CFD Markets News and Forecasts — 21-04-2022

• EUR/USD is eyeing more downside to near 1.0800 on dovish ECB.
• ECB’s Lagarde sees inflation to get doubled by the end of this year.
• The DXY recovered swiftly as Fed’s Powell sounded aggressive on their policy stance.

The EUR/USD pair has witnessed a steep fall after failing to sustain above April 14’s high at 1.0923 as European Central Bank (ECB)’S President Christine Lagarde dictated a dovish stance at the International Monetary Fund (IMF) meeting on Thursday. The asset has experienced a sheer downside after sensing significant selling pressure above the psychological resistance of 1.0900.

ECB’s President Christine Lagarde emphasized downsizing growth forecasts amid the Ukraine crisis, which has resulted in the reduction of real income of households led by higher energy bills and food prices. ECB’s top official warned that the inflation is expected to zoom 100% by the end of this fiscal year and considering the lower growth rate, investors should brace for the end of the Asset Purchase Program (APP), but a rate hike needs potential time.

Meanwhile, the Eurozone Consumer Confidence has surprisingly jumped to -16.9 against the estimates of -20 and the prior print of -18.7. However, it failed to provide any material impact on the shared currency.

The US dollar index (DXY) rebounded sharply in the New York session after Federal Reserve (Fed) chair Jerome Powell sounded a tad more hawkish on the policy stance. An interest rate decision to hike by rates 50 basis points (bps) is on the cards and the Fed is highly expected to drop hawkish guidance too for the remaining year.

• WTI is juggling in a $1 range on disruption in the demand-supply mechanism.
• The IMF has lowered the global growth forecasts to 3.6% from January’s expectation of 4.4%.
• Blockades on Libya’s oil fields and export terminals have reduced the global oil supply by 0.55 million bpd.

West Texas Intermediate (WTI), futures on NYMEX, is continued with its lackluster performance from the past few trading sessions. Trading sessions are settling in a minor range as investors are unable to decide whether to act upon supply worries or to underpin the fears of expected slippage in the demand catalyst.

Supply in the oil market is really tight as the OPEC+ (OPEC allies + Russia) are failing to meet their production targets. Russian oil is being prohibited by the Western leaders after its invasion of Ukraine, which forced major countries to impose sanctions on the former. An embargo on Russian oil by Europe is in discussion and carries a significant impact if it takes place. Meanwhile, additional cuts in the global supply of oil after Libya showed reluctance in oil supply amid political crisis and blockades on major oil fields has escalated pressure on the oil market. The barricades on Libya’s export terminals are resulting in the loss of more than 550,000 barrels per day (bpd).

On the demand front, a significant cut in the global growth forecasts by the International Monetary Fund (IMF) has raised clouds of uncertainty over the aggregate demand prospects. The IMF has reduced the worldwide growth expectations to 3.6% from the previously expected figure of 4.4% announced in January. Also, the lockdown measures in China due to the resurgence of the Covid-19 have produced headwinds for oil prices.

• The AUD/JPY remains positive in the week, so far up 1.34%.
• On Thursday, the AUD/JPY plunged more than 100-pips, spurred by a technical formation.
• AUD/JPY Price Forecast: Two bearish signals might exacerbate a correction in the AUD/JPY.

The Australian dollar posts modest gains despite two bearish technical analysis patterns, which threaten to lower the AUD/JPY prices as the Asian Pacific session begins. The AUD/JPY is trading at 94.68 and has gained some 0.09% at the time of writing.

US equities ended the session with losses, as Fed Chief Jerome Powell “scared” investors when he said that 50-bps rate increases are “on the table” for the May meeting. Meanwhile, Asian equity futures point to a lower open, carrying on Wall Street sentiment and weighing on risk-sensitive currencies, like the AUD, as investors scramble towards safe-haven peers.

On Thursday, the AUD/JPY began the Asian session on the right foot near the daily high, which was 95.58. However, late in the Asian session, the AUD/JPY formed a bearish engulfing candle in the 1-hour chart, that began the 100-pip plunge, from 95.58 to 94.40, late in the North American session.

AUD/JPY Price Forecast: Technical outlook

The AUD/JPY is upward biased, but price action in the last month formed a rising wedge with bearish implications, alongside a bearish engulfing candle pattern. Fuerhtmore, the Relative Strength Index (RSI), although at overbought territory at 70.77, aims lower, a signal that could exacerbate a move downwards.

Therefore, the AUD/JPY outlook is tilted to the downside in the short term. The pair’s first support would be March’s 28 daily high at 94.32. Once cleared, the next support would be April’s 13 daily high at 93.86, followed by  April’s 5 daily low at 92.27.

Key Technical Levels

• USD/JPY is auctioning in a minor range of 127.82-128.71 as investors await Japan’s inflation.
• The BOJ will continue to stick with an ultra-loose policy despite a higher reading of inflation.
• The asset is balancing despite broader weakness in yen and a rebound in the DXY.

The USD/JPY pair is displaying back and forth moves within a narrow range of 127.82-128.71 since Thursday as investors are awaiting the release of Japan’s National Consumer Price Index (CPI). A yearly preliminary reading is advocating a decent surge in inflation as the economic data is expected to land at 1.3% against the prior print of 0.9%.

No wonder, the price pressures from higher energy bills and commodity prices will lift inflation in Tokyo. But still, they won’t be able to raise hopes of hawkish guidance from the Bank of Japan (BOJ). The growth prospects in Japan have yet not reached their pre-pandemic levels. Therefore, more stimulus will always be expected from their central bank.

On the dollar front, the US dollar index (DXY) has attracted some stellar bids after dropping below the critical support of 100.00. The DXY rebounds firmly after the odds of an aggressive hawkish stance from the Federal Reserve (Fed) in May progressed. It is worth noting that an escalation in the interest rate hike expectations after the speech from Fed’s chair Jerome Powell at the International Monetary Fund (IMF) meeting failed to insert any impact on the asset. Despite a broader weakness in the Japanese yen and a sharp rebound in the US dollar index (DXY), a lackluster performance from the major is indicating that yen is gaining strength now.

• The odds of a 50 bps interest rate hike have elevated after Fed Powell’s comments at the IMF meeting.
• Higher inflation pressures in a very tight labor market are compelling for squeezing the liquidity.
• A double bottom formation has raised expectations of a reversal in the gold prices.

Gold (XAU/USD) has bounced back sharply after hitting its potential support, which is placed near $1,940. The precious metal is shrugging off the fears of aggressive rate hike elevation after Federal Reserve (Fed)’s Jerome Powell bolstered the odds of 50 basis points (bps) interest rate hike by the Fed in May.

Fed’s Powell in his appearance at the International Monetary Fund (IMF) meeting along with European Central Bank (ECB) President Christine Lagarde, Bank of England (BOE) Governor Andrew Bailey, and other central bank leaders cited that a 50 bps rate hike is on the table this May. He further added that the Fed is likely to tighten the policy at a higher pace this time than in the previous hike cycles. Higher inflation pressures in a very tight labor market are compelling for squeezing the liquidity from the economy sooner rather than later.  

Meanwhile, the US dollar index (DXY) has witnessed a serious attempt to rebound as a sheer upside has been recorded in the DXT after it slipped below the psychological support of 100.00. For a long time, Fed policymakers have been dictating that investors should brace a tight policy environment for a few quarters as it is highly required to tame the soaring inflation. Also, the 10-year US Treasury yields have climbed above 2.90% on hawkish guidance by the Fed and are aiming to hit 3% for the very first time in the last three years.

Gold Technical Analysis

On an hourly scale, XAU/USD has formed a double bottom chart pattern, which signifies a bullish reversal amid the absence of high-volume sellers while re-testing the critical bottom. The gold prices have witnessed a sheer upside after the successful retest of Wednesday’s low at $1,939.31. The Relative Strength Index (RSI) (14) has defended itself from slipping into the bearish range of 20.00-40.00. Also, the precious metal has established above 20-period Exponential Moving Average (EMA), which signals more gains ahead.

Gold hourly chart

''UK prepares law to give ministers power to tear up Northern Ireland post-Brexit trade deal,'' according to the Financial Times. 

The UK government is preparing legislation that will give ministers sweeping powers to tear up the post-Brexit deal governing trade in NI. 

Meanwhile, David Frost who negotiated the Brexit deal, and other  Senior Conservatives, have argued for large parts of the agreement between the UK and the EU to be set aside following evidence it is harming trade and creating barriers between Great Britain and Northern Ireland.

Any decision to delay the additional checks would spark a fresh row with Brussels, and this would likely weigh on the pound. Brussels has accused British Government of seeking to U-turn on its obligations.

Nevertheless, PM Boris Johnson has refused to rule out triggering a clause in the deal which would allow him to override some of the crucial clauses relating to trade across the Irish Sea.

• The British pound clings to its gains, up some 0.02%.
• A dampened market mood weighed on the GBP/JPY, but it held to its gains.
• GBP/JPY Price Forecast: The pair is range-bound but tilted to the downside in the H1 chart.

The GBP/JPY modestly advances as the New York session winds down, and Asian prepares to take over, up some 0.02%. At the time of writing, the GBP/JPY is trading at 167.27.

On Thursday, US equities finished in the red, as Fed Chief Jerome Powell spooked investors when he said that 50-bps rate increases are “on the table” for the May meeting. Meanwhile, global bond yields rose. The UK’s 10-year Gilts rose by two basis points, sitting at 2.034%, while the Bank of Japan (BoJ) keeps the 10-year JGB at bay near the 0.25% threshold.

Aside from this, the GBP/JPY was range-bound in the 167.00-91 area, though of late, GBP/JPY bears dragged the pair under the 167.34, the 50-hour simple moving average (SMA), opening the door for further losses.

GBP/JPY Price Forecast: Technical outlook

The GBP/JPY remains tilted upwards, but the Relative Strength Index (RSI), with readings of 77, shows the pair as overbought, which means that the cross-currency pair might be subject to a mean-reversion move or a consolation ahead.

The GBP/JPY 1-hour chart illustrates the pair as range-bound but tilted downwards, portrayed by successive series of lower or equal highs, lying below the YTD high at 168.42. Also, as of writing, is testing an upslope trendline, drawn from April 20 lows, which once broken would open the door for further losses.

With that said, the GBP/JPY first support would be the 167.00 figure. A breach of the latter would expose the S1 daily pivot at 166.80, followed by the 100-hour SMA at 166.56, and then the S2 daily pivot point at 166.37.

Key Technical Levels

• NZD/USD bleeding out as US dollar and yields firm.
• Hawkish Fed Powell keeps US yields running into the highest levels since 2018.

NZD/USD is closing the doors to North American traders down by over 1% on Thursday as Federal Reserve Chairman Jerome Powell told an International Monetary Fund panel that restoring price stability is "essential" and that a 50-basis point rate hike was "on the table" at the May Federal Open Market Committee meeting.

Consequently, the US 10-year yield rose 5.8 basis points to almost 2.89%, its highest level since December 2018 and the US dollar rebounded from the lows of the day of 99.81 to score as high as 100.63, bid into the Wall Street close. With inflation running roughly three times the Fed's 2% target, "it is appropriate to be moving a little more quickly," Powell added.

The S&P 500 and Nasdaq had already reversed course by the time Powell spoke, but they closed heavily with the Dow Jones Industrial Average also falling, losing 368.03 points, or 1.05%, to 34,792.76. The S&P 500 dropped 65.79 points, or 1.48%, to 4,393.66 and the Nasdaq Composite had lost 278.41 points, or 2.07%, to 13,174.65 but the end of the play, leaving a bearish outlook for Friday in Asia.

''The Kiwi is very sensitive to long end bond spreads (a reasonable proxy for terminal cash rate expectations), and the latter continue to rise in the US,'' analysts at ANZ Bank said. 

''NZ expectations have also risen following last week’s post-RBNZ retracement, but with 125bps of hikes already “in the tin” here (compared to just 25 in the US), and a peak OCR of 4.13% already priced in by the end of 2023, there’s arguably less scope for upside, which in turn could cap the NZD. Broadly speaking, it’s a picture of other CBs catching up on NZ’s erstwhile rate advantage.''

Meanwhile, in economic news, the US Initial Jobless Claims fell to 184,000 during the week ended April 16 from 186,000 in the previous week. The Philadelphia Federal Reserve's monthly manufacturing index fell to 17.6 in April from 27.4 in March. 

RBNZ in focus

Meanwhile, the inflation data from New Zealand underpinned the hawkish central bank rhetoric. The Reserve Bank of New Zealand has shown that it is keen to get the OCR to neutral as quickly as possible.

''Governor Orr reiterated this point at the IMF interview, noting that the balance of risks was weighted towards constraining inflation expectations in the medium term; he provided strong forward guidance for more rate increases in the coming quarters,'' analysts at Standard Chartered explained. 

''We now expect the rate hikes to be frontloaded, versus our previous call of 25bps hikes at each of the five meetings from April to October, which would take the OCR to 2.25%,'' the analysts added. ''Given the 50bps hike in April and our expectation of another 50bps hike in May, we drop the 25bps hikes in August and October, keeping our end-2022 OCR unchanged at 2.25%.''

• The Australian dollar gave back Wednesday’s gains, losses of 1%.
• Fed Chief Jerome Powell spooked investors as he said that a 50-bps increase in May is “on the table.”
• More Fed officials add to the chorus of hawks expecting a 50-bps increase.
• AUD/USD Price Forecast: A tweezers-top in the daily chart opened the door for further downward pressure.

The Australian dollar reversed its Wednesday’s gains and could not hold above 0.7400, recording an 80-pip loss amid a session dominated by central bank speakers, led by Fed Chair Jerome Powell, who reiterated that a 50-bps increase for the May meeting is on the table. At the time of writing, the AUD/USD is trading at 0.7376.

The market mood of late turned dismal, as US equities are about to finish the trading session in the red. Meanwhile, US Treasury yields continue shooting higher, with the 10-year benchmark note sitting at 2.953%, up to six basis points, while the greenback staged a comeback, gaining 0.22%, sitting at 100.610.

Fed Chief Jerome Powell to discuss 50-bps increases in May

On Thursday, in an International Monetary Fund (IMF) panel, which was led by the Federal Reserve Chair Jerome Powell and the ECB President Mrs. Christine Lagarde, Jerome Powell said, “I[him] would say that 50 basis points will be on the table for the May meeting.” He added that “we [Fed] are committed to using our tools to get 2% inflation back.” Furthermore, Powell supported the idea of “front-end loading” moves if appropriate.

During the day, more Fed officials -San Francisco’s Fed Mary Daly, St. Louis President James Bullard- expressed the need to hike 50-bps in the May meeting. However, if needed, James Bullard even pushed towards a 75 bps rate hike.

Data-wise, an absent Australian docket left AUD/USD traders taking some cues from disappointing inflation data from New Zealand (NZ), which rose 6.9% y/y, lower than the 7.1% estimated, meaning that higher prices could be about to peak. On the US front, the Philadelphia Fed Manufacturing Index for April rose by 17.6, lower than the consensus at 21. At the same time, Initial Jobless Claims increased by 184K, more than the 180K estimated but almost in line with analysts’ expectations.

In the week ahead, the Australian and the US economic docket would feature S&P Global PMI Flash readings for April, including Manufacturing, Services, and Composite indices.

AUD/USD Price Forecast: Technical outlook

The AUD/USD is about to shift to a neutral-upward bias, as shown by the daily chart. Thursday’s price action reversed Wednesday’s gains forming a tweezers top candle chart pattern, usually bearish, which means that sellers overtook buyers, threatening to push prices further down.

The AUD/USD first support would be the 50-day moving average (DMA) at 0.7352. A breach of the latter would expose the confluence of the mid-parallel Pitchfork’s line between the central and bottom lines and the 200-DMA around the 0.7293-0.7305 range, followed by the 100-DMA at 0.7255.

What you need to know on 22 April:

Risk-off trading conditions, triggered in part by a rise in US yields amid hawkish Fed rhetoric, saw US equities dip on Thursday and the safe-haven US dollar outperform, especially against its more risk-sensitive G10 peers like the Australian, New Zealand and Canadian dollars. The US Dollar Index (DXY) reversed an earlier dip below the 100.00 level to rally back into the 100.60s, where it trades with on-the-day gains of about 0.3%.

Fed Chair Jerome Powell, as expected, signaled that 50 bps rate hikes at upcoming meetings were likely and the usually more dovish leaning FOMC member Mary Daly even mentioned the possibility of a 75 bps move. AUD/USD and NZD/USD traded with respective losses of 1.0% and 1.1%, with the latter performer a tad worse following Thursday’s not as hot as feared New Zealand Q1 Consumer Price Inflation figures. USD/CAD, meanwhile, rallied from under 1.2500 towards the 1.2600 mark, as stronger oil prices failed to offer the loonie respite.

In terms of the rest of the major G10 currencies, the euro was the second-best performer on the day, with ECB President Christine Lagarde not saying anything new in her remarks at an IMF panel, but the normally more dovish leaning ECB Vice President Luis de Guindos earlier in the day hinting at the possibility of a first rate hike in July. His remarks seemed to endorse those recently made by some of the ECB’s more hawkish members in recent days pushing for a July hike and saw ECB tightening bets upped as a result.

This supported EUR/USD at the time, with the pair rallying as high as its 21-Day Moving Average in the 1.0930s in early European trade, only for the pair to then reverse 100 pips lower to the low 1.0800s during US trade as the buck regained ground, where it now trades about 0.2% lower on the day. GBP/USD saw similar price action, attempting to break above its 21DMA in the 1.3075 area only to then reverse back to the 1.3025 region where it is now trading lower by about 0.3% on the day.

Meanwhile, higher yields in the US (and elsewhere) saw the yen struggle, though albeit perform a little better than its risk-sensitive peers amid safe-haven demand as stocks fell. USD/JPY gained about 0.4% to rally into the 128.30s, with the bulls eyeing a potential retest of earlier multi-decade highs above 129.00 if 1) US yields keep pushing higher and 2) the BoJ keeps reiterating its dovish stance and defending its yield curve control target range.

In the coming session, flash PMIs will be released across the world, though probably won’t impact FX markets much amid all the focus on central banks, policy divergence and yields. UK and Canadian Retail Sales figures for March should garner some interest, as well as more remarks from ECB President Lagarde and BoE head Andrew Bailey.

• EUR/USD bulls taking on the bears with eyes to 1.0950.
• The daily cancel or this week's candle need to close in the green.

As per the prior analysis, EUR/USD Price Analysis: Weekly bullish M-formation is starting to play out, the bulls have eyed the M-formation on the weekly chart. Following the prior session's sharp rally, there has been a correction on Thursday to mitigate the imbalance of price. In due course, an onwards continuation could be on the cards. 

EUR/USD weekly chart

The M-formation is a reversion pattern and the bulls will be eyeing the neckline in order to mitigate the imbalance of the price. The area can be targeted from a lower time frame perspective. The daily chart is the first place to start such analysis in order to determine the progress of the formation of a bullish structure. 

EUR/USD daily chart

The price has subsequently rallied towards the neckline of the M-formation following the bullish candlestick pattern with the doji followed by the bullish engulfing candle. However, there has been a strong rejection and the bulls will want to see the daily candle close higher than the prior days in order to add conviction to the upside thesis. That being said, so long as the week closes in the green, there will be prospects of a bullish continuation for next week. 

• Major US equity indices reversed early gains on Thursday amid hawkish comments from Fed Chair Powell.
• The S&P 500 dipped back to 4,400, having earlier rallied above 4,500 on initial strength related to strong Tesla earnings.

Major US equity indices reversed early gains on Thursday as US yields rallied following hawkish comments from Fed Chair Jerome Powell, who endorsed the possibility multiple 50 bps rate hikes at upcoming Fed meetings. Strong earnings from Tesla (+2.8%) following Wednesday’s close helped the S&P 500 open Thursday trade roughly 0.75% higher and at one point surpass the 4,500 mark, but Powell’s comments that 50 bps rate hikes were “on the table” at upcoming meetings, which compounded an earlier hint from Fed’s Mary Daly that the Fed would even consider a 75 bps move, saw the index drop under 4,400.

At current levels in the 4,390s, the S&P 500 is trading with on the day losses of nearly 1.5%, with the bears eyeing a test of monthly lows near 4,370. The Nasdaq 100, unsurprisingly, was the underperformer of the major US indices, dropping closer to 2.0% and under 13,750 for the first time this month. The Nasdaq 100 is more heavily weighted to high price-to-earnings ratio tech and so-called growth stocks, which tend to suffer in an environment of rising interest rates.

The Dow, which is weighted a little more towards value/cyclical stocks which tend to hold up better when interest rates rise, dropped a little less than 1.0% to give up 35,000 status. A weaker than expected US Philadelphia Fed Manufacturing survey for April and robust weekly jobless claims numbers didn’t have an impact on market sentiment, with central bank speak taking the limelight.

Looking ahead, earnings remain in focus and could potentially offer the market a bit of a lift. For the most part, it's been a decent earnings season thus far, with the notable exception of the Netflix debacle earlier in the week. Most recently, United Airlines Holdings and American Airlines Group posted strong results and saw strong gains on Thursday after predicting a return to profit this quarter amid a rapid recovery in travel demand.

• USD/CAD is testing the ber's commitments at daily resistance. 
• A 50% mean of the daily range near 1.2555 could act as first support. 

As per the prior analysis, USD/CAD Price Analysis: Bulls are stepping in and eye significant correction, the bulls took on the bears and rallied right back into the M-formation's neckline as illustrated in the following charts:

USD/CAD daily chart, prior analysis

The M-formation is a reversion pattern so the price would now be expected to revert back to at least the neckline of the pattern:

USD/CAD, live market

The price has moved in aggressively, as per the daily chart. However, there were opportunities on the lower time frames to take advantage of the move.

USD/CAD M15 chart

The area of rotation identified in the prior analysis from the hourly chart acted as an area of liquidity from which the 15-min and lower time frame chart traders would have likely engaged from within. 

meanwhile, for the rest of the week, traders will be looking to see whether 1.26 the figure will deny the bulls of further upside at this juncture which would leave the price trapped between daily support and resistance:

The daily chart's 50% mean reversion of the recent range could be the first area of support that may hold initial tests around 1.2555. 

• The EUR/JPY braces to gain supported by ECB hawkish comments, amidst a stronger yen,
• ECB’s de Guindos shifted hawkish, saying that a rate hike in July is possible.
• EUR/JPY Price Forecast: Negative divergence in the daily chart to push the pair towards 137.50.

The shared currency clings to gains in the mid-New York session after printing a YTD high at 140.00. At the time of writing, the EUR/JPY is trading at 139.06, up some 0.24%.

The Japanese yen recovered substantial ground versus the commodity currencies, like the Aussie, the Loonie, and the kiwi. In the case of the low-yielder EUR, it failed, which was lifted by hawkish comments of ECB Vice-President Luis de Guindos, who said that a rate hike in July is possible, while he sees no reason why APP could not end by July.

Market’s reaction

The EUR/USD jumped on those remarks but of late retreated those gains and meanders around 1.0850. In the case of the EUR/JPY, the central bank divergence between the ECB and the Bank of Japan (BoJ) favors the former, which is about to finish its QE program, while the latter remains stimulating the Japanese economy. So the EUR/JPY held to gains, though from a technical perspective, it is forming an inverted hammer after an uptrend, which means the price is exhausted and may consolidate or resume lower.

EUR/JPY Price Forecast: Technical outlook

As abovementioned, exhaustion lies in the EUR/JPY pair. If EUR/JPY bulls fail to record a daily close above 139.00, that will exert additional downward pressure on the cross-currency pair. Also, the Relative Strength Index (RSI) in overbought territory (72.34) formed a negative divergence with price action as the EUR/JPY records higher highs, the RSI prints lower highs.

With that said, the EUR/JPY’s first support would be the psychological 138.00 mark. A break would expose February 2018 highs near 137.50, followed by April’s 19 daily low at 136.83.

• On Thursday, the GBP/USD is losing some 0.18%
• A positive market mood and hawkish Fed chatter lifted US Treasury yields, underpinning the greenback.
• GBP/USD Price Forecast: Bulls struggling at 1.3100 opened the door for further downside pressure.

The British pound fell short of testing the 1.3100 mark, which left it vulnerable to selling pressure; consequently, the GBP/USD prices declined to the daily low at 1.3022. At the time of writing, the GBP/USD is trading at 1.3043, down some 0.18%.

European and US equities are trading with gains, while US Treasury yields rise. The greenback remains underpinned by the latter, as shown by the US Dollar Index, up some 0.22%, sitting at 100.571. Some central bank speaking is dominating newswires

The central bank speaking parade continues

Of late, Fed Chief Jerome Powell said that moving a little quicker is appropriate, and a 50bps hike will be on the table for the May meeting. Powell added that the economy is performing strongly, and the labor market remains tight.

Earlier, St. Louis President James Bullard reiterated that the Fed is behind the curve and will not have a hard landing. He emphasized that a 75bps hike had been done, and the world did not come to an end.

On Thursday, San Francisco Fed President Mary Daly noted that the Fed “will likely” raise rates by 50 bps at a couple of meetings. However, she is open to deliberating what size of increases are needed, according to Yahoo Finance Interview. Daly reiterated that the Fed needs to take a measured pace on rate hikes and get rates up to 2.5% by the end of the year.

Meanwhile, in the European session, BoE’s Catherine Mann said on Thursday that she would need to look at whether 25 bps or additional interest rates hikes are required so the BoE could tame inflation. She added that “If we see rising energy prices and slowing sales, then, in some sense, we are already in stagflation; though, it is a little premature to use such a term.”

With that said, the GBP/USD outlook in the near term is tilted downwards. As the Federal Reserve prepared for successive meetings of 50-bps rate hikes, the BoE’s last 25-bps increase had one dissenter, Jon Cunliffe, who said on April 4 that the central bank might not need to take sustained action to stop stickier inflation in the UK.

GBP/USD Price Forecast: Technical outlook

The GBP/USD is stills tilted to the downside. Given that GBP/USD bulls failed to break 1.3100, they opened the door for further downside. Furthermore, the Relative Strenght Index (RSI), which was aiming higher, turned bearish, sitting at 43.56.

With that said, the GBP/USD first support would be 1.3000. Once cleared, the next support would be April’s 19 daily low at 1.2980, followed by the YTD low at 1.2972.

Fed Chair Jerome Powell, when asked about the topic of inflation at an IMF panel, noted that the Fed is no longer counting on inflation coming back down, as these expectations of supply-side easing have been let down in the past. Powell noted that, of course, it would be great if supply-side pressures eased and inflation came back down, but emphasised the Fed's focus on getting interest rates back to neutral "expeditiously" in order to be prepared either way.

Additional Takeaways:

"We have a job to do regarding demand."

There are more job openings than unemployed people.

"We've got a demand/supply imbalance in the US labor market and elsewhere".

"We have seen some tightening in financial conditions".

Speaking at an IMF panel alongside ECB President Christine Lagarde and other central bank leaders, Fed Chair Jerome Powell was questioned on the appropriateness of the money market's pricing of three 50 bps rate hikes over the next three Fed meetings. Whilst Powell was careful to clarify that he will not endorse any specific market pricing, he said that he did think that markets were priced appropriately given that, with inflation elevated, it makes sense for the Fed to move faster in tightening policy compared to previous hiking cycles. 

"50 bps rate hikes are on the table", Powell said, who emphasised the Fed's commitment to achieving its 2.0% inflation target. Powell also noted that many at the Fed thought 50 bps rate hikes would be appropriate going forward, echoing the remarks of many of his FOMC colleagues in recent days. Powell also reiterated his usual observations that the US economy is very strong and that the labour market is very tight.  

Market Reaction

The initial reaction in the US dollar has been modest weakness, with the DXY pulling back under 100.50 in recent trade from earlier session highs in the 100.60 area. 

Bank of England Governor Andrew Bailey has been talking about the state of and outlook for the UK economy. Here are the key takeaways from his remarks. 

Additional Remarks:

The UK's inflation shock has more in common with the Eurozone than the US.

Quite a few businesses have been talking about a shortage of migrant labour.

"We are in a period of unprecedentedly large shocks".

"We must ask whether series of price shocks is affecting inflation expectations".

The question is whether the UK labour market will slow down.

The BoE is looking to see whether businesses intend to hoard labour. 

The inflation target is going through the most severe test since it was created. 

Short-run inflation expectations are increasing and this is not a surprise. 

"We are seeing some increase in medium-term inflation expectations, but this does not amount to a de-anchoring". 

"We must not be complacent about inflation expectations".

"We must not be complacent about inflation expectations".

"We are walking a very tight line between tackling inflation, and the output effects of real-income shock". 

• EUR/USD has reversed back from highs in the 1.0930s to under 1.0850, with the pair taking cues from yields spreads.
• EUR/USD was supported in early European trade by hawkishness from the ECB VP, but reversed amid a US yields rally.
• With the pair having rejected its 21DMA, bears will be eyeing a near-term test of annual lows around 1.0750.

Movements in yield spreads as a function of rhetoric from central bankers dictated the price action for EUR/USD on Thursday. Comments from the usually dovish leaning ECB Vice President Luis de Guindos earlier in the European morning regarding the possibility of lift-off in July sparked a rally in Eurozone yields that lifted EUR/USD has high as the 1.0930s.

However, since the start of US trade, US yields have gained upside momentum amid hawkish Fed chatter (2s +13 bps to above 2.70% and 10s +11 bps to the mid-2.90s%), triggering a reversal back below 1.0850. A solid US weekly jobless claims report, disappointing US Philly Fed manufacturing survey and slightly better than expected Eurozone Consumer Confidence survey all had little impact on the pair.   

Where, at earlier session highs, EUR/USD had traded with on the day gains of about 0.75% and tested its 21-Day Moving Average, the pair now trades with modest losses of about 0.1% in the 1.0830s. Focus now turns to upcoming remarks at 1800BST from both of the heads of the Fed and ECB and focus looks set to remain on the policy divergence between the two banks.

Whilst the ECB is now seen lifting interest rates by as much as 75 bps this year to end its negative interest rate experiment, US money markets pricing are now pricing interest rates ending the year at 2.95%, meaning an implied more than 250 bps in additional rate cuts over the next six meetings between now and December. This massive rate advantage that the US holds over the euro, despite recent hawkish ECB shifts, its making it tough for EUR/USD to sustain rebounds.

After the pair rejected its 21DMA in the low-1.0900s, short-term bears will be eyeing a push lower back towards annual lows around 1.0750. Over the slightly more medium term, bears will be eyeing a test of the 2020 lows in the 1.0630 area.

• The Swiss franc extends its losses in the week, down 1.24%.
• Risk-on market mood and higher US Treasury yields weighed on the CHF.
• USD/CHF Price Forecast: A daily close above 0.9533 would open the door for a 0.9600 test.

On Thursday, the USD/CHF grinds higher amidst an upbeat market mood, up some 0.37% in the North American session. At the time of writing, the USD/CHF is trading at 0.9535.

So far, the market sentiment remains positive, as the European and US equities remain trading in the green. US Treasury yields remain elevated in the North American session, underpinning the greenback. The US Dollar Index, a gauge of the buck’s value vs. a basket of its peers, edges up 0.17%, sitting at 100.514, near the daily highs, after falling under the 100.000 threshold.

The Swiss franc fall is courtesy of market sentiment. Due to its status as a safe-haven peer, it usually depreciates in times of risk-on market mood. Also, the Swiss National Bank (SNB), one of the most actives central banks in FX, favors a weak CHF, so it’s not rare seeing it intervening in the USD/CHF and the EUR/CHF pairs.

USD/CHF Price Forecast: Technical outlook

The last two days’ USD/CHF price action kept the bullish bias on the pair, further confirmed by Wednesday’s close above 0.9480. the daily moving averages (DMAs) reacted to recent price action and turned upwards, but the Relative Strength Index (RSI) at 71.26, within the overbought territory, might put a lid on USD/CHF gains.

The USD/CHF first resistance would be June 2020 highs at 0.9538. A breach of the latter would expose the 0.9600figure. Once cleared, the following supply zone would be Ju

Key Levels to Watch

• Rising global yields as a result of hawkish ECB and Fed speak is weighing heavily on silver.
• XAG/USD has dumped over 2.5% on the day back to near $24.50.
• Bears are eyeing a test of recent lows in the $24.00 area, where the 200DMA also resides.

Chatter from ECB Vice President Luis de Guindos regarding a possible ECB rate hike as soon as July earlier in the morning meant that global yields were already on the front foot heading into the US trading session and the latest remarks from Fed’s Mary Daly about how the Fed will likely be raising interest rates by 50 bps at the next “couple” of Fed meetings has ignited further upside. At the time of writing, US 2-year yields were up 12 bps to trade back above 2.7% and 10-year yields were up 10 bps to trade in the mid-2.90s%.

The rise in US (and global) yields as bond market participants up their bets on central bank tightening in wake of the latest round of rhetoric from ECB and Fed policymakers has seen spot silver (XAG/USD) prices incur sharp losses. XAG/USD was last trading down by more than 2.5% on the day near the $24.50 per troy ounce mark, having dumped below its 21 and 50-Day Moving Averages earlier in the day, both of which reside closer to the $25.00 level.

Markets are braced for further central bank rhetoric in the coming hours, with both Fed Chair Jerome Powell and ECB President Christine Lagarde slated to speak from 1800BST. Should their comments add further fuel to the global yield rally, XAG/USD bears will be eyeing further downside and may target support in the $24.00 area in the form of earlier monthly lows and the 200DMA.

• US dollar gains momentum during the American session amid higher US yields.
• Risk appetite fades, and crude oil prices retreat.
• USD/CAD bounces after Wednesday’s slide, back above 1.2500.

The USD/CAD broke above 1.2500 and climbed to 1.2521, hitting a fresh daily high. It remains near the top with a bullish tone amid a stronger US dollar.

CAD trims Wednesday’s gains

The USD/CAD extended Wednesday’s slide in European hours and bottomed at 1.2457, the lowest level in two weeks. Yesterday, Canadian inflation data came in above expectations, with the annual headline at 6.7%., the highest since February 1991. Last week the Bank of Canada raised the key rate by 50 bp, and another such hike is expected at the next meeting June 1.

The USD/CAD is accelerating to the upside, trimming some of Wednesday’s losses amid a stronger US dollar. The DXY turned positive and is back at 100.50, after bottoming hours ago at 99.82.

Higher US yields are pushing the greenback to the upside. The US 10-year rose from 2.85% to 2.94%, while the 30-year climbed from 2.89% to 2.98%. The sell-off in Treasuries took place following comments from Fed’s officials. Mary Daly mentioned they will likely raise rates by 50 bps at some meetings.

Negative pressure alleviates

The recovery back above 1.2505 alleviated the negative momentum. If the USD/CAD keeps rising, the next resistance stands at 1.2550 followed by 1.2580. A decline back below 1.2500 should put the pair back into a negative very short-term outlook. The key support stands at 1.2460: a consolidation below would open the door to more losses and a potential decline to 1.2405 (April 5 low).

Technical levels

San Francisco Fed President and FOMC member Mary Daly on Thursday reiterated that the Fed needs to get rates to 2.5% by the end of the year in an interview with Yahoo Finance. "We will likely be raising interest rates by 50 bps at a couple of Fed meetings" she noted, saying that the Fed would deliberate over whether hikes of 25 bps, 50 bps or 75 bps are needed. 

It is an open question how far rates may need to go above 2.5%, Daly added, before repeating her view that the Fed will be able to achieve a "soft landing" for the US economy. The economy has demonstrated that it can self-sustain, she noted, before stating that she would not necessarily call the inflation peak, given lockdowns in China, the Russo-Ukraine war and ongoing supply chain bottlenecks. 

The labour markets in the US are frothy and pushing up inflation, Daly said, though she said she doesn't see a wage-price spiral beginning. 

"We have seen some evidence of Russian forces addressing some of the issues they faced earlier in the war in Ukraine," a Western official told Reuters on Thursday. Russian President Vladimir Putin's failed in his initial pre-war objectives but is still in a position to win inside Ukraine, the official continued.  

Western nations have been scrambling in recent days to increase the pace of arms shipments to Ukraine's military. On Thursday, US President Joe Biden announced $800M in new military aid for Ukraine and said the US would be sending weapons “directly to the front lines of freedom”.

US Treasury Secretary Janet Yellen on Thursday said that a significant amount of the focus at this week's IMF, World Bank and G20 meetings has been on Russia's "reckless, devastating" war in Ukraine, reported Reuters. 

Additional Takeaways:

• Shared the US's commitment for another $500 million in aid to be sent to Ukraine with the Ukrainian Prime Minister. 
• Ukraine needs urgent will deploy aid as quickly as possible. 
• The US and its allies agreed to tighten the vice of sanctions against Russia. 
• The US is doing everything it can to address food security risks from the Ukraine war. 
• A top priority is to end the Covid-19 pandemic and overcome the hurdles of vaccinating the world population. 
• An objective with sanctions on Russia has been to impose maximum pain on Russia while mitigating the impact on US allies. 
• The US needs to be careful about a complete European ban on imports of Russian energy as this would increase oil prices. 
• The proceeds from oil and gas sales are an important revenue source for Russia and it would be desirable to reduce those. 
• There will be more specific details on bolstering food supplies in the coming weeks. 
• Measures on supply and demand side are important for food security. 
• US supply chains are not secure and are not resilient. 
• Producing everything at home would be more expensive. Ideally, trusted partners could help provide efficiencies. 

EUR/USD is being driven by developments at the short end of the interest rates curves and clearly the speed with which the European Central Bank (ECB) normalises policy will be important. Here are three possible scenarios on the ECB’s path to normalisation and its implications for the EUR/USD pair, according to economists at ING.

Base case

“The ECB ends net asset purchases in the second quarter of 2022 and starts hiking interest rates by 25bp in September with another 25bp in December. We expect only two additional rate hikes, bringing the refi rate to 1.0% by the end of 2023, with no further hikes in 2024. Given the fact that the market virtually prices three 25bp hikes from the ECB this year – we look for EUR/USD to trace out a 1.05-1.10 range, ending the year at 1.10. In 2023, the emergence of Fed easing expectations could see the dollar turn around and EUR/USD end the year at 1.15.”

Earlier and more aggressive normalisation

“The ECB ends net asset purchases in June and hikes interest rates by 25bp in July with another 25bp in September. The ECB follows in the Fed’s footsteps, hikes rates by 25bp in December 2022, March, June and December 2023 with another 50bp in 2024, bringing the refi rate to 2%. Multi-year ECB tightening cycle would probably mean more for 2023 than 2022 EUR/USD forecasts. The pair could be trading at 1.20-25 by end-2023 here.”

The fear is back move

“The ECB still sticks to normalisation, hikes rates by 25bp in September and December but delivers no further rate hikes. The more subdued ECB scenario would probably have more impact on EUR/USD this year and could see EUR/USD pinned down near 1.05.”

• USD/JPY rose back into the mid-128.00s on Thursday, as the yen came back under pressure amid rising global yields.
• Traders are now braced for remarks from central bank policymakers including Fed Chair Powell, which could catalyse further upside.
• The bulls are eyeing a potential retest of multi-decade highs printed earlier in the week above 129.00.

USD/JPY rose back into the mid-128.00s on Thursday, as traders deemed Wednesday’s yen recovery to be little more than a dead cat bounce/bear market rally. At current levels near 128.30, the pair is trading with on the day gains of about 0.4%, with the yen amongst the G10 outperformers as a result of a rebound in Eurozone and US bond yields in the run-up to ECB and Fed commentary later this evening from their respective central bank heads.

Japan’s Finance Minister, speaking at the G7 meeting, said little to support the beleaguered yen, reiterating his stance that recent yen weakness is unfavourable and that stability is important, but not signaling any direct intentions to intervene. Meanwhile, the BoJ bought JGBs to defend the upper limit of its -0.25% to 0.25% target range, which theoretically means the bank added stimulus, further hurting the yen’s cause.

Given this backdrop, the USD/JPY will be eyeing a retest of earlier weekly highs above the 129.00 level. Traders will be waiting to see whether remarks from Fed Chair Jerome Powell can catalyse the next leg of the rally towards 130.00, a level last hit in April 2002.

EUR/USD has climbed back above the 1.09 level this morning. In the opinion of economists at Rabobank, the pair will end the year moderately higher. 

Moving on?

“Around four European Central Bank (ECB) officials have indicated that rates could be raised in Q3. there is a clear sense that the Governing Council may be opening up the prospect of a rate move a little earlier than many economists have been expecting.”

“Assuming a win by the incumbent in France’s run-off election, the EUR could benefit further from relief.” 

“Our short-term forecast of EUR/USD 1.08 was breached earlier this week. We expect EUR/USD to push back to its 1.10 pivot into the summer and beyond.” 

How sustainable is the flood of capital finding its way into gold? In the opinion of strategists at TD Securities, the yellow metal is set to see fewer investors willing to buy the safe-haven asset.

The right tail is narrow in gold

“Thus far, the gold's prices have remained extremely resilient against an aggressively hawkish Fed, as a protracted war in Ukraine simultaneously raised both geopolitical uncertainty and inflation risks, thereby fueling demand for the yellow metal as a safe haven. This trend has also likely been exacerbated by the concurrent decline in global equity and bond prices, which is consistent with fears that Treasuries may be less potent havens in a higher-inflation regime.” 

“While the Fed is signaling its intent to combat inflation by reaching policy neutrality by year-end, and to start an aggressive QT regime, outflows from gold markets have been scarce as participants are happy to retain some optionality against the Fed's stated plan amid growth concerns.” 

“Safe-haven flows are likely to subside as the fear trade dissipates, leaving fewer participants left to buy gold. Comex shorts have also largely been wiped out, further removing some fuel for price strength. In this context, the right tail is narrow in gold.”

GBP’s rebound from sub-1.30 levels extended into the high-1.30s today before selling pressure emerged near the figure. Economists at Scotiabank expect GBP/USD to decline towards the 1.2850 zone.

GBP/USD faces firm resistance in the mid-1.31s

“The pound remains caught in a downward trajectory since late-Feb with price action pointing to another break under 1.30 and losses extending toward the mid-1.28s.” 

“A test of 1.31 with an aim to take out last week’s high of 1.3150 would leave the GBP technical picture looking much more positive but the pound faces firm resistance in the mid-1.31s.” 

“Support after the mid-1.30s and the figure is Tuesday’s low of 1.2981 followed by 1.2974.”

EUR/JPY has surged above medium-term resistance at 137.50/54 to mark a further significant break higher. Next resistance is seen at 141.06/18, analysts at Credit Suisse report.

Support at 138.47/39 set to hold to keep the immediate risk higher

“EUR/JPY maintains the strong tone following its break above key resistance from the 2018 and recent highs at 137.50/54, which marked a significant break higher to open up further medium-term upside.” 

“We stay biased higher, with resistance seen next at 140.03/09, ahead of the June 2015 high and 78.6% retracement of the 2014/2016 fall at 141.06/17. We would look for this to then cap at first for a phase of consolidation. Big picture though, we would look for this to be followed by a break higher with resistance then seen next at 141.74, then 142.42.” 

“Support is seen at 139.28 initially, then 138.91, with 138.47/39 now ideally holding to keep the immediate risk higher. Below can see a setback to support next at 137.54/50, potentially 136.95, but with buyers expected to show here.”

US President Joe Biden, in a speech about the latest $800M US military aid package for Ukraine, said that the US is sending weapons "directly to the front lines of freedom", reported Reuters on Thursday. "We are in a critical window as Russia sets the stage for the next phase of war," Biden said, noting that the latest aid package includes heavy artillery, drones, dozens of howitzers and ammunition. 

Moreover, the US is sharing timely intelligence with Ukraine, Biden stated, calling the battle of Kyiv a "historic victory" for the Ukrainians, though noting that now is the time to accelerate assistance. The new package will ensure a steady flow of weapons into Ukraine over the next few weeks, Biden said, though he warned that he had almost exhausted the "draw down" authority Congress had given to him, noting he will be asking Congress for more. 

In order to sustain Ukraine for the duration of the fight, Biden said he would be asking Congress for more money next week. Biden also said that the US would be providing $500M in direct aid to the Ukrainian government and that the US will ban all Russia-affiliated ships from US ports. 

EUR/USD has managed a solid recovery from sub-1.08 levels. Economists at Scotiabank note that the pair needs to surpass the 1.0950 zone to mark an important change of the bearish trend. 

Downward pressure remains well in place since last summer

“Downward pressure remains well in place since last summer and the EUR has only managed modest recoveries. The EUR would have to break past the daily high of 1.0936 and the 1.0950 area to suggest a clear change of trajectory.”

“Support after the mid-1.08s is the figure area and ~1.0780.”

Eurozone Consumer Confidence rose by 1.8 points to -16.9 in April from -18.7 in March, data released by the European Commission on Thursday showed. That was a better outcome than the expected decline to -20.0. In the European Union as a whole, Consumer Confidence rose from -19.6 to -17.6 in April. 

Market Reaction

The euro did not react to the latest better than expected Consumer Confidence figures. FX markets are instead in wait-and-see mode ahead of remarks from Fed Chair Jerome Powell and ECB President Christine Lagarde later in the session.  

An ECB source reportedly told Econostream that some ECB policymakers, for example Austria's Robert Holzmann, will push for a 50 bps rate hike, though any such move is not a foregone conclusion. A 50 bps Deposit Facility Rate hike and a 25 bps hike in the Refinancing Rate would narrow the corridor in one move, the source said, before conceding that the ECB would first want to prime markets for any such move. 

Earlier in the day, ECB President Christine Lagarde said that the ECB will maintain optionality in current conditions of high uncertainty. 

• USD/JPY attracted some dip-buying buying near the 23.6% Fibo. level support on Thursday.
• A combination of factors weighed on the safe-haven JPY and acted as a tailwind for the pair.
• Investors now look forward to Fed Chair Jerome Powell’s speech for a fresh trading impetus.

The USD/JPY pair maintained its bid tone through the early European session and held steady above the 128.00 mark, still down around 50 pips from the daily swing low.

A generally positive tone around equity markets undermined the safe-haven Japanese yen, which was further weighed down by the Bank of Japan's intervention to check the rise in Japanese 10-year yields. Bullish traders further took cues from a goodish rebound in the US Treasury bond yields, bolstered by hawkish Fed expectations.

That said, speculation that officials would respond to the yen's recent slump capped the upside for the USD/JPY pair amid a softer tone surrounding the US dollar. Investors also seemed reluctant and preferred to wait on the sidelines ahead of Fed Chair Jerome Powell's speech at an International Monetary Fund event later during the US session.

From a technical perspective, the overnight sharp corrective pullback from the 129.40 area, or a fresh 20-year high stalled near the 23.6% Fibonacci retracement level of the 121.28-129.41 parabolic rise. The mentioned support, around the 127.60-127.50 region, coincides with the 100-hour SMA and should now act as a key pivotal point for short-term traders.

A convincing break below should pave the way for deeper losses and drag the USD/JPY pair towards the 127.00 mark. The said handle marked ascending trend-line support extending from the monthly low. Some follow-through selling has could accelerate the fall towards testing the next relevant support near the 126.35 region, or the 38.2% Fibo. level.

On the flip side, the daily swing high, around the 128.60 region, now seems to act as an immediate resistance ahead of the 128.85 region and the 129.00 round-figure mark. Sustained strength beyond will suggest that the corrective decline has run its course and lift the USD/JPY pair back towards retesting the two-decade peak, around the 129.40 region.

USD/JPY 1-hour chart

Key levels to watch

• EUR/USD fades the earlier spike to the vicinity of 1.0940.
• ECB’s rate-setters see a probable rate hike in July.
• Chair Powell speaks later on the global economy.

Following the earlier spike to fresh 2-week highs in the 1.0935/40 band, EUR/USD comes under some mild downside pressure and now returns to the area below 1.0900 on Thursday.

EUR/USD now looks to Powell

EUR/USD keeps the bid bias unchanged so far this week and maintains the rebound from Monday’s sub-1.0800 levels well in place amidst the persistent corrective downside in the greenback.

Further rebound in the pair comes amidst the equally positive performance in US and German yields, which manage well to regain upside traction and reverse Wednesday’s pullback.

Earlier in the euro docked, inflation figures in the broader Euroland came a tad below the flash prints for the month of March, while the European Commission’s flash Consumer Confidence is due later in the day.

In the US calendar, Initial Claims rose by 184K in the week to April 16 and the Philly Fed Manufacturing Index deflated to 17.6 in April (from 27.4). Later in the NA session, Chief Powell will speak on The Global Economy at an IMF event.

What to look for around EUR

EUR/USD regains some composure and trespasses 1.0900 to clinch fresh multi-day tops. The duration and extension of the ongoing bounce, however, remains to be seen, as the outlook for the pair still remains tilted towards the bearish side, always in response to dollar dynamics, geopolitical concerns and the Fed-ECB divergence. As usual, occasional pockets of strength in the single currency should appear reinforced by speculation the ECB could raise rates before the end of the year, 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 rebound in the euro.

Key events in the euro area this week: Final EMU Inflation Rate, Flash EMU Consumer Confidence (Thursday) – EMU, Germany Flash Manufacturing, Services PMIs (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. Second round of the presidential elections in France (April 24). Impact on the region’s economic growth prospects of the war in Ukraine.

EUR/USD levels to watch

So far, spot is up 0.40% at 1.0893 and faces the next up barrier at 1.0936 (weekly high April 21) seconded by 1.1000 (round level) and finally 1.1078 (55-day SMA). On the other hand, the break below 1.0757 (2022 low April 14) would target 1.0727 (low April 24 2020) en route to 1.0635 (2020 low March 23).

Bank of England policymaker Catherine Mann said on Thursday that the consequent embedding of current overall inflation into firms' own-pricing is a concern because it may point to a situation in 2023 where pricing remains robust even as demand remains weak, reported Reuters. 

Additional Remarks:

The BoE's remit recognises that shocks will push inflation away from 2% and that appropriate monetary policy can temporarily tolerate such a deviation. 

These days, there is uncertainty at all horizons and among all relationships, and, of course, shocks continue to affect both financial intermediation and the real economy. 

"I am watching surveys and other data closely to see whether and when firms receive the demand signal that would alter their pricing expectations."

If the consumption hit is moderated by other policies or by savings and other smoothing behaviours, it may be well into 2023 before firms receive the demand signal.

• NZD/USD pulled back under 0.6800 on Thursday after finding resistance at its 50-DMA at 0.6816 a day earlier.
• The kiwi is a modest G10 underperformer after NZ CPI data came in not quite as hot as feared.
• But the RBNZ is still expected to press ahead with aggressive tightening in the coming quarters.

The New Zealand dollar was a modest G10 underperformer on Thursday, as traders pulled back slightly on their expectations for RBNZ interest rate hikes in the coming years after not as hot as feared Q1 inflation figures. Inflation surged 1.8% QoQ in New Zealand in Q1, according to the latest Consumer Price Index (CPI) figures, while the YoY rate of inflation jumped to 6.9%, its fastest rate since 1990. But that missed expectations for a 2.0% QoQ and 7.1% YoY rise in the CPI.

After hitting resistance in the form of the 50-Day Moving Average at 0.6816 on Wednesday, NZD/USD has reversed back into the 0.6780s, where it trades lower on the day by about 0.3%. Most analysts agreed that, even if the latest inflation figures were not quite as hot as feared, the RBNZ is still very likely to raise interest rate by 50 bps again at its next meeting in May, following last week’s 50 bps rate rise to 1.50%.

As a result, kiwi underperformance has been modest. Looking ahead, NZD/USD traders are bracing for commentary from Fed Chair Jerome Powell later in the session and he is expected to solidify expectations for 50 bps rate moves at the Fed’s next few policy meetings. USD risks seem tilted to the upside and the NZD/USD bears will be eyeing a potential retest of this week’s lows in the 0.6720 area.

• AUD/USD edged lower on Thursday and eroded a part of the overnight gains to the weekly high.
• Bets for aggressive Fed rate hikes revived the USD demand and exerted some downward pressure.
• The risk-on impulse helped limit deeper losses as investors now await Fed Chair Powell’s speech.

The AUD/USD pair remained on the defensive through the mid-European session and was last seen hovering near the lower end of its daily trading range, around the 0.7425-0.7420 region.

As investors digested more hawkish RBA minutes released earlier this week, the AUD/USD pair met with a fresh supply on Thursday and eroded a part of the overnight gains to the weekly high. China vowed to cut steel output in 2022, which, in turn, was seen as a key factor that acted as a headwind for the resources-linked Australian dollar. Apart from this, the emergence of some US dollar dip-buying exerted some downward pressure on spot prices.

The greenback drew support from a fresh leg up in US Treasury bond yields, boosted by hawkish Fed expectations, and has now reversed its early lost ground to the weekly low. In fact, the markets seem convinced that the Fed would tighten its monetary policy at a faster pace to curb soaring inflation and have been pricing in multiple 50 bps rate hikes. This had sent the US 10-year real yields into the positive territory for the first time in two years.

That said, the risk-on impulse - as depicted by strong move up in the equity markets - capped the safe-haven buck and offered some support to the perceived riskier aussie. Apart from this, softer US macro data further held back the USD bulls from placing aggressive bets and helped limit deeper losses for the AUD/USD pair. Investors also seemed reluctant ahead of Fed Chair Jerome Powell's speech at an International Monetary Fund event later during the US session.

Nevertheless, the bias seems tilted firmly in favour of the USD bulls and supports prospects for the resumption of the AUD/USD pair's recent sharp pullback from the YTD peak touched on April 5. That said, it will still be prudent to wait for sustained weakness below the 0.7400 mark before confirming that this week's bounce from the 0.7340 region, or the one-month low has lost steam.

Technical levels to watch

Gold maintains a slight upward bias in its broader sideways range. A break past the $2,070/75 highs would resolve the range higher for a fresh bull trend, strategists at Credit Suisse report.

Break below $1,877 to reassert the broad sideways range

“Gold above $1,877 can maintain an immediate upward bias in the broader sideways range.”

“Only above the $2,070/75 highs though would be seen to resolve the range higher for a fresh bull trend, with resistance then seen at $2,280/2,300.”

“A break below $1,877 can further reassert the broad sideways range with support then seen next at $1,845/31.”

• The Philly Fed Manufacturing Index saw a larger than expected drop to 17.6 in April from 27.4 last month.
• There was no FX market reaction, with markets instead focused on upcoming central bank speak. 

According to a report from the Federal Reserve Bank of Philadelphia released on Thursday, the headline Manufacturing Activity Index of the Manufacturing Business Outlook Survey fell to 17.6 in April from 27.4 in March. That was larger than the expected decline to 21.0.

Subindices:

• Business Conditions fell to 8.2 from 22.7
• Capital Expenditures fell to 19.9 from 24.8
• Employment rose to 41.4 from 38.9
• New Orders fell to 17.8 from 25.8
• Prices Paid rose 84.6 from 81.0

Market Reaction

There was no market reaction to the latest US data, with markets more focused on upcoming Fed speak from the likes of Fed's Jerome Powell and ECB's Christine Lagarde later in the day.

• Initial Claims were a tad higher than expected but Continued Claims saw a much larger than expected drop. 
• There was no FX market reaction, with markets instead focused on upcoming central bank speak. 

There were 184,000 US Initial Jobless Claims in the week ending on 16 April, the latest data released by the US Department of Labour showed on Thursday, a tad above the expected decline to 180,000 from 186,000 a week earlier. That meant the four-week average number of initial claims rose to 177,250 in the week ending on 16 April from 172,750 a week earlier. 

Continued Claims, meanwhile, fell to 1.417M in the week ending on 9 April, larger than the expected drop to 1.455M from 1.475M a week earlier. As a result, the Insured Unemployment Rate dropped to 1.0% from 1.1% a week before. 

Market Reaction

There was no market reaction to the latest US data, with markets more focused on upcoming Fed speak from the likes of Fed's Jerome Powell and ECB's Christine Lagarde later in the day.

• WTI is stable in the low $100s as traders mull various crude oil market themes.
• Concerns about OPEC+ supply amid expectations for further Russian output decline and difficulties in Libya are keeping prices above $100.
• But rising concerns about slowing global growth this week prevented WTI from testing $110.

Crude oil markets are trading in stable fashion, with front-month WTI futures trading near the $103.00 level, with the 21 and 50-Day Moving Averages (DMA) at $102.70 and just under $101.00 constraining the price action as oil traders mull various competing themes. There has been chatter throughout the week about a potential EU ban on Russian crude oil imports, which could put the nation’s output under further pressure. The International Energy Agency already predicts Russian output to fall by as much as 3M barrels per day (BPD) by May.

Meanwhile, oil traders have also had to contend with increased concerns about the output capacity other major OPEC+ producers, after news broke earlier this week about disruptions in Libya (a 550K shortfall, the state-owned oil producer said) and a Reuters survey revealed OPEC+ output missing its output target by a massive 1.5M barrels per day in March. Fears about near-term crude oil market tightness are for now keeping WTI supported to the north of the $100 per barrel mark.

But oil traders have also had to contend with growing fears about a global growth slowdown as rampant global inflation spurs central banks to tighten financial conditions and amid the negative impact of the Russo-Ukraine war and most recent lockdowns in China. This, combined with some chatter about the Kazakh Caspian Pipeline Consortium (which carries roughly 1M BPD or 1% of global supply) soon returning to full capacity, is keeping WTI pinned in the low $100s for now.

Later in the session, oil traders will be watching what various central bank heads, including the Fed’s Jerome Powell and ECB’s Christine Lagarde, have to say on monetary policy, and whether this impacts broader risk appetite.

• GBP/USD witnessed an intraday turnaround from the one-week high touched on Thursday.
• Sustained break below the 1.3000 mark would set the stage for additional near-term losses.
• Any attempted recovery is more likely to remain capped near the 1.3100 round-figure mark.

The GBP/USD pair faded a mid-European session bullish spike to a one-week low and dropped to a fresh daily low, around the 1.3030-1.3025 region in the last hour.

The US dollar drew support from a fresh leg up in US Treasury bond yields, bolstered by hawkish Fed expectations, and has now recovered a major part of its early losses to the weekly low. This, in turn, was seen as a key factor behind the GBP/USD pair's sharp intraday slide of over 50 pips. From a technical perspective, the pair's inability to capitalize on the positive move and the emergence of fresh selling at higher levels suggests that the near-term downfall might still be far from over. Hence, any subsequent move up is likely to remain capped near the 1.3100 confluence hurdle. 

The said handle comprises 200-period SMA on the 4-hour chart and a descending trend line, which should act as a pivotal point and help determine the near-term trajectory. A convincing breakthrough would suggest that the GBP/USD pair has formed a base below the 1.3000 psychological mark. This, in turn, would pave the way for additional gains and push spot prices to the next relevant hurdle near the 1.3145-1.3150 area, above which bulls might aim to reclaim the 1.3200 round figure. The positive momentum could further get extended towards the 1.3260-1.3265 horizontal zone.

On the flip side, the 1.3000-1.2990 area might continue to protect the immediate downside. Sustained weakness below, leading to a subsequent break through the YTD low, near the 1.2975-1.2970 zone, would make the GBP/USD pair vulnerable to resume its previous well-established bearish trend. The downward trajectory could then drag spot prices to the 1.2910-1.2900 support zone en-route the mid-1.2800s support zone. The GBP/USD pair could eventually drop to test the 1.2820 intermediate support ahead of the 1.2800 round-figure mark.

GBP/USD 4-hour chart

Key levels to watch

• EUR/USD extends the rebound to the 1.0940 region.
• A move to the 1.1000 hurdle should not be ruled out.

EUR/USD’s upside momentum picks up extra pace beyond the 1.0900 yardstick on Thursday.

Further advance appears in store for the pair in the very near term with the immediate hurdle now at the psychological 1.0000 barrier. The surpass of the latter should put a test of the 55-day SMA, today at 1.1077, back on the radar.

While below the 200-day SMA, today at 1.1415, the outlook for the pair is expected to remain negative.

EUR/USD daily chart

• DXY extends the corrective downside to the sub-100.00 area.
• The 97.70 region is expected to offer strong contention.

DXY retreats for the second session in a row and revisits the area below the key 100.00 mark on Thursday.

Price action around the index continues to favour extra weakness. Against that, the dollar’s decline could extend to the late-March lows in the 97.70 area, where decent contention is predicted to emerge.

The current bullish stance in the index remains supported by the 7-month line near 96.60, while the longer-term outlook for the dollar is seen constructive while above the 200-day SMA at 95.41.

DXY daily chart

• EUR/JPY quickly leaves behind Wednesday’s retracement.
• Above 140.00 comes the 141.05 level (June 2015).

EUR/JPY clocked new peaks around 140.00 on Thursday, an area last seen back in June 2015.

The continuation of the uptrend looks the most likely scenario for the time being. That said, if the cross clears 140.00, then the focus of attention will be on the June 2015 high at 141.05. Beyond this level, there are no hurdles of note until the 2014 high at 149.78 (December 2014).

In the meantime, while above the 200-day SMA at 130.48, the outlook for the cross is expected to remain constructive.

EUR/JPY daily chart

Below are key highlights from the statement by Christine Lagarde, President of the European Central Bank, for delivery at the forty-fifth meeting of the International Monetary and Financial Committee.

"The economy is reopening, the labour market continues to improve, the high levels of savings accumulated during the pandemic can be used to partly cushion the energy price shock, and ample policy support remains in place."

"Inflation will be higher if the prices of energy and other commodities increase further and new supply bottlenecks arise."

"We continue to carefully monitor risks to the inflation outlook."

"Our monetary policy will depend on the incoming data and our evolving assessment of the outlook."

"In the current conditions of high uncertainty, we will maintain optionality, gradualism and flexibility in the conduct of monetary policy."

Market reaction

These comments don't seem to be having a significant impact on the shared currency's performance against its major rivals. As of writing, EUR/USD was up 0.5% on the day at 1.0905.

• Silver witnessed aggressive selling on Thursday and dropped to over a one-week low.
• The technical set-up favours bearish traders and supports prospects for further losses.
• Attempted recovery could now be seen as a selling opportunity near the $25.00 mark.

Silver came under intense selling pressure on Thursday and dropped to a one-and-half-week low, around the $24.70-$24.65 region during the first half of the European session.

From a technical perspective, the overnight bounce struggled to find acceptance above the 200-period SMA on the 4-hour chart and the subsequent sharp fall favours bearish traders. The negative outlook is reinforced by the fact that the XAG/USD earlier this week confirmed a bearish break through the lower end of an upward sloping channel extending from the monthly low.

Moreover, technical indicators on the daily chart have just started drifting into bearish territory and support prospects for further losses. That said, RSI on hourly charts is hovering near the oversold zone and warrants some caution before placing aggressive bearish bets. Nevertheless, the XAG/USD seems vulnerable to prolonging this week's decline from the six-week high.

The ongoing downward trajectory seems strong enough to drag spot prices to the next relevant support near the $24.25 region. This is closely followed by the $24.00 round-figure mark and the very important 200-day SMA, around the $23.85 region, which if broken will be seen as a fresh trigger for bearish traders and pave the way for a further near-term depreciating move.

On the flip side, attempted recovery might now confront stiff resistance near the $25.00 psychological mark ahead of the overnight swing high, around the $25.30 region. Any further move up is more likely to attract fresh selling and remain capped near the aforementioned ascending trend-channel support breakpoint, now turned resistance, around the $25.70 region.

Silver 4-hour chart

Key levels to watch

Lee Sue Ann and Quek Ser Leang, FX Strategists at UOB Group, noted NZD/USD now looks poised for extra consolidation, likely within the 0.6715-0.6835 range.

Key Quotes

24-hour view: “NZD soared to a high of 0.6812 before pulling back sharply after NY close. The sharp and rapid pullback has room to extend to 0.6755. The next support at 0.6735 is unlikely to come under threat. Resistance is at 0.6795 followed by 0.6810.”

Next 1-3 weeks: “Our latest narrative was from Tuesday (19 Apr, spot at 0.6735) where ‘while downward momentum has not improved by much, there is scope for NZD to weaken further to 0.6700’. Yesterday (20 Apr), NZD rebounded strongly and took out our ‘strong resistance’ level at 0.6795. The breach of the ‘strong resistance’ indicates that downward pressure has eased. The current movement is viewed as part of a consolidation phase and NZD is likely to trade within a range of 0.6715/0.6835 for now.”

• EUR/GBP gained strong positive traction on Thursday and rallied to a near two-week high.
• The overnight hawkish comments by the ECB policymaker underpinned the shared currency.
• Subdued action around the British pound did little to hinder the strong intraday positive move.

The EUR/GBP cross added to its strong intraday gains and jumped to a nearly two-week high, around the 0.8365 region during the first half of the European session.

Following the previous day's good two-way price moves, the EUR/GBP cross caught aggressive bids on Thursday and built on its recent bounce from mid-0.8200s, or the multi-week low touched on April 14. The European Central Bank (ECB) policymaker Martins Kazaks said on Wednesday that “a rate hike is possible as soon as July.” This comes on the back of the recent surge in the German 10-year benchmark yields to a level last seen in July 2015, near the 1.00% psychological mark on Tuesday, and underpinned the euro.

This, along with some repositioning trade ahead of ECB President Christine Lagarde's speech later this Thursday, contributed to the shared currency's relative outperformance. On the other hand, the British pound, so far, has struggled to gain any meaningful traction and further acted as a tailwind for the EUR/GBP cross. That said, concerns about the potential economic fallout from the ongoing war in Ukraine might hold back traders from placing aggressive bullish bets and keep a lid on any further gains for spot prices.

Traders will further take cues from the Bank of England Governor Andrew Bailey's appearance at the same event. Nevertheless, the mixed fundamental backdrop makes it prudent to wait for sustained move back above the 0.8400 round-figure mark before confirming that the EUR/GBP cross has bottomed out in the near term. This will set the stage for additional gains and allow bulls to aim back to challenge the very important 200-day SMA, currently around mid-0.8400s.

Technical levels to watch

According to the latest Reuters poll of analysts and fund managers, an increasingly hawkish Fed has widened the disparity between several Asian central banks, leading to a rise in the bearish bets on the regional currencies.

Key findings

Short positions on the Malaysian ringgit were raised to their highest since late-August, “while the position was the largest since early December in case of the Thai baht.”

“Bearish bets were also raised on the Taiwan dollar, Indian rupee and the Philippine peso.”

“Bets on the Indonesian rupiah inched closer to a bearish territory after the country's central bank cut its 2022 economic growth outlook amid risks from inflation and geopolitical tensions.”

“Meanwhile, short positions on South Korea's won rose and long positions in the Singapore dollar were cut despite central banks in both countries recently tightening their monetary policy.”

Related reads

• USD/CNY to hit the 6.45 mark by the end of Q2 – MUFG
• BOK Chief Rhee: Economic recovery to be weaker than previously expected

• EUR/USD extends the recovery above the 1.0900 barrier.
• Hawkish ECB-speak suggested a potential hike in July.
• Chief Powell, Initial Claims, Philly Fed Index comes next.

The buying interest gathers extra steam and pushes EUR/USD further north of the 1.0900 barrier to clinch new 2-week highs in the 1.0935/40 band on Thursday.

EUR/USD boosted by ECB chatter

EUR/USD advances for the third session in a row for the first time since late March on Thursday, as sentiment around the European currency was boosted by hawkish comments from ECB Vice-president L. De Guindos, who suggested a probable interest rate hike in July. Earlier in the session, ECB Board member P.Wunsch also anticipated that rates could be positive as soon as this year.

In the debt market, US yields resume the upside along the curve, while the German 10y bund yields also trade in the positive territory above the 0.90% mark.

Data wise in the Euroland, final inflation figures showed the CPI rose a tad below the preliminary reading at 7.4% YoY (from 7.5%) and the Core CPI gained 2.9% YoY (from 3.0%). In addition, the European Commission will publish its preliminary gauge for the Consumer Confidence in the region for the month of April.

Later in the session, Chief Powell will speak on The Global Economy at an IMF event. In the docket, weekly Claims are due in the first turn seconded by the Philly Fed Index and the CB Leading Index.

What to look for around EUR

EUR/USD regains some composure and trespasses 1.0900 on quite a sustainable fashion so far. The duration and extension of the ongoing bounce, however, remains to be seen, as the outlook for the pair still remains tilted towards the bearish side, always in response to dollar dynamics, geopolitical concerns and the Fed-ECB divergence. As usual, occasional pockets of strength in the single currency should appear reinforced by speculation the ECB could raise rates before the end of the year, 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 rebound in the euro.

Key events in the euro area this week: Final EMU Inflation Rate, Flash EMU Consumer Confidence (Thursday) – EMU, Germany Flash Manufacturing, Services PMIs (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. Second round of the presidential elections in France (April 24). Impact on the region’s economic growth prospects of the war in Ukraine.

EUR/USD levels to watch

So far, spot is up 0.57% at 1.0912 and faces the next up barrier at 1.0936 (weekly high April 21) seconded by 1.1000 (round level) and finally 1.1078 (55-day SMA). On the other hand, the break below 1.0757 (2022 low April 14) would target 1.0727 (low April 24 2020) en route to 1.0635 (2020 low March 23).

Moody's Investors Service affirmed New Zealand's sovereign rating at ‘AAA’ while maintaining a ‘Stable’ outlook.

The global ratings agency expects solid growth of 3.0% in 2022 as the economy continues to recover from Covid, even as the fiscal and monetary policy begin to normalize in the face of domestic and external inflationary pressures.

Key findings

“New Zealand's economy to remain resilient, despite its vulnerability to shocks as a small, open and commodities-based economy.”

“The economy's resilience reflects the economy's trade openness, highly competitive agricultural export base, flexible labor and product markets, high wealth levels, and the benefits of its ongoing net migration program.”

“These attributes support New Zealand's medium-term growth potential of around 2.5-3.0%, a level higher than many advanced economy Aaa-rated peers.”

Brent Crude Oil has established a major peak at $139.13. Strategists at Credit Suisse continue to expect a broad range.

Break above $123.74 to clear the way for a rise back to the recent $139.13 high

“Our broader bias is for Brent to remain in a broad although volatile trading range environment during the next 1-3 months, which we expect to be established between the recent $139.13 peak and potentially as far as the still rising 200-day average, currently at $85.11.”

“Above $123.74 is needed to clear the way for a rise back to the recent $139.13 high. Beyond here though would reinject fresh upside momentum into the market for a test of the $147.50 record high, which is currently not our base case.”

Extra gains could now push USD/CNH to the 6.4800 area in the short-term, commented Lee Sue Ann and Quek Ser Leang, FX Strategists at UOB Group.

Key Quotes

24-hour view: “While we expected USD to strengthen yesterday, we were of the view that ‘the major resistance at 6.4500 is unlikely to come under threat’. The subsequent USD strength exceeded our expectations as it surged to 6.4558 before easing off. The rapid rise appears to be overdone and USD is unlikely to advance further. For today, USD is more likely to trade sideways between 6.4250 and 6.4550.”

Next 1-3 weeks: “We have held a positive view in USD since the start of the week (see annotations in the chart below). Yesterday (20 Apr, spot at 6.4170), we highlighted that USD could strengthen further but any advance is expected to face strong resistance at 6.4500. We did not quite expect the strong surge that sent USD soaring to a high of 6.4558. Further USD strength is not ruled out but overstretched shorter-term could lead to a couple of days of consolidation first. Overall, only a breach of 6.4050 (‘strong support’ level was at 6.3900 yesterday) would indicate that the current upward pressure has eased. On the upside, the next resistance above 6.4560 is at 6.4800.”

• Eurozone inflation arrives at 7.4% YoY in March, misses estimates.
• Monthly HICP in the bloc rises by 2.4% in March.
• EUR/USD keeps gains above 1.0900 on the downbeat Eurozone data.

Eurozone’s Inflation rose 7.4% in March, on a yearly basis, according to Eurostat’s final reading of the Eurozone Harmonised Index of Consumer Prices (HICP) report for the month. The reading disappointed expectations of 7.5% while against the 7.5% previous. Core figures rose by 2.9%, missing the 3.0% market estimates.       

The bloc’s HICP rose by 2.4% versus 2.5% expected and 0.9% booked in February while the core HICP numbers also came in at 1.2% versus 1.2% expected and 1.2% last.

Key details (via Eurostat):

“The lowest annual rates were registered in Malta (4.5%), France (5.1%) and Portugal (5.5%). The highest annual rates were recorded in Lithuania (15.6%), Estonia (14.8%) and Czechia (11.9%).”

“Compared with February, annual inflation fell in two Member States and rose in twenty-five. In March, the highest contribution to the annual euro area inflation rate came from energy (+4.36 percentage points, pp), followed by services (+1.12 pp), food, alcohol & tobacco (+1.07 pp) and non-energy industrial goods (+0.90 pp).”

FX implications:

EUR/USD is off the highs but holds the latest gains above 1.0900 despite the dismal Eurozone data.

At the press time, the pair is trading at 1.0922, higher by 0.67% on the day.

USD/CNY has moved higher since the beginning of April. Economists at MUFG Bank retain a bullish outlook for the pair and forecast USD/CNY at 6.45 by the end of the second quarter.

Renminbi to be respond to the sharp narrowing of the yield spread

“The ongoing Ukraine war will very likely bring China lower exports growth and a narrower trade surplus reflecting weaker external demand and higher commodity prices that increase the import bill.”

“Negative yield spreads and poor domestic economic fundamentals will eventually play a more important role in deciding the movement of USD/CNY.”

“We expect USD/CNY to reach 6.45 by the end of Q2.”

The EUR has continued to decline against the USD over the past month. Economists at HSBC expect the EUR/USD pair to extend its slide undermined by the pick-up in political uncertainty ahead of the French elections and the divergence between the European Central Bank (ECB) and the Federal Reserve (Fed).

Main upside risks for the EUR are an improvement in the geopolitical backdrop or additional signs of fiscal policy support

“We look for EUR/USD to move lower over the coming weeks, given the clear disparity in terms of where the ECB is in the cycle compared to the Fed. This does not look set to change anytime soon.”

“The EUR faces political risk in the run-up to the second-round run-off on 24 April of the French presidential election. Any grounds for heightened political uncertainty will likely see the EUR weaker.”

“The main upside risks for the EUR would be an improvement in the geopolitical backdrop or additional signs of fiscal policy support that could allow the ECB to concentrate on bringing down inflation.”

AUD/USD has retraced some of its gains from its recent short squeeze rally that peaked at 0.7661 in early April. In the view of Benjamin Wong, Strategists at DBS Bank, AUD’s ongoing downside correction is unlikely to trend. Rather, it is part of a broadening and “noisy” right hand shoulder of a long-term bullish inverse-head-and-shoulders pattern.

0.7233 should remain as the key support pivot

“AUD is enjoying a bullish undercurrent as it works out the right-hand shoulder of a brewing bullish inverse-head-and-shoulders pattern. Very often, when such shoulders are formed, one should expect range choppiness. For now, the price channel has clearly contained the recent short-covering charge at 0.7661. In a nutshell, AUD certainly is within a medium-term upswing.”

“Aussie remains poised to challenge higher levels. If AUD keeps above its 200 weeks moving average at 0.7152, buying dips within the ‘noisy’ right hand shoulder of a brewing bullish inverse-head-and-shoulders is fancied.” 

“On its shorter time frame, AUD is likely still correcting the rally, where there are price pegs to consider – the Fibonacci retracement at 0.7233 and minor trend support around 0.7337.”

In its April economic assessment report, the Japanese government raised views on the overall economy and private consumption for the first time since December 2021, despite brewing inflationary pressures.

Key takeaways

"The economy appears to be picking up as the severe situation due to COVID-19 is easing."

“The government listed "financial and capital market volatilities" among other downside risks to the economy.”

” The government also raised its assessment of public investment for the first time since July 2020 on robust public works contract data.”

Market reaction

After an up and down Asian session around 128.00, USD/JPY is looking to stabilize above the latter amid a rebound in the US Treasury yields, upbeat market mood and broad US dollar weakness.

The pair is trading at 128.19, up 0.22% on the day, as of writing.

Surveys and updated Bank of England (BoE) forecasts for MPC on Thursday, May 5 will be critical in determining how aggressive the cost of living shock will be and so the vulnerability of GBP. The GBP/USD pair could slide to the 1.2775-1.2800 area on a sustained break below 1.30, economists at Westpac report.

Is UK facing a cost-of-living-crunch or a merely pause in the economic upswing?

“A series of timely surveys will be released into the end of this month and so ahead of the BoE’s early May MPC meeting. The MPC will also receive their quarterly Monetary Policy Review with its updated forecasts. Collectively, the data should provide the MPC with more insight on the potential severity of the UK’s cost-of-living crisis. The impact of the surge on discretionary spending will be a key factor for MPC’s hiking path.”

“Markets are currently pricing between 125 and 150 bps of further hikes into end 2022 though MPC has implied a softer path.” 

“GBP/USD has tested levels below 1.30. A break could trigger a slide to support in the 1.2775-1.2800 area. GBP needs a close above 1.3150 to reduce such pressure.”

• GBP/USD attracted some dip-buying on Thursday amid the emergence of fresh USD selling.
• Bets for more aggressive Fed rate hikes, rising US bond yields should limit the USD losses.
• Investors seemed reluctant ahead of BoE Governor Bailey and Fed Chair Powell’s speech.

The GBP/USD pair climbed to a one-week high, around the 1.3080-1.3085 region during the early European session, albeit quickly retreated a few pips thereafter. The pair was last seen trading just a few pips above the daily low, around the 1.3055 region.

The US dollar extended the previous day's sharp retracement slide from its highest level since March 2020 and witnessed heavy selling for the second successive day on Wednesday. A generally positive tone around the equity markets was seen as a key factor that undermined the safe-haven buck, which, in turn, assisted the GBP/USD pair to attract some buying near the 1.3040 region.

The uptick, however, lacked bullish conviction amid some cross-driven weakness stemming from a sharp spike in the EUR/GBP cross. On the other hand, a goodish pickup in the US Treasury bond yields, bolstered by hawkish Fed expectations, should act as a tailwind for the buck. This further warrants some caution before placing aggressive bullish bets around the GBP/USD pair.

In fact, the markets seem convinced that the Fed would tighten its monetary policy at a faster pace to curb soaring inflation and have been pricing in multiple 50 bps rate hikes. The bets were reinforced by comments by a slew of influential FOMC members since the beginning of this week. Hence, the focus will remain glued to Fed Chair Jerome Powell's speech later during the US session.

Traders will further take cues from the Bank of England Governor Andrew Bailey's appearance at an event in Washington DC amid absent relevant market-moving economic releases from the UK. Meanwhile, the US economic docket features the release of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims later during the early North American session.

Technical levels to watch

French President Emmanuel Macron is set to face off against Marine Le Pen in the second round of the French presidential election this Sunday. A Macron election victory should be stabilising for the euro, but the EUR/USD pair needs to settle above 1.10 to alleviate downside pressure, economists at Westpac report.

A win for Le Pen would be a huge shock

“A Macron victory should see National Assembly Election (should occur in May or June) result in another majority, or at least a workable minority, led by Macron’s La Republique en Marche.”

“A win for Le Pen would be a huge shock, blowing open National Assembly voting and undermining EUR, but is now highly unlikely after Wednesday’s leaders’ debate.”

“EUR needs to regain levels above 1.10 to reduce risk of a slide to retest 2020’s spiked lows in the 1.0650 area.”

The Russian central bank Governor Elvira Nabiullina said on Thursday, “we are looking at forex controls to avoid deviation of rouble rate from official levels.”

Additional comments

“Gold that central bank has is stored in Russia.”

“Russia has enough funds to avoid default.”

hinted at a faster rate cut, in her appearance on Monday.

On Monday, Nabiullina hinted at a faster rate cut. The Russian central bank cut its benchmark rate this month to 17%, in the face of the negative impact of the Western sanctions.

NZD/USD has been correcting lower over the past few weeks. The pair may retest 0.6715 amid its near-term correction, economists at Westpac report.

USD should remain strong ahead of the May FOMC

“The USD is likely to remain strong ahead of the 4 May FOMC, and long-end yield spreads should continue to decline.”

“NZ CPI inflation data slightly disappointed expectations. The 1.8% QoQ and 6.9% YoY results undershot median estimates of 2.0% and 7.1%. And that should be the peak in this cycle. 

“0.6715 could be tested again during the week ahead.”

The Reserve Bank of Australia (RBA) is getting closer to exiting expansionary monetary policy. However, the aussie is unlikely to take advantage of it as the market has already priced in a reasonably tight rate cycle, economists at Commerzbank report.

Risk of weaker growth in China to further dampen AUD’s appreciation potential

“For the three months horizon the market expects a key rate of 0.75% – i.e. a rate step at each meeting including July. Over the coming year, the market expects the key rate to rise to 2.50%.”

“As the market has already priced in a reasonably tight rate cycle AUD is unlikely to be able to benefit much more from a restrictive RBA in May.”

“The risk of weaker growth in China due to continued lockdowns is likely to further dampen the AUD’s appreciation potential.”

• The selloff in the index remains well and sound below 100.00.
• US yields regain some composure ahead of Powell.
• Chief Powell, Initial Claims, Philly Fed Index next of note in the docket.

The sentiment around the greenback deteriorates further and drags the US Dollar Index (DXY) back below the 100.00 level on Thursday.

US Dollar Index weaker, looks to Powell, data

The index sheds ground for the second straight session and returns to the sub-100.00 levels on Thursday. The abrupt move lower in the dollar came after ECB officials opened the door to a probable interest rate hike by July.

The corrective move in the buck comes amidst the resumption of the upside traction in US yields across the curve, leaving behind Wednesday’s daily retracement.

All the attention is expected to be on Chair Powell, who will give Welcoming Remarks at the Volcker Alliance and Penn Institute for Urban Research Special Briefing. Powell will also speak on The Global Economy at the IMF Debate on the Global Economy.

Additionally, the usual weekly Claims, the Philly Fed Index and the CB Leading Index are also due later in the NA calendar.

What to look for around USD

The dollar faces renewed selling pressure and breaks below the key support at the 100.00 yardstick. So far, the greenback’s price action continues to be dictated by the likeliness of a tighter rate path by the Fed as well as geopolitics. In addition, the case for a stronger dollar also remains well propped up by high US yields and the solid performance of the US economy.

Key events in the US this week: IMF World/Bank Spring Meetings, Initial Claims, Philly Fed Index, Fed Powell (Thursday) - IMF World/Bank Spring Meetings, Flash Services/Manufacturing PMIs (Friday).

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

US Dollar Index relevant levels

Now, the index is retreating 0.42% at 99.92 and faces initial contention at 99.57 (weekly low April 14) followed by 97.68 (weekly low March 30) and then 97.18 (100-day SMA). On the flip side, the breakout of 101.02 (2022 high April 19) would open the door to 101.91 (high March 25 2020) and finally 102.99 (2020 high March 20).

USD/JPY is still seen within the 126.90-129.40 range in the next weeks, suggested Lee Sue Ann and Quek Ser Leang, FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that USD ‘could strengthen further’. We added, ‘only a breach of 128.30 would indicate that the current strong upward pressure has eased’. USD subsequently rose to 129.40, dropped sharply to a low 127.44 before rebounding. The price actions suggest that USD has likely moved into a consolidation phase. For today, USD is likely to trade sideways between 127.40 and 128.80.”

Next 1-3 weeks: “We highlighted yesterday (20 Apr, spot at 129.10) that there is no end in sight for the current USD rally. We added, ‘only a breach of 127.70 would indicate that the rally in USD is ready to take a breather’. In other words, we did not expect the subsequent sharp pullback to a low of 127.44. The current movement is viewed as the early stages of a consolidation phase and USD is likely trade within a range of 126.90/129.40 for now.”

• A combination of factors dragged USD/CAD lower for the second straight day on Thursday.
• Strong Canadian inflation figures and an uptick in crude oil prices underpinned the loonie.
• The risk-on impulse weighed on the safe-haven USD and added to the intraday selling bias.

The USD/CAD pair edged lower through the early European session and dropped to a two-and-half-week low, around the 1.2465-1.2460 region in the last hour.

The pair added to the overnight heavy losses and witnessed some follow-through selling for the second successive day on Thursday. Against the backdrop of a hotter-than-expected Canadian CPI report released on Wednesday, an uptick in crude oil prices underpinned the commodity-linked loonie. This, along with the ongoing US dollar retracement slide from the two-year peak, exerted downward pressure on the USD/CAD pair.

The risk-on impulse - as depicted by a generally positive tone around the equity markets - turned out to be a key factor that drove flows away from the safe-haven greenback. That said, a fresh leg up in the US Treasury bond yields, bolstered by hawkish Fed expectations, should act as a tailwind for the buck and help limit losses for the USD/CAD pair. This, in turn, warrants some caution for aggressive bearish traders.

In fact, the markets seem convinced that the Fed would tighten its monetary policy at a faster pace to curb soaring inflation and have been pricing in multiple 50 bps rate hikes. The bets were reinforced by comments by a slew of influential FOMC members since the beginning of this week. Hence, the focus will remain glued to Fed Chair Jerome Powell's speech at an International Monetary Fund event later during the US session.

In the meantime, traders will take cues from the US economic docket, featuring the release of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims later. This, along with the US bond yields and the broader market risk sentiment, will influence the USD and provide some impetus to the USD/CAD pair. Apart from this, oil price dynamics should allow traders to grab some short-term opportunities.

Technical levels to watch

Open interest in natural gas futures markets shrank for the fourth consecutive session on Wednesday, this time by around 6.3K contracts, as per advanced prints from CME Group. In the same line, volume went down by more than 191K contracts, leaving behind the previous daily build.

Natural Gas looks to $8.00 and above

Prices of the natural gas extended the rejection from Monday’s fresh cycle peaks past the $8.00 mark per MMBtu on Wednesday. The downtick came on the back of shrinking open interest and volume, indicative that a potential near-term bounce lies ahead.

EUR/USD regained its traction on Thursday and advanced to its highest level in a week near 1.09. As FXStreet’s Eren Sengezer notes, euro bulls face next test at 1.0920.

ECB President Lagarde and FOMC Chairman Powell will speak later in the day

“ECB President Christine Lagarde and FOMC Chairman Powell will appear at the IMF Springs Meetings. Unless Lagarde pushes back against the idea of hiking the policy rate in early-Q3, the euro is likely to preserve its strength.”

“EUR/USD is closing in on 1.0920 resistance, where the Fibonacci 38.2% retracement of the April downtrend and the 100-period SMA on the four-hour chart is located. With a four-hour close above that level, the pair could eye 1.0960 (200-period SMA, Fibonacci 50% retracement) and 1.10 (psychological level) next.”

“1.0860 (Fibonacci 23.6% retracement) aligns as the first support before 1.0830 (50-period SMA). In case the pair drops below the latter, the next bearish target could be seen at 1.08 (psychological level).”

The Czech National Bank's (CNB's) May meeting is approaching. Economists at ING see EUR/CZK trading in a 24.30-24.50 range heading into the meeting – which poses downside risks for the koruna.

Further hikes are expected in Czechia

“CNB's blackout period starts next Thursday, so early next week we are likely to see a number of speeches by other board members which should support market expectations of further rate hikes. However, the new CNB forecast will show a sharp rate cut later, in addition to rate hikes now.” 

“We can see EUR/CZK trading in a 24.30-24.50 range heading into the 5 May rate meeting – but see the meeting itself as a possible negative event risk for the koruna.”

EUR/USD has not enjoyed too much of a bounce on the back of hawkish comments from three European Central Bank (ECB) members. Economists at ING expect the pair to shrug off the debate over whether the ECB hikes 50bp or 75bp and move within a broad 1.05.10 range.

1.08-1.09 looks like the range for today

“ECB members pointed to the risks of a rate hike in July and presumably the deposit rate ending the year in positive territory – as opposed to the consensus of hikes in September and December and the depo rate ending the year at zero

“ We doubt the debate over whether the ECB hikes 50bp or 75bp this year makes too much difference for EUR/USD – which we expect to trace out a broad 1.05-1.10 range over coming months.”

“For today, 1.0800-1.0900 looks like the range.”

Having enjoyed a strong 3% rally so far this month, the dollar has now entered a consolidatory phase. Driving that may be the fact that the rise in longer-dated US Treasury yields appears to have stalled at the 3% area, consistent with the 10-year US real yield testing zero for the first time since early 2020. What does it mean for FX? In the opinion of economists at ING, the dollar should stay broadly bid.

Any short-term dip in the dollar to prove temporary

“3% seems a barrier for the long end of the US Treasury curve as does the 0% level for the 10-year US real Treasury yield. However, expectations for Fed rate hikes remain strong and the dollar should stay supported on dips.”

“The US data calendar is light today – FOMC Chair Jerome Powell and the European Central Bank's Christine Lagarde speak in Washington – and we expect DXY to hold gains over 100.” 

“The People's Bank of China did not fix the renminbi any weaker than models had suggested – but markets are still running with the theme that China would not mind a weaker currency right now – a theme that is generally bearish for Asian FX and bullish for the dollar.”

Economists at Westpac expect the US Dollar Index (DXY) to settle comfortably above the 100 level. As the Federal Reserve leads the race for rate hikes, DXY could reach 102.

Few central banks will match the Fed this year for policy hikes

“In the early stages of establishing a solid foundation above 100. From here DXY eyes off a thicket of resistance extending back to 2020 in the 100.50-100.90 zone.” 

“Few central banks will match the Fed this year for policy hikes and balance sheet retrenchment, making for a dramatic policy differential in the USD’s favour and notable yield support across the curve, especially versus the ECB. DXY should remain bid in this environment, with talk of 101-102 likely to increase near-term.”

Geopolitical risk and inflation pressure are currently the two primary drivers for the gold market. Strategists at ANZ Bank expect the bright metal to remain supported amid the current market environment.

US 10y yield spikes, reversing curve inversion 

“A recent correction in equity markets reflects fear of slowing economic growth, which supports the move of funds from equity to real assets. A spike in US10y yield saw a reversal of yield curve inversion, but elevated risk is still supporting gold.”

“An aggressive Fed rate hike of 75bp could be a short-term price damper, while elevated inflation due to supply shocks could mitigate the negative impact.” 

“Expectations of more sanctions against Russia are fuelling inflation expectations, thereby raising the stagflation risk. A stronger USD is not a headwind for gold, as the two normally deserted their normal inverse relationship during crisis.”

• USD/JPY regained positive traction on Thursday and reversed a part of the overnight slide.
• A positive risk tone, BoJ’s move to check the risk in yields weighed on the safe-haven JPY.
• An uptick in the US bond yields, modest pickup in the USD demand remained supportive.
• Investors now look forward to Fed Chair Powell’s speech for some trading opportunities.

The USD/JPY pair trimmed a part of its intraday gains and was seen trading near the 128.00 mark during the early European session, up around 0.15% for the day.

Following the previous day's sharp pullback from the 20-year peak, the USD/JPY pair attracted fresh buying on Thursday and was supported by a combination of factors. A generally positive tone around equity markets undermined the safe-haven Japanese yen, which was further weighed down by the Bank of Japan's intervention to check the rise in Japanese 10-year yields. In fact, the BoJ offered to buy unlimited amounts of Japanese government bonds for the second straight day to defend the 0.25% yield cap.

Bullish traders further took cues from a goodish rebound in the US Treasury bond yields, bolstered by hawkish Fed expectations. The markets seem convinced that the Fed would tighten its monetary policy at a faster pace to curb soaring inflation and have been pricing in multiple 50 bps rate hikes. This, in turn, helped revive the US dollar demand, which was seen as another factor that acted as a tailwind for the USD/JPY pair. That said, speculation that officials would respond to the yen's recent slump capped the upside.

In fact, Japanese Finance Minister Shunichi Suzuki made the most explicit warning yet on Tuesday that the damage to the economy from a weakening yen at present is greater than the benefits from it. Suzuki is due to meet US Treasury Secretary Janet Yellen this week, which held back traders from placing fresh bullish bets, at least for the time being. This, in turn, kept a lid on any meaningful gains for the USD/JPY pair and led to an intraday pullback of over 50 pips from the daily swing high, around the 128.60 region.

Market participants now look forward to the US economic docket, featuring the release of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims later. The focus, however, will remain glued to Fed Chair Jerome Powell's speech at an International Monetary Fund event later during the US session. This, along with the US bond yields, will influence the USD price dynamics. Traders will further take cues from the broader market risk sentiment for short-term opportunities around the USD/JPY pair.

Technical levels to watch

European Central Bank (ECB) Vice President Luis de Guindos said in his speech on Thursday, “a rate hike is possible in July but will depend on data.”

Additional comments

“No reason why APP purchases can't end in July.”

“Euroarea inflation is close to peak, will slow in 2H 2022.”

Market reaction

EUR/USD is flirting with 1.0900 on hawkish ECB-speak, adding 0.40% on the day.

• Forex Today: Dollar selloff pauses, eyes on central bankers' appearance at IMF event

USD/JPY cannot be separated from the Federal Reserve’s terminal rate. Economists at TD Securities highlight that the pair could reach 150 as the upswing through multi-decade trendline exposes material upside.

US real yields remain too low

“Unless the Fed abandons hikes or the BoJ unlikely adopts them, USD/JPY will be at the beck and call of the Fed's terminal rate, which likely remains too low and will not be established until well into the tightening cycle. US real yields also remain too low.”

“Many are watching 130 as a key level, but we view 135+ as a more formidable line in the sand.”

“This upleg broke the post-Plaza Accord multi-decade trendline, which keeps USD/JPY ordinates higher and exposes upside potential to 150.”

EUR/USD is breaking its uptrend from early 2017 and stays seen on course to test the 1.0635 low of 2020, analysts at Credit Suisse report.

Resistance at 1.0944/54 caps to keep the immediate risk lower

“EUR/USD is undergoing a concerted attempt to remove its prior cycle low and long-term uptrend from early 2017 at 1.0830/06. We maintain our broader bearish stance and look for a sustained break to expose the 2020 low at 1.0635 and probably we now think lower.”

“Resistance at 1.0944/54 ideally caps to keep the immediate risk lower. Only above 1.1185 though would warn of a near-term base and broader easing of downside pressure.”

Economists at Deutsche Bank expect further advances in equity markets in 2022, before a typical recession correction of 20% in late 2023.

Expecting further advances in 2022

“We maintain our year-end 2022 targets for S&P 500 at 5250 and STOXX 600 at 550.”

“We see some but limited impacts on European earnings from the Russia-Ukraine war, and multiples recovering.”

“In 2023, we expect equity markets to hold up well through the summer before the US falls into recession. This should see equities correct by a typical 20% as it begins, before bottoming half-way through and recovering prior levels.”

The dramatic strength in USD/JPY looks to be finally stalling near-term at 130. But although analysts at Credit Suisse see risk for finally a pause in the rally and some consolidation the bigger picture outlook stays seen constructive and a sustained move above ‘neckline’ resistance at 127.33 would suggest the completion of an even larger multi-year secular base.

USD/JPY in the process of establishing a multiyear secular base

“Whilst we expect 130.00 to cap at first for some consolidation/pullback, a sustained break above ‘neckline’ resistance at 127.33 would suggest a secular base is forming to warn of a significant further rise over the coming years.”

“Resistance above 130.00 would be seen next at the 78.6% retracement of the 1998/2011 decline at 132.20, ahead of the 2002 high at 135.20. Big picture though, we would see scope for a rise into the 147.62/153.01 zone over the coming years”

“Support at 125.09 is seen needed to hold a setback from 130.00 to keep the immediate risk higher.”

Further Federal Reserve repricing is becoming incrementally less beneficial to the dollar, and the European Central Bank (ECB) has exceeded Deutsche Bank’s hawkish expectations. Subsequently, analysts at the bank forecast EUR/USD at 1.17 by end-2022.

EUR/USD is not priced for positive rates

“We have recently downgraded our EUR/USD forecast, implying a neutral view but with a bias to buy EUR/USD around 1.10 over Q2 and a stronger bullish view thereafter (1.17 year-end).”

“We see developments in the energy market as the most upfront negative for EUR/USD – elevated prices are not going away anytime soon.”

“On the flipside, further Fed repricing is becoming incrementally less beneficial to the dollar, the ECB has exceeded our (hawkish) expectations, and Europe’s fiscal response to offset the near-term growth impact looks sizeable.”

“Beyond EUR/USD, our forecasts also look for a broad peak in the dollar over Q2 followed by the beginning of a broader downtrend.”

USD/CHF has moved above its March 2021 and March 2022 highs at 0.9473, which raises the prospect of a medium-term turn higher. A weekly close above here, as well as the 200-week moving average at 0.9525 would confirm the breakout, analysts at Credit Suisse report.

USD/CHF needs to hold above the broken 0.9473 highs into the weekly close

“USD/CHF has recently broken out above March 2021 and 2022 highs at 0.9473, which hints at the potential for a medium-term turn higher. Next key resistances are seen at the 50% retracement of the 2019/2021 downtrend at 0.9497/9500, as well as the 200-week moving average at 0.9525.” 

“A weekly close above 0.9525 would confirm further medium-term upside to at least the 61.8% retracement at 0.9672 and potentially the 78.6% retracement at 0.9901/9921 given the magnitude of the breakout.” 

“The pair needs to hold above the broken 0.9473 highs and certainly above 0.9413 into the weekly close, as a move back below here would quickly raise concern of a false breakout given how mean-reverting the market has been over the past 15 months.”

Gold is fluctuating in a narrow channel at around $1,950 on Thursday. As FXstreet’s Haresh Menghani notes, XAU/USD bears have the upper hand and a drop below the $1,940/35 region will reaffirm the negative bias.

Focus on yields/Fed’s Powell

“The market focus will remain glued to Fed Chair Jerome Powell's speech at an International Monetary Fund event later during the US session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the XAU/USD. Apart from this, fresh developments surrounding the Russia-Ukraine saga should contribute to producing short-term trading opportunities around gold.”

“A convincing break below the $1,940-$1,935 region will reaffirm the negative bias and make gold vulnerable. XAU/USD could then turn vulnerable to accelerate the fall towards the $1,916 intermediate support before eventually dropping to sub- $1,900 levels or March swing lows.”

“The $1,960 support-turned-resistance coincides with the 38.2% Fibonacci retracement level of the $2,070-$1,890 downfall and should act as a pivotal point. Sustained strength beyond has the potential to lift gold towards the 50% Fibo. level, around the $1,980-$1,982 region. The upward trajectory could further get extended and allow bulls to make a fresh attempt to reclaim the $2,000 round figure.”

USD/CNY has surged higher this week. Analysts at Credit Suisse look for a deeper rise, which could reinject momentum into the broader USD trend.

Sharp move higher in USD/CNY to provide a renewed impetus for the broader USD trend

“USD/CNY has now broken above the 200-day moving average at 6.4034, which confirms a base and a medium-term turn higher. Next key resistance is seen at the July 2021 high and 23.6% retracement of the entire fall from at 6.5121/25, which we believe will be tested over the coming weeks. Next resistance above here is seen at the April 2021 high at 6.5759.” 

“So far, the USD has appreciated strongly against other G10 currencies over the past year, whilst USD/CNY has stayed rangebound. A sharp move higher in the latter could provide a renewed impetus for the broader USD trend.”

USD/JPY has hit a 20-year high this week. The worsening in Japan's terms of trade does raise the question of a structurally weaker yen, therefore, economists at Rabobank have raised their USD/JPY one-month forecast to 128 from 125.

USD/JPY to settle at lower levels later in the year

“In view of the pressure on Japan’s trade and current accounts positions, speculation is building that the value of the currency pair may remain higher for longer.” 

“We have raised our one-month forecast for USD/JPY to 128 from 125.” 

“We see potential for the currency pair to settle at lower levels later in the year, though this will be dependent on expectations regarding the path of US economic growth medium-term and the impact that has on the level of US treasury yields.”

Here is what you need to know on Thursday, April 21:

Pressured by the sharp decline witnessed in the US Treasury bond yields, the greenback weakened against its major rivals on Wednesday. The dollar holds its ground early Thursday as investors wait for FOMC Chairman Jerome Powell and European Central Bank (ECB) Christine Lagarde to speak at the IMF Spring Meetings. The European economic docket will feature the final revision to March inflation figures and the preliminary Consumer Confidence data for April. In the second half of the day, the weekly Initial Jobless Claims and Philadelpiha Fed Manufacturing Survey from the US will be looked upon for fresh impetus.

Powell Preview: Fed Chair set to be humble due to three uncertainties, triggering a dollar downfall.

With the yields on the 10-year US Treasury Inflation-Protected Securities (TIPS) moving into positive territory on Wednesday, the 10-year US T-bond yield fell 3.5% and the US Dollar Index /DXY) lost 0.65%. Moreover, mixed comments from Fed officials didn't allow the dollar to gather strength.

Chicago Fed President Charles Evans noted that he was not expecting inflation to drop back to 2% next year but added that there was good reason to think that special factors driving inflation higher would ramp down. Commenting on the rate outlook, San Francisco Fed President Mary Daly noted that it would be "abrupt or surprising" to see the policy rate rising to 2.5% this year. 

EUR/USD gained more than 50 pips on Wednesday and was last seen moving sideways near mid-1.0800s. In addition to the broad-based dollar weakness, hawkish ECB commentary helped the shared currency find demand as well. ECB policymaker Martins Kazaks said on Wednesday that a rate hike could come as soon as July and policymaker Pierre Wunsch noted early Thursday that policy rates could turn positive this year. 

GBP/USD snapped a four-day losing streak on Wednesday. The pair stays relatively quiet near 1.3050 in the early European session as the dollar's market valuation remains the primary driver of its movements.

USD/JPY finally staged a downward correction on Wednesday after touching a multi-decade high of 129.24. The pair seems to have gone into a consolidation phase near 128.00 with the 10-year US T-bond yield recovering a small portion of its latest losses early Thursday.

Will the BOJ drop an SNBomb? USD/JPY may collapse rapidly, hundreds of pips at stake.

Following Tuesday's steep decline, gold registered modest gains on Wednesday. The upbeat market mood in the second half of the day made it difficult for the yellow metal to find demand despite falling US yields. XAU/USD is fluctuating in a narrow channel at around $1,950 on Thursday.

Bitcoin climbed above $42,000 on Wednesday but lost its bullish momentum. At the time of press, BTC/USD was trading flat on the day at $41,500. Ethereum closed in negative territory on Wednesday but managed to stay afloat above the key $3,000 handle.

In its latest report published on Thursday, the Bank of Japan (BOJ) said that the Japanese “financial system remains stable as a whole.”

Additional findings

Market reaction

USD/JPY is holding within the lower band of Thursday’s trading range so far. The yen was rescued by the reports of a likely extra budget agreed on by the Japanese ruling party. Further, the Japanese verbal intervention also could have helped the yen.

South Korea's new central bank governor Rhee Chang-yong said on Thursday, "Inflationary pressure is growing and at the same time, growth is expected to be weaker than previously seen.”                      

"The trade-off between growth and inflation is adding constraints to monetary policy, and it is time for a fine balance between the two," Rhee added.

Market reaction

USD/KRW was last seen up 0.31% on the day, near-daily highs of 1,238.01.

• USD/CHF has been offered at 0.9515 as DXY loses strength amid risk-on impulse.
• The Fed is focusing on squeezing liquidity through rate hikes and balance sheet reduction.
• An unchanged interest rate policy is likely by the SNB despite soaring inflation.

The USD/CHF pair has been corrected to 0.9495 after a sharp upside rally right from the first tick in early Tokyo. The pair have remained in positive territory since the first trading session of April amid a spree of hawkish comments from the Federal Reserve (Fed) policymakers.

A divergence in the ideology of the Fed and SNB (Swiss National Bank) is continuously underpinning the Swiss franc against the mighty greenback. Where SNB is keeping its policy rates at -0.75% despite the 13-year high inflation print at 2.2% due to higher commodity prices, the Fed is focusing on shrinking the liquidity from the market at a higher pace.

San Francisco Fed President and Federal Open Market Committee (FOMC) member Mary Daly on Wednesday stated that the case for a 50 bps interest rate hike in May is now "complete" and that the Fed can also dictate the reduction of its balance sheet at the next meeting, as per Reuters.

Meanwhile, the US dollar index (DXY) is losing strength and is likely to re-test Wednesday’s low at 100.22. The positive market sentiment is hurting the demand for safe-haven assets. A firmer slippage below the previous trading session may bring a short-term reversal in the asset. The market participants are awaiting the speech from Fed chair Jerome Powell, which is likely to provide guidance about the extent of the rate hike and the status of important macroeconomic data.

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

- EUR/USD: EUR amounts        

• 1.0700 920m
• 1.0725 347m
• 1.0790-00 1.1b
• 1.0875 363m
• 1.0900-05 3.3b
• 1.0925 478m
• 1.0950 232m

- GBP/USD: GBP amounts        

• 1.2950 710m
• 1.3050 868m

- USD/JPY: USD amounts                     

• 127.00 366m
• 128.00 231m

- AUD/USD: AUD amounts

• 0.7405-10 290m
• 0.7415-20 630m
• 0.7500 417m

- USD/CAD: USD amounts       

• 1.2500 1.36b
• 1.2535 230m
• 1.2600-05 290m
• 1.2615-20 315m
• 1.2640-50 745m

- NZD/USD: NZD amounts

• 0.6700 386M

After a consolidation period in March the US Dollar Index (DXY) uptrend has resumed. Whilst the trend is now showing signs of losing momentum, economists at Credit Suisse look for the DXY to see further strength yet to the top of the five-year sideways range at 102/102.45.

Looking for signs of a more important peak at 102.00/102.45

“Whilst the trend is showing signs of losing some momentum we maintain our core bullish bias for an eventual test of the top of the five-year range at 102.00/102.45. Our bias remains for an important cap to be set here.”

“Whilst we would look for a fresh cap at 102/102.45, it is quite possible on a long-term basis the USD may be constructing a large and significant bullish ‘triangle’ continuation pattern, although this would only be seen confirmed above the 103.82 high of 2017.”

• AUD/USD attempts a bounce amid a better market mood.
• Risk flows weigh on the US dollar’s haven demand, aiding aussie’s rebound.
• Hawkish RBA’s outlook also remains in play ahead of Powell’s speech.

AUD/USD has stalled its Asian retreat near the 0.7420 region, now looking to recapture 0.7450 ahead of the European open.

The renewed upside in the aussie is largely due to the fresh selling seen in the US dollar, as the buck stalls its rebound vs. its major peers amid an upbeat market mood. The greenback fails to sustain the rebound despite the recovery in the US Treasury yields across the curve.

Investors turn cautious ahead of the speeches by the key global central bankers, with the one from Fed Chair Jerome Powell eagerly awaited to confirm the recently increased hawkishness.  

Meanwhile, the hawkish shift in the forward guidance by the Reserve Bank of Australia (RBA), as revealed in the central bank’s April meeting minutes, also keeps the sentiment around the AUD buoyed.

Besides, Powell’s appearance, “market participants now look forward to the US economic docket, featuring the release of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims later,” FXStreet’s Analyst Haresh Menghani notes.

AUD/USD: Technical levels to consider

In opinion of Lee Sue Ann and Quek Ser Leang, FX Strategists at UOB Group, AUD/USD could now trade between 0.7370 and 0.7495 in the short term.

Key Quotes

24-hour view: “While we expected a stronger AUD yesterday, we were of the view that ‘any advance is unlikely to break the strong resistance at 0.7420’. However, AUD cracked 0.7420 and rose to 0.7457 before easing off. The rapid up-move appears to be running ahead of itself and AUD is unlikely to advance further much further. From here, AUD is more likely to trade sideways between 0.7400 and 0.7455.”

Next 1-3 weeks: “On Tuesday (19 Apr, spot at 0.7355), we highlighted that ‘downward momentum has improved a tad and the chance for AUD to break 0.7325 has increased’. Yesterday (20 Apr), AUD rebounded and took out our ‘strong resistance’ level at 0.7420 (high of 0.7457). Downward momentum has more or less dissipated and AUD is likely to trade sideways from here, expected to within a range of 0.7370/0.7495.”

Considering preliminary readings from CME Group for crude oil futures markets, open interest extended the downside in place since April 7, now by around 6.1K contracts. In the same line, volume reversed the previous build and shrank by around 126.2K contracts.

WTI: Upside appears capped by $109.12

Prices of the WTI charted an inconclusive session on Wednesday against the backdrop of diminishing open interest and volume. That said, further range bound trading should not be ruled out in the very near term, while occasional bullish attempts appear limited by the April peaks just above the $109.00 mark per barrel.

According to Lee Sue Ann and Quek Ser Leang, FX Strategists at UOB Group, GBP/USD is now expected to navigate within the 1.2975-1.3100 range in the next weeks.

Key Quotes

24-hour view: “We expected GBP to ‘consolidate within a range of 1.2985/1.3050’ yesterday. Against our expectations, GBP rose to a high of 1.3069. Despite the advance, upward momentum has not improved by much and GBP is unlikely to strengthen much further. For today, GBP is likely to trade sideways between 1.3010 and 1.3075.”

Next 1-3 weeks: “Two days ago (19 Apr, spot at 1.3005), we highlighted that downward momentum is beginning to build but GBP has to break 1.2940 before a sustained decline is likely. We added, ‘a breach of the strong resistance at 1.3075 would indicate that GBP is not ready to head lower’. Yesterday (20 Apr), GBP rebounded to a high of 1.3069. While our ‘strong resistance’ level is not breached, downward pressure has more or less dissipated. From here, GBP is likely to trade sideways for a period of time, expected to be within a range of 1.2975/1.3100.”

CME Group’s flash data for gold futures markets noted open interest dropped for the second session in a row on Wednesday, this time by around 2.8K contracts. Volume followed suit and resumed the downtrend, now by around 40.3K contracts.

Gold remains capped by $2000

Wednesday’s decent gains in gold prices, however, was on the back of shrinking open interest and volume, indicative of short covering behind the move. That said, further gains appear not favoured while the upside remains limited by recent peaks in the $2000 area per ounce troy.

European Central Bank (ECB) policymaker Pierre Wunsch said on Thursday, the policy rates could turn positive this year.

Additional comments

“Ready to consider a deposit-rate hike in July.”

“ECB would react to unwarranted market fragmentation.”

These comments come after the central bank policymaker Martins Kazaks said Wednesday that “a rate hike is possible as soon as July.”

Market reaction

The shared currency picks up fresh bids on the hawkish comments, with EUR/USD reapproaching 1.0850, as of writing. The spot is down 0.06% on the day.

• EUR/USD has attracted some bids near 1.0830 as the DXY has found uncertainty ahead of Fed’s Powell.
• A lower reading of the Euro’s Consumer Confidence may dent the shared currency.
• The fears of stagflation are expected to keep the euro on the back foot.

The EUR/USD pair is witnessing a double-distribution trend day in today’s session amid a cautious market mood over the release of the Consumer Confidence and core Consumer Price Index (CPI) in the Eurozone. The asset displayed a narrow-range movement at the initial hour in early Tokyo, broke downside to 1.0824, and is likely to balance further.

The Eurozone is facing the headwinds of higher energy prices after Russia invaded Ukraine. Europe, which addresses 25% of its energy demand and more than 30% of its oil demand from Russia, is one of the major victims of war. The economy is likely to witness the situation of stagflation due to higher inflation and stagnant growth rate. The speech from European Central Bank (ECB)'s Christine Lagarde will provide cues from the likely policy announcement by the ECB. 

Also Read: ECB’s Wunsch: Policy rates could turn positive this year

Meanwhile, investors are bracing further drop in the Euro’s Consumer Confidence. The confidence catalyst is expected to release at -20 against the prior figure of -18.7. This may trigger some downside pressures on the shared currency. While the yearly core CPI is seen at 3% similar to the previous print of 3%. 

On the dollar front, the US dollar index (DXY) has slipped after printing an intraday high at 100.59. The DXY is likely to reveal some wild moves in the European session as investors are waiting for the speech of Federal Reserve (Fed) Jerome Powell, which is due in the New York session. The insights from the speech will be more impactful as it is likely to be the last speech by Fed Powell before the rate hike announcement in May.

Lee Sue Ann and Quek Ser Leang, FX Strategists at UOB Group, now see EUR/USD advancing to the 1.0885 level in the next weeks.

Key Quotes

24-hour view: “Yesterday, we highlighted that ‘downward pressure has eased’ and we expected EUR to ‘consolidate and trade sideways’. However, instead of trading sideways, EUR soared to 1.0866 before closing on a firm note at 1.0850 (+0.59%). There is scope for EUR to advance further to 1.0885 (minor resistance is at 1.0870). For today, a sustained rise above this level is unlikely. Support is at 1.0820 followed by 1.0795.”

Next 1-3 weeks: “Our latest narrative was from Monday (18 Apr, spot at 1.0805) where the risk for EUR is on the downside even though it may trade above the solid support at 1.0755 for a couple of days first. We highlighted that ‘only a break of 1.0845 would indicate that the downside risk has dissipated’. Yesterday (20 Apr), EUR rebounded strongly and cracked 1.0845 (high has been 1.0866). Downward pressure has dissipated and the rebound could extend to 1.0885. Further extension is not ruled out but at this stage, the odds for EUR to advance to 1.0925 are low. On the downside, a breach of 1.0775 (‘strong support’ level) would indicate that EUR is likely to consolidate and trade sideways for a period of time.”

• GBP/USD’s recovery fizzles as the US dollar regains ground across the board.
• GBP bulls need acceptance above 21-DMA to reverse the downtrend.
• Speeches by BOE’s Bailey and Fed’s Powell hold the key for cable traders.

GBP/USD is trading in the red around 1.3050 after running into strong offers once again near 1.3070.

The US dollar rebound in tandem with the Treasury yields could be attributed as the main reason behind cable’s pullback from higher levels.

All eyes now remain on the speeches by Fed Chair Jerome Powell and his British counterpart Andrew Bailey, which could likely underscore the Fed-BOE monetary policy divergence.

Looking at GBP/USD’s daily chart, sellers are likely to retain control so long as the price fails to find acceptance above the 21-Daily Moving Average (DMA) at 1.3080.

The 14-day Relative Strength Index (RSI) points south below the central line, justifying the renewed downside in the spot.

If the selling pressure intensifies, cable could drop further to test the 1.3000 level, below which this week’s low of 1.2980 could be retested.

GBP/USD: Daily chart

Only a daily closing above the 21-DMA could reverse the ongoing bearish momentum, initiating a meaningful recovery towards 1.3100.

The April 14 highs at 1.3147 will lure GBP buyers on the road to recovery.

GBP/USD: Additional technical levels

According to Kyodo News Agency, Japan's ruling parties are set to agree on an extra budget to fund more fiscal measures.

These measures are aimed at helping households and small businesses to cope with surging fuel costs.

The above report has rescued the JPY bulls, triggering a sharp pullback in USD/JPY from near 128.60 levels to 128.30, where it now wavers.

Earlier on, the Japanese Finance Minister Suzuki and BOJ Chief Haruhiko Kuroda voiced their discomfort over the recent devaluation of the domestic currency.

The BOJ offered to buy unlimited 10-year Japanese Government Bonds (JGBs) at 0.25% once again this Thursday.

Meanwhile, the rebound in the US dollar alongside the Treasury yields help cushion the downside in the pair. An increasingly hawkish Fed keeps the dollar and yields underpinned, as the focus now shifts towards Chair Jerome Powell’s speech.

USD/JPY technical levels

• WTI continues to display directionless moves as cuts deepen in demand- and supply-side measures.
• The IMF has slashed the global growth forecasts to 3.6 from the previous expectation of 4.4%.
• The oil prices have shrugged off the larger-than-expected slump in the oil stockpiles.

West Texas Intermediate (WTI), futures on NYMEX, is oscillating in a narrow range of $101.63-103.21 in the Asian session as both catalysts of oil prices- demand and supply are facing headwinds. A juggernaut slump in the oil stockpiles reported by the Energy Information Association (EIA) on Wednesday failed to bring any material push in oil prices.

The political crisis in OPEC member, Libya has resulted in a loss of more than 0.55 million barrels per day of oil output. Due to blockades on export terminals and at major fields, Libya is unable to fulfill its duty of oil supply in the global market. Meanwhile, the longer-than-expected delay in a ceasefire between Russia and Ukraine has renewed fears of further slippage in oil supply. Also, the European Union (EU) is progressing toward announcing an embargo on Russian oil.

On the demand front, a decent cut in global growth forecast by the International Monetary Fund (IMF) has raised concerns over the demand for oil for a longer horizon. Taking into consideration Russia’s invasion of Ukraine, the International Monetary Fund (IMF) on Tuesday cut its forecast for global growth to 3.6% this year against the earlier expectation of 4.4% announced in January. Also, China’s economy is facing the Covid-19 pandemic and its unchanged Loan Prima Rate (LPR) has renewed fears of a slowdown in its economy. It will be interesting to see which side the oil prices will bend further.

International Monetary Fund (IMF) Managing Director Kristalina Georgieva warned about the negative impact of a prolonged Chinese slowdown on the global economy, in a video speech to the annual Boao Forum for Asia on Thursday.

Key quotes

“A more prolonged slowdown in China will have a global spillover impact.”

“Central banks should act decisively and communicate clearly.”

“China has policy space to support the economy.”

Market reaction

As the US dollar recovery gathers steam, AUD/USD is feeling the pull of gravity while traders weigh in the IMF warning.

AIUD/USD is trading at 0.7425, losing 0.33% on the day, as of writing.

The Reserve Bank of New Zealand (RBNZ) released its Sectoral Factor Model Inflation gauge for the first quarter of 2022.

The gauge rose to 4.2% YoY in Q1 2022 vs. 3.8% seen in Q4 2021.

Earlier on, New Zealand’s Consumer Price Index (CPI) rose 1.8% QoQ in the first quarter but fell short of market expectations of a 2% increase.

FX Implications

The Kiwi dollar is little moved on the RBNZ inflation gauge, as NZD/USD is in a downside consolidation phase after taking a big hit on the below forecast Q1 CPI release.

At the time of writing, the kiwi is trading at 0.6780, down 0.33% on the day.

About the RBNZ Sectoral Factor Model Inflation

The Reserve Bank of New Zealand has a set of models that produce core inflation estimates. The sectoral factor model estimates a measure of core inflation based on co-movements - the extent to which individual price series move together. It takes a sectoral approach, estimating core inflation based on two sets of prices: prices of tradable items, which are either imported or exposed to international competition, and prices of non-tradable items, which are those produced domestically and not facing competition from imports.

NZD/USD Technical levels to watch

• The greenback bulls are likely to drive the asset higher on inverted head and shoulder formation.
• A bullish range shift in the momentum oscillator RSI (14) adds to the downside filters.
• The 10- and 20-period EMAs are scaling higher, which signals more gains ahead.

The USD/JPY pair has witnessed a rebound after a minor correction from its multi-year high of 129.41, printed on Wednesday. It won’t be wrong to claim that the asset has resumed its upward journey after a mild correction.

The formation of an Inverted Head and Shoulder chart formation on the monthly scale is indicating a strong upside move. An inverted head and shoulder formation denote a prolonged inventory distribution from institutional investors to retail participants. The greenback bulls are likely to test the neckline which is placed from October 2002 high at 125.68, adjoining the June 2015 high further.

Also Read: BOJ’s Kuroda: Excessive, short-term fx volatility would affect business activity

The 10- and 20-period Exponential Moving Averages (EMAs) at 116.90 and 113.53 respectively are scaling higher, which adds to the upside filters.

The Relative Strength Index (RSI) (14) is oscillating in a bullish range of 60.00-80.00, which strengthens the greenback bulls.

Should the asset test the above-mentioned chart pattern’s neckline at 125.68, the market participants may find it a value bet and will drive the asset towards the psychological resistance at 130.00, followed by the fiscal year 2002 high at 135.00.

On the flip side, yen bulls may dictate prices if the pair drop below December 2016 high at 118.66. This will drag the asset toward the 20-EMA and June 2020 high at 113.53 and 109.85 respectively.

USD/JPY monthly chart

Uncomfortable with the sharp devaluation of the yen, Japanese Finance Minister Shunichi Suzuki told G7 that they are watching fx moves with a sense of urgency.

Suzuki said that he “explained to G7 recent rather rapid moves in the yen.”

Japan “did not walk out of G20 meeting and condemned Russia with harsh words,” he added.

Additional comments

“Excessive, short-term fx volatility would affect business activity,” Bank of Japan (BOJ) Governor Haruhiko Kuroda said on Thursday.

Additional quotes

Market reaction

USD/JPY is seeing some fresh buying on these above comments, hitting daily highs at 128.60, up 0.54% on the day.

• Japan’s Suzuki: Told G7 watching fx moves with sense of urgency

China’s President Xi Jinping made some comments on the economy and opposed unilateral sanctions while speaking by video to the annual Boao Forum for Asia gathering on the southern Chinese island of Hainan.

Key quotes

Market reaction

USD/CNY is retreating from near six-month highs of 6.4211, despite the weakest yuan fix since November 11 last year.

The spot is currently trading at 6.4151, down 0.06% on the day.

• Gold Price is back in the red, as sellers keep lurking just below $1,960.
• The US dollar rebounds with yields, capping the XAUUSD rebound.
• All eyes now remain on Fed Chair Powell’s and US President Biden’s speech.

Gold Price is in a narrow consolidative range so far this Thursday, having stalled its rebound just shy of the key $1,960 level.

A rebound in the US dollar alongside the Treasury yields after Wednesday’s sell-off, triggered by the profit-taking slide in the USD/JPY pair, is limiting the recovery in XAUUSD from weekly lows of $1,939.

The US dollar index is flirting with the session highs of 100.50, reversing a slide to near the 100.20 region. Meanwhile, the benchmark 10-year Treasury yields are rising 0.81% on the day, currently trading at 2.86%.

Gold Price could see further downside risks in the near term on an increasingly hawkish Fed, which has sent the US 10-year real yields into the positive territory for the first time in two years.

The sentiment on global markets will be also closely followed for its impact on the safe-haven Gold Price amid uncertainty over the Russia-Ukraine war, concerning inflation levels that threaten the economic recovery worldwide.

Also read: Powell Preview: Fed Chair set to be humble due to three uncertainties, triggering a dollar downfall

The main event risk for Gold Price on Thursday remains Fed Chair Jerome Powell’s appearance at the International Monetary Fund (IMF) Spring Summit. His comments will hold the key, as they come just before the bank enters its "blackout" period.

Powell may fail to excite the dollar bulls and could emerge as a boon for Gold Price, as he may refrain from hinting at an aggressive tightening outlook after the US core inflation eased a bit in March.

Gold Price Chart: Four-hour chart

Gold’s four-hour chart shows that the price is defending the critical 200-SImple Moving Average (SMA) at $1,951.

The 14-day Relative Strength Index (RSI) is inching lower below the midline, suggesting that a further downside could be in the offing.

If the 200-SMA support gives way, then the horizontal 100-SMA at $1,945 will get tested. The additional downside will call for a test of the previous day’s low of $1,939.

On the upside, recapturing the previous year’s high at $1,960 is critical for extending the recovery, above which the bullish 50-SMA at $1,963 will come into play.  

Further up, the downward-sloping 21-SMA at $1,968 will challenge the bearish commitments.

• AUD/USD bulls are protecting a key hourly support area.
• The bulls are also driving up from a 61.8% ratio on the weekly chart.

As per the prior analysis from the New York session, AUD/USD Price Analysis: Bulls are correcting into a critical area of resistance, the Aussie has indeed moved higher and even through the initial layer of the resistance zone as per the following analysis:

AUD/USD daily chart

The price is meeting offers in current trade, as per the H1 chart below:

The bulls are committing to the 50% mean revision area and going by the weekly chart, there could some upside ahead for the remainder of the week and beyond: 

AUD/USD weekly chart 

The price has been established at weekly support and the 61.8% ratio so this could equate to a follow though for the bulls and the foreseeable future. 

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.4098 vs. the estimate of 6.4134 and the previous of 6.3996.

About the fix

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

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

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

USD/JPY is fading a spike to 128.48 highs after the Bank of Japan (BOJ) intervened in the bond market to defend the yield cap at 0.25% for another day.

The BOJ offered to buy unlimited 10-year Japanese government bonds (JGBs) at 0.25%, conducting consecutive unlimited fixed-rate purchases for the second day in a row.

At the time of writing, USD/JPY is trading at 128.28, up 0.32% on the day.

more to come ...

• EUR/USD bulls losing grip but could be about to step in again. 
• French elections are bullish for the euro although the US dollar remains the obstacle. 

EUR/USD bears have gritted their teeth and growled in the face of a bullish stampede, recently sending the euro onto the backfoot despite a favourable prospect in the French elections. At the time of writing, EUR/USD is trading around 1.8040, the 61.8% ratio of the prior bullish impulse. The pair has slid from a high of 1.0854 and has marked a low of 1.0838 in recent trade.  

The two finalists in France’s presidential elections faced off in a live TV debate that could be crucial in persuading wavering voters – particularly on the left – four days before the decisive second-round vote. 

• Poll: Macron performs in the elections debate, good for the euro

However, despite favouritism in the polls for Macron, the euro is sliding. US yields have popped in recent trade and this has pulled the US dollar up from the floor as well. DXY, in an index that measures the greenback vs. a basket of currencies, is making its way through 100.50 at the time of writing, up from 100.34 lows today. 

There are expectations of another weak fix from the People's Bank of China which would be US dollar positive on the fact and potentially give some support to the speculation. 

Nevertheless, the moves are irradiating the near-term bullish prospects for the euro, from a technical standpoint:

EUR/USD technical analysis

The price has reverted back to the support area, marking a new low for the support and taking on the 61.8% ratio. However, the price has left an M-formation which would be expected to see a restest of the neckline:

Given the bullish trend, this neckline could well serve as only a temporary resistance and give way to the bulls, resulting in a bullish continuation for the session ahead. 

• GBP/USD finds a minor pullback at 1.3074 amid uncertainty over the BOE’s Bailey and Fed’s Powell speeches.
• BOE’s Bailey may raise hopes of a fourth-rate hike by the BOE in May.
• The Fed may schedule a balance sheet reduction along with a mega rate hike.

The GBP/USD pair has attracted some offers after forming a high of 1.3074 in early Tokyo. The cable advanced firmly on Wednesday from its yearly lows at 1.2987. It seems that overbought oscillators on the small timeframe are demanding a pullback before a fresh upside.

It looks like investors are getting cautious over the appearances of the Bank of England (BOE) Governor Andrew Bailey and Federal Reserve (Fed) chair Jerome Powell on Thursday.  The pound bulls are bracing the cues for a fourth consecutive interest rate hike by the BOE in May. Inflation is on the rooftop in the sterling area backed by the higher energy bills and food prices, which is likely to put forward a hawkish stance from BOE policymakers.

Meanwhile, the US dollar index (DXY) has witnessed a modest bounce in the Asian session after the bears snapped a three-day winning streak on Wednesday. The DXY is likely to display some volatile moves ahead of the speech from the Fed’s Powell in the American session. The odds of a jumbo rate hike are getting stronger day by day and chances of balance sheet reduction are gaining the limelight after the comments from San Francisco Fed President and FOMC member Mary Daly on Wednesday.

Apart from the speeches of Fed’s Powell and BOE’s Bailey, investors will also focus on the release of the UK Retail Sales, which are due on Friday. The yearly UK Retail Sales are seen at 2.8% against the prior print of 7%.

• A downside break of the ascending triangle pattern has weakened the greenback bulls.
• An overbought situation in the RSI (14) is indicating a pullback to the 20-EMA.
• The bearish broader trend will remain intact till the asset auctions below the 200-EMA.

The USD/CAD pair has witnessed a vertical downside after multiple failed attempts of establishment above 1.2647 since April 14. The asset has tumbled below 1.2500 and is eyeing more downside considering the price action.

An explosion of the ascending triangle chart formation on the downside weakened the greenback bulls. The horizontal resistance of the above-mentioned chart pattern is placed from April 14 high at 1.2642 while the ascending trendline is plotted from April 14 low at 1.2521. The asset has displayed a textbook kind of selling after breaking below the ascending triangle.

A bear cross of 20- and 200-period Exponential Moving Averages (EMAs) at 1.2596 triggered an intense sell-off in the asset.

The Relative Strength Index (RSI) (14) is oscillating in a bearish range of 20.00-40.00, which may result in a minor pullback as an oversold situation will kick in.

Investors should focus on a pullback towards the 20-EMA at 1.2520, which will be an optimum selling opportunity. After tapping the 20-EMA, the emergence of potential sellers will drag the asset towards March’s low at 1.2430, followed by the round level support at 1.2400.

On the contrary, greenback bulls may regain control if the asset surpasses Friday’s low at 1.2590, which will drive the pair towards April 14 and April’s high at 1.2642 and 1.2676 respectively.

USD/CAD hourly chart

The French President Emmanuel Macron was found to be more convincing than far-right candidate Marine Le Pen in a pre-election debate on French televison ahead of Sunday's presidential runoff vote, an opinion poll showed as Reuters reports.

''The snap survey by Elabe for BFM TV found that 59% of polled viewers found Macron more convincing than Le Pen. In 2017, the same polling firm found that 63% of those surveyed found Macron more convincing.

Polls of voting intentions for the April 24 election estimate that Macron will win with around 55.5% of the vote. In 2017, Macron beat Le Pen with 66.1% of the vote.''

This is promising stuff for the euro that has recently found its feet:

The price could be building up for a higher high to mitigate the price imbalance from this point considering the support at the 61.8% ratio.