CFD Markets News and Forecasts — 22-03-2022

• USD/JPY remains on the front foot for the fourth consecutive day, renews six-year top.
• US 10-year, 2-year Treasury yields poke the highest levels since May 2019 as Fedspeak portrays rate-hike aggression.
• Japan PM Kishida is likely to unveil fresh stimulus, Ukraine-Russia crisis continues.
• Powell’s comments, second-tier US data will be important for intraday directions, NATO, key economics will offer a busy Thursday.

USD/JPY refreshes the highest levels last seen during early 2016 with 121.28 figures during Wednesday’s Asian session. That said, the quote seesaws around 121.15 by the press time.

The strong performance of the US Treasury yields and Wall Street seems to have underpinned the USD/JPY pair’s latest rally. Also positive for the yen pair are the chatters over further stimulus from the Japanese government.

That said, yields of the US government bonds for 10-year and 2-year tenures rose to the highest since May 2019 as the Fedspeak keeps inflating expectations of faster rate hikes from the US central bank. Among them, St Louis Fed President, James Bullard and Cleveland Fed President Loretta Mester clearly showed signals of 50 basis points (bps) of a rate lift.

It should be noted that Yomiuri recently mentioned that the Japanese Prime Minister (PM) Fumio Kishida is expected to order the preparation of an additional economic stimulus package by the end of March.

Even so, a continuation of the Ukraine-Russia crisis and a light calendar in Asia challenges USD/JPY bulls of late. Ukraine’s President Volodymyr Zelenskyy who previously eased on his stand to faster the peace talks recently said, “Talks with Russia are difficult, at times confrontational.” On the other hand, war escalates in Mariupol. It’s worth observing that Moscow managed to pay the second tranche of Eurobond coupon payment in the USD and avoided default for the second consecutive time.

Amid these plays, S&P 500 Futures print mild gains while tracking the Wall Street benchmarks whereas the US 10-year bonds yield remains firmer around the multi-month high of 2.39%.

Moving on, Fed Chairman Jerome Powell’s speech will be crucial for fresh impulse amid the latest hawkish comments from Fed policymakers. Should Powell repeat the early-week speech that underpinned the bullish bias, USD/JPY has further room on the upside to travel. Also important to watch are the second-tier US data.

Technical analysis

USD/JPY is on the way to challenge the year 2016 peak surrounding 121.70 before heading towards December 2015 peak near 123.70. Alternatively, a pullback move may retest late 2016 top close to 118.65.

• The DXY has turned sideways in the absence of any potential trigger for further guidance.
• Goldman Sachs sees two 50 bps rate hikes and an interest rate at 2% by the end of 2022.
• Fed Powell’s speech may act as a key driver going forward.

The US dollar index (DXY) has entered into a tad wider range of 97.73-99.20 as investors await a major trigger that may dictate the direction of the greenback after an announcement of an interest rate hike by 25 basis points (bps) last week and delay of a ceasefire between Russia and Ukraine.

Fed Powell’s speech

The Federal Reserve (Fed) has announced seven interest rate hikes by the end of 2022 and the aggressive tightening stance has already underpinned the US Treasury Yields. The benchmark 10-year US Treasury yields has jumped above 2.38%. Despite the confirmation of six more interest rate hikes this year, investors are focusing on Fed Chair Jerome Powell’s speech on Wednesday. The speech is likely to dictate the action plan of elevating the interest rates.

Goldman Sachs said that they now see “two 50 basis point hikes starting with the next meeting (May and June), followed by four 25 basis point hikes into the end of the year.” Also, Goldman Sachs sees rate hikes to 2% by the end of 2022.

Well, a 50 bps rate hike has started gaining traction as traders are pricing in a 66.1% chance of a 50 bps hike at the Fed's May meeting, according to CME's FedWatch Tool, which is up from 50% chances unfolded a week ago.

NATO meeting and EU summit

US President Joe Biden will meet with other NATO allies in Brussels on Thursday to project a roadmap for a diplomatic solution to the ongoing slaughter of Ukraine by Russia. However, investors should be ready for more sanctions on Russia as an outcome of the meeting.

Apart from that, the summit of European Union (EU) leaders will also be attended by US President Joe Bide to discuss the embargo on Russian oil by EU members. Germany has denied withstanding the decision of banning Russian oil in the current scenario.

Major events this week: New Home Sales, Durable Goods Orders, Initial Jobless Claims, Market PMI (Manufacturing and Services), and Michigan Consumer Sentiment.

Eminent issues on the back boiler: EU Leaders Summit, NATO meeting, and Fed Powell’s speech.

• USD/CAD remains pressured around two-month low, holds onto the key technical level break.
• Bearish MACD joins downside break of 200-DMA, nine-month-old rising trend line to favor sellers.
• Bulls need validation from February’s low for fresh entry.
• 50% Fibonacci retracement of June-December 2021 upside lures sellers.

USD/CAD bears keep reins around the lowest levels since late January, pressured near 1.2565 during Wednesday’s initial Asian session.

In doing so, the sellers cheer the previous day’s clear downside break of an ascending trend line from June 2021 and the 200-DMA.

Given the bearish MACD signals supporting the latest break of the key technical supports, now resistance, USD/CAD bears have a pleasant journey ahead.

That said, the 50% Fibonacci retracement (Fibo.) of the pair’s rally during June to December 2021, around 1.2485, becomes nearby support to watch during the quote’s further weakness.

However, the yearly low surrounding 1.2450 will challenge the USD/CAD sellers afterward.

On the contrary, the support-turned-resistance line and the 200-DMA will challenge the corrective pullback respectively around 1.2585 and 1.2615.

Following that, the previous month’s low near 1.2635 will challenge the USD/CAD buyers before activating further run-up.

USD/CAD: Daily chart

Trend: Further weakness expected

New Zealand Prime Minister Jacinda Ardern announced the easing of covid-linked activity restrictions on early Wednesday morning in Auckland. The national leader said, "This is not the end, but in some ways it is also a new beginning," per NZ Herald.

Key changes (from NZ Herald)

Market reaction

NZD/USD cheers the positive announcement by refreshing 2022 high around 0.6970.

Read: NZD/USD prints fresh 2022 highs

• The NZD/JYP, a risk barometer in the FX space, is up by almost 8.5% in the month.
• Asian equity futures point to a higher open, underpinning the NZD/JPY pair.
• NZD/JPY Price Forecast: Upward biased, above 83.00; otherwise selling pressure might push the pair lower.

The New Zealand dollar extends its rally, reaching a new YTD high at 84.53 vs. the Japanese yen, amid an upbeat market mood, which favored one of the risk-barometers in the FX space, the NZD/JPY pair. As the Asian Pacific session is about to begin at the time of writing, the NZD/JPY is trading at 84.44.

US stock indices finished Tuesday’s session in the green, reflecting an appetite for riskier assets. Meanwhile, Asian equity futures are recording gains ahead of the Asian open.

Overnight, the NZD/JPY pair braced to the 50-hourly simple moving average (SMA) around 82.13, jumping towards the 83.00 mark. Once the European session kicked in, the cross-currency pair breached the 84.00 barrier, though late in the North American session, the NZD/JPY registered the new YTD high at 84.31.

NZD/JPY Price Forecast: Technical outlook

From a daily chart perspective, the NZD/JPY is upward biased. However, to further find new support/resistance levels, an analysis of the weekly chart is needed.

Upwards, the NZD/JPY first resistance would be 85.00. Once cleared, the next resistance would be the 86.00 mark, followed by April 2013 cycle highs around 86.41.

• WTI hovers around $108 ahead of the EU summit outcome on the embargo of Russian oil.
• Germany has denied withstanding the Russian oil ban due to higher dependency.
• Investors will focus on oil stockpiles reports from the EIA.

West Texas Intermediate (WTI), futures on NYMEX, is oscillating in a narrow range of $107.20-111.74 after sensing a minor correction near $113.00 on Tuesday. The oil prices are likely to trade directionless on the mixed response from the European Union (EU) players on the embargo of Russian oil. Nations in the European domain part ways with some countries like Germany, which clearly stated that withstanding the US in retaliation for Russia’s invasion of Ukraine, would cause some serious dents on their economy.

Europe has a significant dependency on Russian oil and energy. More than a quarter of Europe‘s oil consumption is derived from Russia and an embargo on Russian oil in times when the Eurozone is going through supply chain bottlenecks and galloping oil prices won’t be a better option.

On the supply side, damage in the Caspian Pipeline Consortium (CPC) may reduce the oil exports by around one million barrels per day (bps). However, its impact is yet not reflected in the oil prices.

Meanwhile, the American Petroleum Institute (API) has reported a slippage in oil stockpiles on Tuesday. The oil stockpiles landed at -4.28M, much lower than the previous print of 3.754. On Wednesday, the oil stockpiles report from the Energy Information Administration (EIA) will remain in focus.

On the dollar front, the US dollar index (DXY) has slipped near 98.40 on easing the risk-aversion theme. The speech from the Federal Reserve (Fed) Chair Jerome Powell will be the major event to be watched on Wednesday.

“The Biden administration is preparing new sanctions on most members of Russia’s State Duma, the lower house of parliament, as the US continues its crackdown on Moscow over its ongoing war against Ukraine,” said Wall Street Journal (WSJ).

The news cites unnamed US Officials to hint that the announcements could come as soon as Thursday.

Also portraying the Ukraine-Russia tussles were the latest comments from Ukraine’s President Volodymyr Zelenskyy who said, “Talks with Russia are difficult, at times confrontational.” Kyiv’s leader also adds, “100,000 people were living in the besieged city of Mariupol in inhuman conditions, without food, water or medicine.”

Furthermore, a leaders’ statement from the North Atlantic Treaty Organization (NATO), shared by Nikkei, also highlight grim concerns. “The North Atlantic Treaty Organization (NATO) has begun coordinating to express concern about cooperation between Russia and China in a joint statement to be finalized at the emergency summit on the 24th,” said the news.

Nikkei also mentioned, “If China supports Russia in military and economic terms, Russia's invasion of Ukraine will regain momentum, and the conflict with the United States and Europe may intensify.”

Market implications

Alike the previous versions, the latest Ukraine-Russia negatives have been less effective and couldn’t stop the S&P 500 Futures from printing mild gains above 4,500.

Read: Forex Today: Dollar gives up despite worrisome developments

• AUD/USD led G10 currency pair gainers by refreshing yearly top, trading sidelined of late.
• Softer greenback, firmer stocks favored bulls, three-year high US Treasury yields fail to propel USD, nor stop equity bulls.
• Ukraine showed signs of compromise, Russia paid a second bond coupon but the war continued.
• RBA’s Lowe again pushed back rate-hike expectations but Fedspeak has been hawkish.

AUD/USD bulls cheered firmer equities and softer greenback to refresh 2022 high around 0.7075 during early Wednesday morning in Asia.

The risk barometer pair renewed its four-month top the previous day despite strong US Treasury yields and mixed sentiment over Ukraine and Russia. In doing so, the Aussie pair became the biggest daily gainers in the G10 currency pairs despite indecision over the market’s risk profile.

The US 10-year and 2-year Treasury yields rose to the highest since May 2019 as the Fedspeak keeps inflating expectations of faster rate hikes from the US central bank. Among them, St Louis Fed President, James Bullard and Cleveland Fed President Loretta Mester clearly showed signals of 50 basis points (bps) of a rate lift.

On the other hand, Reserve Bank of Australia (RBA) Governor Philip Lowe reiterated his dislike for aggression towards rate hikes by saying, “(RBA) will not respond until there is evidence of pervasive price pressures.”

Elsewhere, Ukraine’s President Volodymyr Zelenskyy who previously eased on his stand to faster the peace talks recently said, “Talks with Russia are difficult, at times confrontational.” On the other hand, war escalates in Mariupol. It’s worth observing that Moscow managed to pay the second tranche of Eurobond coupon payment in the USD and avoided default for the second consecutive time.

Apart from the aforementioned play surging covid numbers in China and Europe, with the new variant gaining attention in the bloc, also challenges the market sentiment, but was mostly ignored.

Amid these plays, Wall Street benchmarks regained their mojo and the stock futures are up too.

Moving on, a light calendar in Asia may put AUD/USD at the mercy of risk catalysts while comments from Fed Chair Powell and second-tier US economics may entertain the pair traders afterward.

Technical analysis

Although successful trading above the 200-DMA level of 0.7300 keeps AUD/USD buyers hopeful, a 10-week-old ascending resistance line, near 0.7485 challenges the quote’s further upside.

• The USD/JPY continues rallying for the third consecutive day, up 1.41% in the week.
• Fed’s Bullard, Daly, and Mester favor aggressive rate hikes, thus increasing the odds of a 50 bps move in May.
• USD/JPY Price Forecast:  The 1-hour chart depicts the pair as upward biased.

The USD/JPY clings to the 120.00 mark following Tuesday’s session in which the pair reached a new YTD high at 121.03, in a session where US Treasury yields skyrocketed, led by the 10-year benchmark note up close to nine basis points, up at 2.384%. At 120.86, the USD/JPY reflects the greenback strength amidst an upbeat market mood.

On Tuesday, US equities finished the day in the green. Though of late, the greenback finished downwards, as reflected by the US Dollar Index down 0.03%, sat at 98.444.

Fed speaking driving the majors, US Treasury yields keep rising

The US economic docket featured more Fed speaking, following US Fed Chief Jerome Powell’s Monday’s appearance at the NABE conference. Powell reiterated that “inflation is too high” and signaled that the Fed is ready to hike rates higher than 25 bps at its next “meeting or meetings.”

US Treasury yields immediately reacted upwards, as investors positioned themselves ahead of the May 4 FOMC monetary policy meeting, where the odds of a 50 bps hike are close to 70%.

St. Louis Fed President James Bullard said that “The Fed needs to move aggressively to keep inflation under control,” emphasizing his calls of interest rates above 3% this year. Bullard added that 50 bps moves would definitely be on the mix. Later, San Francisco Fed’s Mary Daly said that inflation is too high, and she commented that it is time to eliminate accommodation.

Cleveland Fed President Loretta Mester is crossing the wires at press time. Mester said that “front-loading rate hikes is appealing” while adding that raising rates around 2.5% will be appropriate.

The Japanese economic docket will feature the Leading Economic Index on its Final reading for January, alongside the Coincident Index Final.

Elsewhere, Russia and Ukraine’s tussles have taken a backseat of late. US President Joe Biden would meet with his European allies on Thursday in Brussels and are expected to announce another tranche of sanctions against Russia over its invasion of Ukraine.

USD/JPY Price Forecast: Technical outlook

The USD/JPY is upward biased, though it faced solid resistance at 121.00. However, once the USD/JPY retreated towards 120.50s and advanced steadily to current price levels, the USD/JPY found support on an upslope trendline, as shown by the hourly (H1) chart.

Upwards, the USD/JPY first resistance would be 121.00. Breach of the latter would expose January 25. 2016 resistance at 121.68, followed by 122.00. On the flip side, failure to reclaim 121.00 would leave the pair vulnerable to further selling pressure. The USD/jPY first support would be 120.38, followed by 120.00, and then the 50-hour simple moving average (SMA) at 119.85.

“I think we will need 50 bps at some meetings, based on my forecast,” said Cleveland Fed President and FOMC member Loretta Mester.

Additional comments

Market reaction

Fed’s Mester joins other hawks in the monetary policy board to support the strong US Treasury yields, recently poking a three-year high. However, neither the US dollar nor equities match the bond moves.

Read: Forex Today: Dollar gives up despite worrisome developments

• GBP/USD bulls stay on course for a key weekly resistance target. 
• The M-formation is playing out with price correcting the weekly bearish impulse. 

Hawkish comments from Fed Chair Jerome Powell yesterday have injected another wave of re-pricing into US rates markets. However, the pound has continued higher in a technical move towards a weekly resistance level as per the following chart: 

GBP/USD weekly chart

The M-formation is a compelling pattern that is playing out with the price reverting towards the neckline of the pattern near 1.3350. This comes in towards a 61.8% golden ratio and 1.34 the figure. Should the area hold, the price would be expected to continue on its southerly trajectory with 1.28 the figure in focus. 

• Euro bulls have rebounded from 1.0960 after a corrective pullback as DXY weakens.
• EU will discuss an embargo on Russian oil in a meeting with Biden.
• Investors will focus on Fed Powell’s speech going forward.

The EUR/USD has witnessed a decent buying interest after a corrective pullback towards 1.0962 amid a positive undertone in the market. The asset is auctioning in a ted wider range of 1.0900-1.1120 after printing a fresh 22-months low near 1.0800.

The shared currency has remained vulnerable in the last two months as Russia’s invasion of Ukraine has posed a serious threat of stagflation in Europe. Rising oil and metal prices have spurred the prices attributed to manufacturing and other economic activities. A continent like Europe, which has a principal dependency on oil and energy from Russia, is facing the heat of sanctions on the Russian economy. The war between Russia and Ukraine has not only impacted the life and infrastructure of Ukraine and the financials of Moscow but has also impacted the supply chain structure of Europe.

Investors are eying the European Union (EU) leaders summit on Thursday, which will also be attended by US President Joe Biden. The EU has announced that a boycott of Russian oil will be the major agenda of the discussions. Therefore, investors will find fresh impetus from the summit.

While the US dollar index (DXY) surrendered its opening gains of Tuesday in the late New York session. The DXY slipped near 98.50 after failing to surpass 99.00 in multiple attempts. The market participants will focus on the speech from Federal Reserve (Fed) Chair Jerome Powell on Wednesday. The speech is likely to dictate the roadmap of imposing six more interest rate hikes by the end of 2022.

• GBP/JPY saw a historic rally on Tuesday, surging above resistance at 158.00 to hit more than five-year highs above 160.00.
• That marked a 1.9% gain, the best on-the-day rally since November 2020.
• Tuesday’s push higher takes the pair on-the-month gains to now nearly 4.0%, as higher stocks/yields hurt the yen.

GBP/JPY saw a historic rally on Tuesday, surging above a key long-term area of resistance around 158.00 to surpass 160.00 for the first time since June 2016. That marked a 1.9% gain, the best on-the-day rally since November 2020, on the day when Pfizer announced successful Covid-19 vaccine trial results. Tuesday’s push higher takes the pair on-the-month gains to now nearly 4.0% and means that GBP is, against the Japanese yen at least, back to its pre-Brexit levels.

A continued improvement in risk appetite in global equities coupled with a historic run higher in US and global bond yields as the Fed pivots hawkishly has had disastrous effects for the yen, which has been battered across the board, including versus GBP. But GBP/JPY’s on-the-month gains aren’t as strong as some of its other G10 peers like AUD/JPY and NZD/JPY, given 1) GBP is more exposed to economic weakness as a result of the Ukraine war and 2) GBP is still being help back by last week’s dovish BoE policy announcement.

Looking ahead, GBP/JPY trades may fear that the pair’s rally is getting a little overextended and if the recent rally in global equities and yields slows/reverses, the pair will likely see some profit-taking. The previous ceiling of 158.00 for 2021 and the start of 2022 may now have turned into a floor, with any retracement back to this area likely to be viewed as a good buying opportunity, assuming market conditions are still unfavorable to the risk appetite/yield sensitive yen. In terms of the economic calendar, UK Consumer Price Inflation and Retail Sales data for February and flash PMI data for March will be worth a watch, as well as remarks from various BoE policymakers throughout the week.

• Investors were in a risk-on mood, supporting the kiwi to fresh 2022 highs.
• Eyers are on the Fed and RBNZ with a focus on inflation risks.

NZD/USD is ending on Wall Street on firm footing and making fresh highs for the year, travelling from 0.6863 to a high of 0.6964, up 1.16% at the time of writing. The moves are despite recent comments from US Federal Reserve Chair Jerome Powell.

Powell yesterday dialled up the hawkishness of the Fed further, forcing bond yields to react. In addition, the USD remains a favoured safe haven currency and, as yet, the Russia/Ukraine peace talks have not yielded any tangible results. Traders are pricing in a 66.1% chance of a 50 basis point hike at the Fed's May meeting, according to CME's FedWatch Tool, up from slightly more than 50% a week ago.  As a result, DXY was up for the third straight day and trading near 99 the figure that outs the May 25 2020 high near 99.975 in focus.

However, the tide has turned on Tuesday. Investors were in a risk-on mood, as US stocks rose and dented some of the safe-haven appeal of the greenback, with equities getting a lift, in part, from bank shares on Fed rate hike expectations. ''The move was a tad surprising given talk of bigger Fed hikes and the growing concern locally about the prospect of a hard landing, but in the end, plain old “risk on” sentiment held the day,'' analysts at ANZ bank said.

''Amid a quiet week locally, the Kiwi was always going to dance to a global beat, and positioning could cap it down the track (speculative positioning swung from short to long last week according to CFTC – which helps in part explain the rally). But for now it is basking in glory (alongside AUD, CAD, and to a lesser extent NOK) as the 3 best performers in the G10 this year. That does square away nicely with moves in commodities.''

Inflation risks in focus

Meanwhile, earlier in the US session, St. Louis Fed President James Bullard repeated his call for the Fed to move aggressively on Bloomberg TV. Additionally, San Francisco Fed President Mary Daly said she believes the main risk to the economy is a worsening of already high inflation as oil prices climb due to the conflict in Ukraine and a disruption in supply chains from China's COVID-19 countermeasures.

Domestically, inflation expectations in New Zealand have risen aggressively over the past year and analysts at ANZ Bank said there’s a real risk that recent price spikes could cause expectations to become unanchored from the RBNZ’s 2% target for CPI inflation – especially as Omicron exacerbates already stretched domestic supply chains.

''The RBNZ already saw inflation expectations as the most significant risk in the February MPS, and now that risk of unanchored expectations is even stronger.

This is a key reason why we think the RBNZ should hike the OCR aggressively by 50bps in both April and May. It will hurt, but its considerably better than what they would need to do to the economy if inflation expectations continue to spiral further in the wrong direction.''

• Despite looking extremely overbought across a range of short-term technical measures, AUD/JPY’s historic move higher went into overdrive on Tuesday.
• The pair lept 2.0% to fresh multi-year highs above 90.00 and is eyeing its 2017 highs at 90.30.
• The recent surge higher in stocks and global yields has battered the yen across the board, not just versus AUD.

Despite now looking extremely overbought across a range of short-term technical and quantitative measures, AUD/JPY’s historic move higher went into overdrive on Tuesday. At current levels just to the north of the psychologically important 90.00 mark, AUD/JPY is trading at four and a half year highs with gains of about 2.0% on the day, putting it on course for its best one-day performance since November 2020. That was the day the successful Pfizer Covid-19 vaccine trial data was announced.

AUD/JPY now trades a massive more than 6.5% above its lows from just one week ago in the 84.50 area and its on-the-month gains stand at roughly 8.0%. That means, with seven full trading session of the month left, the pair is on course to post its largest percentage one-month gain since October 2011, more than a decade ago. A continued improvement in risk appetite in global equities coupled with a historic run higher in US and global bond yields as the Fed pivots hawkishly has had disastrous effects for the yen, which has been battered across the board, not just versus the Aussie.

But importantly, AUD/JPY is yet to crack above a key high from 2017 in the 90.30 area and there is another key long-term high in the 90.75 area just above it. Failure to break above these levels swiftly in the coming sessions might signal some, at this point, much overdue profit-taking. Given the backdrop of still very elevated geopolitical risks, analysts are wary on the prospects for the recent rally in the global equity space to continue and, if the recent upwards trajectory does slow, that would remove one tailwind for AUD/JPY.

The recent move higher in global yields is also looking a little stretched and rates strategists have been warning to expect some consolidation, albeit still at higher levels, ahead. That would remove another key tailwind for the pair. However, amid intense speculation about an upcoming hawkish pivot from the RBA, all while the BoJ continually reiterates its usual ultra-dovish stance, many FX strategists will continue to view AUD/JPY as a buy-on-dips.

The only problem for the technicians is that there isn't any notable support until all the way down at 86.00 (roughly 4.0% lower versus current levels). Unless there is a big reversal lower in equities and yields, it's hard to picture AUD/JPY falling back to such levels. Bulls may instead mull adding to longs around key psychological levels, like perhaps the 88.00 mark.

• Markets are anticipating Fed will raise interest rates by 50 basis points at both its May and June meetings.
• USD/CAD prints fresh session lows nevertheless. 

USD/CAD is sliding into fresh session lows at 1.2567 as the US dollar stalls and losing some 0.2% on the day so far. The greenback is giving back territory despite Federal Reserve Chair Jerome Powell putting the possibility of half-percentage-point interest rate hikes on the table.

Earlier in the day, the greenback saw its biggest one-day percentage gain since March 10 on Monday as the Fed opened the door for raising rates by more than 25 basis points at upcoming policy meetings in order to contain inflation.

In the wake of Powell's comments, markets are anticipating that the central bank will raise interest rates by 50 basis points at both its May and June meetings. Nevertheless, investors were in a risk-on mood and US stocks rose and dented some of the safe-haven appeal of the greenback.

Meanwhile, West Texas Intermediate (WTI) crude oil prices are falling following a jump of 7% a day earlier as the European Union considers banning Russian oil imports amid that country's invasion of Ukraine. ''EU nations are arguing over banning the purchase of about four-million barrels per day of Russian oil that are the largest part of the continent's imports, though reports say there is little consensus on whether the group will go ahead with a ban, which would force it to compete for alternative supplies,'' Reuters explained. 

• Wall Street is set to finish Tuesday’s trading session in the green.
• The sell-off of US Treasuries continues, while the 10-year yield closes to 2.40%.
• S&P 500 Price Forecast: Bulls reclaiming the 200-DMA might open the door for further gains.

US stocks recovered on Tuesday, following Monday’s hawkish remarks of Fed Chief Jerome Powell, who said that “inflation is too high” and opening the door for 50 basis points increases.

The S&P 500 is advancing some 1.10%, sitting at 4517 above the 200-day moving average (DMA), a bullish signal for dip buyers. Meanwhile, the tech-heavy Nasdaq rises almost 2%, sits at 14,106.28, while the Dow Jones Industrial climb 0.69%, up at 34792.36.

On Monday, US central bank chief Jerome Powell said that “if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so.”

Meanwhile, money market futures have priced at least a 63.9% chance of a 50 basis point increase to the Federal Funds Rate (FFR) in the May 4 Fed monetary policy meeting, as shown by CME Fed Watch Tool.

In the meantime, the sell-off on US Treasuries continues, as reflected by the US Treasury yields rising. The 10-year benchmark note gains six basis points, sitting at 2.384%. The greenback is barely down 0.01%, at 98.461.

Sector-wise, consumer discretionary, communication services, and financials rose 2.65%, 2.17%, and 1.62%, respectively. Meanwhile, the energy sector is logins 0.57%, weighed by Russia – Ukraine tussles, while Hungary and Germany backpedaled the ban of Russian oil.

S&P 500 Price Forecast: Technical outlook

The S&P 500 broke above the 200-DMA at 4473.08, as mentioned above. However, a daily close above it would open the door for further gains. Nevertheless, as equities are highly sensitive to market mood, stock traders need to be aware of it before opening fresh bullish bets on the S&P 500 index.

With that said, the S&P 500 first resistance would be September 4545.85. Once cleared, the next resistance would be February 2, daily high at 4595.81, short of the following resistance, the 4600 mark.

• Silver has stabilised around $24.80 in recent trade despite further upside for US equities and bond yields.
• Geopolitical risks remain elevated as Russo-Ukraine war continues and Western leaders sound the alarm about potential Russian chemical weapons attacks.
• For now, support at $24.50 is holding, but a bearish break could see the 200 and 50DMAs at $24.00 tested.

Spot silver (XAG/USD) prices have stabilised in recent trade in the $24.80 area having dipped as low as the $24.50s earlier in the day, despite global equities and bond yields continuing to push higher, usually a double whammy for precious metals. In fairness, XAG/USD prices are still trading down by about 1.5% on the day. But it appears that against the backdrop of still very much elevated energy and other commodity prices (that is keeping stagflation fears alive), the bears werent yet ready to push the precious metal below last week’s lows in the $24.50 area.

Indeed, geopolitical risks remain elevated as the Russo-Ukraine war rumbles on and Western leaders sound the alarm about potential Russian chemical weapons attacks that could be used to break the current deadlock. Such a move would further accelerate the imposition of ever-harsher Western sanctions on Russia, with the EU now leaning towards a blanket Russian oil import ban. But this week’s further hawkish shift from Fed Chair Jerome Powell who stoked expectations that the Fed might hike rates by more than 25bps at upcoming meetings seems to have overridden geopolitical concerns for now.

Indeed, there has been a lot of focus on the recent resultant sharp upside seen across US and global yields, which has increased the opportunity cost of holding non-yielding assets like silver. Should recent upside yield moves continue, and should risk appetite in the equity space also remain healthy as has (to the surprise of many) been the case over the past week or so, a bearish break in XAG/USD is likely. The next major support below $24.50 is the 200 and 50-Day Moving Averages in the $24.00 area.

What you need to take care of on Wednesday, March 23:

The American dollar edged lower against most major rivals on Tuesday, except against the Japanese yen, with USD/JPY soaring to 121.02, its highest since February 2016. The greenback advanced during the Asian session, following the lead of soaring US government bond yields after Fed Chair Powell hinted at a 50 bps hike in May.

However, European indexes managed to post some modest gains, putting a halt to the dollar’s demand. Wall Street followed the lead of its overseas counterparts, also posting gains and weighing on the dollar. Speculative interest ignored bonds sell-off that sent the yield on the US 10-year Treasury note to a multi-month high of 2.39%.

The EUR posted a tepid advance vs the greenback, with the pair now trading in the 1.1020 price zone. The Union is too close and too affected by the Russia-Ukraine conflict to actually see its currency appreciate, despite mounting speculation the ECB will have to hike rates by at least 50 bps before the year-end.

The GBP/USD pair reached a fresh three-week high of 1.3273, retaining most of its intraday gains by the end of the day.

The AUD/USD pair reached a fresh 2022 high of 0.7469, trading nearby ahead of the Asian opening, while USD/CAD consolidated losses near its weekly low at 1.2564.

 Crude oil prices started the day with a strong footing but finished the day with modest losses. WTI settled at around $10.900 a barrel.

Gold edged sharply lower during US trading hours, bottoming for the day at $1,910.64 a troy ounce. It later recovered and ended at around $1,922.00.

Meanwhile, the number of coronavirus contagions keeps rising in Europe, mostly linked to the BA2 variant. The World Health Organization blamed it on European governments lifting restrictions too soon.

Additionally, Russia continues to escalate its attack on Ukraine, with no solution at sight for the Eastern European crisis.

Top 3 Price Prediction Bitcoin, Ethereum XRP: Crypto bulls are back in town

• Gold is trapped between daily support and resistance.
• Markets digest Fd Powell and risk appetite returns, capping golds recovery.
• Gold Weekly Forecast: Technicals turn bearish after weekly decline

The gold price is suffering a 0.7% blow on the day so far albeit stabilising above the lows made at the start of the US day. XAU/USD is trading at $1,921.48 after falling from $1,938 and meeting a low of $1,910.73. The US dollar fell, correcting a move higher the previous day as comments from US Federal Reserve Chair Jerome Powell faded and a rise in equities markets help boost risk-on sentiment.

Traders are pricing in a 66.1% chance of a 50 basis point hike at the Fed's May meeting, according to CME's FedWatch Tool, up from slightly more than 50% a week ago. However, gold prices remain extremely well-supported despite the explosive price action in rates markets following Chair Powell's comments. As a result, DXY was up for the third straight day and trading near 99 the figure that outs the May 25 2020 high near 99.975 in focus.

The mood, nevertheless, is risk on and the dollar is giving back some ground in afternoon trade on Wall Street. The Dow Jones Industrial Average rose 0.8% with the S&P 500 up by 1.13% and the Nasdaq Composite adding 1.85% while the US yields soar to multi-year highs by putting the possibility of the half-percentage-point rate hikes on the table. Two-year, five-year, 10-year and 30-year Treasury yields all stood at their highest levels since 2019.

''While the Chair's comments were entirely consistent with the messaging at the undeniably hawkish FOMC meeting, Powell additionally noted that the Fed will be driven by actual inflation rather than forecasts. This opens the door to an imminent 50bp hike, as the Fed's ability to tame inflation in the near-term is extremely limited,'' analysts at TD Securities explained.

Fed behind the curve

The analysts explained also that, 'in turn, the market is now 80% priced for a 50bp hike in May. In this context, gold prices have remained incredibly resilient. This could potentially highlight a growing cohort of participants interpreting the Fed's hiking path as being behind the curve on inflation, as the Fed moves too slowly and cautiously to tame inflation.''

Finally, the analysts argued that ''while CTAs were lent a lifeline to trend followers amid ongoing negotiations between Russia and Ukraine, the margin of safety is narrowing once more.''

''This would raise risks that safe-haven buyers could offload length in a vacuum concurrently with massive CTA liquidations, but Shanghai traders have seemingly ended a period of liquidations and have meaningfully added to their gold in the recent trading session.''

Gold technical analysis

The price is trapped between daily support and resistance although there is a bias to the downside while below the counter trendline. The correction of the latest daily bearish impulse has met a 38.2% ratio already which is an additional bearish factor as sellers move in at a discount. There are prospects of a firmer test of the support in the $1,880 for the days ahead:

The hourly chart is also offering a bearish bias the price moves in and stalls at resistance as illustrated above. 

• The EUR/JPY reached a new YTD high at 133.33 during the New York session.
• An upbeat market mood weighs on safe-haven peers, like the JPY and the CHF.
• EUR/JPY Price Forecast: A daily close above 133.00 would cement the upward bias; otherwise, a mean reversion move is on the cards.

On Tuesday, during the North American session, the shared currency reached a new YTD high vs. the Japanese yen. Factors like an improved market sentiment despite stalled peace talks between Russia and Ukraine, and central bank tightening, were not able to stop the rally above the 133.00 mark for the first time since October 2021. The EUR/JPY is trading at 133.15 at the time of writing.

As abovementioned, an upbeat market sentiment surrounds the markets.European equities closed with gains. Meanwhile, US stock indices record gains between 0.59% and 1.73% across the pond.

Overnight, the EUR/JPY stayed subdued around the 131.50 area. However, the cross-currency pair rallied once the European session kicked in, though it reached a YTD high at 133.33 during the New York session.

EUR/JPY Price Forecast: Technical outlook

From a daily chart perspective, the EUR/JPY is upward biased, though a daily close above a ten-month-old downslope trendline above 132.80.90 is needed to pave the way for further gains. Otherwise, the EUR/JPY would be vulnerable to a mean reversion move.

Hourly chart

The EUR/JPY intraday is bullish, though as the Relative Strength Index (RSI) gets out of overbought conditions at 66.98, the EUR/JPY could aim lower before resuming upwards.

If that scenario plays out, the EUR/JPY first support would be 133.00. Breach of the latter would expose 132.74, followed by 132.33, and then 132.00.

• On Tuesday, the shared currency trims some of Monday’s losses, up some 0.07%.
• Risk appetite increased, despite continuing advance of the Russia-Ukraine conflict and a hawkish Fed.
• EUR/USD Price Forecast: Downward biased below the 1.1100 mark.

After two days of losses in the North American session, the shared currency climbs amid a risk-on market mood and a firmer greenback. At the time of writing, the EUR/USD is trading at 1.1025.

The financial market sentiment is upbeat, as reflected by global equities. The greenback is almost flat during the day, as portrayed by the US Dollar Index, which after reaching the 98.97 daily high, retreating towards 98.489, for a minimal 0.01% gain. Meanwhile, US Treasuries keep advancing for the second consecutive day, led by the 10-year benchmark note, which gains six basis points, sitting at 2.377%.

Fed and ECB speaking grab the headlines

On Monday, Fed’s Chief Jerome Powell said that the US central bank would take the “necessary steps”  to tame inflation down towards the 2% target. He emphasized that he favors 50 basis points increases, pretty much aligned with what other Fed policymakers have said.

On Tuesday, Fed speakers continued. St. Louis Fed’s James Bullard said that the Fed needs to get policy-neutral, saying that “faster is better” and reiterated that 50 basis points increases would be in the mix.

Later, San Francisco Fed’s Mary Daly said that inflation is too high, and two supply chain shocks push it “much higher.” She added that it is time to eliminate accommodation, marching up to neutral and determining if the US central bank would need to go above it, as she does not see inflation at 2% by 2022.

Elsewhere, the Eurozone economic docket featured some European Central Bank (ECB) speakers. ECB’s Luis de Guindos said that the possibility of stagflation could be dismissed. Later in the European session, Francois Villeroy said that the ECB should take a cautious approach to normalizations while it needs to focus on underlying medium-term prices.

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

EUR/USD Price Forecast: Technical outlook

The EUR/USD bias is downwards, though, on Tuesday, the EUR/USD jumped off from daily lows around 1.0969 and broke above the 1.1000 mark, exposing the mid-line between the top and central Pitchfork’s parallel lines around 1.1080-90. Nevertheless, the downtrend remains intact unless EUR/USD bulls push the pair above the 1.1100 mark, which could pave the way for further gains.

The EUR/USD first support would be the 1.1000 mark on the downside. Breach of the latter would expose Pitchfork’s central parallel-line, which also confluences near the 1.0900 mark, that once cleared would open the door towards March 7 YTD low at 1.0806.

San Fransisco Fed President Mary Daly said on Monday that we now have policy-supported demand combined with fragile supply chains, which is a recipe for inflation, reported Reuters. 

Additional Remarks: 

On the economy, inflation and supply chains...

"Inflation is too high, and added to that you have two supply chain shocks further pushing up on inflation."

"Oil supply shocks can limit growth, but we are in a different situation than in the 1970s."

"Uncertainty is an issue as this war proceeds."

"The main risk I see is inflation pressures, which are more than we want, need, or thought 3 months ago."

"The pandemic in many ways is the 'culprit' behind high inflation."

"Going forward, I expect some of this to roll off, helping get supply and demand back in balance."

"Supply chains will hopefully repair as well."

"I shaved a little off my own growth forecast, I now see it at about trend."

"At-trend growth of about 2%, against all these headwinds, is really quite remarkable."

"I expect the Fed's policy adjustment and other factors to bring inflation down."

"I don't think we'll be at 2% inflation by end of year."

"I don't have a new-found fear that we've lost inflation anchor."

"I see well-anchored inflation expectations."

"I do have a concern that when inflation stays higher for longer, that 'tugs' at the inflation anchor."

On policy...

"It's time to remove accommodation, marching up to neutral, looking if we need to go over neutral."

"Right now full employment seems to be met, the labor market is extraordinarily tight and inflation is too high."

"It's time to tighten policy in the United States, despite uncertainty with Ukraine and Covid."

On markets...

"The yield on 10-year treasury is low for understandable factors, including safe-haven buying."

"Markets also don't expect runaway inflation."

• AUD/USD bid as commodities run higher in the face of hawkish Fed.
• The Russian invasion of Ukraine puts upward pressure on commodities.

AUD/USD is making a fresh high in midday New York trade touching 0.7452 having travelled from a low of 0.7375 in risk-on markets.  The US dollar is giving back territory despite Federal Reserve Chair Jerome Powell putting the possibility of half-percentage-point interest rate hikes on the table.

Earlier in the day, the greenback saw its biggest one-day percentage gain since March 10 on Monday as the Fed opened the door for raising rates by more than 25 basis points at upcoming policy meetings in order to contain inflation.

''His tone was more hawkish than his post-FOMC press conference last week. Of course, a lot can happen between now and the May 3-4 meeting. Recall that a 50 bp hike at the March 15-16 meeting was over 80% priced in last month before it became clear that 25 bp was most likely,'' analysts at Brown Brothers Harriman said. 

Nevertheless, in the wake of Powell's comments, markets are anticipating that the central bank will raise interest rates by 50 basis points at both its May and June meetings. Nevertheless, investors were in a risk-on mood and US stocks rose and dented some of the safe-haven appeal of the greenback.

The Dow Jones Industrial Average rose 0.8% with the S&P 500 up by 1.13% and the Nasdaq Composite adding 1.85% while the US yields soar to multi-year highs by putting the possibility of the half-percentage-point rate hikes on the table. Two-year, five-year, 10-year and 30-year Treasury yields all stood at their highest levels since 2019.

Meanwhile, net AUD short positions have dropped sharply to their lowest levels since August 2021 while soaring commodity prices are offering the AUD support vs. the USD in the spot market. The Russian invasion of Ukraine is adding some serious upward pressure on commodities. Crude oil has surged higher on reports Europe was considering a ban on Russian oil as several European countries push for the fifth round of sanctions on Russia,.

• NZD/USD pushed to its highest level since late November in the 0.6950 area on Tuesday.
• The kiwi’s rally on Tuesday comes amid strong risk appetite and a broad push higher in the global equity space.
• NZD also has the added tailwind of one of the most hawkish central banks in the G10 in the RBNZ.

NZD/USD rallied to the 0.6950 area on Tuesday and, in doing so, pushed to its highest level since late November. At current levels almost bang on the round figure, the pair is trading with gains of just shy of 1.0% on the session and is up more than 1.2% versus Asia Pacific session lows in the 0.6860s. Indeed, the kiwi is the best performing G10 currency on the day by a reasonably significant margin, despite a weakening in Consumer Sentiment in Q1 2022 versus Q4 2021 according to the latest release by Westpac.

The kiwi’s impressive rally on Tuesday comes amid strong risk appetite and a broad push higher in the global equity space – conditions typically good for the likes of NZD and AUD. But the kiwi (and Aussie) are also benefitting from their relative distance to the Ukrainian conflict versus, say, the likes of NOK, SEK and other more risk-sensitive European currencies. Indeed, if investors are looking to allocate towards a currency that 1) can benefit from risk-on, 2) can benefit from higher commodities and 3) is less exposed to the negative economic effects of the Ukraine war, the kiwi (and Aussie) pretty much tick all boxes.

The kiwi also has the added tailwind of one of the most hawkish central banks in the G10 in the RBNZ. The RBNZ is already well ahead of the Fed in the current hiking cycle and things are expected to stay that way with the bank likely to lift interest rates in 50bps intervals at coming meetings. That might explain why the kiwi has been able to rebuff post-hawkish Fed USD strength better than most of its other G10 peers.

Looking ahead, the major drivers of risk appetite (geopolitics, Fed rhetoric etc.) will remain important for NZD/USD. There isn’t anything of importance on the New Zealand economic calendar this week, but FX traders should keep an eye on a barrage of Fed speak throughout the rest of the week that will give more insight into which policymakers support what tightening path ahead, plus US flash March PMIs on Thursday.

• The Mexican peso advances firm vs. the greenback, despite falling oil prices.
• An upbeat market sentiment boosts emerging market currencies.
• USD/MXN Price Forecast: Neutral biased, but up and downside risks remain.

The Mexican peso rallies firmly despite that the US Federal Reserve hiked rates for the first time in three years, but interest rates differentials still favor the Mexican peso. At 20.2964. the USD/MXN reflects the 5.50% differential between Mexico and the US.

In the meantime, European and US stock markets continue advancing during the day, reflecting the positive market sentiment. Meanwhile, oil prices dropped from daily highs near the $115.00 mark as Germany and Hungary backpedaled from a potential embargo on Russian oil, easing pressures on the black gold. That stopped the fall of the USD/MXN pair, as traders were looking to push the exchange rate towards February 23 daily low at 20.1558, short of the psychological 20.00 barrier.

Meanwhile, the US Dollar Index advances on the day some 0.96%, sitting at 98.536, putting a headwind for the USD/MXN.

Overnight, the USD/MXN opened near Monday’s low, around 20.30s. Once the North American session began following a bank’s holiday in Mexico, the Mexican peso strengthened as USD/MXN traders pushed the pair towards 20.2494 lows.

USD/MXN Price Forecast: Technical outlook

The USD/MXN bias is neutral, as depicted by the daily chart. On Friday last week, the USD/MXN broke below the 200-DMA at 20.4155, exacerbating a move towards the YTD lows. Nevertheless, USD/MXN traders need to be aware that a dampened market mood, would significantly affect Emerging Markets’ currencies, weakening the peso.

Upwards, the USD/MXN first resistance would be the 200-DMA at 20.4155. Breach of the latter would expose the 50-DMA at 20.5634, followed by the January 28 cycle high at 20.9130, short of the 21.00 barrier. On the flip side, the USD/MXN first support would be February 23 daily low at 20.1558, followed by the psychological 20.00 barrier and June 25, 2021 low at 19.7050.

• The Swiss franc is gaining 0.13% on Tuesday.
• Higher US Treasury yields failed to underpin the USD/CHF pair.
• USD/CHF Price Forecast: An inverted head-and-shoulders in the 4-hour chart looms, though to confirm its validity, would need to reclaim 0.9373.

After reaching a daily high at 0.9375, and a daily low at 0.9314, the USD/CHF stabilizes below January’s 31 pivot high at 0.9343, amid a risk-on market mood and higher US Treasury yields. The USD/CHF is trading at 0.9327 at press time during the North American session.

In the meantime, the US Dollar Index, a gauge of the greenback’s value against a basket of its rivals, advances some 0.01%, sits at 98.474 but fails to underpin the USD/CHF. At the same time, US Treasury yields are soaring, led by 5s and 10s, each one at 2.397% and 2.381%, respectively.

Overnight, the USD/CHF began in the Asian session on a higher note, pushing through November 24, 2021, high at 0.9373, but USD bulls failed to hold their reins, as the pair dropped sharply, breaking on its way the 100, 200 and the 50-hour simple moving averages (SMAs) on its way south, to stabilize near the 0.9320 mark.

USD/CHF Price Forecast: Technical outlook

From the daily chart perspective, the USD/CHF is upward biased. However, USD bulls faltering to keep the exchange rate above 0.9343 exposed the pair to the 0.9297-0.9343 range.

4-Hour chart

The USD/CHF is also upward biased from an intraday perspective, as depicted by the simple moving averages (SMAs) in a bullish order. However, the 50-SMA lies above the spot price at 0.9357 and would be the first resistance level.

It is worth noting that an inverted head-and-shoulders pattern could be forming, but the USD/CHF would need to break upwards to confirm the right-shoulder formation. That said, the USD/CHF first resistance would be 0.9357. A decisive break would expose the inverted head-and-shoulders neckline near November 24, 2021, cycle high at 0.9373, followed by the 0.9400 mark.

• GBP/USD hit a near two-week high above the 1.3200 level on Tuesday rising, as much as 0.7% to the 1.3250s.
• The pair has been underpinned by strength in risk appetite as global equities move higher, resulting in a weaker USD.
• GBP/USD’s breakout above resistance in the 1.360-1.3200 are could be a key technical milestone, but UK fundamentals are weak.

GBP/USD hit a near two-week high above the 1.3200 level on Tuesday, rising as much as 0.7% to the 1.3250s as a continued push higher in global equity markets spurred risk appetite in currency markets. Though it remains well supported against its more interest rate sensitive safe-haven peer the yen, post-hawkish Fed Chair Jerome Powell US dollar strength on Monday has proven short-lived versus most of the buck’s G10 peers. While markets are upping bets on a more aggressive and further-reaching Fed tightening cycle, optimism that the new policy switch is “appropriate” given the backdrop of high inflation and a hot US labour market seems to be supporting sentiment.

The ongoing improvement in risk appetite, to which pound sterling is normally quite sensitive, has been able to overpower recent dovish BoE-related weakness in GBP/USD. Of course, that means that if global equities do start selling off again, the pair is at risk of giving up its newfound 1.32 status once more. There are still plenty of reasons why there could be a swift reversal lower in stocks; the Russo-Ukraine war (maybe Russia starts chucking chemical weapons around), a toughening of Western sanctions against Russia (potential EU embargo of Russian oil) and a worsening of the China Covid-19 outbreak to name a few.

GBP/USD’s breakout above key resistance in the 1.360-70 area and the 1.3200 level is a key technical milestone that opens the path towards a (technically driven) push towards 1.3300. Indeed, the pair has already bounced off of resistance in the form of the late-February/early March lows in the 1.3275 area. While the main driver of GBP/USD at present is currently a macro story of risk-on, if that switches back to forex fundamentals and central bank divergence, the UK economy’s comparatively weaker position and the BoE’s comparatively more dovish stance weakens the prospect for a sustained rally.

Looking to the immediate future, focus is on February UK Consumer Price Inflation data scheduled for release on Wednesday, to then be followed by another speech from Fed Chair Powell, ahead of flash UK and US PMIs on Thursday.

The Indonesian rupiah (IDR) is set to move only slightly downward over coming months despite the Federal Reserve rate hike cycle, economists at ING report.

Possibly higher rates and a surprisingly resilient currency

“We believe that rising inflation and a round of tightening from the central bank will be enough to nudge long-end rates to peak at roughly 7.05%, especially with the US Federal Reserve taking on a more pronounced hawkish tilt.”

“IDR will likely face some depreciation pressure in the coming months given the possible financial market outflow related to the Fed rate hike cycle. However, we have noted a relatively more resilient currency with IDR benefiting from positive export dynamics as higher global commodity prices translate to higher export earnings.”

“We are likely to see only a mild depreciation episode for IDR in 2022, especially if Bank Indonesia pushes ahead with a modest tightening cycle of its own.”

• The USD/CAD grinds higher after five days in the red.
• Fed’s Chair Powell approves 50 bps rate hikes and could happen not just once.
• USD/CAD Price Forecast: Broke the 200-DMA, exposing the USD/CAD to further downward pressure, with 1.2500 as the next target.

The USD/CAD snaps five days of consecutive losses amid a risk-on market mood. At the same time, oil prices ease from around $115.00, thus weighing on the Loonie, as the greenback reflects recent hawkishness from Federal Reserve policymakers, led by Fed’s Chair Powell saying that a 50 bps increase is on the cards, aligned with Fed hawks Bullard, Bostic, Waller, and Barkin. At the time of writing, the USD/CAD is trading at 1.2611.

Fed’s hawkishness and higher US Treasury yields keep the US dollar strong

Meanwhile, European and US equities keep trading in the green, while the DXY retraced from daily highs near the 99.00 mark around 98.481, up some 0.01%. Meanwhile, US Treasury yields are surging, in the day, as market players begin to price in hikes of the US central bank. Worth noting that the yield in 5s at 2.380% is higher than the 10-year T-note yield at 2.368%, something that USD/CAD traders need to be aware of.

The US economic docket featured more Fed speaking. St. Louis Fed’s James Bullard said that the Fed needs to get policy-neutral, saying that “faster is better” and reiterated that 50 basis points increases would be in the mix.

The Canadian economic docket featured the Producer Price Index for February monthly, which rose 3.1%, higher than January’s 2.5%, while the Raw Materials Prices increased by 29.8%, but lower than the previous reading at 30.5%.

USD/CAD Price Forecast: Technical outlook

The USD/CAD just crossed below the 200-day moving average (DMA) at 1.2607, additionally to the 50-DMA crossing under the 100-DMA, each located at 1.2681 and 1.2687, respectively. Also, on March 18, the USD/CAD broke an upslope trendline, drawn from late January, support which once broken exposed the abovementioned 200-DMA.

With that said, the USD/CAD bias is neutral-downwards. The first support would be a six-month-old upslope trendline around 1.2560-75. Breach of the latter could pave the way for further downside, with the January 19 daily low at 1.2450, followed by November 10, 2021, cycle low at 1.2387.

Upwards, the first resistance would be the 200-DMA at 1.2607. Once cleared, the next resistance would be 1.2650, followed by the confluence of the 50 and 100-DMA around 1.2681-87.

• USD/TRY advances marginally around the 14.80 region.
• Turkey 10y yields climb to record highs past 25.00%.
• The risk-on sentiment reclaims ground lost.

The Turkish lira remains on the defensive albeit marginally and lifts USD/TRY to the 14.85 region on Tuesday.

USD/TRY remains capped by 15.00

USD/TRY advances for the fourth consecutive session so far on Tuesday despite the sentiment appears to be favouring the risk complex.

The Turkish lira, in the meantime, remains unable to benefit from the better mood in the riskier assets, apparently following hopes of a positive outcome at the ongoing Russia-Ukraine talks.

The selling pressure in the lira comes amidst a new record high in the Turkey 10y benchmark note yields, this time trespassing the 25.0% level.

What to look for around TRY

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

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

USD/TRY key levels

So far, the pair is gaining 0.15% at 14.8430 and a drop below 14.5217 (weekly low March 15) would expose 13.7063 (low February 28) and finally 13.5091 (low February 18). On the other hand, the next up barrier lines up at 14.9889 (2022 high March 11) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level).

• Silver has been under selling pressure in recent trade and is eyeing a break below last week’s lows around $24.50.
• Equities are rallying, undermining silver’s safe-haven appeal, and yields are higher, increasing silver’s “opportunity cost”.

Spot silver (XAG/USD) prices have been coming under selling pressure in recent trade and are currently trading at session lows in the $xx per troy ounce, with the bears eyeing a test of last week’s lows at the $24.50 mark. Despite a lack of fresh positive developments regarding the Russo-Ukraine conflict (still no discernable progress in peace talks) and despite recent Fed hawkishness, risk appetite is strong and global equities firmly on the front foot, weighing on demand for safe-havens like silver. Some recent headlines alleging that there is a push going on behind the scenes within the Democrat party to revive Biden’s failed Build Back Better fiscal stimulus package might be helping risk appetite at the margin.

Either way, US (and global) yields are also rising sharply in tandem with US (and global) equities, raising the opportunity cost of holding non-yielding assets such as silver. The US 10-year, for example, is nearing 2.40% for the first time since May 2019, up more than 6bps on the day and taking month-to-date gains to more than 50bps. This sharp rise is largely a result of the recent hawkish Fed shift towards signaling 1) a faster pace of rate hikes (i.e. 50bps intervals at each meeting are likely) and 2) a higher terminal rate (i.e. of above so-called “neutral”).

Should the toxic combination of rallying equities and bond yields continue to undermine demand for precious metals, things could get ugly for XAG/USD. With the pair already down move than 2.0% on the day from earlier session highs closer to $25.50, a break below $24.50 could open the door to a run lower towards the 200 and 50-Day Moving Averages in the $24.00 area. Ahead, geopolitics aside, Fed speak is the main focus over the coming days, with Fed Chair Jerome Powell scheduled to speak against on Wednesday.

Belarus could "soon" join the war in Ukraine, US/NATO officials said on Tuesday, tweeted a CNN reporter, and are already taking steps to do so. "Putin needs support" and "anything would help" one official was quoted as saying. The reporter said that Belarusian opposition told them that combat units are ready as soon as the next few days, with thousands prepared to deploy. 

Market Reaction

There wasn't any reaction to the latest reports, which adds to recent speculation about Belarus joining the fight on the side of Russia. 

Senior Economist at UOB Group Alvin Liew reviews the latest interest rate decision by the BoJ.

Key Takeaways

“The Bank of Japan (BOJ), as widely expected, decided to keep its policy measures unchanged at its Monetary Policy Meeting (MPM) and downgraded the view on the economy due to impact from COVID-19 on 18 Mar 2022.”

“In a stark divergence with its G7 peers who are on the cusp or already normalizing monetary policy, the BOJ kept its preference for easing as it retained the statement that “it expects short- and long-term policy interest rates to remain at their present or lower levels.” It also highlighted the extremely high uncertainties over how the Russia-Ukraine war will affect Japan's economic activity and prices.”

“With the inflation largely stemming from an uncertain supply shock while domestic demand remains weak, we are certain that the BOJ will keep its current easy monetary policy intact for 2022 and will maintain its massive stimulus, possibly at least until FY2023.”

Economists at Rabobank maintain that the USD will remain supported in the near-term. Therefore, they forecast EUR/USD at 1.08 on a one-month view though see the pair edging higher towards 1.12 on a one-year view.

EUR/USD to pivot around the 1.10 level in the coming months

“The imbalances in the supply and demand of commodities caused by Russia’s pariah status could create stresses in some markets for years. This is likely to underpin safe-haven demands of USDs. The fact that this coincides with an aggressive pick-up in the pace of Fed tightening strengthens the near-term outlook for the USD.” 

“In view of the risks to Europe stemming from energy supply, we would not rule out a dip in EUR/USD as far as 1.08 on a one-month view. That said, we expect EUR/USD to pivot around the 1.10 level in the coming months rising towards 1.12 on a one-year view.”

• EUR/USD made a U-turn and reversed the drop to 1.0960.
• The continuation of the upside targets the 1.1140 region.

EUR/USD reverses two consecutive daily pullbacks and manages to quickly leave behind daily lows in the 1.0960 region on Tuesday.

Further buying interest should meet the immediate barrier at the 20-day SMA at 1.1052, which is deemed as the last obstacle for a visit to the weekly peak at 1.1137 (March 17).

The longer run negative outlook for EUR/USD is expected to remain unchanged while below the key 200-day SMA, today at 1.1519.

EUR/USD daily chart

USD/CAD holds a narrow range around 1.26. Although the pair may experience some more range trading in the short-term, economists at Scotiabank expect the loonie to gain traction as commodity prices stay elevated.

Technical pointers suggest more downside risk for USD/CAD

“With crude still trading well north of $100 and commodity prices generally elevated while broader market volatility continues to recede, we remain constructive on the CAD outlook – although rising US yields may become a headwind for the loonie if domestic yields fail to keep up.”

“So far, however, gains have been capped around 1.2620/25 and we note that short-term trend signals continue to lean bearish, limiting scope for USD gains.”

“We look for more range trading in the short run but feel technical pointers continue to suggest more downside risk for the USD.”

Markets have sharply re-priced central bank expectations for the Bank of England (BoE). However, expectations are still too high, therefore, the pound could suffer significant damage, economists at Scotiabank report.

GBP/USD could challenge 1.34 if the stars align

“After falling to ~117bps expected by year-end on Friday, OIS pricing is back to expecting a Bank Rate above 2% at the end of this year with ~140bps in hikes projected. This implied policy rate is about 65bps higher than where BoE communications suggest it will be at the December meeting, and we think it will be tough for the GBP to gain ground against the USD while a re-pricing of hike expectations weighs on it.”

“Smaller than expected damage from the war in Ukraine may be GBP positive but even prior to the war the BoE seemed unlikely to meet lofty market expectations.”

“If the stars align, the GBP could aim for a test of 1.34, but gains beyond this level look limited – while a re-test of 1.30 towards 1.28 seems the more likely development.”

In the view of economists at Scotiabank, the EUR/USD pair is set to move downward as Fed’s hawkishness and the ongoing war in Ukraine weigh on the shared currency.

Widening yield spreads and war risk weigh on the euro

“Markets are already showing around an 85% chance of two 25bps hikes in 2022 – which we think is the most that the ECB will hike by this year – so there is limited scope for EUR gains on a more hawkish tone from the ECB.”

“With the Fed moving more aggressively and overshooting its neutral rate, yield differentials will remain a EUR headwind over the next few quarters.”

“We see the EUR aiming for a re-test of 1.08 in coming days/weeks on war and Fed/ECB risks.”

EUR/USD looks to be coming under pressure again. The current expected consolidation stays seen as temporary ahead of a retest and eventual break of the recent low at 1.0806, analysts at Credit Suisse report.

Consolidation stays seen as temporary

“We remain of the view that the current consolidation is temporary ahead of the broader trend turning lower again. Near-term support is seen at 1.0950, ahead of 1.09, below which should clear the way for a retest of uptrend support from early 2017 low and the recent low at 1.0825/06. Whilst a fresh hold here should be allowed for, we continue to look for a sustained break lower in due course.”

“Below 1.0806, we see support next at 1.0775/66, ahead of 1.0727 and eventually the 2020 low itself at 1.0635.” 

“Above 1.1070/72 is needed to ease the immediate downside bias for strength back to 1.1120 and then the recent high and Fibonacci retracement at 1.1138/45, potentially as far as 1.1275, but with fresh sellers expected here.”

• WTI has eased back from APac session highs in the $113.00s to under $110 amid fresh profit-taking.
• The EU is reportedly split over whether or not to press ahead with a Russian oil import ban.

After rising as high as the $113.00s during Asia Pacific trade as oil market participants responded to chatter about a potential EU ban on Russian oil imports and weekend news of disruptions to Saudi energy infrastructure, front-month WTI futures have eased back somewhat. Prices are now back to trading beneath $110 per barrel, down about $3.50 versus Monday’s closing highs in the upper $112.00s. That still leaves prices higher by more than $15 versus last week's lows, though still some $20 lower versus earlier monthly highs.

Reports that EU foreign ministers are split over whether to press ahead with the Russian oil embargo likely prompted some profit-taking, with Germany reportedly still of the view that the bloc remains too dependent on Russian energy to take such a step. “The proposed ban is still some way from becoming policy because a significant number of EU nations oppose the ban... Still, the fact that the ban is being discussed at all is a significant shift” said analysts at Commonwealth Bank of Australia.

Looking ahead, geopolitical developments remain in the forefront, though traders will also be focused on the latest weekly Private API crude oil inventory data release at 2130 GMT. Oil traders continue to fret about uncertainty regarding the extent of loss of Russian supply at a time when global oil reserves are at multi-year lows.

Gold jumped from a low of $1,782 at the start of 2022 to a high of $2,070 as Russian-to-Western world tensions peaked in the second week of March, before it fell back towards $1,925 as geopolitical tensions related to the war in Ukraine moderated somewhat. Strategists at TD Securities expect XAU/USD to average $1,863 this year.

Gold to drift below low-$1,800s by year-end if Fed policy gets much more aggressive 

“Based on the pattern of market behaviour over the last several years, we see considerable volatility and expect the yellow metal to average about $1,863 this year.”

“Average prices are likely to be highest in the latter part of H1-2022 as inflation stays at multi-decade highs, economic growth wanes and the Fed is seen as being behind the curve.”

“The outlook deteriorates in the latter part of the year as central bank policy gets much more aggressive in their fight against inflation, which should see price the yellow metal drift to modestly below low-$1,800s by year-end.”

“If the Fed does not become restrictive, the yellow metal can test the record $3,100 (in current dollars) found back in January 1980.”

• Higher international yields (versus Japan) and more dovish BoJ commentary are hitting the yen hard on Tuesday.
• USD/JPY hit multi-year peaks above 121.00 before backing off somewhat, with on the month gains near 5.0%.

The yen continues to suffer at the hands of a bearish combination of dovish BoJ rhetoric and higher/rising yields elsewhere and is the worst-performing G10 currency on Tuesday by a substantial margin. After BoJ Governor Haruhiko Kuroda reiterated on Tuesday that it remains premature to exit from its ultra-accommodative monetary stance and US 10-year yields surged to fresh multi-year highs above 2.35% (now up nearly 20bps on the week and 50bps on the month), USD/JPY was propelled to its highest level since February 2016 above 121.00.

The pair has since eased back to just above the 120.50 mark, but continues to trade with on-the-day gains of about 0.9%, taking its on-the-month gains to nearly 5.0%. The main driver of the move higher in yields that has propelled USD/JPY to multi-year peaks has been the Fed’s hawkish shift in its policy guidance. In wake of the central bank’s policy announcement last Wednesday and Fed Chair Jerome Powell’s speech on Monday, markets are upping their bets that 1) the Fed moves more quickly to lift rates (i.e. in larger intervals than 25bps per meeting) and 2) that the Fed takes interest rates higher than so-called “neutral” (the 2.0-2.5% area).

The extent of the move higher in USD/JPY has some traders worried that conditions might be becoming overbought – indeed, the pair’s 14-session Relative Strength Index (RIS) has reached 82.5 as of Tuesday, well above the 70 level that denotes overbought. That’s its highest since 2016. Whilst some consolidation/a technical correction might certainly be in order if US yields continue recent upside momentum, dips will remain very attractive. In the immediate future, traders should keep an eye out for a couple of Fed speakers orating later this session ahead of another speech from Powell on Wednesday.

• AUD/USD extended its rally after breaking above 0.7400.
• The risk-positive market environment is helping the AUD find demand.
• RBA's Lowe says they won't respond until they see pervasive price pressures.

After closing the first day of the week virtually unchanged, the AUD/USD pair edged slightly lower during the Asian trading hours but didn't have a difficult time regaining its direction. The pair was last seen trading at its highest level in two weeks at 0.7430, rising 0.45% on a daily basis.

Cautious comments from Reserve Bank of Australia (RBA) Governor Phillip Lowe and the risk-averse market atmosphere forced AUD/USD to stay on the back foot. Lowe reiterated that they will not respond with a policy until there is evidence of pervasive price pressures and added they are monitoring how persistent supply-side problems will be.

Nonetheless, the positive shift in risk sentiment in the European trading hours helped AUD/USD push higher and buyers continued to show interest once the pair climbed above 0.7400.

Reflecting the upbeat market mood, US stock index futures are posting modest gains and the US Dollar Index is flat near 94.50. There won't be any high-tier data releases on Tuesday and the risk perception is likely to continue to impact the pair's action.

AUD/USD technical outlook

Assessing AUD/USD's near-term outlook, “the 50% Fibonacci retracement of the 0.8007-0.6968 range, at 0.7487, is now within reach," said Benjamin Wong, Strategist at DBS Bank. "Hence selling into strength (on a protracted weakening of its terms of trade and industrial metals index) as we approach the daily Ichimoku chart cloud resistance levels at 0.7499 and 0.7557 needs to be risk managed.”

Additional levels to watch for

• DXY’s bull run falters just ahead of the 99.00 mark on Tuesday. 

• Above 99.00 should come the weekly top at 99.29 (March 14). 

DXY gives away part of the earlier spike to the boundaries of the 99.00 yardstick on Tuesday. 

The continuation of the bid tone in the index carries the potential to extend to the next target of note at the 99.00 neighbourhood ahead of the weekly high at 99.29 (March 14). If cleared, the the dollar could attempt an assault to the 2022 peak at 99.41 (March 7). 

The current bullish stance in the index remains supported by the 6-month line near 96.00, while the longer-term outlook for the dollar is seen constructive while above the 200-day SMA at 94.59. 

DXY daily chart

Ukrainian President Volodymyr Zelenskyy told the Italian parliament on Tuesday that Russian forces see Ukraine as a gate to Europe, per Reuters.

Zelenskyy asked the Italian parliament to back more sanctions on Russia and not allow exceptions for any Russian banks. "How can we sow crops under Russian artillery fire," Zelenskky said and noted that they were on the brink of surviving the war with Russia.

Market reaction

The market mood remains upbeat on Tuesday with US stock index futures rising between 0.2% and 0.5%. 

• EUR/JPY rose sharply in response to increasing JPY-selling.
• Immediately to the upside comes the 2022 high at 133.15.

EUR/JPY stages a strong comeback and briefly moved beyond the key barrier at the 133.00 yardstick on Tuesday.

The intense rally in the cross remains unchallenged so far and now targets the 2022 top at 133.15 (February 10) prior to the October 2021 top at 133.48 (October 2).

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

EUR/JPY daily chart

The European Union's (EU) investment in defence will require a more supportive framework of fiscal rules and potentially new tools at the European level, European Economic Commissioner Paolo Gentiloni said on Tuesday, per Reuters.

"The discussion of a new EU joint borrowing is unlikely to take place now," Gentiloni added. "The discussion will take place in a few weeks when we have a clearer view of the economic impact of this crisis."

Market reaction

These comments don't seem to be having a noticeable impact on market mood. As of writing, the Euro Stoxx 600 Index was up 0.5% on the day.

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting comment on the latest trade figures in the Malaysian economy.

Key Takeaways

“Exports sustained its seventh month of double-digit gains with 16.8% y/y in Feb (Jan: 23.9% y/y). This came in higher than our estimate (15.0%) but below Bloomberg consensus (22.1%). Imports rose 18.4% y/y in Feb (Jan: 26.7% y/y). The trade surplus widened to MYR19.8bn (Jan: MYR18.6bn).”

“All major export sectors recorded strong increases led by manufactured (14.2% y/y), agriculture (38.7% y/y), and mining (30.7% y/y) goods.  Key contributors include electrical and electronics (25.8%), chemicals & chemical products (28.2%), palm oil & palm oil based agriculture products (58.9%), manufactures of metal (31.8%), and LNG (45.7%). Export orders from all major markets improved – ASEAN (20.1%), China (19.2%), EU (18.5%), and Japan (15.9%).”

“We expect Malaysia’s export momentum to moderate in coming months mainly due to high base effects from last year. Higher downside risks to global growth and external demand arising from the Russia-Ukraine conflict and commodity price spikes could weigh on Malaysia’s exports via secondary trade channels. Potential upsides include Malaysia being a net exporter of LNG, crude oil, and palm oil, as well as potential diversion of export orders to Malaysia. Noteworthy is the reopening of national borders on 1 Apr will help ease labour shortages for selected key export sectors. Given fluid conditions, we maintain our 2022 export growth forecast of 2.0% (2021: +26.0%).”

GBP/USD has turned north following a decline toward 1.31 earlier in the day. The pair is closing in on key 1.32 resistance and additional gains could be witnessed if sellers fail to defend that level, FXStreet’s Eren Sengezer reports.

Pound bulls to take action above 1.32

“The economic docket will not feature any high-impact data releases on Tuesday and GBP/USD needs risk flows to continue to dominate the financial markets in order to extend the recovery.”

“In case 1.32 level turns into support, the next bullish target could be seen at 1.3250 (Fibonacci 61.8% retracement).”

“On the downside, 1.3150 (Fibonacci 38.2% retracement) aligns as first support before 1.31 (50-period SMA, Fibonacci 23.6% retracement, psychological level).”

Fitch Ratings provided a grim global economic outlook amid soaring inflation, courtesy of the Russia-Ukraine war, which has stoked up oil prices.

Key takeaways

“Fitch Ratings has cut its world GDP growth forecast for 2022 by 0.7pp to 3.5%.”

“Eurozone GDP growth cut by 1.5pp to 3.0% and the US by 0.2pp to 3.5%.”

“We have lowered our forecast for world growth in 2023 by 0.2pp to 2.8 percent."

"This reflects the drag from higher energy prices and a faster pace of US interest rate hikes than anticipated.”

“Global inflation is back with a vengeance after an absence of at least two decades. This is starting to feel like an inflation regime change moment.”

Related reads

• Gold Price Forecast: XAU/USD looks vulnerable whilst below $1,941 – Confluence Detector
• ustralian PM Morrison: Russia-Ukraine war will depress global growth

The Federal Reserve has started its tightening cycle and the central bank’s economic projections point to a faster pace of rate increases than expected. Equities have rallied, with the S&P 500 ending last week up 6.2%, despite the Fed’s more hawkish stance. Economists at UBS think this move is justified.

Fed's turn of speed isn't inconsistent with rising stocks

“The Fed is re-establishing its inflation-fighting credentials, which is positive for long-term growth. Markets initially appeared to welcome the Fed's efforts to get ahead of the curve with the 5-year/5-year forward inflation swap, a market-based measure of longer-term inflation expectations, falling from 2.65% to 2.51% after the rate decision.”

“A flattening of yield curves is not a sign that markets expect an imminent recession. Even when a recession did follow an inversion, there was a long and variable lag. Recessions started, on average, 21 months after an inversion, with a range of 9-34 months. Since 1965, the S&P 500 has returned an average of 8% in the 12 months following a 2-year/10-year inversion.”

“Equity performance tends to be positive at the early stages of a rate hiking cycle. Since 1983, the S&P 500 has returned an average of 5.3% in the six months following the first Fed rate rise.”

The European Central Bank (ECB) needs to overlook the near-term volatility in energy prices while closely watching the underlying inflation trends, policymaker Francois Villeroy de Galhau said on Tuesday.

developing story ....

• Gold price remains stuck in a familiar range below $1,940, lacking a clear direction.
• Treasury yields firm up on hawkish Fed while the Russia-Ukraine crisis rages on.
• Gold bulls to face an uphill battle amid hawkish Fed, Ukraine saga.

Amidst the hawkish Fed’s outlook and the Russia-Ukraine stand-off, gold price is struggling to find a clear direction. The bright metal continues to gyrate in a $20 narrow range so far this week, looking for a decisive break in either direction. Fed Chair Jerome Powell remains confident on the US economy, backing a 50bps rate hike in May. The aggressive Fed’s tightening plans have pushed the US Treasury yields through the roof, capping gold’s upside. Meanwhile, increased Russian hostilities on Ukraine and a stalemate on the peace talks keep the downside cushioned in gold price.  

Read: Gold Price Forecast: XAU/USD to offset Fed rate hikes by virtue of safe-haven demand – ANZ

Gold Price: Key levels to watch

The Technical Confluences Detector shows that gold price is extending declines to test the pivot point one-day S1 at $1,923.

Acceptance below that level will call on sellers to target strong support at $1,918, which is the convergence of the Fibonacci 23.6% one-week, the previous day’s low and Bollinger Band four-hour Lower.

If the sell-off intensifies, then a sharp drop towards the confluence of the SMA200 four-hour and the pivot point one-day S2 at $1,909 cannot be ruled out.

The intersection of the Fibonacci 161.8% one-day and Fibonacci 38.2% one-month at $1,904 will be a level to beat for gold bears.

Alternatively, if bulls jump back into the game, then immediate resistance is seen at $1,926, the Fibonacci 61.8% one-day.

Further up, gold bulls will need to find a strong foothold above a dense cluster of resistance levels around $1,931.

That level comprises of SMA5 one-day, SMA10 four-hour, Fibonacci 38.2% one-day and one-week.

The next powerful upside barrier is that of the Fibonacci 26.3% one-day, where the $1,936 level aligns.

The previous day’s high of $1,941 will be next on buyers’ radars on a sustained move higher.

Here is how it looks on the tool

About Technical Confluences Detector

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

Japanese Finance Minister Suzuki is making some comments on the economic outlook and the exchange rate value, in light of the Russia-Ukraine war.

Key quotes

Germany’s Finance Minister Christian Lindner said Tuesday that his “government will deploy the fiscal policy to avoid stagflation.”

Additional comments

Related reads

• EUR/USD bounces off multi-day lows around 1.0960, focus on ECB-speak
• ECB’s de Guindos: We can dismiss the possibility of stagflation

Economist at UOB Group Lee Sue Ann assesses the latest BoE event, where the “Old Lady” raised the policy rate by 25 bps.

Key Takeaways

“The Bank of England (BOE), at its meeting in Mar, voted by a majority of 8-1 to increase the Bank Rate by 25bps to 0.75%. This is the third consecutive policy meeting that the BOE has raised its key interest rate, marking the quickest pace of tightening since 1997, and taking its policy rate back to pre-pandemic levels.”

“However, the BOE struck a more dovish tone, suggesting the Monetary Policy Committee (MPC) expects an increasingly delicate balancing act in the coming months as it considers the trade-off between strong inflation and weakening growth.”

“We see room for a further 25bps hike, due to the strength of the labour market and upward revisions to our inflation outlook. For now, we have pencilled in the next hike at the 5 May meeting. Thereafter, we look for a pause.”

• EUR/USD extends the leg lower to the 1.0960 region.
• German bund 10y yields retest the 0.50% area on Tuesday.
• ECB’s Lagarde, De Guindos, Panetta, Lane next on tap in the euro docket.

The selling bias in the European currency remains well and sound and drags EUR/USD to fresh multi-session lows around 1.0960 on turnaround Tuesday.

EUR/USD weaker post-Powell, looks to USD

EUR/USD remains on the defensive for the third straight session and retreats to the 1.0960 area in response to the intense march higher in the greenback, which in turn appears bolstered by Monday’s hawkish tilt from Powell’s message, higher yields and the absence of progress in the Russia-Ukraine peace dialogue.

The pair’s negative performance comes in contrast with the persevering move higher in German 10y benchmark yields, which revisit the 0.50% area for the first time since October 2018.

Now looking at the ECB, no news from VP De Guindos earlier in the session, who ruled out the possibility of stagflation in the region, in line with Lagarde’s comments at the beginning of the week.

Absent data releases in the euro area, investors’ attention would be on speeches by Chair Lagarde and Board members Panetta and Lane.

Across the pond, the Richmond Fed index is only due, while FOMC’s Williams, Daly and Mester are also due to speak later in the NA session.

What to look for around EUR

EUR/USD comes under further downside pressure and breaks below the key support at 1.1000 the figure in the first half of the week. So far, pockets of strength in the single currency should appear reinforced by the speculation of the start of the hiking cycle by the ECB at some point by year end, while higher German yields, elevated inflation, the decent pace of the economic recovery and auspicious results from key fundamentals in the region are also supportive of a firmer euro for the time being.

Key events in the euro area this week: ECB Lagarde (Tuesday) – Germany, EMU Flash PMIs (Thursday) – Germany IFO Business Climate (Friday).

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

EUR/USD levels to watch

So far, spot is retreating 0.11% at 1.1003 and faces the next up barrier at 1.1137 (weekly high March 17) followed by 1.1235 (55-day SMA) and finally 1.1283 (100-day SMA). On the other hand, a drop below 1.0960 (low March 22) would target 1.0900 (weekly low March 14) en route to 1.0805 (2022 low March 7).

• GBP/USD rebounds from intraday low while consolidating weekly losses.
• UK Chancellor Sunak hints at responsible approach to public finances, Brexit has a long way to go.
• US Treasury yields retreat from multi-month high, stock futures, FTSE print mild gains.
• Headlines from Russia, Ukraine have been positive of late, Fedspeak propels bond rout.

GBP/USD pick-up bids to consolidate daily losses around 1.3165 during the second negative day amid Tuesday’s European session.

The cable pair’s latest rebound could be linked to the retreat in the US Treasury yields, as well as comments from UK Chancellor Rishi Sunak.

UK’s Sunak said, “Ongoing uncertainty caused by global shocks means it’s more important than ever to take a responsible approach to public finances.”

On the other hand, the US 10-year Treasury yields and the 2-year counterpart both rose to a fresh high since May 2019 during the Asian session before recently easing to 2.32% and 2.16% in that order.

Also challenging the GBP/USD bears are the market’s recent optimism due to the news from Ukraine and Russia, which in turn favor Euro Stoxx 50 Futures and FTSE 100 to print mild gains and also push the US Dollar Index (DXY) to step back from the daily top.

Among them were the comments from Ukraine President Volodymyr Zelenskyy who showed readiness to discuss commitment from Ukraine not to seek NATO membership. Additionally, Russia’s ability to pay the second installment of Eurobond coupons favors the market sentiment and supports the GBP/USD rebound.

On the contrary, comments from the UK’s Lords sub-committee on the Brexit protocol challenge the recovery moves. “The UK and EU need to do more to explain how updates to EU law could impact Northern Ireland, a House of Lords committee has warned,” said the BBC. Furthermore, money markets’ bets favoring a 0.50% rate hike by the Fed in May and 190 basis points (bps) of interest rate lifts by the end of 2022 also challenge the GBP/USD pair’s upside momentum.

That said, the quote’s rebound eyes Fedspeak and developments surrounding the Ukraine-Russia peace talks for fresh impulse ahead of Wednesday’s UK Consumer Price Index (CPI) and Thursday’s busy calendar including PMIs and US Durable Goods Orders.

Technical analysis

GBP/USD bears need to conquer an ascending trend line from the last Tuesday, around 1.3145, to keep the reins. Also testing the downside move is the 50-SMA level of 1.3108. On the contrary, the 100-SMA and a 12-day-old horizontal resistance area surrounding 1.3190-3200 restrict the short-term upside of the cable pair.

European Central Bank (ECB) Vice President Luis de Guindos made some comments on the risks to growth due to soaring inflation during his appearance on Tuesday.

“We can dismiss the possibility of stagflation,” the ECB policymaker said.

more to come ...

CAD/JPY rally resumes. In the view of economists at Scotiabank, gains risk extending towards the 99 area.

Limited scope for corrections lower

“A weekly close above 94.41 (61.8% Fib of the 2015/2016 decline in the cross) targets additional gains to 99.05 (76.4% retracement).”

“Trend signals are bullish on the daily, weekly and monthly oscillators, suggesting limited scope for CAD corrections lower.”

“Minor dips (towards the low 94s) should be well-supported.”

USD/CNH is still expected to trade within the 6.3300-6.3900 range in the next weeks, commented FX Strategists at UOB Group.

Key Quotes

24-hour view: “USD traded between 6.3619 and 6.3790 yesterday, narrower than our expected sideway-trading range of 6.3600/6.3800. Despite the quiet price actions, upward momentum is showing tentative signs of building. For today, USD could rise above 6.3800 but the next resistance at 6.3860 is unlikely to come into the picture. Support is at 6.3690 followed by 6.3630.”

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

AUD/USD has rallied as much as 6.8% from its late January lows of 0.6968. In the view of Benjamin Wong, Strategist at DBS Bank, a near-term exhaustion is ahead.

Expecting a near-term exhaustion

“The long-term outlook on AUD remains bright with the price path since fetching a critical multi-year low at 0.5510 deemed robust. The near-term is altogether different.”

“AUD’s price with its terms of trade and its underlying of the S&P GSCI Industrial Metals Index flags a near-term wind of caution.”

“The 50% Fibonacci retracement of the 0.8007-0.6968 range, at 0.7487, is now within reach. Hence selling into strength (on a protracted weakening of its terms of trade and industrial metals index) as we approach the daily Ichimoku chart cloud resistance levels at 0.7499 and 0.7557 needs to be risk managed.”

• DXY advances further and approaches 99.00.
• US yields pushes higher to new cycle tops.
• Fedspeak, Richmond Fed index next in the docket.

The US Dollar Index (DXY), which measures the greenback vs. a bundle of its main competitors, maintains the bid bias unchanged near the 99.00 region on Tuesday.

US Dollar Index stronger on yields, risk-off

The index extends the march north for the third session in a row on Tuesday and trades at shouting distance from the 99.00 barrier as market participants keep adjusting to the recent hawkish message from Chief Powell, the move higher in US yields and the persistent uncertainty surrounding the war in Ukraine.

Indeed, US yields across the curve move further up after Chair Powell expressed his concerns over the elevated inflation and opened the door to a faster pace of the Fed’s tightening cycle. On this, Powell even considered the probability of a 50 bps rate hike in May.

Currently, and according to CME Group’s FedWatch Tool, the probability of a 50 bps interest rate hike at the May 4 meeting is at almost 64%, up from around 50% just a week ago.

In the US data space, the Richmond Fed Index will be the sole release along with speeches by NY Fed J.Williams (permanent voter, centrist), San Francisco Fed M.Daly (2024 voter, hawkish) and Cleveland Fed L.Mester (voter, hawkish).

What to look for around USD

The index extends further the bounce off last week’s lows in the sub-98.00 area following the start of the tightening cycle by the Federal Reserve at its meeting on March 16. Concerns surrounding the geopolitical landscape prop up further the demand for the buck in combination with the offered stance in the risk-associated complex. Looking at the broader picture, bouts of risk aversion – exclusively emanating from Ukraine - should underpin inflows into the safe havens and lend legs to the dollar at a time when its constructive outlook remains well supported by the current elevated inflation narrative, a potential more aggressive tightening stance from the Fed and the solid performance of the US economy.

Key events in the US this week: MBA Mortgage Applications, Fed Powell, New Home Sales (Wednesday) – Initial Claims, Durable Goods Orders, Flash PMIs (Thursday) – Final Consumer Sentiment, Pending Home Sales (Friday).

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

US Dollar Index relevant levels

Now, the index is up 0.26% at 98.73 and a break above 98.96 (weekly high March 22) would open the door to 99.29 (high March 14) and finally 99.41 (2022 high March 7). On the flip side, the next down barrier emerges at 97.72 (weekly low March 17) followed by 97.71 (weekly low March10) and then 97.44 (monthly high January 28).

USD/JPY has pushed through 120 today. Fed's tough love on inflation could send the pair to 125, economists at ING report.

Search for terminal Fed rate continues

“Hawkish comments from Fed Chair Jerome Powell yesterday have injected another wave of re-pricing into US rates markets. Expect much speculation over whether a flat or inverted US yield curve means recession – and certainly, this energy shock has increased the chances of a late 2023/24 US recession.”

“A sharply deteriorating trade position on the back of fossil fuel prices and a still dovish central bank leaves the door wide open for USD/JPY to trade up to 125 over coming weeks.”

The benchmark 10-year US T-bond yield hit its highest level since May 2019 above 2.3%. Economists at OCBC Bank expect Treasury yields to stabilize in a range of 2.05-2.25% in the coming weeks.

10Y yield to reach 2.5% by year-end

“We expect Treasury yields to stabilize with upside limited in the near term; the 10Y UST yield is likely to trade in a range of 2.05-2.25% in the coming weeks.”

“Further head, we look for the 10Y yield to reach 2.5% by year-end.”

• EUR/USD prints three-day downtrend, recently bouncing off daily low.
• ECB’s De Guindos dismiss possibility of stagflation even while expecting higher inflation for longer.
• Monetary markets price in 50 bps rate hikes by the year end.
• Market sentiment improves on Russia-Ukraine headlines, yields retreat from three-year high.

EUR/USD pares intraday losses around 1.0980 amid the initial European session on Tuesday. Even so, the major currency pair remains near the lowest level in a week during the three-day downtrend.

The major currency pair’s latest rebound could be linked to the comments from the European Central Bank (ECB) Vice President Luis de Guindos who dismissed fears of stagflation in the bloc. The policymaker also said, “Exposure of European banks to Russia is limited,” while conveying fears of higher inflation for longer.

Elsewhere, money markets hint at roughly 50 basis points (bps) of the ECB rate hikes by the end of 2022, which in turn propel EUR/USD prices.

Also likely to underpin the EUR/USD’s corrective pullback is the latest retreat in the US Treasury yields. That said, the US 10-year Treasury yields and the 2-year counterpart both rose to a fresh high since May 2019 during the Asian session before recently easing to 2.32% and 2.16%.

It should be noted that Ukrainian President Volodymyr Zelenskyy’s readiness to discuss commitment from Ukraine not to seek NATO membership and Russia’s ability to pay the second installment of Eurobond coupons favor the market sentiment and favor the EUR/USD buyers. That said, the Euro Stoxx 50 Futures print mild gains at the latest.

Moving on, multiple ECB speakers are on the cards to shake EUR/USD, including ECB President Christine Lagarde. Also important will be the Fedspeak and headlines from Russia-Ukraine.

Technical analysis

A clear downside break of a two-week-old ascending trend line directs EUR/USD towards the mid-March swing low near 1.0900. Alternatively, the support-turned-resistance near 1.1020 precedes the 21-DMA level of 1.1065 to restrict short-term recovery moves.

Hungarian National Bank meets today. A hawkish central bank is set to help HUF below 370 against EUR, economists at ING report.

Hawkish hike to give further support to forint

“We expect a hawkish 100bps hike in the base rate followed by a 50bp hike in the 1-week deposit rate on Thursday in line with consensus.”

“We are expecting average inflation of around 9% for this year. In the last two days, the market has lifted pricing up again but we still see room, especially in the six to nine month horizon, to move market expectations closer to our terminal rate in the range of 8.00-8.25%.” 

“We expect a hawkish outcome of today's meeting, which we think should push Hungary's forint back below 370 per euro.”

Economists at Bank of America Global Research have revised up USD/JPY forecasts. They expect the pair to reach 123 in the third quarter amid excessive supply of yen into the summer.

Excess supply of JPY into summer

"We raise our above-consensus USD/JPY forecast – 123 by 3Q22 and 120 at year-end (vs 118 previous, 116 consensus).”

"We except excess supply of JPY into summer: (1) energy imports, (2) university funds' investment, (3) policy divergence.”. 

“Longer-term, stretched valuation and supply-led nature of energy price increase pose risk of a sharper JPY rebound in 2023.”

EUR/USD has dipped sub 1.10 on the US rates move and could fall further. Economists at ING see the pair tackling the recent 1.08 low in the next few days.

ECB speakers today

“Amongst the ECB speakers today, we have President Christine Lagarde and Chief Economist Philip Lane. Let's see if arch-dove Lane has anything to say about the current levels of EUR/USD. In reality, tighter monetary policy (not FX intervention) is the only credible tool available to the ECB to fight euro weakness. Let's see if they are prepared to use it.”

“Given the momentum behind the move in US interest rates, we could easily see EUR/USD pressing the recent 1.08 low over coming sessions.”

Russia’s invasion of Ukraine sent the aussie soaring against the euro. Short-term, the AUD should chop higher, back towards EUR/AUD 1.47, though Westpac’s end-June forecast is at 1.51/1.52.

Euro still fragile as war rages

“The war is on the eurozone’s doorstep and some eurozone members are the most directly exposed to energy supply disruptions and soaring prices. Australia in contrast is a net energy exporter and an exporter of metals whose prices have also surged. So Australia’s terms of trade have soared, just as the eurozone’s have slumped.”

“The RBA continues to push back on the idea of any change in policy settings near-term though it notes growing inflation risks and is upbeat on Australia’s growth prospects.” 

“Short-term, EUR/AUD should chop lower, back towards 1.47, though our end-June forecast is 1.51/1.52, so long as Europe eventually finds some relief from energy prices.”

• Gold prices struggle for clear directions as Ukraine-Russia headlines battle firmer yields.
• Ukraine President Zlenskyy reiterated readiness to dump NATO plans, Russia overcomes default fears with second coupon payment.
• US Treasury yields refreshed three-year high before the latest retreat.
• Gold Price Forecast: XAU/USD bulls to face an uphill battle amid hawkish Fed, Ukraine saga

Gold (XAU/USD) reverses early Asian recovery rebound while dropping back to $1,932, down 0.15% intraday amid the initial European session on Tuesday.

Even so, the yellow metal prints mild gains on a weekly basis, considering the previous day’s upbeat start, following the biggest week-on-week slump since June 2021.

The metal’s latest weakness could be linked to cautious optimism after Ukraine President Volodymyr Zelenskyy showed readiness to discuss commitment from Ukraine not to seek NATO membership in an attempt to overcome the deadlock in the peace talks. Also favoring the gold sellers could be the headlines from Reuters suggesting Russia’s ability to avoid another default by channeling $65.63 million for coupon payout on 2029 Eurobond to Russia's National Settlement Depository.

Alternatively, a retreat in the US Treasury yields from multi-month high tests the XAU/USD bears. That said, the US 10-year Treasury yields and the 2-year counterpart both rose to a fresh high since May 2019 during the Asian session before recently easing to 2.32% and 2.16%.

Hawkish comments from the Fed policymakers, including Chairman Jerome Powell, underpinned the bond rout the previous day. On the same line were upbeat fears of inflation due to the escalating Ukraine-Russia war.

Looking forward, gold prices will take clues from the Fedspeak, as well as headlines from Kyiv and Moscow, before the economic calendar gets populated on Thursday.

Technical analysis

Gold prices fade bounce off weekly support line amid steady RSI and bullish MACD signals, suggesting further declines towards the support retest, around $1,922 at the latest.

However, the 200-SMA and late February’s low, respectively around $1,910 and $1,878, will challenge the metal’s weakness past $1,922.

In a case where XAU/USD drops below $1,878, a south-run towards January’s high near $1,853 can’t be ruled out.

Meanwhile, recovery moves will have a tough time crossing the $1,950-55 resistance area comprising 100-SMA and 61.8% Fibonacci retracement (Fibo.) level of February 24 to March 08 upside.

It’s worth noting, though, that gold’s successful run-up beyond $1,955 enables the buyers to aim for the $2,000 psychological magnet with the 50% Fibo. surrounding $1,975 likely to act as an intermediate halt.

Gold: Four-hour chart

Trend: Sideways

GBP has been outperforming in Europe. As the UK has room to deliver fiscal support measures, the pound is set to remain bid against the euro, driving the EUR/GBP pair to the 0.8310/05 zone in the next few days.

Hoping for some fiscal support

“In focus over coming sessions is the UK Chancellor's spring statement (tomorrow). That the UK's fiscal position has some room to support the economy may provide a little more room for the Bank of England to hike. Money markets have re-priced the BoE's Bank rate back to 2.20% for the 22 December meeting.” 

“The resilience of BoE tightening expectations should keep GBP bid versus the euro over coming months.”

“0.8305/10 looks the bias for EUR/GBP over coming sessions.”

Gold’s geopolitical risk premium eased amid peace talks between Russia and Ukraine. A stronger USD and the prospects of a more aggressive rate hike cycle also weighed on sentiment. Strategists at ANZ expect the yellow metal to offset prospects of aggressive tightening thanks to safe-haven demand amid prolonged Ukraine conflict.

Gold investment demand is rebounding

“The US Federal Reserve raised rates by 25bps at its meeting last week. Its dot plot showed the median for the next two years is exceeding long-term projections. While an aggressive rate hike cycle remains a key headwind, this should be offset by strong safe-haven demand amid the uncertainty created by the ongoing war in Ukraine.”

“Investment demand has seen strong inflows since February, with ETF net flows rising to 202t year-to-date. This follows a net liquidation of 300t in 2021. Investors have also added net-long positions of 233t of gold in futures.”

“Physical gold demand in India and China could be impacted by higher gold prices and the prospects of slower economic growth. Deteriorating gold spot premium in India and China suggests weakening physical offtake.”

Commodity prices have risen further and remain a powerful source of support for the kiwi. Therefore, economists at Westpac expect the NZD/USD pair to hit 0.71 by June.

NZD/USD to reach 0.70 during the month ahead

“Commodity prices should remain a major source of support this year.”

“Potential to reach 0.70 during the month ahead, and 0.71 by June.”

EUR/USD has declined below 1.10 early Tuesday after having closed the first day of the week in negative territory. Next bearish target aligns at 1.0940, FXSTreet’s Eren Sengezer reports.

EUR/USD has more room on the downside

“The fundamental outlook favours the dollar against the euro in the near term due to the ECB-Fed policy divergence and the European economy's high exposure to the ongoing Russia-Ukraine conflict.”

“1.0940 (Fibonacci 23.6% retracement of the latest downtrend) aligns as the next bearish target. In case this level turns into resistance, additional losses toward 1.09 (psychological level) and 1.0840 (static level) could be witnessed.”

“Strong resistance seems to have formed at 1.10 (psychological level, Fibonacci 38.2% retracement, 50-period SMA) ahead of 1.1020 (100-period SMA) and 1.1040 (Fibonacci 50% retracement).”

• Platinum remains mildly bid around one-week high inside bullish chart formation.
• 50-SMA offers intermediate support, $1,062 act appears tough nut to crack for bulls.

Platinum (XPT/USD) extends the previous week’s rebound inside a short-term ascending trend channel, up 0.25% intraday around $1,043 during the initial European session on Tuesday.

In addition to the bullish chart formation, namely the rising channel, the XPT/USD’s upside break of 50-SMA joins firmer RSI to keep buyers hopeful.

It should be noted, however, that a convergence of the 200-SMA and upper line of the aforementioned channel offers strong resistance around $1,062.

Following that, an upward trajectory towards the 50% Fibonacci retracement (Fibo.) of March 08-15 downside, around $1,085, can’t be ruled out. Though, the $1,100 threshold and March 10 swing high near $1,105, will challenge platinum buyers afterward.

Alternatively, a downside break of the 50-SMA level of $1,037 will drag the quote towards the channel’s support, near $1,028.

In a case where the XPT/USD prices drop below $1,028, the $1,000 psychological magnet will act as an intermediate halt during the south-run targeting the monthly low near $985.

Platinum: Four-hour chart

Trend: Further upside expected

FX option expiries for March 22 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.1010 2885m
• 1.1050 443m
• 1.1075 677m
• 1.1140-50 968m

- GBP/USD: GBP amounts        

• 1.3000 250m

- USD/JPY: USD amounts                     

• 117.80 440m
• 118.50 406m

- USD/CHF: USD amounts        

• 0.9300 420m
• 0.9390 400m

- AUD/USD: AUD amounts

• 0.7205 358m
• 0.7250 1.3b

- NZD/USD: NZD amounts

• 0.7050 621m

Gold fluctuates in a relatively tight range below $1,950. XAU/USD bulls are set to face an uphill battle, with a break above the $1,938 mark needed to see further gains.

Gold is teasing a symmetrical triangle breakout

“The metal remains exposed to upside risks, as it teases a symmetrical triangle breakout on the four-hour chart.”

“If gold bulls manage to settle above the falling trendline resistance at $1,938, then it would validate an upside breakout from the triangle. The further advance will be initiated, opening doors towards the mildly bearish 50-Simple Moving Average (SMA) at $1,945. Up next, gold buyers will target $1,950, the March 17 highs en-route the ascending 100-SMA at $1,954. The previous year’s high of $1,960 will be next in sight.”

“If bulls failed to yield a triangle breakout, then the price of gold could pull back towards the 21-SMA at $1,933. Deeper declines will then call for a test of the rising trendline (triangle) support at $1,923. A sustained break below the latter will confirm a triangle breakdown, exposing the upward-sloping 200-SMA support at $1,910.”

Further gains in USD/JPY now face the next hurdle at the 120.40 level in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that ‘there is room for USD to test 119.45 first before easing off’. USD subsequently rose to 119.49 before closing on a firm note at 119.47 (+0.25%). USD rose above the major resistance at 120.00 during early Asian hours and the rapid improvement in momentum is likely to lead to further USD strength. The next resistance is at 120.40. Support is at 119.60 followed by 119.30.”

Next 1-3 weeks: “We have expected a higher USD for more than a week now. In our latest narrative from yesterday (21 Mar, spot at 119.20), we indicated that the chance for USD to rise above 119.70 has increased. USD not only rose above 119.70 during early Asian hours but also edged above 120.00. Further USD strength is not ruled out but deeply overbought conditions suggest a slower pace of advance from here. The next resistance is at 120.40. Overall, only a breach of 118.90 (‘strong support’ level was at 118.30 yesterday) would indicate that the current strong upward pressure has eased.”

Considering advanced prints from CME Group for natural gas futures markets, open interest shrank for the second session in a row on Monday, this time by around 2.2K contracts. In the opposite direction, volume resumed the upside ad went up by around 28.5K contracts.

Natural Gas remains capped by $5.00

Prices of natural gas charted an inconclusive session after faltering once again at the $5.00 area on Monday. The move was in tandem with shrinking open interest and higher volume, opening the door to further side-line trading in the very near term and with the $5.00 mark per MMBtu still limiting the upside.

Here is what you need to know on Tuesday, March 22:

The dollar continues to outperform its rivals after starting the new week on a firm footing. On the back of rising US Treasury bond yields, the US Dollar Index pushes higher toward 99.00 early Tuesday. The economic docket will not feature any high-tier macroeconomic data releases. Market participants will keep a close eye on central bank speak and developments surrounding the Russia-Ukraine conflict.

In a statement published on Monday, Kremin noted there was no significant progress in peace talks with Ukraine and warned that an EU embargo on Russian oil "would hit everyone." Similarly, Ukrainian President Volodymyr Zelenskyy said it was not possible to make a decision on what should be done with occupied territories in Ukraine. Heading into the European session, US stock index futures are posting small daily losses.

Meanwhile, the benchmark 10-year US T-bond yield hit its highest level since May 2019 above 2.3% on hawkish remarks from Fed officials. FOMC Chairman Jerome Powell reiterated that the policy could become "restrictive" if needed to restore price stability. Atlanta Fed President Raphael Bostic noted that he expects six rate hikes in 2022 and Richmond Fed President Thomas Barkin argued that it might be appropriate to hike the policy rate by 50 basis points to tame inflation.

EUR/USD is having a hard time gaining traction after dipping below 1.1000 earlier in the day. European Central Bank President Lagarde said on Monday that their policy will not be in sync with the Fed policy. Lagarde is scheduled to speak again at 1315 GMT.

GBP/USD continues to edge lower toward 1.3100 pressured by the broad-based dollar strength. Later in the day, Bank of England (BOE) Deputy Governor Jon Cunliffe, who voted to keep the policy rate unchanged last week, will be delivering a speech at 1515 GMT.

The risk-averse market environment is allowing gold to find demand but rising US Treasury bond yields cap the yellow metal's upside. Hence, XAU/USD fluctuates in a relatively tight range below $1,950.

Fueled by surging US T-bond yields, USD/JPY extended its rally and was last seen trading at its highest level since January 2016 near the mid-120s. Japan’s Chief Cabinet Secretary Hirokazu Matsuno said earlier in the day that they were not thinking of an economic stimulus package at the moment.

Bitcoin declined toward $40,000 on Monday but managed to gather bullish momentum. After advancing to its strongest in more than two weeks at $43,390 earlier in the day, BTC/USD erased a portion of its gains and was last seen rising 3% on the day at $42,250. Ethereum climbed above $3,000 for the first time since early March on Tuesday before going into a consolidation phase near that level. 

“US must stop escalating tensions with Russia,” TASS reports, citing comments from Russian Deputy Foreign Minister Sergei Ryabkov on Tuesday.  

This comes after US President Joe Biden warned Monday that "evolving intelligence" suggests Russia is exploring options for potential cyber-attacks targeting US critical infrastructure, per CBS News.

Related reads

• Forex Today: Dollar continues to gather strength on rising yields
• President Zelenskyy: Prepared to discuss commitment from Ukraine not to seek NATO membership

• AUD/USD has failed to sustain above 0.7400 as DXY strengthens on hawkish Fed.
• The rising odds of a 50 bps interest rate hike by the Fed have weighed down the antipodean.
• Goldman Sachs sees Fed’s interest rates to 2% by the end of 2022.

The AUD/USD pair has witnessed a steep fall after failing to sustain above 0.7400 as the Federal Reserve (Fed) put forward an aggressive hawkish roadmap for 2022 to contain the soaring inflation.

The Fed has announced ‘loud and clear that six more interest rate hikes are on the cards this year. To tame the galloping inflation, interest rate elevation is the last resort. Over that, the CME’s FedWatch Tool has displayed 60% odds for a 50 basis point (bps) interest rate hike in May’s Federal Open Market Committee (FOMC).

Meanwhile, Goldman Sachs said that they now see “two 50 basis point hikes starting with the next meeting (May and June), followed by four 25 basis point hikes into the end of the year.” Also, Goldman Sachs sees rate hikes to 2% by the end of 2022.

The US dollar index (DXY) is performing strongly on Tuesday as the index has surged 0.36%. The DXY has witnessed some significant bids after surpassing 98.00 from where it felt resistance multiple times. While, the 10-year US Treasury yields are comfortably trading near 2.33%, at the press time.

The speech from Reserve Bank of Australia (RBA)’s Governor Philip Lowe has failed to strengthen the antipodean as the administration needs more proof of widespread price pressures to turn for policy tightening.

The speech from Fed’s Chair Jerome Powell on Wednesday will remain a major event this week as it will provide insights for the likely monetary policy action in May.

In opinion of FX Strategists at UOB Group, further upside in NZD/USD is likely while above 0.6840 for the time being.

Key Quotes

24-hour view: “We highlighted yesterday that NZD ‘could rise to 0.6925 but a sustained advance above this level is unlikely’. NZD subsequently rose to 0.6922 before easing off. Upward momentum has waned somewhat and this coupled with overbought conditions suggests NZD is unlikely to advance further. From here, there is a slight downward bias but any weakness is viewed as part of a lower trading range of 0.6855/0.6910. In other words, a clear break of 0.6855 is unlikely.”

Next 1-3 weeks: “Last Friday (18 Mar, spot at 0.6895), we highlighted that further NZD strength is likely and a break of 0.6925 would shift the focus to 0.6950. Yesterday (21 Mar, spot 0.6905), NZD rose to 0.6922 before pulling back. Shorter-term upward momentum has waned somewhat but only a breach of 0.6840 (no change in ‘strong support’ level) would indicate that NZD is not ready to rise above 0.6925.”

CME Group’s flash data for crude oil futures markets noted traders trimmed their open interest positions by around 1.6K contracts at the beginning of the week, extending the downtrend for the seventh session in a row. On the other hand, volume reversed the previous drop and went up by nearly 158K contracts.

WTI: Initial up barrier comes near $115.00

Prices of the WTI extended the upside on Monday well north of the $110.00 mark per barrel. The strong bounce was amidst shrinking open interest, however, removing some strength from prospects for further upside in the very near term. That said, the immediate resistance remains at the $114.85 level (March 10 high).

There is scope for extra upside in cable, although there is a tough barrier in the 1.3260 area for the time being, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that GBP ‘is likely to trade sideways within a range of 1.3115/1.3205’. Our view for sideway-trading was not wrong even though GBP traded within a narrower range than expected (1.3128/1.3210) before closing little changed at 1.3169 (-0.06%). The price still appears to be part of a consolidation and we continue to expect GBP to trade sideways, likely within a range of 1.3120/1.3220.”

Next 1-3 weeks: “Last Friday (18 Mar, spot at 1.3170), we highlighted that the chance for a sustained rise above 1.3220 has increased. GBP subsequently rose to 1.3211 and yesterday (21 Mar), it advanced to 1.3210 before easing off. Upward momentum has waned somewhat but we still see room for GBP to move above 1.3220. At this stage, any further advance is expected to face solid resistance at 1.3260. On the downside, a breach of 1.3090 (‘strong support’ level was at 1.3070) yesterday would indicate that the current upward pressure has eased.”

Open interest in gold futures markets extended the downtrend for yet another session on Monday, this time by just 83 contracts according to preliminary readings from CME Group. Volume, instead, rose for the second session in a row, now by around 7.6K contracts.

Gold: Upside appears capped by $1950

Monday’s uptick in gold prices was amidst a small decrease in open interest and the continuation of the uptrend in volume. Against this, the precious metal remains poised for further consolidation in the very near term at least, with the immediate up barrier around $1950 mark per ounce troy.

• An open-drive session has helped the greenback bulls to renew a six-year high at 120.50.
• Bulls are firmer above 10 and 20-period EMAs.
• The RSI (14) is oscillating in a bullish range of 60.00-80.00, which adds to the upside filters.

The USD/JPY pair has got an adrenaline rush, which is very much clear from the open drive session on Tuesday. The pair opened around 119.46 and continued to move upside swiftly. The asset has gained almost 0.7% in today’s session and is showing no signs of exhaustion yet. It is worth noting that the asset has renewed its six-year high after kissing 120.47 on Tuesday.

On a weekly scale, USD/JPY has witnessed a juggernaut rally after a breakout out of the rising channel on the upside. The upper end of the rising channel is placed from 2 April 2021 high at 110.97 while the lower end is marked from 8 January 2021 low at 102.59. Moreover, the asset has also surpassed its five-year-old resistance at 118.66.

The 10 and 20-period Exponential Moving Averages (EMAs) are scaling higher at 116.70 and 115.25 respectively, which adds to the upside filters.

The Relative Strength Index (RSI) (14) is oscillating in a range of 60.00-80.00, which signals for the continuation of a bullish trend.

Should the major test its ground at 118.66, a build-up of fresh bids will drive the pair towards the psychological resistance of 120.00, followed by a 5 February 2016 high at 121.49.

On the flip side, bears can take control if the pair slips below March 15 low at 117.70. This will drag the pair towards 10 and 20-period EMAs at 116.70 and 115.25 respectively.

USD/JPY weekly chart

According to FX Strategists at UOB Group, EUR/USD is expected to navigate between 1.0950 and 1.1150 in the next weeks.

Key Quotes

24-hour view: “EUR traded between 1.1008 and 1.1069 yesterday, narrower than our expected sideway-trading range of 1.1005/1.1080. The underlying tone has softened somewhat and EUR could edge lower for today. That said, any weakness is unlikely to challenge the major support at 1.0950 (there is another support at 1.0980). On the upside, a breach of 1.1050 (minor resistance is at 1.1030) would indicate that the current downward pressure has eased.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (21 Mar, spot at 1.1040). As highlighted, EUR appears to have moved into a consolidation phase and is likely to trade between 1.0950 and 1.1150 for now.”

• GBP/JPY takes the bids to refresh multi-day high, prints three-day uptrend.
• US 10-year, 2-year Treasury yields rise to the highest levels since May 2019.
• Hawkish Fedspeak, inflation fears propel bond coupons, market sentiment dwindles after recently mixed headlines from Russia, Ukraine.
• Risk catalyst, bond market moves are crucial for near-term directions.

GBP/JPY poke October 2021 top while taking the bids around 158.20, up 0.52% intraday heading into Tuesday’s London open.

In doing so, the cross-currency pair cheers the yen’s broad weakness, mainly due to the firmer US Treasury yields. Also favoring the pair are the recent positive headlines from Moscow and Kyiv.

The US 10-year Treasury yields and the 2-year counterpart both poke the highest levels last seen during May 2019, taking the bids near 2.33% and 2.17% respectively level by the press time.

Fears of the Fed’s aggression in rate hikes and inflation woes seem to underpin the latest bond rout. Atlanta Fed President Bostic and Richmond Fed’s Barkin promoted the US central bank’s ability to restrain inflation by indirectly signaling a faster pace of the rate hike. However, the comments from Fed Chair Jerome Powell who said, “The Fed will raise rates by more than 25bps at a meeting or meetings if necessary,” offered a major upside momentum to the T-bond coupons.

Additionally fueling the bond yields are comments from International Monetary Fund’s (IMF) Asia-Pacific Director Changyong Rhee who said, “The US has the room to raise interest rates.” Furthermore, firmer US inflation expectations, as portrayed by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, exert additional downside pressure on the bonds.

It’s worth noting, however, that Russia’s second coupon payment, as signaled by Reuters’ source, joined Ukraine President Volodymyr Zelenskyy’s readiness to discuss commitment from Ukraine not to seek NATO membership to challenge the pair bears of late. Previously, Ukraine President Zelenskyy mentioned that no immediate decision is possible on occupied Ukrainian territory per Interfax. Additionally, US President Joe Biden also cited fears of a cyberattack against the US.

Moving on, the UK’s headlines inflation and preliminary PMIs for March will add a burden to the watcher’s list.

Technical analysis

A clear upside break of a five-month-old descending trend line, around 157.30 by the press time, helps GBP/JPY bulls to attack the 2021 peak of 158.22. However, overbought RSI and June 2016 peak surrounding 159.20 will challenge the pair’s upside targeting the 160.00 psychological magnet.

• EUR/JPY has overstepped 132.00 swiftly on broader weakness in the Japanese yen.
• Rising oil and metal prices are hurting the yen.
• Speech from ECB’S Lagarde will be the major event that will keep investors on the sidelines.

The EUR/JPY pair has witnessed a firmer long build-up, which has pushed the cross above 132.00 after multiple failed attempts. The shared currency bulls are getting stronger ahead of the speech from European Central Bank (ECB)’s President Christine Lagarde, which is due on Tuesday. Apart from the ECB’s Lagarde speech, speeches from ECB’s Vice President Luis De Guindos, ECB’s members Fabio Panetta and Philip Richard Lane will also hold on Tuesday.

EUR/JPY has been underpinned amid a broader sell-off in Tokyo’s yen. The Japanese yen is facing the heat of an unchanged interest rate policy by Bank of Japan (BOJ) Governor Haruhiko Kuroda. The BOJ kept its interest rates at -0.1% amid an in-controlled inflation print. Japan’s National Consumer Price Index (CPI) landed at 0.9%, much higher than the previous print of 0.5% and market consensus of 0.3% but remained below the upside cap of 2%.

Also, the boiling oil prices and rising metal prices are weighing pressure on the Japanese yen. Oil prices have crossed $110 comfortable and are likely to continue moving the north amid various supply constraints.

This week, the European Union (EU) summit will remain a major driver for the cross, which is due on Friday. Also, US President Joe Biden will attend the summit in addition to the NATO meeting on designing a roadmap of a diplomatic solution for Russia and Ukraine. While, the Japanese docket will report Tokyo’s Consumer Price Index (CPI) numbers, which are due on Thursday.

• USD/CAD bears flirt with two-month low amid oversold RSI conditions.
• Key Fibonacci retracement support, previous resistance line challenge further downside.
• 20-SMA restricts immediate upside, 1.2730 is the key hurdle.

USD/CAD licks its wounds near the lowest levels since late January, picking up bids to 1.2590 heading into Tuesday’s European session.

The downbeat RSI conditions, nearly oversold, hint at the bear’s inability to keep reins.

However, the loonie pair’s sustained trading below the key SMAs keep USD/CAD prices directed towards the 78.6% Fibonacci retracement (Fibo.) of January-March upside, around 1.2550.

That said, further recovery moves may aim for the 20-SMA level of 1.2615 before directing the USD/CAD bulls towards the 50% Fibo. level of 1.2675.

Even so, the pair buyers remain skeptical until the quote rises past 1.2725-30 resistance confluence including the 200-SMA And 38.2% Fibonacci retracement level.

On the contrary, the 78.6% Fibonacci retracement level of 1.2550 and previous resistance line from March 15, around 1.2530, lures the USD/CAD bears before directing them to January’s low surrounding 1.2450.

USD/CAD: Four-hour chart

Trend: Corrective pullback expected

• USD/TRY holds onto the previous week’s rebound from 10-DMA.
• MACD conditions portray buyers losing momentum inside short-term rising wedge bearish chart pattern.
• Multiple supports, fundamental catalysts keep buyers hopeful around one-week high.

USD/TRY grinds higher around 14.85 during Tuesday’s Asian session.

In doing so, the Turkish lira (TRY) pair extends the last week’s U-turn from the 10-DMA inside a one-month-old rising wedge bearish chart pattern. Also teasing USD/TRY sellers is the receding bullish bias of the MACD.

However, multiple failures to break the 10-DMA and strong fundamentals supporting the USD growth, as well as weighing on the TRY, keep USD/TRY bulls hopeful.

That said, the current upside eyes the 15.00 threshold ahead of the monthly peak of 15.06.

In a case where USD/TRY bulls keep reins past 15.06, the upper line of the stated wedge, near 15.30 will be in focus.

Alternatively, the 10-DMA level of 14.75 restricts the immediate downside of the pair ahead of the wedge’s support line, close to 14.70 at the latest.

Should the USD/TRY prices drop below 14.70, the bearish formation suggesting a south-run towards February’s low surrounding 13.25 can’t be ruled out. Though, the 14.00 round figure and the monthly bottom near 13.75 will challenge the bears on the way.

USD/TRY: Daily chart

Trend: Bullish

Following the aggressive tightening outlook delivered by Fed Chair Jerome Powell on Monday, Goldman Sachs outlined a new Fed projection report, reviving the timing and the degree of the rate hikes this year.

Goldman Sachs said that they now see “two 50 basis point hikes starting with the next meeting (May and June), followed by four 25 basis point hikes into the end of the year.”

The US investment banking giant added, they now “see Fed balance sheet reduction to start May.”

• Markets in the Asian domain part ways with the Indian bourses as the latter has slipped 0.25% on Tuesday.
• Risk-off impulse is fading away amid a decent uptick in the Asian markets.
• NATO meeting and speech from Fed’s Powell will be the major events to keep under the radar.

Markets in the Asian domain are majorly trading positive on Tuesday after a decent recovery in the US markets in the late New York session. It seems that the global equities are shrugging off the volatility of the seven interest rate hike announcements and the market mood is turning positive.

At the press time, Japan’s Nikkei 225 surges 1.50%, China A50 is mildly positive by 0.1%, and Hang Seng climbs 0.9%. However, the Indian bourses have turned negative after a bullish open.

The announcement of six additional rate hikes during the year signals that the Federal Reserve (Fed) is determined to curtail the galloping inflation although the aggressive hawkish stance taken by the Fed will squeeze the liquidity in the global markets significantly. Apart from that, the CME’s FedWatch Tool has displayed a 60% probability for a 50 basis point (bps) interest rate hike in May’s Federal Open Market Committee (FOMC).

Meanwhile, US President Joe Biden’s meeting with its NATO allies has gained the limelight. Although the major attention will remain on the roadmap of a diplomatic solution between Russia and Ukraine but multiple urges from the NATO member to Russian leader Vladimir Putin for a ceasefire may lead to the discussion of the additional sanctions on Moscow.

Moving forward, Wednesday‘s speech from the Fed Chair Jerome Powell will remain a major event to be watched. Fed’s Powell is likely to dictate the roadmap of six more interest rate hikes during the year.

• EUR/USD prints three-day downtrend on breaking fortnight-long support.
• DXY renews weekly top as yields rally on hawkish Fed, ECB’s Lagarde refrains from following Fed.
• Ukraine-led fears ease as Russia again avoids default, Kyiv ready to discuss separation from NATO.
• Speeches from ECB, Fed policymakers to join Russia-Ukraine headlines to direct immediate moves.

EUR/USD pares intraday losses around 1.1000 amid the early European morning on Tuesday. Even so, the major currency pair holds onto the downside break of the previous support line from March 07 as bond sellers’ aggression propels the US dollar.

That said, the US 10-year Treasury yields and the 2-year counterpart both rise to a fresh high since May 2019 while taking the bids near 2.33% and 2.17% respectively level by the press time. Behind the moves are the US Federal Reserve (Fed) policymakers’ hawkish mood and inflation fears.

Atlanta Fed President Bostic and Richmond Fed’s Barkin promoted the US central bank’s ability to restrain inflation by indirectly signaling a faster pace of the rate hike. However, the comments from Fed Chair Jerome Powell who said, “The Fed will raise rates by more than 25bps at a meeting or meetings if necessary,” offered a major upside momentum to the T-bond coupons.

On the same line were comments from International Monetary Fund’s (IMF) Asia-Pacific Director Changyong Rhee who said, “The US has the room to raise interest rates.” IMF’s Rhee also mentioned that Asia’s inflation will peak in Q2 of this year. It’s worth noting that firmer US inflation expectations, as portrayed by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, also underpins the firmer yields and weigh on the EUR/USD prices.

Alternatively, Russia’s second coupon payment, as signaled by Reuters’ source, joined Ukraine President Volodymyr Zelenskyy’s readiness to discuss commitment from Ukraine not to seek NATO membership to challenge the pair bears of late. Previously, Ukraine President Zelenskyy mentioned that no immediate decision is possible on occupied Ukrainian territory per Interfax. Additionally, US President Joe Biden also cited fears of a cyberattack against the US.

At home, European Central Bank (ECB) President Christine Lagarde dismissed risks of stagflation in her speech at the Institut Montaigne, in Paris, on Monday. “ECB monetary policies will not be in sync with the Fed policy,” adds ECB President Lagarde.

Amid these plays, stock futures in the US and Europe print mild losses while the US Dollar Index (DXY) remain firm for the third consecutive day, up 0.13% intraday around 98.65 at the latest.

Looking forward, EUR/USD bears will keep eyes on the central bankers’ comments, as well as Ukraine-Russia headlines to tighten the grips.

Technical analysis

A clear downside break of a two-week-old ascending trend line joins a sustained U-turn from January’s low, around 1.1125, to direct EUR/USD prices towards the mid-March swing low near 1.0900. However, any further weakness past 1.0900 will make the quote vulnerable to test the monthly low surrounding 1.0805.

Meanwhile, the 21-DMA level of 1.1065 acts as an immediate hurdle for the EUR/USD to cross before challenging January’s bottom of 1.1125.

• Indian rupee depreciates on rising oil prices and broader risk-aversion theme.
• Seven interest rate hikes by Fed in 2022 will squeeze the liquidity in the market significantly.
• Rising oil prices are likely to widen India’s fiscal deficit.

The USD/INR has decisively breached its previous upside hurdle of 76.00 and is marching swiftly towards 76.50 amid diminishing demand for risk-sensitive assets and rising oil prices.

The announcement of seven rate hikes by the Federal Reserve (Fed) in 2022 has undermined the demand for the Indian rupee. To tame the galloping inflation, Fed policymakers have decided to tap the aggressive tightening policy going forward. Additional six interest rate hikes in the US economy may squeeze the liquidity principally from the market and the growth prospects will remain questionable. This has featured a risk-off impulse in the market and investors have started pouring funds into the greenback.

It is worth notifying that the 10-year US Treasury yields have comfortably reached 2.33% amid rising odds of an interest rate hike by 50 basis points (bps) in May’s monetary policy from the Fed. The CME’s FedWatch Tool is showing 60% odds for a 50 bps interest rate hike in May’s Federal Open Market Committee (FOMC).

Meanwhile, the oil prices are surging sharply, which is posing additional pressure on the Indian rupee. Supply constraints due to sanctions on Russian oil imports are posing the risk of a wider fiscal deficit for India.

Going forward, investors will focus on Wednesday’s Fed Chair Jerome Powell’s speech, which will provide insights into the likely monetary policy action in May.

• GBP/USD remains pressured around one-week-old ascending support line.
• Bearish MACD signals, failures to cross 1.3190-3200 resistance area favor sellers.
• 50-SMA adds to the downside filters, bulls need validation from 1.3275.

GBP/USD stays depressed for the second consecutive day, down 0.12% intraday around 1.3150 during early Tuesday morning in Europe.

The cable pair’s latest weakness could be linked to the multiple failures to cross the 100-SMA and a 12-day-old horizontal resistance area surrounding 1.3190-3200, as well as the bearish MACD signals.

It’s worth noting that an ascending trend line from the last Tuesday, around 1.3145, challenges the immediate downside of the pair. Also testing the GBP/USD bears is the 50-SMA level of 1.3108.

In a case where GBP/USD declines below 1.3108, also conquered the 1.3100 threshold, the monthly low surrounding the 1.3000 psychological magnet will be in focus.

On the flip side, recovery moves remain elusive below 1.3200, a break of which will direct GBP/USD buyers towards the horizontal line comprising lows marked during late February and early March, close to 1.3275.

During the quote’s run-up beyond 1.3275, the 200-SMA and 61.8% Fibonacci retracement of February-March downside, respectively around 1.3365 and 1.3400, should lure the pair buyers.

GBP/USD: Four-hour chart

Trend: Further weakness expected

• USD/RUB extended its downside below 61.8% Fibo retracement to 96.00.
• Bulls are firmer above 200 EMA but need to overstep 20 EMA for further upside.
• A breach of the RSI (14) above 60.00 will add to the upside filters.

The USD/RUB pair has rebounded sharply after hitting a low of 96.00 on March 16. Earlier, the major witnessed an intensified sell-off from March 7 high at 155.00. On Tuesday, the greenback bulls are facing pressure from the 21-period Exponential Moving Average (EMA), which is trading at 107.68.

On a four-hour scale, USD/RUB has attracted some significant bids after encountering the 200-period EMA, which is currently trading at 100.35. The pair extended its weakness below 61.8% Fibonacci retracement earlier but has been reversed now and is currently facing resistance at 21-period EMA.

The Relative Strength Index (RSI) (14) is oscillating in a range of 40.00-60.00, which signals a consolidation phase, while the pair may enter into a rally once the RSI (14) will breach 60.00 decisively.

For an upside, bulls need to violate Tuesday’s high at 108.50, which will send the pair to March 11 low and March 14’s average traded price at 113.12 and 123.25 respectively.

Should the major drop below March 16 low at 96.00, it will drag further to February 28 low at 93.02. Breach of the latter will expose it to March 1 low at 89.40.

USD/RUB four-hour chart

Associated Press (AP) reported the latest comments from the Ukrainian President Volodymyr Zelenskyy, as he said “late Monday was prepared to discuss a commitment from Ukraine not to seek NATO membership in exchange for a cease-fire, the withdrawal of Russian troops and a guarantee of Ukraine security.”

Additional quotes

Market reaction

Risk sentiment is seeing a bit of a lift on Zelenskyy’s comments, as S&P 500 futures trim losses while AUD/USD rebounds towards 0.7400.

Meanwhile, the US dollar index retreats towards 98.50, as of writing.

• AUD/JPY has managed to sustain its five-day winning streak.
• RBA’s Lowe seeks more evidence on widespread price pressures before a hawkish response.
• The Japanese yen is going through an intensified sell-off after the BOJ kept interest rates unchanged.

The AUD/JPY pair has rebounded sharply from 88.40 after sensing a decent selling pressure from Tuesday’s high at 88.62. Earlier, the risk barometer continued its five-day winning streak on Tuesday amid the broader sell-off in the Japanese yen.

The cross has witnessed a follow-up buying after a ted hawkish stance in the Reserve Bank of Australia (RBA)’s Governor Philip Lowe. RBA’s Lowe has mentioned that the policymakers are keeping an eye on the labor market for signs of rising costs. However, the central bank has also cleared that it won’t respond unless it will find a significant indication of widespread price pressures. It is worth mentioning that RBA has not followed the footprints of other Western leaders and has kept its interest rates unchanged.

The antipodean has also been underpinned against the Japanese yen on rising metal prices in the global market. While Tokyo is a major importer of metals and is facing the heat of higher metal prices.

The Japanese yen is going through intensified sell-off in the market after the Bank of Japan (BOJ) kept its interest rate unchanged at -0.1%. Japan’s National Consumer Price Index (CPI) accelerated to 0.9% from %, much higher than the previous print of 0.5% and market consensus of 0.3%. The major rationale behind the unchanged stance over the interest rates is the print of National CPI below the upside cap of 2%.

For further direction, investors will focus on Tokyo’s Consumer Price Index (CPI) numbers from the Statistics Bureau of Japan, which are due on Thursday.

Reserve Bank of Australia (RBA) “will not respond until there is evidence of pervasive price pressures,” the central bank Governor Phillip Lowe said at an event honoring journalists on Tuesday.

Additional quotes

“Monitoring the job market for labor costs signals and how pervasive shift in inflation is psychology is.”

“Also monitoring how persistent supply-side problems will be.”

Market reaction

AUD/USD keeps lows near 0.7375 on the dovish comments from RBA’s Lowe, as it clearly reflects the monetary policy divergence between the Fed and RBA. The pair is down 0.26% on the day.

• Gold rebounds from intraday low but stays depressed amid strong US dollar.
• US 10-year Treasury yields renew three-year high as Fedspeak suggests aggression towards faster rate-hikes.
• Ukraine-Russia tussles, China’s covid woes add to the risk-off mood.
• Might we see a minimal job loss recession? Why not?

Gold prices remain tight-lipped around $1,932, down 0.18% intraday, as it struggles to justify traditional safe-haven status amid firmer US dollar during Tuesday’s Asian session. The yellow metal offered an upbeat start to the week but buyers failed to keep the reins as the US Treasury yields rallied to a fresh multi-month high amid hopes of faster rate hikes by the US Federal Reserve (Fed), as well as looming economic recession.

US 10-year Treasury yields rise to a fresh high since May 2019 while taking the bids near 2.328% level by the press time as market’s fears of inflation magnify, pushing the Fed policymakers towards aggression in tightening monetary policies going forward.

On Monday, Atlanta Fed President Bostic and Richmond Fed’s Barkin promoted the US central bank’s ability to restrain inflation by indirectly signaling a faster pace of the rate hike. However, the comments from Fed Chair Jerome Powell who said, “The Fed will raise rates by more than 25bps at a meeting or meetings if necessary,” offered a major upside momentum to the T-bond coupons.

“Sharp moves in the US Treasury market are increasingly pointing to the risk of an approaching recession, with "bond vigilantes coming out of the woodwork" and markets doubting the U.S. Federal Reserve's plan to engineer a "soft landing" for the economy as it hikes interest rates to fight inflation, market experts said,” mentioned Reuters. On the same line were comments from International Monetary Fund’s (IMF) Asia-Pacific Director Changyong Rhee who said, “The US has the room to raise interest rates.” IMF’s Rhee also mentioned that Asia’s inflation will peak in Q2 of this year.

Firmer yields help the US dollar Index (DXY) print a three-day uptrend around 98.70 while disappointing the riskier assets like commodities and Antipodeans, including gold.

It’s worth noting that the fears of an escalation in the Ukraine-Russia crisis and China's covid resurgence challenge the XAU/USD bears. Recently, Ukraine President Volodymyr Zelenskyy mentioned that no immediate decision is possible on occupied Ukrainian territory per Interfax. Additionally, US President Joe Biden also cited fears of a cyberattack against the US.

Looking forward, gold prices are likely to remain sidelined as firmer yields battle the traditional safe-haven status, which in turn highlight incoming US data and Fedspeak as the key catalysts.

Technical analysis

Gold prices keep the bounce off 50% Fibonacci retracement (Fibo.) of September 2021 to March 2022 upside amid steady RSI and bearish MACD signals by the press time.

That said, the 21-DMA around $1,945 restricts short-term advances of the yellow metal ahead of the previous support line from early February, near $1,987 at the latest.

In a case where gold prices rally beyond $1,987, the $2,000 threshold will act as the key hurdle to the north.

Alternatively, pullback moves may retest the 50% Fibo. level surrounding $1,895 but a convergence of the 50-DMA and a horizontal area since November 2021 highlights $1,877-80 as the key short-term support zone.

To sum up, gold prices remain indecisive between the $1,877 and $1987 trading range.

Gold: Daily chart

Trend: Sideways

• USD/JPY remains firmer around the highest levels since 2016, briefly pieced 120.00 of late.
• Yields rally as IMF’s Rhee joins hawkish Fedspeak, BOJ’s Kuroda and Ukraine-Russia crisis.
• Comments from Fed policymakers, Ukraine updates will be crucial for near-term directions.

Firmer yields and risk-off mood propels USD/JPY to pierce the 120.00 psychological magnet while refreshing a six-year high during Tuesday’s Asian session. That said, the quote eases to 119.85 by the press time.

That said, US 10-year Treasury yields rise to a fresh high since May 2019 while taking the bids near 2.328% level.

It’s worth noting that the benchmark US bond coupon rallied the most in three weeks the previous day after Atlanta Fed President Bostic and Richmond Fed’s Barkin promoted the US central bank’s ability to restrain inflation by indirectly signaling a faster pace of the rate hike. However, the comments from Fed Chair Jerome Powell who said, “The Fed will raise rates by more than 25bps at a meeting or meetings if necessary,” offered a major upside momentum to the T-bond coupons.

Recently adding strength to the bond selling are the statements from the International Monetary Fund’s (IMF) Asia-Pacific Director Changyong Rhee who said, “The US has the room to raise interest rates.” IMF’s Rhee also mentioned that Asia’s inflation will peak in Q2 of this year. Additionally, the Bank of Japan (BOJ) Governor shrugged off the market’s expectations of monetary policy tightening and offered additional strength to the USD/JPY prices.

On a different page, the Ukraine-Russia crisis worsens as Ukraine President Volodymyr Zelenskyy mentioned that no immediate decision is possible on occupied Ukrainian territory per Interfax. Additionally, US President Joe Biden also cited fears of a cyberattack against the US.

Against this backdrop, S&P 500 Futures drops 0.30% but Japan’s Nikkei 225 rose 1.6% even as Japan’s Chief Cabinet Secretary Hirokazu Matsuno turned down the hopes of a multi-million yen stimulus earlier in the day.

Given the risk-aversion and firmer yields, USD/JPY is likely to witness firmer upside. However, comments from the Fed policymakers and updates from the Ukraine-Russia front are important to watch for fresh impulse.

Technical analysis

USD/JPY remain on the way to challenge late 2019 peak surrounding 121.70 unless dropping back below an upward sloping resistance-turned-support line, near 118.00 by the press time,

• AUD/USD fades bounce off intraday low, extends pullback from two-week high.
• US 10-year Treasury yields remains strong near three-year top, Aussie bond coupons rally to fresh high since 2018.
• Ukraine-Russia crisis, hawkish Fedspeak exert downside pressure on the sentiment.
• Comments from Fed policymakers, risk catalysts will be crucial to watch for fresh impulse.

AUD/USD sellers attack daily bottom surrounding 0.7380 as sour sentiment and upbeat yields propel the US dollar during early Tuesday. In doing so, the risk-barometer pair extends the previous day’s pullback from a fortnight high.

The US 10-year Treasury yields rise to a fresh high since May 2019 while taking the bids near 2.328% level. At home, the Aussie 10-year bond coupons have also rallied to the fresh top since November 2018.

Underpinning the multi-day high bond coupons are the hawkish comments from the Fed policymakers.  On Tuesday, Atlanta Fed President Bostic and Richmond Fed’s Barkin initially promoted the US central bank’s ability to restrain inflation by indirectly signaling a faster pace of the rate hike. However, the comments from Fed Chair Jerome Powell who said, “The Fed will raise rates by more than 25bps at a meeting or meetings if necessary,” offered a major upside momentum to the T-bond coupons.

Adding to the bond selling are the statements from the International Monetary Fund’s (IMF) Asia-Pacific Director Changyong Rhee who said, “The US has the room to raise interest rates.” IMF’s Rhee also mentioned that Asia’s inflation will peak in Q2 of this year.

Elsewhere, the worsening conditions of the Ukraine-Russia crisis, after Kyiv rejected Moscow’s demand of surrendering in Mariupol, weigh on the market’s mood and AUD/USD prices. Recently, Ukraine President Volodymyr Zelenskyy mentioned that no immediate decision is possible on occupied Ukrainian territory per Interfax. Additionally, US President Joe Biden also cited fears of a cyberattack against the US.

Amid these plays, S&P 500 Futures drop 0.30% but Australia’s ASX 200 rise around 1.50% by the press time.

Moving on, risk catalysts and Fedspeak are the key catalysts to watch for the AUD/USD traders.

Technical analysis

AUD/USD pullback remains elusive until staying beyond the 0.7315-10 support confluence including the 100-DMA and an upward sloping trend line from late January. Alternatively, a nine-week-old resistance line lures buyers around 0.7475.

Bank of Japan (BOJ) Governor Haruhiko Kuroda made some comments on consumer inflation in his appearance on Tuesday.

Key quotes

developing story ....

The People’s Bank of China (PBOC) set the yuan (CNY) reference rate at 6.3664 versus the previous release of 6.3677, while crossing the market expectations of 6.3635 during Tuesday's Asian session.

"China central bank injects 20 billion yuan via 7-day reverse repos at 2.10% versus prior 2.10%," said Reuters along with the PBOC fix announcement.

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.

“Low possibility that request for power saving will remain in place after Tuesday due to expected warmer weather,” said Japan’s Chief Cabinet Secretary Hirokazu Matsuno after the country witnessed a major power cut-off the previous day.

Additional comments

Market reaction

The news joins firmer US Treasury yields to exert additional downside pressure on the market sentiment. That said, USD/JPY remains firmer around the six-year high near 120.00.

Read: S&P 500 Futures drop as US T-bond yields stay firmer around three-year high

• NZD/USD skids near 0.6870 as DXY strengthens on rising odds of 50 bps rate hike in May by the Fed.
• Risk-off impulse has diminished the demand for risk-perceived assets, kiwi bulls lose their grip.
• This week investors will focus on Powell’s speech and NATO meet.

The NZD/USD pair has slipped below Monday’s low at 0.6873 as risk-sensitive assets lose appeal on souring market mood. The kiwi bulls have been hammered ahead of the Federal Reserve (Fed)’s Chair Jerome Powell's speech, which is due on Wednesday.

The speech from the Fed’s Powell is likely to dictate the roadmap of six interest rate hikes to curtail the galloping inflation. Fed policymakers have announced seven rate hikes for this year, which has raised concerns over the growth prospects amid a tight environment, which features squeezing liquidity and higher borrowing cost.

Apart from the Fed’s policy tightening, investors are uncertain over Thursday’s NATO meeting. As we have entered into the fourth week of Ukraine’s invasion by Russia with no potential indications of a ceasefire, investors are hoping for more pain ahead on intensifying fears of stagflation in Europe. Although the intention of the NATO meeting will remain a diplomatic solution to make a truce between Moscow and Kyiv, multiple urges from NATO may call for additional sanctions on the Kremlin.

The US dollar index (DXY) is approaching 99.00 swiftly as the US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (Fed) data, rose to 2.90% by the end of Monday’s North American trading session. Moreover, the CME’s FedWatch Tool is showing 60% odds for a 50 basis point (bps) interest rate hike in May’s Federal Open Market Committee (FOMC), which has underpinned the greenback against the kiwi.

• Market sentiment remains sours as Fedspeak hints at aggressive rate hikes, Ukraine-Russia crisis worsens.
• US 10-year Treasury yields seesaw around May 2019 top after refreshing multi-day peak.
• S&P 500 Futures track Wall Street losses but Nikkei 225 stays firmer after an extended weekend.

Hawkish Fedspeak adds to the market’s risk-off mood, joining the Kyiv-Moscow tussles, which in turn propels the US Treasury yields while weighing on the S&P 500 Futures during Tuesday’s Asian session.

That said, the US 10-year Treasury yields rallied to the fresh high since May 2019 after rising almost 15 basis points (bps) to 2.32%, around 2.313% by the press time. Further, the S&P 500 Futures print mild losses around 4,442 at the latest. Japan’s Nikkei 225, however, prints 1.50% daily gains by the press time on hopes of over 10 trillion yen stimulus, backed by Japanese media Sankei.

Atlanta Fed President Bostic and Richmond Fed’s Barkin initially promoted the US central bank’s ability to restrain inflation, indirectly signaling a faster pace of the rate hike. However, the comments from Fed Chair Jerome Powell who said, “The Fed will raise rates by more than 25bps at a meeting or meetings if necessary,” offered a major upside momentum to the T-bond coupons.

Also fueling the US Treasury yields were firmer prints of the US Chicago Fed National Activity Index for February, which rose to 0.51 versus 0.29 expected.

Elsewhere, the worsening conditions of the Ukraine-Russia crisis after Kyiv rejected Moscow’s demand of surrendering in Mariupol. Recently, Ukraine President Volodymyr Zelenskyy mentioned that no immediate decision is possible on occupied Ukrainian territory per Interfax. Additionally, US President Joe Biden also cited fears of a cyberattack against the US.

Looking forward, US President Biden’s meeting with the North Atlantic Treaty Organization (NATO) allies on Thursday will be crucial, as well as comments from various Federal Reserve (Fed) policymakers, for the market players.

It’s worth noting that the preliminary readings for March month’s PMIs and the US Durable Goods Orders for February will join the Ukraine-Russia headlines to become additional catalysts.

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

• DXY remains firmer for the third consecutive day, renews daily high of late.
• Yields rallied to a fresh high since 2019 as Fedspeak signals aggressive rate hikes.
• Ukraine-Russia tussles continue, Biden warns of Russian cyberattack on the US.
• Comments from Federal Reserve policymakers will be important, as well as geopolitical catalysts.

US Dollar Index (DXY) takes the bids to refresh intraday high around 98.60 during a three-day uptrend to Tuesday’s Asian session. The greenback gauge recently cheered firmer yields and upbeat US data, as well as the safe-haven status, to print the latest gains.

That said, the US 10-year Treasury yields rallied to the fresh high since May 2019 after rising almost 15 basis points (bps) to 2.32%, around 2.313% by the press time.

The bond coupons gained support from the hawkish Fedspeak, as well as firmer prints of the US Chicago Fed National Activity Index for February, which rose to 0.51 versus 0.29 expected.

It’s worth noting that Atlanta Fed President Bostic and Richmond Fed’s Barkin initially promoted the US central bank’s ability to restrain inflation by indirectly signaling a faster pace of the rate hike. However, the comments from Fed Chair Jerome Powell who said, “The Fed will raise rates by more than 25bps at a meeting or meetings if necessary,” offered a major upside momentum to the T-bond coupons.

Additionally helping the greenback gauge is the worsening conditions of the Ukraine-Russia crisis after Kyiv rejected Moscow’s demand of surrendering in Mariupol. Recently, Ukraine President Volodymyr Zelenskyy mentioned that no immediate decision is possible on occupied Ukrainian territory per Interfax. Additionally, US President Joe Biden also cited fears of a cyberattack against the US.

Amid these plays, the Wall Street benchmarks closed in the red after posting the biggest weekly run-up since November 2020 whereas the S&P 500 Futures print mild losses at the latest.

Moving on, a light calendar may trouble the greenback traders during the day but comments from various Fed speakers will entertain the buyers.

Technical analysis

US Dollar Index pierces the 10-DMA hurdle surrounding 98.55, a clear break of which will enable the greenback gauge to challenge a downward sloping resistance line from March 07, around 99.15 at the latest.

Meanwhile, pullback moves remain elusive until providing a daily close beneath the 21-DMA level surrounding the 98.00 threshold.

Japan Prime Minister (PM) Fumio Kishida crossed wires during the initial hour of Tokyo open on Tuesday while saying, "We will make a strong protest against Russia."

Reuters also mentions Japan’s PM Kishida as strongly opposing Russia’s decision to cancel peace talks.

“It is ‘unfair’ and ‘completely unacceptable’,” adds the Japanese leader per Reuters.

Market reaction

The news exerts additional downside pressure on the market sentiment, already challenged by firmer yields. As a result, the S&P 500 Futures drop 0.20% by the press time of early Tuesday morning in Asia.

Also read: USD/JPY prints fresh six-year high at 119.50 on higher odds of seven rate hikes by the Fed in 2022

• USD/CHF has found bids near 0.9300 as DXY strengthens on a downbeat market tone.
• NATO aims a ceasefire between Russia and Ukraine through a diplomatic route.
• SNB will dictate their interest rate decision this week.

The USD/CHF pair has witnessed some significant bids near 0.9300 amid a rebound in the appeal for the safe-haven assets. The market participants are uncertain over the meeting between US President Joe Biden and other NATO allies, which is due on Thursday.

The central agenda behind the meeting is to bring a ceasefire between Russian rebels and Ukraine defenders by a diplomatic route. However, the NATO members could impose additional sanctions on Russia as the former have urged a truce multiple times to Moscow. This has soured the market sentiment significantly and investors have underpinned the greenback against the Swiss franc.

On the dollar front, the US dollar index (DXY) has climbed near 98.50 on extended bets over seven rate hikes in 2022. An aggressive hawkish stance from the Federal Reserve (Fed)’s policymakers has shifted the liquidity into the greenback. Fed’s Chair Jerome Powell’s speech on Wednesday is likely to put forward the path of six more interest rate hikes, which may shift the greenback in a better position and will eventually diminish the demand for risk-perceived assets. The 10-year US Treasury yields are hovering around 2.95% ahead of Powell’s speech.

Going forward, investors will keep an eye on the interest rate decision by the Swiss National Bank (SNB), which is due on Thursday. Currently, Swiss interest rates are holding at -0.75%.

• Silver prices retreat after an upbeat start to the week.
• Golden cross, firmer RSI favor bulls, 10-DMA guards immediate upside.
• Ascending support line from early February acts as the key support.

Silver (XAG/USD) prices struggle to extend the previous day’s gains, despite a bullish moving average crossover, around $25.20-30 during Tuesday’s Asian session.

The bright metal justifies the 50-DMA’s run-up through the 200-DMA, known as a golden cross, on Monday but the bulls seem to need validation from the 10-DMA level of $25.35. Also challenging the upside momentum are the bearish MACD signals.

Even so, firmer RSI and the commodity’s ability to stay beyond an upward sloping trend line from February 03, around $24.80 at the latest, keep XAG/USD bulls hopeful.

That said, the March 10 high around $26.10 acts as an additional upside filter past the 10-DMA, a break of which will allow the bulls to challenge the monthly peak of $26.95.

Meanwhile, a downside break of the aforementioned support line, near $24.80, will defy the latest bullish moving average crossover and can direct the quote towards the month low around $24.30.

Following that, the 50-DMA and the 200-DMA, near $24.10 and $24.00 in that order, will challenge the silver bears.

Silver: Daily chart

Trend: Further upside expected