index remains supported by the 6-month line just below 96.00, while the longer-term outlook for the dollar is seen constructive while above the 200-day SMA at 94.55.

DXY daily chart

USD/JPY continues its strong surge higher. In the view of analysts at Credit Suisse, the pair is set to soar as high as 123.00.

Support is seen at 118.47/37

“USD/JPY has cleared the 118.61/66 highs of 2018 with ease to further reinforce the existing large base from last year. Although a knee-jerk pullback should be allowed for, we maintain our core bullish with resistance seen next at 120.66/68 ahead of the 2016 high at 121.69 and eventually our ultimate objective still at 122.90/123.00.” 

“Support moves higher to 119.08 initially, then 118.79, with 118.47/37 ideally holding to keep the immediate risk higher. Below can see a setback to 117.80/70, potentially the 13-day exponential average at 117.57, but with fresh buyers expected here.”

EUR/USD trades narrowly. As long as the world’s most popular currency pair stays below the 1.11 level, a re-test of 1.10 and a subsequent fall to 1.09 is on the cards, according to economists at Scotiabank.

Euro is not out of the woods yet

“The EUR is not out of the woods yet, and we think it will still need to hold above 1.11 for longer or risk a re-test of 1.10 in the near-term that then targets 1.09.” 

“The daily high of 1.1070 is resistance followed by 1.1090/00, 1.1120, and the Thursday peak of 1.1137.”

“Support is ~1.1035 followed by 1.1010/00 and the mid-1.09s.”

USD/CAD fell sharply last week. The pair is testing the lower edge of the recent range at 1.2587/79. Economists at Credit Suisse look for the market to hold above here to maintain the range, with a break above 1.2645/59 needed to cement a floor at this key level.

A close below 1.2579 would clear the way for a fall to the YTD lows at 1.2450/48 

“USD/CAD is challenging important support at the lower boundary of the recent range at 1.2587/79, which includes the recent price low and the uptrend from June 2021. We expect this level to hold for a bounce back to the middle of the range, with resistance seen at 1.2645/59 initially, then at 1.2693/98 and eventually at the recent price high at 1.2775/78.

“Above 1.2775/78 would raise the risk of a more sustained turn back higher again and clear way to challenge last week’s high at 1.2867/71, which we would then expect to break for a renewed attempt to test the YTD high at 1.2895/2901.”

“A sustained close below 1.2587/79 would warn of a deeper setback within the broader range, with support then seen at 1.2557/52 initially, then at 1.2483 and eventually at the YTD lows at 1.2450/48, which we expect to hold at the very latest.”

• Silver lacked any firm directional bias and oscillated in a range on the first day of a new week.
• Last week’s failure near the 200-hour SMA suggests that the recent bounce has lost steam.
• The mixed technical set-up warrants some caution before placing aggressive directional bets.

Silver seesawed between tepid gains/minor losses on Monday and remained confined in a narrow trading band, around the $25.00 psychological mark through the early North American session.

From a technical perspective, last week's goodish rebound from the $24.45 area faltered near the 200-hour SMA. The mentioned barrier, currently around the $25.35-$24.40 region, should act as a pivotal point and help determine the next leg of a directional move for the XAU/USD.

Sustained strength beyond the aforementioned barrier will be seen as a fresh trigger for bullish traders and set the stage for a further near-term appreciating move. The XAG/USD might then surpass an intermediate resistance near the $25.75-$25.80 and reclaim the $26.00 round figure.

The momentum could further get extended and push spot prices towards the next relevant hurdle near the $26.40 region en-route the $27.00 mark and mid-$27.00s. That said, neutral oscillators on daily/hourly charts warrant caution before placing aggressive bullish bets around the XAG/USD.

On the flip side, sustained weakness below the $24.85 area might protect the immediate downside ahead of the $24.45 area. Some follow-through selling would make the XAG/USD vulnerable and accelerate the slide towards testing the very important 200-day SMA support near the $24.00 mark.

Silver 1-hour chart

Technical levels to watch

Atlanta Fed President and FOMC member Raphael Bostic said on Monday that the war in Ukraine had not changed his thinking on balance sheet reduction, which could happen quickly and faster than last time, reported Reuters. The Fed has not yet settled on the appropriate pace for the balance sheet runoff, he added, but he expects there to be a "symmetry of scale" relative to last time. Moreover, continued Bostic, balance sheet reductions will inform the appropriate pace of rate hikes. 

On the economy, Bostic said that he sees inflation at 4.1% by the year's end and does not predict a recession, with GDP still expected to grow at a pace of 2.8% this year. Inflation will return back to 2.0% by 2024, he said, adding that he is comfortable with more aggressive rate hikes if the data says that's appropriate. My baseline, he noted, is that we won't need to take interest rates above neutral, but he is open to the idea if needed. Bostic said earlier in the day that his estimate for the neutral rate of interest is 2.25%. 

• Rising commodity prices assisted the resources-linked aussie to attract some dip-buying on Monday.
• The Fed’s hawkish outlook, elevated US bond yields underpinned the USD and might cap the upside.
• The Ukraine crisis weighed on investors’ sentiment and might further keep a lid on gains for AUD/USD.

The AUD/USD pair recovered a major part of its modest intraday losses and was last seen trading in the neutral territory, just above the 0.7400 round-figure mark.

The pair attracted some dip-buying near the 0.7375 region and has now moved well within the striking distance of the two-week high touched earlier this Monday. A fresh leg up in commodity prices turned out to be a key factor that benefitted resources-linked currencies, including the aussie. That said, a combination of factors might hold back bulls from placing aggressive bets and cap gains for the AUD/USD pair, at least for now.

Investors remain nervous amid the worsening situation in Ukraine, which was evident from a softer tone around the equity markets. This, in turn, drove some haven flows towards the safe-haven US dollar and might keep a lid on any meaningful upside for the perceived riskier Australian dollar. Apart from reviving safe-haven demand, the buck was further underpinned by the Fed's hawkish outlook and a fresh leg up in the US Treasury bond yields.

It is worth recalling that the Fed announced the start of the policy tightening cycle last week and indicated that it could raise rates at all the six remaining meetings in 2022. Moreover, various FOMC members have backed the case for a more aggressive policy stance by the US central bank to combat stubbornly high inflation. This assisted the yield on the benchmark 10-year US government bond to stand tall near the highest level since June 2019.

Hence, the market focus will be on Fed Chair Jerome Powell's scheduled speech later during the US session. Apart from this, traders will take cues from fresh developments surrounding the Russia-Ukraine saga, which will continue to play a key role in driving the broader market risk sentiment. This, along with the US bond yields, might influence the USD price dynamics and produce some trading opportunities around the AUD/USD pair.

Technical levels to watch

• GBP is a modest underperformer amid a broadly quiet/subdued start to the week for FX markets.
• GBP/USD continues to trade in the mid-1.3100s and continues to struggle ahead of the 1.3200 mark.

It’s been a subdued start to the week for pound sterling as market participants continue to digest last week’s dovish BoE policy announcement that threw cold water on expectations for multiple further interest hikes this year. GBP is currently sat at the bottom of the G10 performance table, and down about 0.2% on the day versus the buck, in otherwise quiet FX market trade amid a lack of notable fresh macro drivers. Markets are awaiting fresh developments regarding the Russo-Ukraine war, as well as a barrage of Fed and BoE speak plus a smattering of tier one and two UK/US data releases throughout the week.

GBP/USD is thus experiencing fairly contained trading conditions as it pivots either side of the 1.3150 level and, as has been the case for the last three sessions, continues to struggle as it nears the 1.3200 level. The pair’s failure to get back above the 1.3200 level and key resistance in the 1.3160-75ish area in the form of the 2021 lows is not a good omen heading into this week.

If many analysts are right that last week’s aggressive rally in global equities (which supported GBP/USD at the time) was just a short-term bear market dead cat bounce, then the pair’s next stop could be a retest of recent lows around 1.3000. If the bearish thesis proves wrong and cable is able to bust above 1.3200, the next area of resistance for traders to be aware of is in the 1.3260-70 area.

• Mounting concerns related to the Russian invasion of Ukraine keep investors in cautious mode.
• Global stocks trade mixed, but government bond yields are on the rise.
• Gold Price is neutral, but technical signs hint at another leg lower.  

Gold Price heads into the US, opening trading at around $1,925 a troy ounce, retaining modest intraday gains in a risk-averse environment. The market’s mood is sour amid persistent tensions between Russia and Ukraine. Moscow attacks mounted over the weekend, and peace talks are a far chance now. That said, safe-haven assets are posting modest intraday advances, as financial markets seem to be on pause ahead of a new catalyst.

Asian and European indexes trade mixed, but government bond yields are up, with the yield on the US 10-year Treasury note up to 2.20% amid concerns inflation will keep on rising, regardless of central banks’ measures. Oil prices resumed their advances after Russia’s Deputy PM Novak said crude price might rise to $300 a barrel if Russian oil is shunned, but that's unlikely. Gold Price may recover the upside should the news hit Wall Street.

Also read: Commodity traders eye big gains as Fed risks another recession – What’s next? [Video]

XAUUSD Technical Outlook

XAUUSD is stuck around the 50% retracement of the January/March rally, with increased bearish potential. The bright metal is meeting sellers around a flat 20 DMA, while the daily Momentum heads firmly lower within negative levels.

Gold price bottomed last week at $1,895 a troy ounce, just ahead of the 61.8% retracement of the mentioned rally at $1,890.60, a critical support level. On the other hand, the 38.2% retracement comes at around $1,960, where selling interest has proved strong.

Technicals hint at a decline, while fundamentals hint at an advance. The aforementioned Fibonacci levels are critical as XAUUSD could find its way on a clear break of any of those. 

• USD/JPY was seen consolidating its recent strong gains to the highest level since February 2016.
• A softer risk tone extended some support to the safe-haven JPY and capped gains for the major.
• Elevated US bond yields, the Fed’s hawkish outlook underpinned the USD and acted as a tailwind.
• The divergent Fed-BoJ monetary policy outlook supports prospects for further near-term gains.

The USD/JPY pair extended its sideways/consolidative price moves through the mid-European session and remained confined in a range just a few pips below the multi-year peak set on Friday. The pair was last seen trading around the 119.20-119.25 region, nearly unchanged for the day.

Following the recent strong run-up of over 450 pips from the monthly low, around the 114.65 region, a softer risk tone drove some haven flows towards the Japanese yen and capped the USD/JPY pair.  The worsening situation in Ukraine kept a lid on the recent optimistic move in the markets and benefitted traditional safe-haven assets.

Ukraine's government defiantly rejected Russian calls to surrender the port city of Mariupol in exchange for humanitarian corridors. This comes after Russian forces advanced into the besieged port of Mariupol following one of the deadliest rockets strikes on Saturday. This, in turn, tempered investors' appetite for riskier assets.

Investors, however, remain hopeful about an eventual Russia-Ukraine peace deal. In fact, Turkey's foreign minister had said that both sides were nearing an agreement on critical issues. This, along with the divergent monetary policy adopted by the Fed and the Bank of Japan (BoJ), should act as a tailwind for the USD/JPY pair.

It is worth recalling that the Fed last week announced the start of the policy tightening cycle and indicated that it could raise rates at all the six remaining meetings in 2022. Moreover, influential FOMC members have backed the case for a more aggressive policy stance by the US central bank to combat stubbornly high inflation.

The Fed's hawkish outlook remained supportive of elevated US Treasury bond yields. This has resulted in a further widening of the spread between the US and Japanese 10-year government bond yields amid a more dovish BoJ. The fundamental backdrop supports prospects for further gains for the USD/JPY pair, though overbought RSI warrants caution.

Investors also seemed reluctant to place aggressive bets and preferred to wait on the sidelines ahead of Fed Chair Jerome Powell's speech later during the US session. In the meantime, the US bond yields will influence the USD price dynamics. Apart from this, the broader risk sentiment could provide some impetus to the USD/JPY pair.

Technical levels to watch

Atlanta Fed President and FOMC member Raphael Bostic on Monday said that the Fed needs to get its benchmark Federal Funds interest rate to "neutral" as quickly as we can, reported Reuter. Bostic said he currently estimates the "neutral" rate to be around 2.25%.

Employers are trying to set wages to catch up to inflation, Bostic added, saying also that his current hope is that very high wage growth as a response to the pandemic will not become a permanent feature. If we get inflation under control, Bostic added, we can avoid inflation expectations shifting higher. 

Atlanta Fed President and FOMC member Raphael Bostic said on Monday that he expects six rate hikes in 2022 followed by a further two in 2023, reported Reuters. Elevated uncertainty has tempered confidence that an extremely aggressive rate path is appropriate, he noted, adding that with the conflict in Ukraine, we need to be extra-observant and prepared to adapt our thinking on policy and the economy. 

In 2022, getting inflation back under control is a top priority and the Fed will do "all in its power", Bostic added, commenting that the US labour market is tight. Uncertainty is likely to reduce economic activity, Bostic noted, though caveating that he is yet hearing that from his contacts. The war in Ukraine will intensify uncertainty and push up prices, as well as exacerbate supply chain problems, Bostic noted, saying that the risks to the policy path are in both directions and the Fed will adapt as appropriate. 

Bostic commented that it is critical to resolve the significant imbalance between labour supply and demand. Disruption to Russian energy could imperil growth in the EU, he added, noting that the US has the capacity to boost oil and wheat output, but that it would take time.  

• EUR/JPY falters once again in the 132.00 region on Monday.
• Extra gains look on the cards with the target at the 2022 high.

EUR/JPY fades part of the recent strong upside after testing the decent hurdle near the 132.00 mark, or monthly highs.

The cross gathered extra upside traction following the recent breakout of the 200-day SMA (129.97). The surpass of the 131.90/132.00 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

• USD/CAD gained some positive traction on Monday and snapped four days of the losing streak.
• The Fed’s hawkish outlook acted as a tailwind for the USD and remained supportive of the move.
• Bullish crude oil prices underpinned the loonie and might cap any meaningful gains for the pair.

The USD/CAD pair held on to its modest intraday gains through the first half of the European session and was last seen trading just a few pips above the 1.2600 mark.

The pair attracted some dip-buying in the vicinity of the monthly low on Monday, though the attempted recovery lacked bullish conviction and was capped by a combination of factors. Crude oil prices rallied over 4% on the first day of a new week and underpinned the commodity-linked. This, along with subdued US dollar price action, acted as a headwind for the USD/CAD pair, at least for the time being.

Oil prices built on last week's goodish rebound from the monthly low and gained strong follow-through traction amid reports that the European Union will consider whether to impose an oil embargo on Russia. Adding to this, attacks by Yemen's Iran-aligned Houthi group caused a temporary drop in output at a Saudi Aramco refinery joint venture in Yanbu and provided an additional lift to the black liquid.

On the other hand, the US dollar, so far, has struggled to gain any meaningful traction, which, in turn, failed to impress bullish traders or provide any meaningful impetus to the USD/CAD pair. That said, the Fed's hawkish outlook, indicating that it could raise rates at all the six remaining meetings in 2022, helped limit any downside for the buck and extended some support to the major.

Nevertheless, the USD/CAD pair, for now, seems to have snapped four successive days of the losing streak and remains at the mercy of fresh developments surrounding the Russia-Ukraine saga. Apart from this, traders will take cues from Fed Chair Jerome Powell's scheduled speech later during the US session, which, along with the USD and oil price dynamics, should provide some impetus to the pair.

Technical levels to watch

USD/MYR is now expected to remain sidelined within the 4.1800-4.2100 range so far, suggested Quek Ser Leang at UOB Group’s Global Economics & Markets Research.

Key Quotes

“We highlighted last Monday (14 Mar, spot at 4.2030) that risk for USD/MYR has shifted to the upside but ‘it is premature to expect a break of the major resistance at 4.2150’. USD/MYR subsequently rose to 4.2100 before pulling back to trade sideways, albeit in a choppy manner.”

“The movement is viewed as part of a consolidation and USD/MYR is likely to trade sideways for this week, expected to between 4.1800 and 4.2100. Looking ahead, if USD/MYR closes above 4.2100, it would increase the odds for a sustained rise above 4.2150.”

Gold is stable following biggest weekly loss in nine months. In the view of economists at Commerzbank, the yellow metal is still regarded as a safe-haven and store of value.

Fed rate hike expectations weighed on gold

“At -3.4%, XAU/USD chalked up its biggest weekly loss since last June. We attribute this to the US Federal Reserve rate hike and the market expectations regarding further rate increases during the course of the year. The higher bond yields and higher real interest rates are also likely to have contributed to last week’s fall. By contrast, the US dollar has depreciated somewhat – so it presumably generated no headwind.” 

“ETF investors continued their robust gold buying: the gold ETFs tracked by Bloomberg registered inflows of 30 tons last week. According to the CFTC’s statistics, speculative financial investors remain at an above-average level as compared with the past 1½ years, however. In other words, it is not only ETF investors but also speculative financial investors who appear to be still counting heavily on gold as a safe-haven and store of value.”

• A combination of factors dragged USD/CHF lower for the fourth successive day on Monday.
• The CHF drew haven flows and exerted downward pressure amid subsequent USD demand.
• The Fed’s hawkish outlook favours the USD bulls and should help limit losses for the major.

The USD/CHF pair dropped to over a one-week low during the first half of the European session, with bears now awaiting sustained weakness below the 0.9300 mark.

The pair struggled to capitalize its modest intraday gains to mid-0.9300s and drifted into the negative territory for the fourth successive day on Monday. The worsening situation in Ukraine tempered investors' appetite for perceived riskier assets, which was evident from the prevalent cautious mood around the equity markets. This, in turn, benefitted the Swiss franc's safe-haven status and exerted some downward pressure on the USD/CHF pair amid subdued US dollar price action.

The corrective pullback dragged spot prices further away from the 11-month peak, around the 0.9460 region touched last week, though any further downside is more likely to remain limited. The Fed's hawkish outlook, indicating that it could raise rates at all the six remaining meetings in 2022, should act as a tailwind for the USD. Moreover, two influential FOMC members said on Friday that the US central bank needs to adopt a more aggressive policy stance to combat stubbornly high inflation. This, in turn, favours the USD bulls and should lend support to the USD/CHF pair.

St. Louis Fed President James Bullard  - a known hawk - explained why he voted for a 50bps rate hike and said that the central bank’s reputation was on the line if it failed to act with sufficient urgency. Adding to this, Fed Governor Christopher Waller said the war in Ukraine was the reason he didn’t push for a 50 bps rate hike, but that was definitely on the table for upcoming meetings. Hence, the focus now shifts to Fed Chair Jerome Powell's scheduled speech later during the US session. Apart from this, geopolitical headlines will be looked upon for some impetus around the USD/CHF pair.

Technical levels to watch

Quek Ser Leang at UOB Group’s Global Economics & Markets Research noted USD/THB could still attempt a move to the 33.67 level in the near term.

Key Quotes

“Last Monday (14 Mar, spot at 33.43), we highlighted that ‘upward momentum remains strong’. We added, ‘A break of 33.48 appears likely but in view of the overbought shorter-term conditions, the early Jan high at 33.74 could be out of reach this week’. Our view was not wrong as USD/THB cracked 33.48 and rose to 33.57 before pulling back.”

“While upward momentum has eased somewhat, there is room to USD/THB to rise to 33.67 before a more sustained pullback is likely. A break of 33.74 appears unlikely. Support is at 33.28 followed by 33.09.”

• USD/JPY consolidates below six-year highs of 119.40, as markets turn cautious.
• Fed/BOJ divergence, Ukraine crisis remain the underlying factors, influencing the pair.  
• Rising wedge hurdle on the 4H chart at 119.52 remains a tough nut to crack.

USD/JPY is trading around a flat line below the six-year highs of 119.40 reached last Friday, as markets remain in limbo amid renewed Ukraine tensions and hawkish Fed.

The US Treasury yields are extending the previous rebound, as Fed officials hint at a 0.50% rate hike in May, underpinning the US dollar. This, in turn, keeps the downside cushioned in the major.

Meanwhile, the greenback also finds support from intensifying Ukraine-Russia crisis, with the Kremlin now stating that the progress in Ukraine talks 'less than we would like'.

Looking ahead, US President Joe Biden’s meeting with NATO leaders will be closely eyed later this Monday. Fed Chair Jerome Powell’s speech will also hog the limelight, as the Fed-BOJ monetary policy divergence will continue to weigh on the Japanese yen.

USD/JPY’s four-hour chart shows that the price is lacking follow-through upside momentum, at the moment.

With the Relative Strength Index (RSI), however, probing the overbought territory, there is some room to rise for the currency pair.

Therefore, the one-week-old rising wedge upside barrier at 119.52 remains on bulls’ radars should the spot catch a fresh bid-wave.

A sustained move above the latter will call for a test of the 110.00 round level.

USD/JPY: Four-hour chart

On rejection at the wedge hurdle, the price could head back towards the rising trendline (wedge) support at 118.95, below which the ascending 21-Simple Moving Average (SMA) at 118.82 will be challenged.            

Daily closing below the latter will confirm a bearish wedge, opening floors for a further correction towards bullish 50-SMA at 117.82.

The last line of defense for buyers is seen at the March 15 lows of 117.69.

USD/JPY: Additional levels to consider

The Kremlin said in a statement on Monday, there is no basis for a possible Putin-Zelensky meeting, as there needs to be significant progress made first.

Additional takeaways

Market reaction

Risk-aversion remains the key theme so far this Monday’s trading, with the S&P 500 futures down 0.21% and the US dollar index steadying around 98.25.

The tensions surrounding the Russia-Ukraine resurfaced after Ukraine refused to surrender Mariupol to the Russians.  

• EUR/USD navigates without direction in the 1.1050 region.
• ECB’s Lagarde sees no signs of stagflation so far.
• Chief Powell will speak later in the NA session.

EUR/USD looks to leave behind Friday’s pullback amidst alternating risk appetite trends at the beginning of the week.

EUR/USD focuses on Powell, geopolitics

EUR/USD starts the trading week around the mid-1.1000s amidst the absence of traction in either direction, the recovery in yields on both sides of the ocean and no relevant news from the Russia-Ukraine front.

In fact, German 10y bund yields leave behind the recent weakness and advance to the 0.40% region, while their US peer flirt with the 2.20% mark once again.

No reaction in the European currency after ECB’s Chairwoman C.Lagarde said earlier in the session that she does not see elements of stagflation in the current context, at the time when she also ruled out any sync with the Fed’s policies.

In the domestic docket, German Producer Prices rose 1.4% MoM and 25.9% in the year to February. Across the Atlantic, Chief Powell is due to speak along with FOMC’s Bostic. In the US docket, the sole release will be the Chicago Fed National Activity Index.

What to look for around EUR

The European currency manages to bounce off Friday’s lows in the 1.1000 neighbourhood, although the bullish attempt seems to have run out of steam around 1.1060 so far. In the meantime, pockets of strength in the euro 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: Germany Producer Prices, ECB Lagarde (Monday) – ECB Lagarde (Tuesday) – Germany, EMU Flash PMIs (Thursday) – Germany IFO Business Climate (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 advancing 0.05% at 1.1055 and faces the next up barrier at 1.1137 (weekly high March 17) followed by 1.1241 (55-day SMA) and finally 1.1289 (100-day SMA). On the other hand, a drop below 1.1002 (low March 18) would target 1.0900 (weekly low March 14) en route to 1.0805 (2022 low March 7).

In a committed effort to counter inflation, the European Central Bank (ECB) is now expected to increase the benchmark interest rate to 0% this year, Bloomberg reports, citing the money markets’ expectations.

The bank’s key rate stands at minus 0.5% and has been negative since 2014.

Additional takeaways

“Money markets are now pricing two quarter-point hikes in 2022, compared with smaller than one such increase at the start of the month, according to interest-rate swaps.“

“Traders had first positioned for two 25-basis-point hikes in 2022 following the ECB’s February meeting, only to erase those bets amid concern the war would be a bigger drag on growth.”

The hawkish expectations for the ECB’s tightening were revived after the Fed delivered a hawkish rate hike last week. Meanwhile, the ECB hinted at accelerated reduction of asset purchases at its March 10 policy meeting.

Read: Lagarde speech: Not seeing elements of stagflation now

Market reaction

EUR/USD is moving back and forth around 1.1050, with the Ukraine crisis playing a spoilsport in the pair’s upside momentum. The spot is little changed on the day.

Risks of renewed deterioration in the Ukraine conflict appear very high. Therefore, US dollar strength since the invasion of Ukraine could be about to change given the limited scope for any near-term improvement, economists at MUFG Bank report. 

US curve could reach conversion point more quickly than expected, lifting USD

“We fear the hope of peace may now be a little excessively priced which could see European currencies turn weaker versus USD once again. If China was to indicate more explicitly its support for Russia as the US have indicated, a wider contagion in market pricing could well unfold. All of this coupled with a hawkish Fed communication point to renewed USD appreciation.”

“If market conditions worsen once again, which seems more likely than not to us, the US 2s10s curve is likely to flatten further toward the point of inversion. The correlation with the US dollar is not perfect but periods of flattening from 50bps down to 0bps have coincided with US dollar strength – Mar ’97 to Jan 2000 (+11%); Apr 2005 to Dec 2005 (+8%); Apr 2018 to Aug 2019 (+8%). So the history for the US dollar is pretty good at this juncture for the 2s10s curve spread. We wouldn’t expect the same extent of gains due to the current level but US dollar strength looks likely.”

In opinion of FX Strategists at UOB Group, USD/CNH is predicted to keep the trading range between 6.3300 and 6.3900 in the next weeks.

Key Quotes

24-hour view: “We expected USD to ‘trade sideways within a range of 6.3530/6.3730’ last Friday. USD subsequently popped to 6.3807 before easing off to close little change at 6.3675 (+0.03%). We continue to expect USD to trade sideways, likely between 6.3600 and 6.3800.”

Next 1-3 weeks: “We continue to hold the same view as from last Thursday (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 alternates gains with losses in the low-98.00s.
• US yields regain upside traction across the curve on Monday.
• The Chicago Fed Index, Chief Powell next on tap in the docket.

The greenback, when tracked by the US Dollar Index (DXY), trades without a clear direction around 98.20 at the beginning of the week.

US Dollar Index looks to Ukraine, Powell

Following Friday’s bounce off weekly lows in the 97.70 region, the index is so far charting an inconclusive session on Monday amidst a mild rebound in US yields and a steady geopolitical front news wise.

Indeed, the US yield curve continues to flatten following levels past the 2.00% mark in the short end of the curve, while the belly and the long end manage to reverse the recent downside and return to the positive territory.

A light US calendar will see the Chicago Fed National Activity Index and short-term bill auctions ahead of speeches by Atlanta Fed R.Bostic (2024 voter, centrist) and Chief J.Powell.

What to look for around USD

The index managed to bounce off recent sub-98.00 levels following the start of the tightening cycle by the Federal Reserve at its meeting on March 16. 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 lend legs to the dollar at a time when its constructive outlook remains underpinned 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: Chicago Fed National Activity Index, Fed Powell (Monday) – MBA Mortgage Applications, Fed Powell, New Home Sales (Wednesday) – Initial Claims, Durable Goods Orders, Flash PMIs (Thursday) – Final Consumer Sentiment, Pending 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 0.03% at 98.25 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).

Ukraine conflict optimism and Riksbank repricing has triggered strong SEK rebound. A clear de-escalation of the Russia-Ukraine war will be required for the Swedish krona to extend its advance in the coming weeks and remain at stronger levels, economists at MUFG Bank report.

Hawkish shift in Riksbank policy providing tailwind for SEK

“The increasing likelihood of the Riksbank significantly bringing forward plans for tighter policy is providing a favourable tailwind for SEK performance in the run up to the next policy meeting on 28th April.”

“A clear de-escalation of the Ukraine conflict will be required for the SEK to extend its advance in the coming weeks and remain at stronger levels. Otherwise it runs the risk of correcting lower again should the Ukraine conflict prove more prolonged.”

The AUD/USD pair closed above the 50-week moving average at 0.7382 to set up a potential test of the year-to-date high at 0.7441 this week, analysts at OCBC Bank report.

Aussie is shaking off the jitters in China at the moment

“AUD/USD closed the week above the 50-week MA (0.7378) and the 0.74 resistance, creating a positive technical setup this week. The year-to-date high (0.7441) is in sight.” 

“AUD is shaking off the jitters in China at the moment.”

How might markets perform as the Federal Reserve hikes interest rates? Positive corporate earnings, above-trend growth and still accommodative financial conditions suggest risk assets can still perform well as the Fed raises interest rates, Jordan Jackson, Global Market Strategist at JP Morgan, reports.

A few key takeaways from past rate hiking cycles

“In every hiking cycle, the yield curve has been flattened, an environment where short rates are rising faster than long rates. This creates a challenging environment for traditional fixed income as rates increase across the curve.”

“Equities tend to perform well as the Fed is typically hiking in a positive economic backdrop.”

“Performance of the US dollar has been mixed. Given this, investors should not base their short-term view of the dollar solely on a tightening Fed.”

“We continue to believe the risk of a recession this year is minimal; however, a hawkish Fed does increase recession risks sometime in 2H23 or 2024. That said, positive corporate earnings, above-trend growth and still accommodative financial conditions suggest risk assets can still perform well as the Fed raises interest rates.”

The Bank of England (BoE) hiked key rates by 25 bps but showed hesitance in its future tightening plans, dampening the pound outlook. Analysts at OCBC bank expect cable to remain under pressure while below the 1.32 level.

Less hawkish BoE and the widening US-UK yield differentials points to further downside for GBP

“The relatively less hawkish BoE and the widening US-UK yield differentials (both on the front and back-end) points to further downside for the GBP.”

“So long as the pair is capped under the 1.32 resistance, the bias is still on the negative.”

EUR/USD has found it difficult to sustain north of 1.11. In the view of economists at OCBC bank, the pair’s bounce may have topped off, barring actual improvement on the ground.

Potential to re-engage downside this week

“Near-term positive momentum is still intact, but the swift reversal before the 1.1150 resistance could imply that a top in the bounce may have been seen.”

“Potential to reverse lower later this week if 1.1100 is not recovered swiftly and if there is no clear improvement in the situation on the ground.”

In light of the ongoing uptrend, USD/JPY could now test 119.70 in the short-term horizon, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected USD to ‘trade sideways between 118.35 and 119.05’ last Friday. We did not expect the strong rise to 119.39. While the rapid advance appears to be running ahead of itself, there is room for USD to test 119.45 first before easing off. The major resistance at 119.70 is unlikely to come into the picture for now. Support is at 119.00 followed by 118.80.”

Next 1-3 weeks: “Last Thursday (17 Mar, spot at 108.85), we highlighted that further USD strength is not ruled out but the recent rally may take a pause first. We added, the next resistance is at 119.70. USD subsequently traded sideways before rising to 119.39 on Friday. While upward momentum has not improved by all that much, the chance for USD to rise to 119.70 has increased. On the downside, a breach of 118.30 (‘strong support’ level was at 117.90 last Friday) would indicate that the current upward pressure has eased.”

European Central Bank (ECB) President Christine Lagarde dismissed risks of stagflation in her speech at the Institut Montaigne, in Paris, on Monday.

“Policies to fight climate change will probably raise inflation in the medium term but be deflationary in the long run,” Lagarde said.

Market reaction

EUR/USD is keeping its renewed upside intact above 1.1050 on Lagarde’s comments. The pair is now up 0.05% on the day at 1.1055.

The JPY weakness extended beyond 119.00. Economists at OCBC expect the pair to reach the 120 level but remain cautious about further gains beyond this mark.

Underlying weak-JPY drivers are very much intact

“The upcoming quarter-end flows should keep the USD/JPY bid in the coming sessions.”

“The underlying weak-JPY drivers are very much intact, and the recent improvement in risk sentiment could provide a further negative.”  

“Do not rule out a sharper test of the 120.00 resistance ahead, but (for now) stay cautious about significant further upside beyond that psychological level.” 

EUR/USD is losing its recovery momentum. In the opinion of economists at ING, a move back below 1.10 is possible this week.

Softening momentum for European currencies vs the USD to keep the pair’s upside capped

“EUR/USD declined towards 1.10 again at the end of last week after a brief break above 1.11 and we expect a softening of the momentum for European currencies vs the USD to keep the pair’s upside capped.”

“We see room for a pull-back to the 1.09 level.”

The coming days will be a litmus test on whether last week’s risk-on rallies brought market’s sentiment too quickly on the optimistic side of the spectrum. Economists at ING expect the dollar to find some support, while the rally in European currencies may pause.

Growth differentials coming to the rescue?

“Encouraging developments in Ukraine may keep risk assets and pro-cyclical currencies supported, although the rally in European currencies is starting to look a bit tired. After all, a military de-escalation may not be enough to bring energy prices materially lower or dramatically reduce the overall economic impact on Europe’s growth outlook.”

“Growth differentials – and consequent monetary policy expectation differentials – may build a case for a dollar comeback this week, with the greenback yet to fully benefit from Wednesday’s hawkish hike by the Fed.”

“We expect the dollar to find some support against the low-yielders and the bloc of European currencies in the near-term, while other pro-cyclical currencies – like the outperforming AUD and NZD – could remain bid.”

“DXY could find a floor at 98.00 and climb back to the 99.00 mark by the end of the week.”

GBP/USD extends its correction from weekly highs, now pressured around 1.3150. Economists at ING think cable is set to remain below the 1.32/33 area.

EUR/GBP to dip to the 0.8300 mark in the near-term

“Some re-pricing of rate expectations after some cautiousness emerged in the latest BoE meeting and the dollar possibly regaining some momentum all mean that cable may struggle to recover beyond the 1.32/1.33 area.”

“The euro’s greater exposure to lingering uncertainty in Ukraine could still favour a EUR/GBP decline to the 0.8300 mark in the near-term.”

AUD/USD closed the week at 0.7415. Economists at ING believe that the pair could extend its upside momentum and test the 0.75 level in the coming days.

Good momentum may linger

“We think the aussie could remain supported for the time being, thanks to its low exposure to the Ukraine conflict, rebounding iron ore prices and a very supportive re-pricing of the RBA rate expectations.”

“One risk may stem from a further deterioration in China's Covid situation, with the country reporting the first deaths since January 2021 amid a surge in Omicron cases. Markets are not giving too much weight on this topic so far, and may be relying on the notion that Beijing will deploy more pro-growth tools if necessary.”

“We think that an acceleration to 0.75 in the coming days is all but possible, although the pair may lack enough bullish momentum for a decisive break above that level just yet.” 

EUR/USD is slowly saying goodbye to 1.11 levels again. Prolonged Russia-Ukraine war is set to weigh on the world’s most popular currency pair, economists at Commerzbank report.

FX traders have to read the military location map

“The market is likely to see the fact that Russian offensive operations are only happening in selected areas, whereas the Russian invaders are largely starting to dig in defensive positions. I think many market participants regard this as a signal for a prolonged war.”

“The longer the war continues the more likely it becomes that the real economic and inflationary effects above all for the eurozone will be significant. And that is why that prospect is negative for EUR/USD.”

USD/JPY consolidates just below six-year highs of 119.41. In the view of economists at Citibank, a rise above the 120 level is likely, with the next major resistance not seen until 125.80.

Bullish bias on USD/JPY over the coming weeks

“After the break of December 2016 high of 118.60, the next major resistance is not until the 2015 high of around 125.80. While not expecting the pair to rise that far, it is likely USD/JPY continues its medium-term uptrend, so a rise above 120 is likely in the next few weeks." 

"While BoJ is looking increasingly left behind with rate differentials widenings, we note the renewed bounce in oil prices may be another negative for JPY. Japan’s current account should suffer as JPY-denominated oil price has jumped sharply and holds a tight correlation with monthly import costs, which are also set to rise."

• GBP/USD witnessed some selling on the first day of a new week amid modest USD strength.
• The cautious market mood and the Fed’s hawkish outlook acted as a tailwind for the buck.
• A dovish assessment of the BoE decision undermined the GBP and contributed to the downtick.

The GBP/USD pair remained on the defensive through the early European session and was last seen trading just a few pips above the daily low, around the 1.3160-1.3155 region.

The pair struggled to capitalize on Friday's goodish rebound from the vicinity of the 1.3100 mark and edged lower on the first day of a new week amid modest US dollar strength. Despite hopes for a peace deal to end the war in Ukraine, investors remain concerned amid the heavy aerial bombardment in the capital city Kyiv by Russian forces. This was evident from the prevalent cautious market mood, which, in turn, benefitted the greenback's safe-haven status and weighed on the GBP/USD pair.

Moreover, the Fed's hawkish outlook, indicating that it could raise rates at all the six remaining meetings in 2022, acted as a tailwind for the buck. Adding to this, influential FOMC memebers said on Friday that the US central bank needs to adopt a more aggressive policy stance to combat stubbornly high inflation. This helped the yield on the benchmark 10-year US government bond to hold steady just below the highest level since June 2019, which further underpinned the greenback.

On the other hand, the British pound was pressured by a dovish assessment of the Bank of England's policy decision last week. In fact, the BoE raised its key rate for the third successive meeting, though the 25 bps rate hike disappointed investors anticipated a more aggressive increase. Moreover, the UK central bank also softened its language around the need for future rate hikes.

The fundamental backdrop, along with the post-BoE price action, suggests that the path of least resistance for the GBP/USD pair is to the downside. That said, the lack of any follow-through selling warrants some caution for aggressive bearish traders and positioning for any meaningful downside. In the absence of any major market-moving economic releases, traders on Monday will take cues from a scheduled speech by Fed Chair Jerome Powell, due later during the US session.

Technical levels to watch

The kiwi ended the week a touch above 0.69, having held gains. Next upside target is 0.6925, economists at Westpac report.

NZD/USD targets 0.71+ by year-end

“Next upside target remains 0.6925, and beyond that 0.6955.”

“Risk sentiment has improved further, despite mixed reports from Ukraine/Russia, and commodity prices have risen further.”

“Longer-term, we target 0.7100+ by year end.”

“The RBNZ clearly has more work to do to claw back inflation expectations, and NZ commodity prices should remain supportive.”

US Dollar Index (DXY) has held to a 98-99 range. Economists at Westpac believe that DXY could test the low 97s before attempting to hit the 100 level.

Firming risk climate could see DXY test lower levels

“DXY looks to be headed to 100+ in time, but for now a firming risk climate could see it test lower levels first.”

“China’s policymakers have vowed more economic support and safe-haven flows around Ukraine are reversing, all of which could see DXY testing the low 97s near-term.”

EUR/USD has recovered its poise following the sharp losses made on the back of the Russian invasion of Ukraine. While the shared currency is still vulnerable to bad news on the war and on energy supply, economists at Rabobank have revised up one-month EUR forecasts across the board. However, they maintain that the value of EUR/USD is set to remain lower this year than it would have been without the conflict and energy uncertainties.

Putin’s threat to respond to Western sanctions to send Europe into recession

“President Putin’s threat to respond to Western sanctions with an energy embargo would doubtless send Europe into recession. In this scenario, EUR/USD could drop past its 2020 lows in the 1.06 area and weaken substantially across the board. This would likely see EUR/CHF below parity and EUR/GBP below 0.82. On the assumption that recession is avoided, the EUR will clearly fare better.”

“We maintain that the value of EUR/USD is set to remain lower this year than it would have been without the conflict and energy uncertainties. However, if the eurozone can avoid recession, it is likely that the EUR can hold a 1.09 to 1.11 range in the coming months. This suggests scope for EUR/CHF to hold in the 1.03 area and for EUR/GBP to edge towards 0.85 on a 3-6 month view.”

• WTI extends rebound from monthly low, up for the fourth consecutive day.
• An upside break of weekly resistance line, 200-SMA join bullish MACD signals to favor buyers.
• 61.8% Fibonacci retracement level adds to the downside filters.

WTI remains on the front foot around $106.30, up nearly 3.0% on a day after refreshing weekly tops around $106.70 during Monday’s late Asian session.

Although the black gold retreats from daily top of late, also the weekly high, it manages to stay beyond the 100 and 200 SMAs, as well as a downward sloping trend line from March 10.

Given the bullish MACD signals favor the latest breakouts, the upside momentum is likely to extend.

However, a clear break of the 50% Fibonacci retracement level of February 18 to March 08 upside, near $107.00, becomes necessary for the bull’s conviction.

Following that, a fortnight-long horizontal area surrounding $115.00 will regain the market’s attention.

Alternatively, pullback moves may initially aim for the 100-SMA and the previous resistance line, respectively around $105.30 and $104.00, before highlighting the 61.8% Fibonacci retracement level surrounding $102.30.

In a case where the WTI crude oil prices drop below $102.30, the odds of witnessing a south-run towards the $100.00 threshold and then to the 200-SMA near $98.00 can’t be ruled out.

WTI: Four-hour chart

Trend: Further upside expected

Gold stages a modest bounce after booking a 3.4% weekly loss. However, upside attempts could be limited below the 21-Daily Moving Average (DMA) of $1,941, FXStreet’s Dhwanie Mehta reports.

XAU/USD eyes 21-DMA on road to recovery

“If the recovery momentum extends, then gold bulls will need a daily closing above the upward-sloping 21-DMA at $1,941 to flex their muscles. Further up, the $1,950 supply zone could be challenged en-route the previous year’s high of $1,960. The February highs of $1,975 will be next on buyers’ radars.”

“On the downside, if the critical support line at $1,917 is taken out on a daily closing basis, then a test of the March lows of $1,901 will be inevitable. The next strong support zone is seen near $1,880, which is the confluence of the February 24 low and ascending 50-DMA.”

FX option expiries for March 21 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.1100 2.8b
• 1.1150 646m

- GBP/USD: GBP amounts        

• 1.3095 664m

- USD/JPY: USD amounts                     

• 117.00 980m
• 118.00 635m
• 119.00 695m

- USD/CAD: USD amounts       

• 1.2750 1.4b

- EUR/CHF: EUR amounts

• 1.0300 692m

Considering preliminary readings from CME Group for natural gas futures markets, open interest resumed the downside by nearly 6K contracts on Friday, partially reversing the previous build. In the same line, volume went down by around 97.3K contracts following three consecutive daily builds.

Natural Gas targets $5.00 and above

Friday’s knee-jerk in prices of natural gas was amidst shrinking open interest and volume, leaving the prospect for further downside somewhat diminished and opening the door to further rebound instead, with the immediate target at the $5.00 mark per MMBtu.

• EUR/GBP consolidates the biggest daily fall in five weeks below the key HMA.
• Previous resistance line, ascending trend line support challenge short-term downside.
• Convergence of 50-HMA, 100-HMA appears a tough nut to crack for the bulls.

EUR/GBP steps back from the intraday high, as well as the 200-HMA, by declining to 0.8390 ahead of Monday’s European session.

Even so, the cross-currency pair holds onto the previous day’s upside break of a two-day-old resistance line amid bullish MACD signals, suggesting further advances beyond the 0.8395 immediate hurdle.

That said, a confluence of the 50-HMA and the 100-HMA, close to 0.8405, will be crucial resistance to break for the EUR/GBP buyers past 0.8395, a break of which can direct the pair towards 0.8430 and then to the monthly high surrounding 0.8460.

Meanwhile, the resistance-turned-support line, close to 0.8385 by the press time, precedes a one-week-old ascending trend line, surrounding 0.8370, to limit the short-term downside of the EUR/GBP prices.

It should be noted, however, that a sustained downside past 0.8370 will direct the pair towards the early month’s swing high near 0.8345 before highlighting the 0.8300 for the bears.

EUR/GBP: Hourly chart

Trend: Pullback expected

Here is what you need to know on Monday, March 21:

The US dollar remained bid, as the market turned risk-averse on Monday amid a prolonged Russia-Ukraine war. Escalation of the conflict sapped investors’ confidence after Ukraine refused to surrender the embattled southern port city of Mariupol as Russia warned of humanitarian 'catastrophe’.

As the crisis intensified, it poured cold water on hopes for diplomacy seen over the previous week. Traders also weighed in the hawkish comments from Fed officials amid the fallout of the call between US President Joe Biden and China’s President Xi Jinping. President Biden warned China of consequences if it supported Russia’s invasion of Ukraine.

Meanwhile, markets were also disappointed after People’s Bank of China (PBOC) refrained from cutting the mortgage lending rates, leaving them unchanged in the first quarter of this year.

Mounting tensions surrounding the Ukraine crisis re-ignited the rally in oil prices, as European Union (EU) mulls whether to impose an oil embargo on Russia. The EU leaders and Biden are scheduled to meet on Monday to firm up the West's response to Moscow.

Traders now look forward to the speeches by ECB President Christine Lagarde and Fed Chair Jerome Powell later in the day, in absence of the first-tier economic news on both sides of the Atlantic.

Heading into the European session, the S&P 500 futures shed 0.34% on the day, indicative of a risk-off market profile while the US dollar index was last seen up 0.10% so far, trading around 98.35.

EUR/USD loses its recovery momentum and turns back into the red zone below 1.1050, courtesy of the risk-off flows-driven dollar’s strength, stabilizing Treasury yields. The shared currency ignores hawkish comments from ECB policymaker Robert Holzmann, as he argued for a rate hike.

GBP/USD extends its correction from weekly highs, now pressured around 1.3150. The BOE hiked key rates by 25 bps but showed hesitance in its future tightening plans. Soaring inflation continues to threaten economic growth. Focus this week remains on the UK inflation and Retail Sales data.  

USD/JPY consolidates just below six-year highs of 119.41 reached last Friday, as the Fed-BOJ monetary policy divergence played out. The Japanese central bank left the policy settings unchanged yet again in its March meeting.

Gold finds support from the renewed geopolitical concerns, although the upside attempts could be limited below the 21-DMA of $1,941 amid a firmer dollar.

After the previous week’s recovery rally, Bitcoin has eased slightly, trading around $41,000. Ethereum lacks a clear directional bias around $2,850.

• NZD/USD attracted some dip-buying on Monday, though the uptick lacked bullish conviction.
• The cautious market mood benefitted the safe-haven USD and capped the perceived riskier kiwi.
• Hawkish Fed, elevated US bond yields further underpinned the buck and acted as a headwind.

The NZD/USD pair retreated a few pips from the vicinity of the monthly peak and was last seen trading around the 0.6900 mark heading into the European session.

Following an early dip to the 0.6880-0.6875 region, the NZD/USD pair attracted some buying on Monday, albeit struggled to capitalize on the move beyond the very important 200-day SMA. The Russia-Ukraine conflict has shown no signs of ending and kept investors on the edge. This was evident from the prevalent cautious market mood, which benefitted the safe-haven US dollar and acted as a headwind for the perceived riskier kiwi.

The greenback was further underpinned by the fact that the Fed last week indicated that it could raise rates at all the six remaining meetings in 2022. This, along with hawkish comments by influential FOMC members and elevated US Treasury bond yields, further inspired the USD bulls. In fact, Louis Fed President James Bullard said on Friday that the central bank’s reputation was on the line if it failed to act with sufficient urgency.

Adding to this, Fed Governor Christopher Waller said that the war in Ukraine was the reason he didn’t push for a 50 bps rate hike, but that was definitely on the table for upcoming meetings. This helped the yield on the benchmark 10-year US government bond to hold steady just below the highest level since June 2019 touched last week.

That said, a combination of factors held back traders from placing aggressive bearish bets around the NZD/USD pair. Investors remain hopeful about the possibility of a peace deal to end the war in Ukraine. Apart from this, rising commodity prices extended some support to the resources-linked kiwi and extended some support to the major.

Investors also seemed reluctant and preferred to wait on the sidelines ahead of Fed Chair Jerome Powell's scheduled speech later during the US session. Nevertheless, the NZD/USD pair's inability to find acceptance above a technically significant 200-DMA makes it prudent to wait for some follow-through buying before positioning for further gains.

Technical levels to watch

The upside momentum could push AUD/USD to the 0.7440 area in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted last Friday that ‘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’. AUD subsequently rose to 0.7418 before closing on a firm note at 0.7415 (+0.54%). Conditions remain overbought but there is scope for AUD grind higher. That said, a clear break of 0.7440 is unlikely for today. On the downside, a breach of 0.7360 (minor support is at 0.7385) would indicate that the current upward pressure has eased.”

Next 1-3 weeks: “Our update from last Friday (18 Mar, spot at 0.7385) still stands. As highlighted, 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 0.7320 (‘strong support’ level was at 0.7300 last Friday).”

• USD/CHF prints the first daily gains in four, bounces off one-week low.
• News from Ukraine, China joins hawkish Fedspeak to defend USD bulls after weekly losses.
• Fed’s Powell, Biden’s call with European/British leaders will direct intraday moves.

USD/CHF picks up bids to refresh intraday high around 0.9340 as buyers cheer the greenback’s recovery heading into Monday’s European session.

The Swiss currency (CHF) pair snaps three-day rebound as escalating geopolitical fears from Ukraine join risk-negative headlines from China and Saudi Arabia to underpin the US dollar’s safe-haven demand. Also favoring the USD bulls are the recently hawkish comments from the Fed policymakers.

On Friday, Federal Reserve Bank of Minneapolis President Neel Kashkari, Richmond Fed President and FOMC member Thomas Barkin, as well as Fed Board of Governors member Christopher Waller, tried to shrug off the pessimism surrounding inflation and Fed’s next moves. The policymakers justified the latest rate hike considering the Ukraine crisis and backed the action, which in turn rejects USD bears fearing a dovish hike in the future.

Elsewhere, Ukraine’s rejection of Russia’s demand to surrender Mariupol hints at intensifying war conditions. The same push US President Joe Biden to have a call with the leaders of France, Germany, Italy and the UK.

It should be noted that China’s record high covid infections and a suspension of trading in Hong Kong by the troubled real estate firmer Evergrande also weigh on the market sentiment, which in turn favor the USD/CHF of late.

Amid these plays, the S&P 500 Futures drop half a percent by the press time while an off in Japan restricts US Treasury moves in Asia.

Looking forward, Fed Chair Jerome Powell is up for a speech and will be observed considering the negative impacts of his last words on the USD. Should the policymaker reiterate hopes of easing inflation fears, the USD bears return to the table. Even so, the risk-off mood may restrict USD/CHF downside.

Technical analysis

A daily closing below 0.9345 resistance confluence including January’s top and 10-DMA keeps USD/CHF bears hopeful to visit the 0.9300 round figure.

CME Group’s flash data for crude oil futures markets noted traders scaled back their open interest positions by around 3.4K contracts at the end of last week, extending the downtrend for the sixth session in a row. Volume followed suit and dropped by around 276.7K contracts, reversing the previous daily build.

WTI looks supported around $95.00

Prices of the WTI extended the rebound from last week’s lows around $95.00 on Friday, although the uptick was amidst shrinking open interest and volume, noting the presence of short covering behind the move. Against this, further upside looks unsustainable and could expose another visit to the $95.00 region in the near term.

According to FX Strategists at UOB Group, GBP/USD could extend the upside further north of 1.3220 in the next weeks.

Key Quotes

24-hour view: “Our expectations for GBP to ‘test the major resistance at 1.3220’ did not materialize as it traded between 1.3111 and 1.3197. The price actions are likely part of a consolidation and GBP is likely to trade sideways for today, expected to be within a range of 1.3115/1.3205.”

Next 1-3 weeks: “Last Thursday (17 Mar, spot at 1.3150), we held the view that the rebound in GBP has scope to extend to 1.3220. After GBP popped to a high of 1.3211, we highlighted on Friday that “the chance for a sustained rise above 1.3220 has increased”. There is no change in our view for now. Only a breach of 1.3070 (no change in ‘strong support’ level from last Friday) would indicate that GBP is not ready to head towards 1.3220.”

• USD/RUB is likely to remain uncertain ahead of Biden’s meeting with NATO.
• Australia has decided to ban alumina exports to Russia.
• EU is looking to discuss the embargo on Russian oil with US President Joe Biden.

The USD/RUB has been the most vulnerable asset after Russia invaded Ukraine. A high degree of volatility has been witnessed in the pair recently as the major fell sharply near 100.00 after hitting a high of 155.00 on March 7.

The Russian rouble has been through the stages of hell after the collapse of Russia’s SWIFT international payments system and sanctions on their oil imports by the US. Adding to that, various Western leaders are looking to substitute the Russian oil as early as possible.

Russian leader Vladimir Putin’s preference over an invasion against a diplomatic solution has brought a financial crunch to its economy. Interest rates in Russia are sky-rocketing while assets of various Russian diplomats and businessmen have been ceased.

The potential meeting between US President Joe Biden and NATO allies on Thursday in Brussels has raised the clouds of uncertainty again. The central agenda of the meeting is going to be the formation of a roadmap that will be destined to a ceasefire between Russia and Ukraine diplomatically. Also, the outcome of the meeting could be more sanctions on Russia.

Meanwhile, the western leaders are continuously imposing sanctions on Russia. Australia’s administration has decided to ban alumina exports to Russia, as per Reuters. 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.

Apart from that, the European Union (EU) has announced that it will discuss the embargo on Russian oil in a meeting with US President Joe Biden, which is due on Thursday.

Open interest in gold futures markets shrank for the fifth consecutive session on Friday, this time by more than 2K contracts according to advanced prints from CME Group. On the other hand, volume went up by around 4.8K contracts after two daily pullbacks in a row.

Gold now targets the $1950 mark

Friday’s drop in gold prices was in tandem with shrinking open interest, hinting at the idea that further decline appears not favoured and allowing for a near-term rebound instead. That said, the immediate target comes at the $1950 mark per ounce troy.

• AUD/USD pulled back from the two-week high touched earlier this Monday amid stronger USD.
• The Fed’s hawkish outlook, along with the caution mood benefitted the safe-haven greenback.
• Rising commodity prices extended some support to the aussie and helped limit deeper losses.

The AUD/USD pair edged lower heading into the European session and was last seen hovering near the lower end of its daily trading range, around the 0.7400 round-figure mark.

The pair witnessed a modest pullback from a two-week high, around the 0.7425 region touched earlier this Monday and for now, seems to have snapped four successive days of the winning streak. The cautious market mood was seen as a key factor that acted as a headwind for the perceived riskier aussie. This, along with the emergence of some US dollar buying exerted some downward pressure on the AUD/USD pair.

Despite hopes for a peace deal to end the war in Ukraine, investors remain on the edge amid the heavy aerial bombardment in the capital city Kyiv by Russian forces. This, in turn, kept a lid on the recent optimistic move in the markets and benefitted the safe-haven USD, which was further underpinned by the Fed's hawkish outlook. In fact, the Fed indicated that it could raise rates at all the six remaining meetings in 2022.

Adding to this, comments by influential FOMC members, along with elevated US Treasury bond yields, further inspired the USD bulls. St. Louis Fed President James Bullard explained why he voted for a 50 bps rate hike and said on Friday that the central bank’s reputation was on the line if it failed to act with sufficient urgency.

Adding to this, Fed Governor Christopher Waller noted that the war in Ukraine was the reason he didn’t push for a 50 bps rate hike, but that was definitely on the table for upcoming meetings. This helped the yield on the benchmark 10-year US government bond to hold steady just below the highest level since June 2019.

That said, rising commodity prices could extend some support to the resources-linked Australian dollar and cap gains for the AUD/USD pair. Moreover, investors might also refrain from placing aggressive bets and prefer to wait for Fed Chair Jerome Powell's scheduled speech, due later during the US session this Monday.

Technical levels to watch

• Platinum pares intraday gains inside $40.00 trading range between 50-DMA and 200-DMA.
• Ascending trend line from mid-December 2021 adds to the downside filters.
• Multiple hurdles to test the bulls below $1,130.

Platinum (XPT/USD) consolidates daily gains around $1,032, up 2.04% intraday ahead of Monday’s European session.

In doing so, the precious metal steps back from the 50% Fibonacci retracement (Fibo.) of December 2021 to March 2022 upside, around $1,040. However, the quote remains inside a $40.00 range, comprising 50-DMA and 200-DMA.

That said, the bearish MACD signals and steady RSI line hint at the quote’s further weakness towards the $1,010-05 area comprising the 200-DMA, an upward sloping support line from December and 61.8% Fibo.

In a case where the quote drops below $1,005, it needs validation from the $1,000 round figure and the monthly bottom surrounding $985 to convince bears.

On the contrary, recovery moves not only need to cross the 50% Fibonacci retracement level of $1,040 but also the 50-DMA level of $1,053 to recall the XPT/USD bulls.

Following that, multiple hurdles around $1,100 and the $1,130 may test the platinum prices before directing the prices towards the monthly high surrounding $1,183

Platinum: Daily chart

Trend: Pullback expected

FX Strategists at UOB Group now expect EUR/USD to navigate within the 1.0950-1.1150 range in the next weeks.

Key Quotes

24-hour view: “We highlighted last Friday that EUR is ‘unlikely to strengthen much further’ and we expected it to ‘trade between 1.1055 and 1.1140’. However, EUR dropped sharply to 1.1001 before rebounding quickly. The price actions appear to be part of a consolidation phase. In other words, EUR is likely to trade sideways for today, expected to be within a range of 1.1005/1.1080.”

Next 1-3 weeks: “The sharp drop in EUR last Friday took out our ‘strong support’ level at 1.1025 (low of 1.1001). The breach of the ‘strong support’ has invalidated our view for EUR to advance to 1.1180. EUR appears to have moved into a consolidation phase and is likely to trade between 1.0950 and 1.1150.”

• Aluminum remains firmer amid supply crunch fears, mounting sanctions on Moscow.
• Australia banned exports of alumina and aluminum ores to Russia.
• Ukraine’s rejection of Russia’s demand to surrender in Mariupol adds to the risk-off mood.
• PBOC inaction, China’s COVID-19 numbers test bulls amid a sluggish session.

Aluminum prices remain on the front foot around $3,535, up nearly 5.0% heading into Monday’s European session. Reuters adds futures data for Aluminum while saying, “The most-traded May aluminum contract on the Shanghai Futures Exchange gained 2.1% to 23,055 yuan ($3,624.37) a tonne, having earlier hit its highest since March 8.”

The metal’s latest gains could be linked to Reuters’ news suggesting, “London aluminum prices jumped as much as 4.8% on Monday, as fears of supply disruption resurfaced after Australia banned exports of alumina and aluminum ores to Russia amid mounting sanctions on Moscow for its invasion of Ukraine,” The news also adds, “The move will limit Russia's capacity to produce aluminum, which is a critical export for Russia, the Australian government said.”

Other than the demand-supply matrix, risk catalysts also challenge aluminum prices of late. It’s worth noting that the escalated shelling in Ukraine by Russian forces joins Kyiv’s rejection of Moscow’s demand to surrender Mariupol to portray the recent geopolitical risks. On the same line is the attack on Saudi Arabian oil plants by Yemen’s Houthis, as well as an increase in China’s covid numbers and a suspension of trading in Hong Kong by the troubled real estate firmer Evergrande.

Given the escalating concerns over further sanctions on Russia, the supply crunch may intensify, which in turn could propel the metal prices.

However, today’s call of US President Joe Biden with the leaders of Europe and the UK will join comments from ECB President Christine Lagarde and Fed Chairman Jerome Powell to direct short-term moves.

• Lonnie bulls are firmer below 200-period EMA.
• The formation of ascending triangle signifies volatility contraction which will be followed by an expansion ahead.
• For the downside, the RSI (14) needs to drop below 40.00.

The USD/CAD pair has witnessed the carnage from its recent high of March 15 at 1.2870. On Monday, the asset has remained in a narrow range of 1.2591-12610.

On a daily scale, USD/CAD is auctioning in an ascending triangle formation. The lower end of the ascending triangle is placed from 1 June 2021 at 1.2007 while the upper end is marked from 20 August 2021 at 1.2949.  The formation of an ascending triangle indicates consolidation with a positive bias.  Usually, this kind of pattern display volatility contraction followed by an expansion in the same.

The pair is trading below the 200-period Exponential Moving Average (EMA) at 1.2657, which signals a subdued performance ahead.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, which signals a consolidation move. However, a slippage below 40.00 levels will set a bearish stage for the major going forward.

Should the pair test the lower end of the ascending triangle formation at 1.2570, the asset may attract significant bids which will send the pair to 21-period EMA at 1.2713, followed by March 15 at 1.2870.

For the downside, the loonie bulls need to violate January 19 low at 1.2451, which will drag the pair to 21 October 2021 low at 1.2288. Breach of the latter will send the pair to its ultimate target to 27 May 2021 high at 1.2142.

USD/CAD daily chart

Analysts at Goldman Sachs have raised their expectations for Fed’s tightening, especially after Chair Jerome Powell said in the March decision that every meeting will be a live one.

Key quotes

"The largest tailwind to spending is the ongoing recovery of virus-sensitive services spending, which should pick up going forward since consumers appear less concerned about virus risks post-Omicron. Additionally, household net worth has increased to a very high level, and many households will be able to support spending by drawing down savings."

“We put weight on both sets of signals, and expect that a recovering service sector and spend out of savings will keep real PCE growth positive in 2022 but that weak income growth will weigh on spending, particularly for lower-income consumers. After updating our growth impulse estimates and incorporating a smaller oil price drag and slightly larger reopening boost.”

“We now forecast real PCE growth of +0.6%/+2.0%/+2.5%/+2.25% in Q1-Q422, implying a modest upgrade to our 2022 GDP forecast to +0.5%/+2.25%/+2.75%/+2.25% in Q1-Q4 (vs. +0.5%/+1.5%/+2.5%/+2.5% previously) and +1.9% on a Q4/Q4 basis (vs. +1.75% previously; +2.7% consensus)."

"Based on the stronger growth outlook and the signal from last week's FOMC meeting that Fed officials are increasingly willing to raise the funds rate above their estimate of neutral, we now expect the FOMC will hike at every meeting through Q123 (vs. Q422 previously) and to only slow to a quarterly pace in Q223. We still expect seven 25bp rate hikes in 2022, but now expect five hikes in 2023 and a higher terminal rate of 3-3.25%. We continue to see a meaningful risk of a 50bp hike at some point that would lead the policy rate to reach our terminal forecast sooner."

The Reserve Bank of New Zealand (RBNZ) is unlikely to deliver big interest rate hikes, as it could risk putting the economy into a recession while combating higher inflation, Kiwibank Chief Economist Jarrod Kerr said in the latest client note.

Key quotes (via Bloomberg)

“Given a more subdued growth outlook, we expect the RBNZ to keep to the speed limit of 25 basis points per hike.”

“If the RBNZ accelerates its tightening it risks crashing the economy into a recession.”

“Economic growth will slow to 3% this year from 5.6% last year as the country battles its omicron outbreak. The probability of a recession has risen as the housing market slows.”

“Interest rates have already started to bite.”

• Asia-Pacific markets drift lower as geopolitical fears escalate in Ukraine, China reports record covid infections.
• PBOC’s status-quo, holiday in Japan defend bulls amid sluggish start to the key week.
• Multiple diplomatic meetings, central bank comments and PMIs to offer active sessions ahead.

Given the escalation in the Russia-Ukraine crisis joining geopolitical risks from Saudi Arabia and COVID-19 fears from China, risk appetite remains sour during Monday’s Asian session. It should be noted, however, that an off in Japan and no monetary policy change by the People’s Bank of China (PBOC) restricts the market moves of late.

Adding to the trading barrier is the cautious sentiment ahead of US President Joe Biden’s call with the leaders of Europe and the UK, as well as comments from the European Central Bank (ECB) President Christine Lagarde and Fed Chairman Jerome Powell.

While portraying the mood, MSCI’s index of Asia-Pacific shares outside Japan drops 0.30%. It’s worth noting that stocks in China remain mildly offered as the dragon nation prints record daily coronavirus infections and Evergrande suspends trading in Hong Kong.

Hong Kong’s Hang Seng and India’s BSE Sensex track China while flashing nearly 0.30% intraday loss while Australia’s ASX 200 remain indecisive as Australian Prime Minister Morris Scott hints at budget measures to battle fuel prices. Further, New Zealand’s NZX 50 rise 0.30% as a record trade deficit on YoY hints at RBNZ’s slower normalization, as well as chatters over removing virus-led activity measures.

It should be noted that firmer oil prices also weigh on the Asia-Pacific shares but cautious sentiment ahead of the day’s key events restrict the moves.

On a broader front, the S&P 500 Futures drops 0.28% intraday whereas the US Dollar Index (DXY) pare recent losses while the gold print mild gains at the latest.

Moving on, speech from European Central Bank (ECB) President Christine Lagarde and Fed Chairman Jerome Powell, as well as US President Joe Biden’s cal with the leaders of France, Germany, Italy and the UK will be important for the markets to watch.

• EUR/USD extends Friday’s losses, consolidates the biggest weekly gains in six.
• Off in Japan restricts yields but fears from Ukraine underpin DXY’s safe-haven demand.
• Multiple ECB policymakers tried to defend the rate-hike view, Fedspeak has been hawkish as well.
• Comments from ECB President Lagarde, Fed Chairman Powell can offer fresh impulse, Biden’s call with Western leaders eyed as well.

EUR/USD remains on the back foot for the second consecutive day, around 1.1045 amid Monday’s early European morning. The major currency pair rose the most since late January the last week amid the US dollar’s inability to cheer the Fed’s rate hike. However, the latest risk-off mood, mainly propelled by the Ukraine-Russia crisis, seems to favor the bears ahead of the day’s key events.

The escalated shelling in Ukraine by Russian forces joins Kyiv’s rejection of Moscow’s demand to surrender Mariupol to portray the recent geopolitical risks. On the same line is the attack on Saudi Arabian oil plants by Yemen’s Houthis, as well as an increase in China’s covid numbers and a suspension of trading in Hong Kong by the troubled real estate firmer Evergrande.

While the risk-off mood underpins the US dollar’s safe-haven demand, an off in Japan limits the Treasury moves and challenges the EUR/USD bears ahead of the speech from European Central Bank (ECB) President Christine Lagarde and Fed Chairman Jerome Powell.

During the weekend, multiple ECB policymakers ranging from Vice President Luis de Guindos to Robert Holzmann tried to defend the latest inaction by the bloc’s central bank. However, the policymakers did cite inflation fears, which in turn highlights today’s Lagarde speech for the pair traders. Should the policymaker anticipate easing of inflation fears, like Fed’s Powell, the EUR/USD prices may have a further downside to witness.

On the other hand, Fedspeak justified the rate-hike and dot-plot while also defending Powell’s expectations over inflation’s weakness in future by citing the geopolitical catalysts. As a result, today’s speech from Powell will be important for the quote as any change from the previous inflation view may help the USD to print more gains amid the latest risk-aversion.

Elsewhere, US President Joe Biden will have a call with the leaders of France, Germany, Italy and the UK, which in turn may escalate the risk-off mood if trying to exert more pressure on Moscow.

Talking about the data, Chicago Fed National Activity Index for February, expected to ease to 0.29 from 0.69, will decorate the calendar.

Technical analysis

Failure to cross a downward sloping resistance line from February, as well as bearish MACD signals, directs EUR/USD sellers towards the 100-SMA and a two-week-old rising trend line, respectively around 1.1030 and 1.0990.

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

• A back and forth move of cable in a range of 1.3093-1.3203 is indicating a volatility contraction.
• Pound bulls are firmer above 100-period EMA, which adds to the upside filters.
• The formation of a head and shoulder pattern is indicating a strong upside move.

The GBP/USD pair is oscillating in March 17’s intraday range of 1.3093-1.3203. The cable’s performance has remained subdued in the Asian session and is likely to continue to get contracted until a decisive move.

On an hourly scale, the cable is going through some significant reversal setups. The asset is forming a head and shoulder pattern that signals a bullish reversal. Usually, a head and shoulder formation denote a sustained inventory distribution from institutional investors to retail participants. It is worth noting that at the end of the right shoulder, there is a contraction in the size of ticks. This indicates a volatility contraction, which is followed by an expansion in the size of the ticks and volumes after a decisive breakout.

The Relative Strength Index (RSI) (14) is juggling in a 40.00-60.00 range, which signals a consolidation move.

The asset has been stabilized above 100-period Exponential Moving Average (EMA), which adds to the upside filters.

A movement towards the upside will be witnessed once the asset will violate the range contraction on the upside. A decisive move above the round level of 1.3200 will drive the pair towards March 6 high at 1.3246, followed by March 3 low at 1.3318.

On the flip side, bears can dictate the prices once the cable skids below March 18 low at 1.3111, which will drag the pair towards March 16 low at 1.3036. Breach of the latter will send the pair towards psychological support at 1.3000.

GBP/USD one-hour chart

• USD/TRY struggles to extend two-day uptrend, seesaws around weekly high
• Bears remain cautious until witnessing a break of monthly support line.
• Bullish MACD keeps upside momentum directed towards 15.20-22.

USD/TRY snaps two-day uptrend while paring recent gains around 14.81 during very early Monday morning in Europe.

In doing so, the Turkish lira (TRY) pair drops back towards a three-day-old rising support line. However, the bullish MACD signals keep buyers hopeful.

Should the quote drops below 14.78 nearby support, a convergence of the 50-SMA and 23.6% Fibonacci retracement (Fibo.) of February 28 to March 11 upside, near 14.75, will challenge the quote’s further weakness.

It’s worth noting an upward sloping support line from late February, close to 14.60, acts as a tough nut to crack for the USD/TRY bears to retake controls.

On the contrary, the fresh upside will aim for the last Monday’s swing high near 14.90 ahead of challenging the 15.00 threshold.

Following that, the monthly high of 15.06 and 61.8% Fibonacci Expansion (FE) of the February-March moves, close to $15.20-22, will be crucial to watch.

USD/TRY: Four-hour chart

Trend: Further upside expected

• USD/INR looks to reclaim 77.17 on a bullish flag formation.
• The RSI (14) needs to violate 60.00, which may set a bullish stage for the asset.
• Bears are hopeful below 200-period EMA at 75.73.

The USD/INR pair has been trading sideways in a range of 75.90-76.20 but with a bearish bias amid the absence of a fresh trigger for further guidance.

On a four-hour scale, the USD/INR is trading in a bullish flag formation, which signals a directionless move after a strong upside move and leads to a further movement toward the north if consolidation displays a decisive breakout.

Generally, a rangebound move after a rally denotes initiation of bids by investors who didn’t capitalize upon the initial rally or those participants place longs, which prefer to enter in an auction once a bullish stage is set in.

The 200-period Exponential Moving Average (EMA) is trading at 75.73, which will remain major support for the asset going forward.

The Relative Strength Index (RSI) (14) is oscillating in a range of 40.00-60.00, which signals a lackluster move. However, greenback bulls may be delighted if the RSI (14) violates 60.00.

For the upside, USD/INR needs to surpass March 16 high at 76.43. This will send the pair towards March 14 high at 76.76, which will be followed by March 8 high at 77.17.

On the contrary, bulls may lose control if the asset slips below 200-period EMA at 75.73, which will drag the pair to March 2 low at 75.48. Breach of the latter will push the pair lower to February 25 low at 75.07.

USD/INR four-hour chart

• Gold consolidates the biggest weekly fall since June 2021 as Russia-Ukraine tussles escalate in Mariupol.
• PBOC inaction, chatters over Evergrande and Saudi Arabia adds to the risk-off mood.
• Japan’s off restricts market moves in Asia, speech from Powell, Biden eyed for fresh impulse.
• Gold Weekly Forecast: Technicals turn bearish after weekly decline

Gold (XAU/USD) licks its wounds around $1,928, up 0.30% intraday during Monday’s Asian session. The yellow metal witnessed the biggest weekly loss since June 2021 the latest as market sentiment improved during the last week, weighing on the safe-haven demand of the bullion. However, Ukraine’s rejection of Russia’s demand to surrender in Mariupol renews risk-aversion of late.

In addition to Kyiv’s readiness to battle in Mariupol, escalated shelling in Ukraine by Russian forces also portrays the grim conditions. Recently, the Chinese Envoy showed readiness to de-escalate the war in Ukraine but markets have their doubts as the last week’s call between US President Joe Biden and his Chinese counterpart Xi Jinping refrained from conveying any major details on the key issue. On the contrary, discussion over Taiwan added to the Sino-American jitters and helped renew gold’s safe-haven demand.

Elsewhere, the increasing covid numbers in China and a suspension of trading in Hong Kong by the troubled real estate firmer Evergrande also weigh on the market sentiment.

It’s worth noting that the People’s Bank of China (PBOC) matched wide market expectations to keep the benchmark interest rates unchanged. As per the latest policy move, the one-year Loan Prime Rate (LPR) was kept at 3.7% while the five-year counterpart remained unchanged at 4.6%.

Against this backdrop, the S&P 500 Futures drops 0.28% intraday whereas the Asia-Pacific shares trade mixed amid a holiday in Japan and a light calendar elsewhere.

Looking forward, US President Joe Biden will have a call with the leaders of France, Germany, Italy and the UK. Given the latest escalation on the Ukraine-Russia issue, the politicians may exert more pressure on Moscow, which in turn could add to the XAU/USD strength. Also likely to direct the gold prices for the day is a speech from Fed Chair Jerome Powell. Should Powell keep expecting a downside risk to inflation in the future, the US dollar weakness may add to the metal’s latest upside moves.

Technical analysis

Gold (XAU/USD) prices cross the 50% Fibonacci retracement (Fibo.) of January-March upside amid steady RSI and lackluster MACD signals of late.

Given the quote’s latest sidelined performance between the 100 and 200 SMA, respectively around $1,952 and $1,905, the metal’s latest run-up aims at the upper limit of the stated range i.e. near $1,952.

However, a horizontal area from late February will challenge the XAU/USD’s further upside around $1,977-80.

On the contrary, a downside break of the 200-SMA level surrounding $1,905 will need validation from the $1,900 threshold.

Also challenging the gold sellers is the 61.8% Fibo. level near $1,890 and February 24’s swing low surrounding $1,879.

Gold: Four-hour chart

Trend: Further recovery expected

• GBP/JPY is oscillating in a narrow of 156.7-157.22 after the hangover of monetary policies.
• Investors await fresh impetus from the Russia-Ukraine war for further guidance.
• BOE has raised their interest rates by 25 basis points while BOJ kept policy rates unchanged.

The GBP/JPY is trading in a narrow of 156.7-157.22 from Friday despite the Bank of Japan (BOJ) keeping the interest rates unchanged at -0.1%. The cross has delivered a subdued performance in the Asian session despite the BOJ featuring a neutral stance on the monetary policy considering the capped inflation numbers.

The BOJ’s policymakers have taken a neutral stance after the print of Japan’s National Consumer Price Index (CPI) at 0.9%, much lower than the upside cap of 2%. The BOJ is keeping its stance unchanged since 2016 amid corned inflation numbers.

It is worth noting that amid broader weakness in the Japanese yen, the GBP/JPY has failed to deliver any decent performance. Moreover, the Bank of England has raised its interest rates by 25 basis points (bps) for the third time in a row. To contain the galloping inflation, the BOE is aggressively increasing its interest rates. Adding to that, the BOE was the first central bank in the world economy, which raised its interest rates after the Covid-19 pandemic.

After the hangover of monetary policy announcements by both of the nations, investors will keep monitoring the headlines from the Russia-Ukraine war. US President Joe Biden will meet with its NATO allies in Brussels on Thursday to discuss a diplomatic solution to Russia’s invasion of Ukraine.

Moreover, Biden will also meet with the European Union (EU) on a similar day. The EU has announced that it will consider an embargo on Russian oil imports after meeting with Biden. This may bring more uncertainty in the oil market and henceforth the pound will be impacted amid higher dependency on il imports from Russia.

Following US President Joe Biden’s warning to Chinese President Xi Jinping over Beijing supporting Russia’s invasion of Ukraine, Qin Gang, China’s ambassador to the US, said that they “will do everything” to de-escalate the war in Ukraine.

Key quotes

“There’s disinformation about China providing military assistance to Russia.”

“China isn’t sending “weapons and ammunitions to any party.”

“We will do everything to dis-escalate the crisis.”

“China has normal trade, economic, financial, energy cooperation with Russia.”

“Normal business between two sovereign countries.”

While China has “a lot of common interests” with Russia, that “is not a liability, China is part of the solution, it’s not part of the problem.” 

Market reaction

The US-China failed talks and escalating Ukraine situation is limiting the upside in AUD/USD, as the aussie draws support from higher commodities prices.

Ahead of the federal budget announcement on March 29, Australian Prime Minister Scott Morrison has signaled additional measures to counter the rising cost of living, doubtlessly together with short-term petrol excise cuts, per The Guardian.

Key quotes

“Excessive gas prices, which have hit $2.20 in some elements of Australia, don’t just hit the economy and hit family budgets when they fill up, but they have a knock-on effect across the economy.”

“We’ve been carefully considering our response to ensure that we can deliver a budget that both addresses those immediate needs but also ensures that we continue on with our strong economic plan for a stronger economy.”

Market reaction

AUD/USD is easing off two-week highs of 0.7425, as traders remain cautious amid looming Russia-Ukraine risks. The spot is currently trading at 0.7406, down 0.11% on the day.

• Silver renews intraday high to consolidate Friday’s losses.
• 10-DMA, previous support from February restricts immediate upside.
• 50% Fibonacci retracement, 50-DMA restrict short-term declines amid steady RSI.

Silver (XAG/USD) regains $25.00 while printing 0.50% intraday upside during Monday’s Asian session.

In doing so, the bright metal pares the biggest weekly fall since January by extending the last week’s bounce off the 50% Fibonacci retracement (Fibo.) of February-March upside, around $24.45, amid steady RSI.

However, the 10-DMA and the support-turned-resistance line from February 10, respectively near $25.45 and $25.60, will challenge the short-term XAG/USD bulls.

Should the prices rally past $25.60, the silver buyers will initially aim for $26.10 before challenging the monthly high surrounding the $27.00 threshold.

Alternatively, pullback moves can drop back to the 50% Fibo. level near $24.45 before targeting the 50-DMA, around $24.00 by the press time.

It’s worth noting, however, that the quote’s weakness past $24.00 will be challenged by the $23.90-85 area comprising the 61.8% Fibonacci retracement and the late February’s low.

Overall, silver prices are likely to extend the latest rebound but the bulls will remain cautious below $25.60.

Silver: Daily chart

Trend: Pullback expected

One-month risk reversal (RR) of USD/RUB, a gauge of calls to puts, marked the biggest daily fall during early Monday in Asia, per the latest options market data from Reuters.

While the daily RR figure prints -1.400 number, the weekly gauge of the options market rose during the last five weeks, by +1.150 at the latest.

It’s worth noting that the options market pares its bullish bias considering the latest pullback in the US dollar. However, the Russia-Ukraine tussles keep the USD/RUB bulls hopeful of late.

That said, the quote remains on the back foot around 101.10, down 5.95% intraday by the press time.

Read: USD/RUB: Ruble to face pressure through 2022 – Commerzbank

• USD/CNH prints three-day uptrend, picks up bids of late.
• PBOC kept one-year, five-year LPR unchanged at 3.7% and 4.6% respectively.
• Steady RSI hint at sustained recovery from 50% Fibonacci retracement level, 200-SMA adds to the downside filters.

USD/CNH picks up bids to renew intraday high around 6.3725, rising for the third consecutive day during Monday’s Asian session.

The offshore Chinese currency (CNH) pair’s recent gains could be linked to the People’s Bank of China’s (PBOC) inaction. As per the latest policy move, the one-year Loan Prime Rate (LPR) was kept at 3.7% while the five-year counterpart remained unchanged at 4.6%.

Read: PBOC keeps benchmark interest rate unchanged at 3.7%

Following the PBOC status-quo, USD/CNH crosses a one-week-old descending trend line, which in turn joins sustained trading beyond the key SMAs and steady RSI to favor buyers.

That said, the 23.6% Fibonacci retracement (Fibo.) of February-March upside, near 6.3860, lures intraday bulls ahead of the monthly high of 6.4100.

During the rise, the 6.4000 threshold may act as an intermediate halt.

On the flip side, the 50-SMA level of 6.3600 initially challenges the pullback moves before the 61.8% Fibo. level surrounding 6.3455.

However, USD/CNH bears will remain cautious until witnessing a clear downside break of the 200-SMA level of 6.3430.

USD/CNH: Four-hour chart

Trend: Further upside expected

The White House said in a statement on Monday, US President Joe Biden is scheduled to travel to Warsaw on Friday, March 25.

President Biden is set to host a call between France's Macron, Germany's Scholz, Italy's Draghi and UK PM Johnson on Monday, the White House said.

This comes amid escalating situation between Russia and Ukraine over Mariupol, after the latter rejected surrendering Mariupol over the weekend.

More to come ....

• AUD/USD bulls approach monthly high during the five-day uptrend.
• PBOC left benchmark LPR rates unchanged after keeping MLF rates intact the last week.
• Ukraine rejects Russian demand to surrender Mariupol, China’s Evergrande suspends trading in Hong Kong.
• Risk-off fails to propel USD as Japan’s holiday limits bond moves in Asia.

AUD/USD takes the bids around 0.7425 to refresh a fortnight high, also extending the previous four-day uptrend during Monday’s Asian session.

In doing so, the Aussie pair ignores challenges to the market sentiment emanating from Ukraine and China while cheering the People’s Bank of China’s (PBOC) inaction, as well as softer US dollar.

The People’s Bank of China (PBOC) matched wide marked expectations to keep the benchmark interest rates unchanged. As per the latest policy move, the one-year Loan Prime Rate (LPR) was kept at 3.7% while the five-year counterpart remained unchanged at 4.6%.

Elsewhere, Ukraine’s rejection of Russia’s demand of surrendering Mariupol joins the increasing covid numbers in China and a suspension of trading in Hong Kong by the troubled real estate firmer Evergrande to weigh on the risk appetite. Also challenging the market’s mood are the US patriot missiles that head to Saudi Arabia on request to battle Yemeni Houthis.

Amid these plays, the S&P 500 Futures drops 0.20% whereas the Asia-Pacific shares trade mixed amid a holiday in Japan and a light calendar elsewhere.

It’s worth noting that Fed Chair Jerome Powell’s hopes of easing inflation on the US dollar during the last week despite the 0.25% rate-hike and signals for six such moves in 2022.

Looking forward, this week’s speech from Fed’s Powell and US President Joe Biden’s meeting with the North Atlantic Treaty Organization (NATO) allies will be crucial for short-term AUD/USD moves. Talking about data, Chicago Fed National Activity Index for February, expected to ease to 0.29 from 0.69, will decorate the calendar.

Technical analysis

The AUD/USD pair’s successful trading above the 200-DMA and a downward sloping trend line from May, respectively around 0.7300 and 0.7275, keep the pair buyers hopeful.

That said, an upward sloping resistance line around 0.7480, forming part of the stated wedge, restricts the short-term upside of the Aussie pair.

• WTI has climbed near $106.00 as the EU will discuss an embargo on Russian oil in meeting with Biden.
• IEA is expecting a three-million bpd drop in supply against a one-million bpd drop in demand.
• The market has shrugged-off optimism over the additional oil pumping from the OPEC cartel.

West Texas Intermediate (WTI), futures on NYMEX, has witnessed an intense buying interest after hitting a low of $92.37 on Tuesday. The black gold is surging swiftly after the International Energy Agency (IEA) raises concerns over the supply bottlenecks due to sanctions imposed on Russia by the Western leaders.

The 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 statement from the IEA has pushed the oil prices higher after an almost 25% fall from its recent highs at $126.51 on March 8.

The market participants have shrugged off the optimism from the OPEC cartel on pumping more oil into the global supply to support the demand-supply imbalance. The OPEC has promised to utilize their spare capacity to produce more oil that may fix the shortage of oil going forward.

Meanwhile, the US has sent Patriot Missiles to Saudi Arabia after an urgent request to fend-off drone and missile attacks by the Iran-backed Houthi rebels in neighboring Yemen as per Wall Street Journal. This may pose uncertainty to the potential Iran nuclear deal going forward and investors may underpin oil further.

Moreover, the European Union has announced that it will consider an embargo on Russian oil against its invasion of Ukraine. The EU community will discuss the sanction in meeting with US President Joe Biden this Thursday, as per Reuters. Should this occur, a fresh impulsive wave will be witnessed in the oil prices.

On the dollar front, the US dollar index (DXY) is trading in a range of 98.13-98.34. Investors are eyeing the Federal Reserve (Fed)’s Chair Jerome Powell's speech, which is due on Wednesday.

Early Monday in Asia, the People’s Bank of China (PBOC) set the yuan (CNY) reference rate at  6.3677 versus the previous release of 6.3425, also crossing the market expectations of 6.3584.

"China c.bank injects 30 billion yuan via 7-day reverse repos at 2.10% vs prior 2.10%," adds Reuters following the PBOC fix.

The PBOC kept the benchmark interest rates, as well as the monetary policy unchanged considering the last week's inaction over the Medium-Term Liquidity Facility (MLF) rate.

Read: PBOC keeps benchmark interest rate unchanged at 3.7%

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.

The People’s Bank of China (PBOC) matched wide marked expectations to keep the benchmark interest rates unchanged during Monday’s Asian session.

As per the latest policy move, the one-year Loan Prime Rate (LPR) was kept at 3.7% while the five-year counterpart remained unchanged at 4.6%.

Following the news, AUD/USD starts picking up bids to 0.7420 whereas the USD/CNY also pares early Asian session losses near 6.3615.

It should be noted that the risk-off mood challenges the AUD/USD prices from cheering the PBOC status-quo.

Read: S&P 500 Futures, US T-bond yields seesaw as Ukraine-Russia fears grow over Mariupol

“The People's Bank of China (PBOC) is unlikely to cut the reverse repo rates this month since it left the rate on medium-term lending facility unchanged last week, a sign it intends to ‘hold steady’ in the near term and sees current liquidity supply and demand stable, the Securities Daily said citing analyst,” said Reuters.

The news also mentioned that the PBOC increased injections on Thursday and Friday, pushing down the benchmark DR007.

“The increased injections also served to meet higher demand in the second half due to more tax payments and China Government Bond issuances,” added the news per Reuters.

Read: USD/CNY to reach 6.70 by year-end fueled by policy divergence between PBoC and Fed – Commerzbank

• DXY retreat from intraday high, holds onto Friday’s rebound from one-week low.
• Sustained trading above 100-SMA, monthly horizontal support keep buyers hopeful amid steady RSI.
• 50-SMA, weekly resistance line challenge short-term upside momentum.

US Dollar Index (DXY) pares intraday gains around 98.30 during Monday’s Asian session. However, the greenback gauge keeps the last week’s U-turn from one-month-old horizontal support and the 100-SMA.

Given the steady RSI supporting the latest rebound from the aforementioned key supports, DXY is likely to remain firmer.

That said, a convergence of the 50-SMA and a descending trend line from March 14, near 98.55, becomes the key short-term hurdle for the US Dollar Index bulls to cross.

Following that, the 99.00 threshold will act as an intermediate halt during an upward trajectory towards the monthly peak of 99.41.

Meanwhile, the 100-SMA and a horizontal support area from late February, respectively around 98.15 and 97.70, act as tough nuts to crack for the DXY bears.

In a case where the quote drops below 97.70, the odds of its further fall towards an upward sloping trend line from February 10, near 97.25, can’t be ruled out. Though, the 200-SMA level of 97.00 can defend the bulls afterward.

DXY: Four-hour chart

Trend: Further upside expected

• S&P 500 Futures pause four-day uptrend, US 10-year Treasury yields stabilize after declining for the last two days.
• Ukraine rejects Russian demand to surrender Mariupol, Biden-Xi talks failed to offer any help.
• Risk-aversion continues ahead of this week’s Biden-NATO meeting, Fed Chair Powell’s speech.
• PBOC interest rate decision, second-tier US data will entertain intraday traders.

With Ukraine’s rejection of Russia’s demand of surrendering in Mariupol, market sentiment remains sour during Monday’s Asian session. The risk-off mood also takes clues from Xi-Biden talks that failed to deliver any positive results during Friday’s telephonic conversation.

While portraying the mood, the S&P 500 Futures drop 0.10% intraday to 4,450 whereas the US 10-year Treasury yields pause two-day downtrend around 2,153%, up 0.05 basis points at the latest.

Ukraine's Deputy Prime Minister Iryna Vereshchuk mentioned, “There is no question of surrendering Mariupol,” per Ukrainska Pravda said Reuters. 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.

It’s worth noting that the 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.

Elsewhere, attacks over Saudi Arabian oil plants by Yemen’s Houthis and reflation fears raised by global central bankers during the last week, including the Fed and the ECB, also weigh on the market sentiment.

Amid these plays, the US Dollar Index (DXY) printed the first weekly loss in six, up 0.05% intraday around 98.30 at the latest.

Moving on, the risk-aversion wave may help the US dollar to consolidate some of the latest losses. However, Tuesday’s speech from Fed Chair Jerome Powell will be crucial to watch for fresh directions.

Another important event of the week is US President Biden’s meeting with the North Atlantic Treaty Organization (NATO) members as Ukraine urges for airspace ban in Kyiv.

Additionally, today’s Chicago Fed National Activity Index for February, expected to ease to 0.29 from 0.69, as well as the People’s Bank of China’s (PBOC) interest rate decision will be important to watch for short-term directions.

• AUD/JPY has printed a fresh four-year high at 88.40 as the BOJ kept interest rates unchanged.
• The risk barometer has jumped over the print of Japan’s National CPI at 0.9% below the upside cap of 2%.
• Apart from Biden-NATO talks, investors will also focus on RBA’s Lowe speech.

The AUD/JPY pair has recorded a fresh four-year high at 88.40 on Monday amid broader weakness in the Japanese yen post the unchanged interest rate policy by the Bank of Japan (BOJ) on Friday. The asset has been scaling higher from the last three trading sessions and is expected to display a similar momentum follow-up on Monday.

Investors have underpinned the aussie against the Japanese yen after the BOJ Governor Haruhiko Kuroda preferred to maintain the status quo and kept the interest rate at -0.1%. The decision came despite the wide deviation in Japan’s National Consumer Price Index (CPI) print. Japan’s National CPI came in at 0.9%, much higher than the previous print of 0.5% and market consensus of 0.3%. The major rationale behind the unchanged stance over the interest rates is the print of National CPI below the upside cap of 2%.

Meanwhile, the antipodean has remained a performer in the past few trading sessions on rising prices of base metals. Boiling oil prices after Russia’s invasion of Ukraine has eventually increased the prices of various commodities.

Now investors will focus on US President Joe Biden's meeting with the NATO allies on Thursday, which will provide fresh impetus over the Russia-Ukraine war. But before that, a speech from the Reserve Bank of Australia (RBA)’s Governor Philip Lowe will hold significant importance. This will provide insights into the likely monetary policy action by the RBA in April’s meeting.

• AUD/USD prints mild intraday losses around two-week high, recently sidelined.
• Sustained trading beyond 200-DMA, descending trend line from May favor buyers.
• Rising wedge teases sellers but 0.7200 break-down becomes necessary.

AUD/USD remains pressured during Monday’s Asian session, down 0.10% around 0.7410 by the press time.

In doing so, the Aussie pair prints daily losses for the first time in the last five days while staying near a two-week high.

It should be noted, however, that the pair’s successful trading above the 200-DMA and a downward sloping trend line from May, respectively around 0.7300 and 0.7275, keep the pair buyers hopeful.

Even if the AUD/USD prices drop below 0.7275, a clear downside break of the 0.7200 round figure, comprising the support line of a five-week-old rising wedge bearish pattern, will be crucial to welcome the sellers.

On the contrary, an upward sloping resistance line around 0.7480, forming part of the stated wedge, restricts short-term AUD/USD upside.

In a case where the quote rises past 0.7180, October 2021 high near 0.7560 will be crucial to watch for the pair’s further advances.

AUD/USD: Daily chart

Trend: Further weakness expected