CFD Markets News and Forecasts — 23-03-2022

• USD/CAD has slipped below ascending triangle formation, which may strengthen loonie bulls further.
• Slippage of the RSI (14) below 40.00 will add to the downside filters.
• A bearish cross of the 20 and 200-period EMAs at 1.2707, points more weakness ahead.

The USD/CAD pair has remained vulnerable in the past few trading sessions. The major has eroded around 2.20% in the past eight sessions after sensing intensified selling pressure near March 15 high at 1.2871.

On the daily scale, USD/CAD is auctioning in an ascending triangle formation in which the upside remains capped while the asset updates its lows after some intervals. The upside of the ascending triangle formation is capped around 21 December 2020 high at 1.2735, which coincides with 20 August 2021 high and 20 December 2021 high. While, the lower trendline is placed from 1 June 2021 low at 1.2007, which follows 21 October 2021 low at 1.2288 and January 13 low at 1.2454.

A bearish cross of the 20 and 200-period Exponential Moving Averages (EMAs) at 1.2707, points more weakness ahead.

The Relative Strength Index (RSI) (14) is on the verge of dropping below 40.00, which is likely to add to the downside filters.

Should the asset slip below Wednesday’s low at 1.2542, loonie bulls may witness significant bids, which will drag the pair near the psychological support and 27 October 2021 high at 1.2500 and 1.2432 respectively.

On the flip side, greenback bulls may take over the control if the asset oversteps Tuesday’s high at 1.2624. This will send the pair towards 20-period EMA at 1.2675, followed by the psychological resistance at 1.2700.

USD/CAD daily chart

• EUR/USD fails to extend late Wednesday’s corrective pullback.
• Multiple technical indicators challenge bulls below 1.1050.
• Downbeat RSI adds strength to the bearish bias targeting 1.0900.

EUR/USD struggles to holds 1.1000 threshold during Thursday’s Asian session, despite the latest rebound from 1.0964.

That said, the major currency pair’s sustained weakness below the 21-DMA, a downward sloping resistance line from early February and a 13-day-old previous support line joins sluggish RSI to keep sellers hopeful.

Hence, the EUR/USD bears are ready to challenge the weekly low surrounding 1.0960 before eyeing the short-term horizontal support zone near 1.0900.

However, a clear downside break of the 1.0900 will make the quote vulnerable to refresh yearly low, currently around 1.0800.

On the flip side, the 21-DMA and a six-week-long descending trend line, respectively around 1.1035 and 1.1045, will challenge the quote’s further rebound. Also important will be the support-turned-resistance line from March 07 near 1.1050.

Should the EUR/USD prices rise past 1.1050, a broad horizontal area from late January, around 1.1120-40, will be in focus.

EUR/USD: Daily chart

Trend: Further weakness expected

As markets head towards the key data/events, it becomes important to know the key risk catalysts surrounding the main events.

Among the data, the March month US PMIs and Durable Goods Orders for February will decorate the calendar whereas the latest headlines from the US, the UK and Russia pose challenges to the market sentiment. The reason could be linked to US President Joe Biden’s visit to the European friends from North Atlantic Treaty Organization (NATO).

Starting with the US, “The first shipment from a new, $800 million arms package for Ukraine that U.S. President Joe Biden authorized last week will start flying out of the United States in the next day or so, and will not take long to reach Ukraine, a senior U.S. defense official said on Wednesday,” per Reuters.

On the other hand, the UK is believed to have sent 6,000 missiles and $33 million for the Ukrainian military.

In response, the US Embassy in Moscow received a list of diplomats considered, “persona non grata” by the Russian Foreign Ministry.

Following the Russian notice, the US media quoted the White House communiqué urging Russia to stop expelling diplomats and personnel.

Market reaction

The news weighs on the market sentiment and challenges AUD/USD around a four-month high.

Read: AUD/USD flirts with 0.7500 at four-month high as USTR news battles pre-NATO, US data caution

• The NZD/JPY March rally has gained 8.48% in the month.
• NZD/JPY Price Forecast: A breach of the 85.00 mark would expose levels not seen since July 2015.

The New Zealand dollar extended its rally vs. the Japanese yen for the second time in the week, despite a downbeat market mood courtesy of tensions in Eastern Europe. As the Asian Pacific session is about to kick in, the NZD/JPY trades at 84.43 at the time of writing.

US equities finished Wall Street’s trading session with losses. In the meantime, the greenback traded firmly, as portrayed by the US Dollar Index rising 0.20% at 98.612, while the US Treasuries sell-off stalled, with yields down.

The NZD/JPY pair is a cross-currency pair traded mainly as pure market sentiment play. However, it appears to be decoupled from a positive correlation with the S&P 500. Since mid-February of 2022, the S&P 500 began sliding, as the US central bank turned hawkish, while the NZD/JPY began its 800 pip rally, from around 76.00 towards 84.00

Overnight, the NZD/JPY began on a higher note, around 84.00-30, reaching a daily low at 83.70. Late in the New York session, staged a rebound achieving a YTD high at 84.64, despite the negative divergence between NZD/JPY’s price action and the Relative Strength Index (RSI), a momentum indicator in the 1-hour chart.

NZD/JPY Price Forecast: Technical outlook

The NZD/JPY daily chart depicts the pair as upward biased. Furthermore, the 50-day moving average (DMA) at 78.12 just crossed over the 200-DMA at 78.04, forming a golden cross, which means the NZD/JPY is ready to make new highs unless a sudden market sentiment increases appetite for safe-haven peers.

With that said, the NZD/JPY’s first resistance would be the 85.00 mark. A breach of the latter would expose the April 2013 high at 86.41, followed by April 2014 at 89.92, and the 90.00 mark.

“China’s worst virus outbreak since the start of the pandemic has led to some oil refiners cutting back operations and is forcing analysts to rethink their demand estimates as strict lockdowns curb consumption,” said Bloomberg.

The analytics published during the early Thursday morning in Asia also claims, “The Covid-19 resurgence is posing a threat to global oil consumption and may accelerate demand destruction, helping to rein in bloated prices that soared on Russia’s war in Ukraine.”

Additional quotes

Market reaction

Following the news, WTI crude oil prices pause the previous day’s upside around a two-week high, trading sidelined near $113.70 by the press time.

Read: WTI Price Analysis: Bulls attack three-week-old resistance below $115.00

• The DXY is oscillating around 98.50, awaiting trigger for further rally.
• FOMC members: Daly and Mester have framed an aggressive hawkish path for the interest rate saga.
• While chances of US recession are very much limited.

The US dollar index (DXY) is hovering around 98.50 despite rising odds of a 50 basis point (bps) interest rate hike by the Federal Reserve (Fed) in May’s monetary policy. To tame the galloping inflation, elevated borrowing rates are the only measure that may bring price stability. The DXY has been consolidating in a narrow range of 97.70-99.42 for the last two weeks.

Fed’s Daly sees interest rates at 2.5% at least

San Francisco Federal Reserve Bank President Mary Daly in her speech on Wednesday has dictated a significant hawkish stance going forward. The expectation of 2.5% borrowing rates to settle down the inflation has set the US Treasury yields on fire. For a 50 bps rate hike in May, Fed’s Daly has preferred to leave the context on data. Apart from that, the Federal Open Market Committee (FOMC) member has cleared that the Ukraine crisis possesses upside risk to inflation but it’s too early to call for a global recession and the US has a very minute chance of having a recession.

Fed’s Mester advocates some 50bps rate hikes this year

Cleveland Federal Reserve Bank President Loretta Mester has advocated 50 bps interest rate hikes by the Fed more than once by the end of 2022. The FOMC member reiterates that the markets are mature enough to handle the move and it is better to do that earlier rather than later. The Fed has to corner the inflation by deploying all necessary measures. Adding to that, the FOMC member reiterates the same punchline of Fed’s Daly that the streak of rate hikes won’t lead to the US in any recession.

Key events in the US this week: Durable Goods Orders, Continuing Jobless Claims, Initial Claims, Market PMI Composite, Pending Home Sales, Michigan Consumer Sentiment Index

Eminent issues on the back boiler: Russia-Ukraine war, EU leaders summit, NATO meeting, FOMC members' speeches

• WTI bulls take a breather at 11-day top amid overbought RSI.
• Sustained trading beyond the key SMAs keep buyers hopeful but a clear break of $115.00 becomes necessary for bulls.

WTI crude oil prices seesaw around a two-week high, easing to $113.60 during the early Asian session on Thursday.

The black gold’s latest pause could be linked to a failure to overcome a short-term important resistance amid overbought RSI conditions. Even so, the commodity’s sustained trading beyond the 100 and 200-SMA keep WTI buyers positive.

That said, a pullback towards the 100-SMA level surrounding $107.70 can’t be ruled out. However, any more weakness will make the quote vulnerable to decline towards breaking the $100.00 threshold while eyeing the 200-SMA near $99.70.

Should the WTI bears dominate past 200-SMA, the monthly low surrounding $92.36 will be on their radar.

Alternatively, an upside break of the aforementioned horizontal area established since March 03, around $115.00-114.70, will propel the quote towards $125.00.

Following that, the latest multi-month high of $126.51 will challenge the WTI bulls before directing them to the $130.00 threshold.

WTI: Four-hour chart

Trend: Pullback expected

“A Russian-drafted call for aid access and civilian protection in Ukraine that does not mention Moscow's role in the crisis failed at the U.N. Security Council on Wednesday,” said Reuters.

The news also mentioned that only Russia and China voted yes while the other 13 members abstained.

Market reactions

The news reveals China’s support to Russia, even though indirectly, which in turn becomes important as North Atlantic Treaty Organization (NATO) members accuse Beijing of helping Moscow in the Ukraine invasion. The same challenges the market sentiment and weigh on the AUD/USD prices at a four-month high.

Read: AUD/USD flirts with 0.7500 at four-month high as USTR news battles pre-NATO, US data caution

• AUD/USD seesaws around four-month high as upbeat commodity prices, USTR news contradicts cautious mood.
• USTR reinstates expired product exclusions from ‘Section 301’ China tariffs.
• US President Biden will meet NATO allies from Europe, more sanctions on Russia teased.
• Australia’s CBA PMIs came in softer for March, US PMIs, Durable Goods Orders will be eyed next.

AUD/USD bulls take a breather at a four-month high surrounding 0.7510 during early Thursday morning in Asia, retreating to 0.7500 after a two-day uptrend. The Aussie pair’s latest pullback could be linked to the market’s anxiety ahead of the key data/events lined up for publication on Thursday, as well as recently released downbeat Aussie PMIs.

Australia’s preliminary readings of Commonwealth Bank (CBA) PMIs for March came in below-forecast for Manufacturing and Services, down to 57.3 and 57.9 versus 59.0 and 62.7 expected. However, the figures are better than their previous readings and push Composite PMIs to 57.1 versus 56.6 prior.

Elsewhere, US Senator John Cornyn said he met with US Treasury Secretary Janet Yellen to discuss Russian gold sanctions. The news becomes more worrisome as US President Biden will be meeting his European counterparts from North Atlantic Treaty Organization (NATO) to push for more sanctions on Moscow. On Wednesday, the Wall Street Journal (WSJ) signaled that the Biden administration is working on heavy sanctions on around 300 Russian lawmakers. To counter the same, Russian President Vladimir Putin has said, “Russia will seek payment in roubles for gas sold to ‘unfriendly’ countries.”

Additionally, hawkish comments from the Fed policymakers backed chatters over 50 basis points (bps) of a Fed rate-lift and Quantitative Tightening (QT) in May, which in turn challenged the market sentiment and AUD/USD prices.

Alternatively, a pullback in the US Treasury yields and news from the US Trade Representative’s (USTR) office surrounding the Sino-American trade pact seems to have helped the AUD/USD prices, due to Australia’s trade ties with Beijing. In the latest update, USTR mentioned that it will reinstate 352 expired product exclusions from US ‘Section 301’ tariffs on imported goods from China. These exclusions were expired in 2020.

Also positive was a pullback in the US Treasury yields from three-year high and discussions in the Chinese media that the People’s Bank of China (PBOC) can announce rate cuts.

Amid these plays, Wall Street snapped a six-day uptrend but prices of gold and crude oil improved. That said, the US Dollar Index (DXY) also remained positive.

Looking forward, global markets are likely to remain anxious and may portray inaction ahead of the Biden meeting with NATO friends. Also important to watch are the March month US PMIs and Durable Goods Orders for February.

Read: Durable Goods Orders Preview: Upside surprise set to trigger next leg up in the dollar

Technical analysis

A daily closing beyond an ascending resistance line from the mid-January and a downward sloping trend line from June 2021, respectively around 0.7490 and 0.7480 at the latest, enables AUD/USD bulls to aim for a late 2021 peak surrounding 0.7560.

• USD/JPY may face the heat of an overbought situation but will remain a buy the dip counter.
• The asset may recapture six-year-old resistance near 121.70.
• Bulls are firmer above 10 and 20-period EMAs.

The USD/JPY pair is facing overbought pressures above 121.00 and is likely to perform subdued in the Asian session. The major has witnessed a dream rally in the past few trading sessions, which is visible from the full-bodied giant positive ticks on the weekly chart consecutively for three weeks. The greenback bulls are inching closer to six-year-old resistance at 121.70 considering a broader weakness in the Japanese yen.

On the 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 is holding above its five-year-old resistance at 118.66.

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. However, an overbought scenario at this stage cannot be ruled out.

Meanwhile, the 10 and 20-period Exponential Moving Averages (EMAs) are aiming higher at 117.00 and 115.50 respectively, which adds to the upside filters.

Considering the overbought situation, the major may find some long liquidation and test its five-year-old resistance now support at 118.66, which will fetch some fresh bids that will drive the pair towards the psychological resistance of 120.00, followed by 29 January 2016 high at 121.67.

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

• The AUD/JPY finished Wednesday’s trading session with gains of  0.73%.
• Risk-aversion in the financial markets was not an excuse for the Aussie to gain.
• AUD/JPY Price Forecast: UJpward biased, though due to overbought conditions in the RSI, might correct lower before resuming upwards.

The AUD/JPY, one of the FX space risk barometers, rallies for seven consecutive days amidst a risk-off market mood in global equities, as portrayed by US stock indices which recorded losses between 1.29% and 1.49%. At the time of writing, the AUD/JPY is trading at 90.79

Factors like the Russia-Ukraine crisis and renewed worries of global inflation dampened the market sentiment. Ukrainian President Volodymyr Zelesnkyy called for more pressure on Russia as discussions stagnate, while Russia continues its airstrikes in the port city of Mariupol. Linked to this, US President Joe Biden is on his way to a two-day NATO summit in Brussels.

Overnight, the AUD/JPY seesawed around the 89.90-90.50 area but late in the North American session reached a new YTD high at 90.93.

AUD/JPY Price Forecast: Technical outlook

The AUD/JPY is upward biased. Despite the steepness of the rally, which could suggest that the AUD/JPY might be subject to a correction, the next resistance would be 91.00. Once cleared, the AUD/JPY following supply zone would be Pitchfork’s mid-parallel line between the top and the central ones, around 92.00, followed by the 93.00 mark.

On the flip side, the AUD/JPY first support will be the 90.00 mark. If that scenario plays out, the AUD/JPY nest support would be 89.00, followed by the March 21 daily high at 88.50.

• The kiwi is on the front foot and eyeing a break to the 0.70 area. 
• A generalised rally in commodity prices is supporting NZD.

NZD/USD has been on firm grounds mid-week as it moves up towards 0.70 the figure. US stocks finished Wednesday's session lower, while crude oil futures rose together with gold prices. Nevertheless, the kiwi held up well.

The S&P 500 lost  1.2% to 4,456.24, the tech-heavy Nasdaq Composite was 1.3% off at 13,922.60 and the Dow Jones Industrial Average declined 1.3% to 34,358.50. The 10-year US Treasury yield fell 8 basis points to 2.30%. 

''The Kiwi held up reasonably well overnight given the breather in global risk sentiment and fall in equities. That said, commodities and the AUD have rallied, led by oil. While higher oil prices aren’t a positive for NZ, the generalised rally in commodity prices is, and the NZD seems to be able to latch on to any thread of positivity at the moment,'' analysts at ANZ Bank explained.

''We still have mixed views on how things will unfold. Our forecasts call for a mild further strength by year-end (0.70) but we also acknowledge risks of a hard landing, which is becoming a bigger talking point in markets as each day passes. Ahead of expected back-to-back 50bp OCR hikes we think NZ short end rates haven’t yet peaked; all else equal that’s likely to limit how much lower the NZD might be able to go (until the Fed catches up).''

• EUR/USD has stuck around 1.1000 as investors await fresh impetus from EU leaders summit.
• EU members are mixed on the embargo of Russian oil, Germany reiterates to stick with Russian oil.
• A preliminary estimate for the US and Euro PMI is 56.3 and 56 respectively.

The EUR/USD pair is juggling around 1.1000 in the absence of any potential trigger that could dictate the further direction for the asset. Investors are waiting for the European Union (EU) leaders summit, which will also be joined by US President Joe Biden on Thursday.

The central attention of the meeting is likely to be attributed to an embargo on Russian oil. Following Russia’s invasion of Ukraine, the EU has concluded that Russia’s arbitrariness should be answered with an aggressive stick approach. Instead of that, the EU leaders are likely to discuss an embargo on Russian oil despite a higher dependency on oil imports from Moscow.

It is worth noting that Europe banks heavily on Russia to address its 30% demand for energy and 25% demand for oil. And, gauging a substitute on very short notice may escalate the threat of supply worries and eventually to slippage in manufacturing activities. However, EU members are mixed on banning Russian oil as Germany has stated that it is notwithstanding the decision of banning the Russian oil imports in the current scenario considering the boiling oil prices and supply chain bottlenecks.

Meanwhile, the US dollar index (DXY) has been struck around 98.60 and is indicating a volatility contraction going forward.

Apart from the EU leaders summit, investors will focus on Manufacturing PMI prints from the US and eurozone. The US Manufacturing PMI is likely to land at 56.3, lower than the previous figure of 57.3 while the eurozone PMI may reveal a figure of 56, lower than the prior print of 58.2.

• GBP/USD bulls are on the path for a firm test of critical resistance.
• Bears are waiting patently for a discount to present itself. 

GBP/USD continues its advance towards a key area of resistance. The weekly M-formation shows that the price reverting towards the neckline of the pattern near to the 1.3350 mark.

GBP/USD weekly chart

This comes in towards a 61.8% golden ratio and 1.34 the figure. The bears will be moving in for the kill at this point and the price would be expected to continue on its southerly trajectory with 1.28 the figure in focus. 

• Gold moves higher for a fresh daily high on Wednesday. 
• Risk-off is the theme and safe-haven flows are benefitting the gold price. 

The price of gold is higher in mid-week trading as US stocks fell sharply following Moscow's plans to switch its natural gas sales to some countries to roubles. This has sent oil prices and tensions higher in global financial markets. At the time of writing, the gold price is trading near the highs of the day at $1,947.25. The yellow metal rallied from a low of $1,915.64 earlier in the day and is set on a fresh daily high and a bullish close. 

Responding to Western sanctions that have hit Russia's economy hard, President Vladimir Putin said Moscow will seek payment in roubles for gas sales from "unfriendly" countries, while its forces bombed areas of the Ukrainian capital Kyiv a month into their assault

Prices for commodities such as oil and wheat have climbed as tensions in Ukraine have escalated, putting additional upward pressure on already high inflation due to supply chain bottlenecks. Rising inflation has led many central banks, including the US Federal Reserve, to take measures to rein in prices, such as by raising interest rates. However, gold can also benefit from the safe-haven flows amid the uncertainties surrounding the war. 

''Market participants are keenly watching US 10-year rates as they approach a trend-channel that has served multi-decade-long resistance. In this context, gold prices have remained incredibly resilient despite the explosive price action in rates markets following Chair Powell's comments,'' analysts at TD Securities explained. 

US 10-year yield trend channel

The above chart illustrates the trend channel as the 10-year yield move sin towards 2.5%.

''While rates markets are now pencilling in higher odds for a 50bp hike in May, gold markets could be reflecting 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,'' the analysts at TD Securities said 

''In this context, gold prices once again narrowly avoided catalyzing a massive CTA liquidation program last session, but the margin of safety remains low. Such a liquidation event would raise risks that safe-haven buyers could offload length in a vacuum concurrently with massive CTA liquidations. Fortunately, Shanghai traders have seemingly ended a period of liquidations and have meaningfully added to their gold in recent trading sessions.''

Gold technical analysis

The price is completing a 50% mean reversion of the monthly bullish impulse, as illustrated on the weekly chart where the price meets the prior highs and support block. This could see demand move in again and an extension of the upside in the comings weeks.

What you need to take care of on Thursday, March 24:

The dollar ended Wednesday mixed, as investors struggled to make something out of mostly worrisome headlines. Higher crude oil prices amid escalating tensions between Russia and western nations dented the market’s mood.

The barrel of West Texas Intermediate surged to $115.37 a barrel, while Brent changed hands at as high as $118.41 a barrel. Gold, on the other hand, advanced within range, posting intraday gains but holding below the weekly high at $1,941.24 a troy ounce.

European stocks edged lower, weighing on their American counterparts. US indexes trimmed Tuesday’s losses, ending the day with substantial losses.

Government bond pared their slumps, which resulted in yields retreating from multi-year highs. The yield on the 10-year US Treasury note peaked at 2.417%, to later shed roughly 10 basis points and hurt the dollar’s demand.

Secretary of State Antony Blinken announced that the US government formally accused Russian troops of committing war crimes in Ukraine. US President Joe Biden will meet his European NATO counterparts on Thursday, and more sanctions on Moscow are expected to be announced. Leaders will also discuss the Iran nuclear deal.

The pound was among the worst performers, with GBP/USD falling to 1.3147 on the back of higher UK inflation and the Budget report. According to official data, the Consumer Price Index jumped to 6.2% YoY in February from 5.5% in the previous month. Also, Finance Minister Rishi Sunak presented a new budget, which included upward revisions to inflation and downward revisions to growth.  Tax growth expectations were downwardly revised to 3.8% from 6%. GBP/USD hovers around 1.3200 at the time being.

German Chancellor Olaf Scholz announced the country would build their own LNG terminals faster than planned, as bans on Moscow energy could put the region into recession. EU Consumer Confidence plummeted to -18.7 in March, according to preliminary estimates. EUR/USD is barely holding above 1.1000.

Commodity-linked currencies benefited from higher oil and gas prices, also getting a late boost from strengthening gold. The AUD/USD pair flirts with the 0.7500 level, while USD/CAD trades near a fresh monthly low of 1.2541.

The USD/JPY pair consolidated gains and settled just above the 121.00 mark, while USD/CHF edged lower, now trading near the 0.9300 figure.

Ethereum price to wreck short positions with a 20% jump

• Precious metals benefit from a risk-off market mood and lower US Treasury yields, silver and gold up 1.25% and 0.96%, each.
• Russia exerts pressure on selling gas to non-friendly countries, as Putin intends to use the Russian rouble as a payment method.
• XAG/USD Price Forecast: Golden-cross in the daily chart paves the way for further gains.

Late in the New York session, Silver (XAG/USD) recovered some of its bright, as XAG bulls stage a recovery and reclaim the $25.00 mark, amidst lower yields and risk-aversion in the financial markets. At the time of writing, XAG/USD is trading at $25.09.

Global equities overnight were upwards, though since the mid-European session and through the North American one, a dampened market mood, have them recording losses. Russia-Ukraine tussles keep grabbing headlines, though both parties’ stances remain put, so there has been no change. Linked to this, US President Joe Biden is traveling to the two-day reunion at NATO offices in Brussels. The US, UK, and EU keep imposing sanctions in Russia, whom of late in the day, retaliated as Russian President Putin said they intend to use Russian roubles when selling gas to non-friendly countries. Those remarks lifted oil prices as WTI’s reclaimed the $114.00 mark.

In consequence, precious metals are rising. Gold (XAU/USD) is also up in the day, close to 1%, at $1939.52 a troy ounce, while the sell-off in US Treasuries stalled, as the 10-year T-note yield eases from weekly highs, losing five basis points, down at 2.321%, a tailwind for XAG/USD.

Fed speakers take the forefront

Early in the New York session, Loretta Mester, Cleveland Fed President, crossed the wires. She said that the Fed would need to do some 50 bps moves this year while favoring frontloading rate hikes to better position themselves for how the US economy evolves in the second half of 2022. Mester added that “I have no concerns that rate increases are going to push the US economy into recession.”

Loretta Mester added her name to the list of Fed officials that have expressed the need for a 50 bps increase to the Federal Funds rates, led by Fed Chair Powell, James Bullard, Raphael Bostic, Chris Waller, and Mary Daly.

XAG/USD Price Forecast: Technical outlook

Silver (XAG/USD) bias is upwards, further confirmed by Monday’s trading session. On that day, the 50-day moving average (DMA) rollover the 200-DMA, forming a golden-cross, a bullish signal that, although is lagging, could open the door for further gains on XAG/USD.

With that said, XAG/USD’s first resistance would be November 16, 2021, daily high at $25.40. Breach of the latter would expose August 4, 2021, daily high at $26.00, followed by July 16, 2021, at $26.45.

St. Louis Federal Reserve President James Bullard, who on Friday called for a dramatic increase in the Fed's overnight lending rate to more than 3% this year, is crossing the wires with the following comments dripping through:

• Russia's war will mean less globalization, more fragmentation around the world.
• Direct macroeconomic effects on u.s. economy from Russia's invasion is not that large.
• Could easily be that Europe is pulled into recession as a result of war.
• We've seen these kinds of oil prices before, didn't cause a recession in US.
• US economy will continue to grow above trend this year and next, labor markets will continue to improve further.
• It's not as if we are a little bit over on the inflation target; we are way over.
• All indications are that inflation will go up in the spring.
• High inflation has necessitated 'all of us' to think about how fast we need to move.
• We will have to move faster than what we are used to.
• We have to think bigger.

Bullard's messaging remains as hawkish as ever. After Powell’s comments Monday, Bullards said yesterday that the Fed needs to move aggressively to curb inflation and that he thinks 50 bp moves would “definitely be in the mix.”  

''The plural "50 bp moves" is clearly not a base case, yet'', as analysts at Brown Brothers Harriman noted, ''but Bullard is certainly pushing hard for it,'' as well a balance sheet runoff to start ASAP. 

• AUD/USD is taking on the 0.75 figure in midday New York.
• The US dollar is softer Fed's aggressive stance early this week fades.

AUD/USD is higher by 0.45% as it moves in on the 0.75 figure during New York trade.  The boost to the US dollar from US Federal Reserve's aggressive stance early this week faded and investors waited for President Joe Biden to unveil new sanctions against Russia during his trip to Europe.

Energy and commodity prices, in general, are strong which is giving the Aussie boost. However, US president Joe Biden, who heads to Brussels on Wednesday for talks with NATO and European leaders, will push Europe to reduce reliance on Russian oil and gas. Nevertheless, the European Union seems unlikely to agree to a ban on Russian oil.

Meanwhile, the release of stronger than expected February Australian labour data has ticked another box on the country’s journey towards tighter monetary policy.  At 4.0%, the February unemployment rate sank to a near 14 year low, while the employment change was double market expectations at 77.4K.  

The market is positioned for rates hikes from the RBA this year suggesting it may be hard for the Aussie to rally much further on hawkish commentary from their respective central bankers, analysts at Rabobank argued. ''That said, given the links of both currencies to commodity exports, we see the potential for both to edge a little higher vs the USD though the course of this year.'' Nevertheless, the analysts also noted that ''espite the signs that the RBA is edging towards a policy tightening, the RBA remains one of the most cautious central banks in the G10.''

• The Swiss franc benefits amid a risk-off market mood, as reflected by the USD/CHF down 0.25%.
• Falling US Treasury yields, led by the 10-year, 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.

Overnight, the USD/CHF reached a daily high at 0.9357, but a risk-off market mood, which benefitted the low-yielder Swiss franc, impeded USD bulls to reclaim the neckline of an inverted head-and-shoulders pattern forming in the 4-hour chart. At 0.9304, the USD/CHF slides and aims to test the 0.9300 mark.

Risk-aversion is back, as reflected by global equities, which could not shrug off Russia-Ukraine tensions. Meanwhile, the US Dollar Index, a gauge of the greenback’s value against a basket of its rivals, advances 0.22%, sitting at 98.637 but failing to underpin the USD/CHF. US Treasury yields are dropping from weekly highs, led by the 10-year benchmark note falling six basis points down at 2.306%.

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 0.9360, almost confluence with the neckline of the inverted head-and-shoulders, acting as 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 an upslope trendline drawn from March 7 lows, around 0.9320. Breach of the latter could push the price towards the 50-SMA at 0.9360. A decisive break would expose the inverted head-and-shoulders neckline near November 24, 2021, cycle high around 0.9360-75, followed by the 0.9400 mark.

Reuters has reported that the United States will announce a package of Russia-related sanctions on political figures and oligarchs on Thursday while US President Joe Biden meets with NATO leaders on Ukraine, US national security adviser Jake Sullivan said on Wednesday.

''Sullivan, speaking to reporters as Biden headed to Brussels for the NATO summit, said G-7 leaders will also agree on Thursday to coordinate on sanctions enforcement and plan to issue a statement.

He also said officials will have more to say on Friday about European energy issues.''

Meanwhile, the euro has been offered in recent trade as the tensions continue to mount:

• EUR/USD pressured within bullish corrective phase

• EUR/USD is pressured in New York trade as traders weigh the risks associated with higher energy prices.
• A rise in cases “likely” caused by a more transmissible COVID-19 strain is also a concern.
• US president Joe Biden is heading to Brussels for talks with NATO and European leaders.

At 1.005, EUR/USD is down 0.20% during the time of writing and has travelled from a high of 1.1043 to a low of 1.0964 so far. The bears are engaged on the back of another sharp increase in oil and natural gas prices. Additionally, traders are on standby for announcement of fresh sanctions against Russia by the US during the president's trip to Europe.

US president Joe Biden is heading to Brussels for talks with NATO and European leaders and will seek European leaders to reduce their nation's dependency on Russian oil and gas. Biden is expected to announce new sanctions on members of the Russian parliament over Moscow's invasion of Ukraine.

However, the European Union currently is not expected to agree to a ban on Russian oil which would also weigh on the euro, especially now that Russia will insist that "unfriendly countries" pay for Russian natural gas exports only in rubles going forward, according to reports.

Russian President Vladimir Putin said Wednesday that he told Russian government officials a number of Western countries made "illegitimate decisions on the so-called freezing of the Russian assets," which has resulted in a line being crossed "over the reliability of their currencies" and has undermined the trust for those currencies, the Associated Press reported. 

Putin said it "made no sense" to supply Russian goods to the European Union and the United States and receive payment in foreign currencies, including the euro and US dollars. Putin is outlining certain measures to switch to payments for "our natural gas, supplied to so-called unfriendly countries" in Russian rubles but will continue to supply natural gas in accordance with volumes and prices fixed in previously concluded contracts. Russia provides about 40 percent of Europe’s natural gas.

Covid wave swells over Europe

Several European countries have lifted coronavirus restrictions too “brutally”, the World Health Organization (WHO) has warned, as they are witnessing a rise in cases “likely” caused by a more transmissible COVID-19 strain. WHO Europe director Hans Kluge said to be “optimistic, but vigilant” about the pandemic’s development in Europe, adding that cases were on the rise in 18 out of 53 states in the region. 

“The countries where we see a particular increase are the United Kingdom, Ireland, Greece, Cyprus, France, Italy and Germany,” Kluge said. “Those countries are lifting the restrictions brutally from too much to too few,” he added. Epidemiologists have noted that rising cases were partly due to the spread of the highly contagious BA.2 sub-lineage of the Omicron variant which has become dominant in many countries. However, it does not appear to cause more severe disease compared with other strains.

EUR/USD technical analysis

The weekly chart above shows that the price is correcting the weekly bearish impulse and stalling at a 50% mean reversion in resistance territory. The bears are moving in ana bearish close on the week could be significant and continue to weigh on the price outlook towards a downside extension in coming weeks

• The Canadian dollar remains firm vs. the greenback, with the USD/CAD down 0.37% in the week.
• Russia/Ukraine woes and US central bank hawkishness could not stop CAD bulls from extending USD/CAD losses.
• USD/CAD Price Forecast: Downward biased once the 200-DMA was breached.

USD/CAD drop extends to seven straight days amid a risk-off market mood in the equity markets, which has faltered to underpin the FX markets, portraying an upbeat sentiment, favoring commodity-driven currencies while safe-haven peers are the laggards of the day. At the time of writing, the USD/CAD is trading at 1.2557.

A downbeat market sentiment keeps global equities pressured while the greenback remains firm. The US Dollar Index, a gauge of the greenback’s value against a basket of six currencies, climbs 0.22% sits at 98.639. The US 10-year treasury yield easies from YTD highs, down two basis points at 2.348%.

Russia will receive roubles when selling oil and gas; boosts the Loonie

Russia – Ukraine’s woes are back in the forefront, keeping investors on their toes. Ukrainian President Zelensky stated that talks with Russia are intricate and sometimes confrontational. On the Russian front, Foreign Minister Lavrov said that NATO’s eastward expansion continues irrespective of whether a particular nation is a member.

Later, Russian President Vladimir Putin said they intend to use Russian roubles when selling gas to non-friendly countries, which caused a jump in oil prices, ultimately benefitting the Canadian dollar.

It’s worth noting that Canada’s oil and energy exports contribute just under 10% of its GDP.

In the meantime, Western Texas Intermediate (WTI’s), the US crude oil benchmark, rises almost 5%, exchanges hands at $114.06 per barrel a day, a headwind for the USD/CAD.

The US economic docket featured more Fed speakers. On a call with reporters, Loretta Mester,  Cleveland Fed President, said that the Fed would need to do some 50 bps moves this year while favoring frontloading rate hikes to better position themselves for how the US economy evolves in the second half of 2022. She further added that “I have no concerns that rate increases are going to push the US economy into recession.”

USD/CAD Price Forecast: Technical outlook

The USD/CAD is downward biased once the pair broke under the 200-day moving average (DMA), sitting at 1.2609. Given that March 3 low at 1.2586 gave way to the USD/CAD, sellers’ next target would be the YTD low at 1.2450. Nevertheless, it would find some hurdles on the way south.

The USD/CAD first support would be 1.2550. Breach of the latter would expose September 3, 2021, daily low at 1.2493, followed by January 19 YTD low at 1.2450.

• The oil bulls remain in control with WTI up more than $5.0 on the day in the $114.00 area.
• WTI has now recovered more than 50% of its pullback from multi-year highs near $130 to $93 earlier this month.
• Traders have cited a major Russian pipeline outage, a bullish US inventory report and expectations for more sanctions as bullish.

With the bulls seemingly now very much back in charge in global oil markets, front-month WTI futures are trading near session highs in the $114.00 area. Prices are up more than $5.50 on the day, taking on-the-week gains to more than $9.0 and signifying that WTI has now recovered more than 50% of its pullback from earlier monthly highs in the $130 area to as low as the $93 region. Traders are pointing to an announcement from Russia that more than 1M barrels per day (over 1% of global supply) in exports via its Caspian Pipeline Consortium (CPC) pipeline, which runs through Khazakstan, has been halted due to storm-damaged berths.

“Prices are primarily rising on the loss of CPC Blend crude exports out of Novorossiisk, which accounts for about 1.3 million barrels per day of exports, adding further bullish fuel to the fire as the drop in Russian crude exports finally appears underway,” said an analyst at Kpler. The immediate drop in Russian exports as a result of apparent maintenance issues comes against the backdrop of severe sanctions placed by Western nations on the Russian economy in response to its invasion of Ukraine.

And more sanctions may well be forthcoming in the next few days, with EU nations reportedly split over to implement a Russian oil import ban and with US President Joe Biden set to arrive in the EU on Wednesday. The US President will take part in a series of emergency NATO and EU summits as leaders. “You'll know at the end of April what the total loss of Russian oil is” said Trafigura's Ben Luckock at the FT Commodities Global Summit, who predicted record backwardation and that WTI could hit $150 by Summer and $200 at a later date.

Elsewhere, the latest official weekly US inventory figures were bullish, with headline crude oil inventories posting a larger than expected draw of more than 2.5M barrels and gasoline stocks also falling by more than expected. US production, meanwhile, remained unchanged at 11.6M barrels per day. Oil prices saw modest upside in wake of the data, but WTI was unable to break convincingly back above $115.00.

• The USD/MXN remains down in the week around 1%.
• Geopolitical woes in Eastern Europe and Fed speaking keep riskier assets pressured.
• Rabobank: Banxico will hike 50 bps and expect the bank rates to end around 8% in 2022.
• USD/MXN Price Forecast: Downward biased, as bears eye a break of 20.1500, exposing the 20.00 psychological level.

Despite a risk-off market mood in the financial markets, courtesy of Russia – Ukraine tensions and hawkish Federal Reserve expectations of rate hikes larger than 25 bps, the Mexican peso rally has extended to seven consecutive days. At the time of writing, the USD/MXN is trading at 20.1706, down some 0.53%, reflecting the peso strength.

Risk aversion is back again. European and US equities are falling, while the greenback stays firm, as shown by the US Dollar Index, up 0.28%, at 98.701. US Treasury yields are almost flat, as shown by the 10-year T-note, down for the first time in the week one basis point, at 2.366%.

Geopolitical jitters back at the forefront

Ukraine’s President Zelensky said that talks with Russia are confrontational and complex. At the same time, the Russian Foreign Minister Lavrov commented that NATO’s eastward expansion continues irrespective of whether a particular nation is a member. Of late, Russian President Vladimir Putin said they intend to use Russian roubles when selling gas to non-friendly countries, which caused a jump in oil prices, benefiting the peso prospects due to the Mexican economy being dependent on crude exports.

Banxico’s to hike 50 bps – Rabobank

“Banxico will announce its latest rate decision on Thursday, March 24th, and we expect another 50bp hike taking the policy rate up to 6.50%. This is expected by the majority of analysts, and the market is fully priced for a 50bp move.”

The analysts at Rabobank added that “last week’s FOMC and Russia’s invasion of Ukraine has led us to revise our forecast to factor in another two 50bp increases and two more 25bp increases, taking the policy rate up to 8.00% by year-end.”

Fed speaking continues

The US economic docket featured more Fed speakers. Earlier, Fed Chief Powell talked about digital currencies, leaving monetary policy aside. Meanwhile, Cleveland Fed President Loretta said that the Fed would need to do some 50 bps moves this year while favoring frontloading rate hikes to better position themselves for how the US economy evolves in the second half of 2022. She further added that “I have no concerns that rate increases are going to push the US economy into recession.”

Putting this aside, the US New Home Sales for February rose 0.772M  lower than the 0.81M estimated.

USD/MXN Price Forecast: Technical outlook

In the near term, the USD/MXN is downward biased. On its way south, it has broken several support levels, like the 20.3117 February 25 daily low, and at press time, it is approaching February 23 daily low at 20.1558.

If the USD/MXN clears the latter, USD/MXN’s next support would be 20.00, followed by June 25, 2021, a daily low at 19.7049.

• USD/JPY continues to trade with an upside bias and is now above 121.00 and at fresh multi-year highs.
• The pair’s gains on the month now stand at an impressive 5.3%, though it is looking technically overbought.
• Wednesday’s upside reflects a continued stream of hawkish Fed speak, with upside momentum in US yields having eased.

USD/JPY continues to trade with an upside bias and, though having pulled back from fresh multi-year highs it hit above 121.40 earlier in the day, remains support above 121 and trading with on-the-day gains of about 0.25%. Though subdued price action in US bond market (meaning unchanged yields) removes one major tailwind for the pair, higher oil prices with US President Joe Biden due to arrive in Europe on Wednesday and Western nations subsequently expected to announce new sanctions against Russia is undermining the yen. The US is net crude oil exporter, shielding the buck from the negative impact oil price upside, whereas Japan is a big net energy importer.

Wednesday’s upside may also be a reflection of a continued and steady stream of Fed speak, with policymakers indicating their desire to support/openness towards larger 50bps rate hikes at upcoming meetings. This is reinforcing the hawkish message conveyed by Fed Chair Jerome Powell on Monday and is underpinning the US dollar even if the move higher in US yields has run out of steam. Either way, USD/JPY’s rally abve 121.00 on Wednesday takes its on-the-month gains to now roughly 5.3%.

The hawkish shift from the Fed serving to ensure that US bonds cannot be used as a safe haven amid the ongoing Russo-Ukraine conflict, making a significant reversal lower in yields unlikely. Higher yields mean the US dollar is the haven of choice to hedge geopolitical risk, as opposed to the yen. That, combined with the aforementioned vulnerability of the Japanese economy to high energy prices, means the outlook for a sustained drop in USD/JPY isn’t great, even though by many metrics, the pair is very overbought.

USD/JPY’s 14-Day Relative Strength Index score hit 83.50 on Wednesday, its highest since late 2016. A score above 70.00 is considered overbought. While that does suggest some profit-taking and consolidation likely lays ahead, the RSI’s ability to predict a turnaround has been patchy over the last two years. Looking to the rest of the week, more Fed speak, flash March US PMIs and Japanese Tokyo inflation data will all be worth watching, while traders continue to monitor geopolitical developments.

San Francisco Fed President and FOMC member Mary Daly said on Wednesday that she wants to march rates to about 2.5% given that inflation is at the top of her mind, reported Reuters. The real neutral rate is about 0.5%, meaning the nominal rate is around 2.5%, Daly noted, adding that some increase in the policy rate to above the neutral rate in 2023 is likely to be required.

If inflation comes down, we might find just a little restrictive policy is just right, but if inflation moves up, we will need to be more restrictive, she noted. We are prepared to do whatever its takes to achieve price stability, Daly continued, adding that policymakers project a front-loading of rate increases. 

Additional Remarks:

"Balance sheet adjustments would also deliver at least another rate hike worth of tightening."

"This is quite a bit of frontloading compared to prior cycles."

"The data will tell us if 50bps is the right recipe."

"I have everything on the table."

"The data will help us determine how much is necessary."

"The Ukraine conflict poses upside risk to inflation."

"The conflict is a modest risk to growth, but would not deliver stagflation."

"It's too early to call whether we will have a global recession, but there is a very limited chance of a US recession". 

• Wall Street futures trimmed Tuesday’s gains as optimism faded.
• The better performance of the US dollar undermines gold demand.
• Gold Price bounces modestly from a Fibonacci level at $1,925.00 remains range-bound.  

Gold Price stands at around $1930.00 a troy ounce, still struggling for direction as financial markets try to assess central banks and war-related headlines, although pressuring the upside and nearing the weekly high of $1,941.24. XAUUSD is raising on the back of a souring market’s mood, with Wall Street changing course after Tuesday’s gains. The US dollar is also appreciating in a risk-averse environment, mainly against its European rivals. Commodity-linked currencies, on the other hand, are finding support in soaring oil prices, reaching fresh multi-month highs versus the greenback.

Meanwhile, US indexes remain in the red, maintaining Gold Price afloat. US indexes had briefly extended their slides after the initial slump, now consolidating early losses. The Nasdaq Composite is doing better than its counterparts, down a modest 0.19%. The Dow Jones Industrial Average, on the other hand, remains near its daily lows, currently down 244 points. 

Sentiment-related trading has been the main theme ever since Russia invaded neighbor Ukraine, which initially sent Gold Price towards its record highs in the $2,070 price zone. The crisis continued to escalate on a daily basis, but demand for the safe-heaven metal receded on the back of the broad dollar’s strength. Additionally, the greenback benefited from a more aggressive US Federal Reserve stance on monetary policy, as current actions to tame inflation have probed insufficient.

US Treasury yields are playing an important role in the market’s direction. Government bonds had pared their Tuesday’s slump, but not before the yield on the 10-year Treasury note peaked at 2.417%, a fresh multi-month high. The yield on the 2-year note peaked at 2.198%, but is now hovering around 2.15%. 

The soft tone of equities is being exacerbated by soaring oil prices. In the absence of relevant macroeconomic figures, financial markets rotate around the Russia-Ukraine crisis. Crude oil prices are once again on the run, following some comments coming from Moscow. President Vladimir Putin said that they intend to use Russian rouble when selling gas to “non-friendly” countries, clarifying that they will respect their contracts on supply. The barrel of WTI is currently changing hands at $113.65, its highest in two weeks. Higher oil prices provide unexpected support to Gold Price. 

Also read: Gold Price attempts to rebound after testing key support

Gold Price Technical Outlook

XAUUSD has spent the week hovering around a Fibonacci level, the 50% retracement of this year’s rally at $1,925.20. Movements away from the level have been shallow, although Gold Price bottomed the previous week near the next Fibonacci support level at $1,980.00, while intraday advances fell short of nearing the 38.2% retracement at $1,960.00. Market participants are looking for a clear break of any of those extremes for more sustained directional strength.

Technical readings in the daily chart suggest that Gold Price may come under further pressure, as it has been unable to move beyond a flat 20 DMA for over a week, meeting sellers around it. The same chart shows that technical indicators are directionless around their midlines, reflecting side-lined speculative interest.

From a fundamental perspective, however, XAUUSD has room to appreciate further and retest bears’ determination at around the $2,000 figure, while a break above the latter could result in a test of record highs in the $2,070 price zone.

• The NZD/USD drops from around 0.6970s as market mood dampened on Russia/Ukraine woes.
• The greenback remains firm, underpinned by Fed policymakers.
• Cleveland’s Fed President Mester adds her name to the Fed’s hawks list.
• NZD/USD Price Forecast: The break above the 200-DMA shifted the bias to upwards, though faces solid resistance around 0.7000.

The NZD/USD slides amid Wednesday’s downbeat market sentiment, courtesy of increasing tensions in the Russia-Ukraine conflict, which took the back seat at the beginning of the week, as the US central bank grabbed the attention after hiking rates and Fed speaking. At the time of writing, the NZD/USD is trading at 0.6960.

Reflection of the market mood is equities, with European and US stocks indices falling. In the FX space, the greenback advance as shown by the US Dollar Index, rising 0.35%, sitting at 98.760, while the 10-year benchmark note eases from weekly highs, down one basis point, down to 2.366%.

Russia – Ukraine war update

Ukraine’s President Zelensky said that talks with Russia are confrontational and complex. At the same time, the Russian Foreign Minister Lavrov commented that NATO’s eastward expansion continues irrespective of whether a particular nation is a member. Meanwhile, US President Joe Biden is expected to announce sanctions on more than 300 members of Russia’s lower chamber of Parliament on Thursday.

Fed officials parade continues

The US economic docket would feature more Fed speakers. Earlier, Fed Chief Powell talked about digital currencies, leaving monetary policy aside. Of late, Cleveland Fed President Loretta Mester has added her name to the list of hawks in the US central bank. On Wednesday, Mester said that the Fed would need to do some 50 bps moves this year while favoring frontloading rate hikes to better position themselves for however the US economy evolves. She further added that “I have no concerns that rate increases are going to push the US economy into recession.”

Aside from this, the US New Home Sales for February rose 0.772M  lower than the 0.81M estimated, a report mainly ignored by NZD/USD traders.

NZD/USD Price Forecast: Technical outlook

Tuesday’s price action showed that the NZD/USD pair broke above the 200-day moving average(DMA)at 0.6909, shifting the bias from neutral-upwards to upwards, however it faced strong resistance around the 0.6970 area, some pips short of the 0.7000 psychological level.

With the Relative Strength Index (RSI) a momentum indicator around 66, with some room before reaching overbought conditions, the NZD/USD might test the 0.7000 mark. If that scenario plays out, the NZD/USD first resistance would be 0.6974, followed by 0.7000, and then the downslope trendline of a descending channel around 0.7050-70 area.

On the flip side, the NZD/USD first support would be the 200-DMA at 0.6909. Breach of the latter would expose January 13 previous resistance-now-support at 0.6890, followed by February 23 daioly high resistance-now-support at 0.6809.

The flash estimate of March Eurozone Consumer Confidence dropped to -18.7 in March from -8.8 the month prior, data from the European Commission on Wednesday showed. That was much steeper than the expected drop to -12.9 and marked the worst such reading since May 2020. 

Market Reaction

While the data alludes to a larger than expected know to public confidence in the Eurozone as a result of the Ukraine war and its economic impact, the euro has not reacted, with EUR/USD continuing to trade slightly to the south of the 1.1000 level.  

• UK Chancellor of the Exchequer Sunak’s announcement of new tax cuts has failed to give GBP a lasting lift.
• GBP/USD continues to trade in subdued fashion near the 1.3200 level after hot UK CPI also failed to lift sterling.

While the latest fiscal/tax policy announcements from the UK Chancellor of the Exchequer will certainly cheer up the British public, it has done little to cheer up pound sterling, which continues to underperform versus the majority of its G10 peers. Chancellor Rishi Sunak’s announcement of a fuel duty tax cut, a lift to the tax-free earnings threshold, a slight reduction to the tax rate for the bottom bracket and new support for businesses seemed not to impress FX market participants.

GBP/USD continues to languish near the 1.3200 level, broadly in line with its pre-Spring Statement announcement levels, with traders seemingly still very much of the view that the new policies won’t do much to improve the fairly weak outlook for the UK economy. That suggests the BoE is likely to stick to its new dovish line that only modest further monetary tightening “might” be appropriate in the months ahead.

At current levels in the 1.3190s, GBP/USD is trading with losses of about 70 pips or 0.5% on the session, with sterling also failing to garner impetus from higher-than-expected UK Consumer Price Inflation figures out earlier in the session. Headline UK inflation hit its highest in 30-years at 6.2% in February, more than expected. Attention now turns to remarks from BoE Governor Andrew Bailey, who will be appearing at a summit later in the day.

• EUR/USD challenges weekly lows near 1.0960.
• The dollar remains bid on geopolitics, inflation.
• EMU Flash Consumer Confidence next on tap in the docket.

The selling pressure keeps hurting the single currency and drags EUR/USD to the area of weekly lows around 1.0960.

EUR/USD weaker on USD-buying

EUR/USD came under renewed and strong downside pressure following the intense improvement in the sentiment around the dollar, which was exacerbated in response to persevering geopolitical unease along with the resurgence of inflation jitters.

In addition, investors' hunt for safety collaborated with the demand for bonds and forced yields on both sides of the Atlantic to shed part of the recent gains.

In the domestic calendar, the European Commission will publish the flash gauge of the Consumer Confidence in the region for the current month. Across the pond, New Home Sales contracted 2.0% MoM in February, or 0.772M units.

What to look for around EUR

EUR/USD comes under pressure and breaches the key support at the 1.1000 yardstick midweek. 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: EC Flash Consumer Confidence (Wednesday) – 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 0.47% at 1.0975 and faces the next up barrier at 1.1137 (weekly high March 17) followed by 1.1229 (55-day SMA) and finally 1.1277 (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).

Cleveland Fed President and FOMC member Lorreta Mester on Wednesday reiterated her view that we (the Fed) are going to need to do some 50bps rate hikes this year, reported Reuters. 

Additional Remarks: 

"I would like to frontload some of our interest rate hikes and it is better to do that earlier rather than later."

"Frontloading rate hikes better positions policy for however the US economy evolves."

"I don’t have concerns on beginning to reduce the balance sheet and raise rates at the same meeting."

"By reducing the balance sheet, it will have a good effect on not further distorting the yield curve."

"Markets can handle such a move and we need to get on with the process."

"We have to do what we can do to get inflation under control."

"I do think we need to be more aggressive earlier rather than later."

"I am supportive of getting the balance sheet process started."

"We will need to bring interest rates up this year and next to tame inflation."

"Some wage increases we are seeing are outstripping productivity growth."

"It is going to take some deliberate policy actions on our part to bring inflation down."

"There are no concerns that rate increases are going to push the US economy into recession."

"We need to get inflation under control for both sides of the mandate."

"I supported 25bps at the last meeting because it was coupled with ongoing rate increases."

• Wall Street futures trimmed Tuesday’s gains as optimism faded.
• The better performance of the US dollar undermines gold demand.
• Gold bounces modestly from a Fibonacci level at $1,925.00 remains range-bound.  

Spot gold accelerated its advance and reached a fresh daily high of$1,93 a troy ounce, helped by the poor performance of US indexes. The Dow Jones Industrial Average opened 200 points lower, having ever since extended its slump to currently trade roughly 230 points lower. The S&P 500 shed 0.73% at the time being, while the Nasdaq Composite trades some 110 points lower.

Sentiment-related trading has been the main theme ever since Russia invaded neighbour Ukraine, which initially sent Gold Price towards its record highs in the $2,070 price zone. The crisis continued to escalate on a daily basis, but demand for the safe-heaven metal receded on the back of the broad dollar’s strength. Additionally, the greenback benefited from a more aggressive US Federal Reserve stance on monetary policy, as current actions to tame inflation have probed insufficient.

US Treasury yields are playing an important role in the market’s direction. Government bonds had pared their Tuesday’s slump, but not before the yield on the 10-year Treasury note peaked at 2.417%, a fresh multi-month high.

The soft tone of equities is being exacerbated by soaring oil prices. In the absence of relevant macroeconomic figures, financial markets rotate around the Russia-Ukraine crisis. Crude oil prices are once again on the run, following some comments coming from Moscow. President Vladimir Putin said that they intent to use Russian rouble when selling gas to “non-friendly” countries, clarifying that they will respect their contracts on supply. The barrel of WTI is currently changing hands at $113.65, its highest in two weeks. Higher oil prices provide unexpected support to Gold Price. 

Also read: Gold attempts to rebound after testing key support

XAUUSD Technical Outlook

XAUUSD has spent the week hovering around a Fibonacci level, the 50% retracement of this year’s rally at $1,925.20. Movements away from the level have been shallow, although Gold Price bottomed the previous week near the next Fibonacci support level at $1,980.00, while intraday advances fell short of nearing the 38.2% retracement at $1,960.00. Market participants are looking for a clear break of any of those extremes for more sustained directional strength.

Technical readings in the daily chart suggest that Gold Price may come under further pressure, as it has been unable to move beyond a flat 20 DMA for over a week, meeting sellers around it. The same chart shows that technical indicators are directionless around their midlines, reflecting side-lined speculative interest.

From a fundamental perspective, however, XAUUSD has room to appreciate further and retest bears’ determination at around the $2,000 figure, while a break above the latter could result in a test of record highs in the $2,070 price zone.

Swiss National Bank (SNB) meets on Thursday, March 24 at 08:30 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of four major banks upcoming central bank's Interest Rate Decision. 

The SNB is set to keep rates on hold at -0.75%. Importantly, market participants will watch closely the language and classification of the Swiss franc.

Nordea

“Inflation is rising in Switzerland; the pace is much slower than in other developed markets, but it will put pressure on the central bank to act. The war between Russia and Ukraine does not help. Switzerland imports a relatively large volume of metals and energy, which will add to the already rising inflation pressure. Nonetheless, the current market turmoil has resulted in material safe haven flow and FX appreciation, which is why we expect the central bank to stay put for now.”

BBH

“SNB is expected to keep rates steady at -0.75%. We expect upward revisions to the inflation forecasts, but the trajectory should continue to suggest liftoff won’t be seen until 2024 at the earliest. Of note, forecasts for 2024 will be added at this meeting and will be a key part of the bank’s forward guidance. Swaps market is pricing in over 50 bp of tightening over the next 12 months, which seems too aggressive.”

Credit Suisse

“We don’t expect any change to the central bank’s main policy rate, which currently stands at -0.75%. The SNB’s room for maneuver is not as broad as it used to be given the rise in inflation, in particular when it comes to countering appreciation pressures on the Swiss franc. However, given the ongoing Ukraine conflict and the darkening economic outlook for the euro area attached to it, we do not think the SNB will risk raising its long-term inflation forecast closer to 2%yoy or possibly even above. Therefore, we expect the central bank’s long-term inflation forecast to remain visibly below 2% YoY. We believe the SNB will continue labelling the Swiss franc as ‘highly valued’ and will reiterate its willingness to intervene in the foreign exchange markets. We find this argument less and less convincing, though.”

Citibank

“SNB Policy Rate: Citi Forecast -0.75%, Consensus -0.75%, Previous -0.75% (Franc still highly valued). Despite more franc strength, a dovish signal from the SNB, such as raising the franc assessment to ‘overvalued’, seems unlikely as the franc has already moved away from euro parity without intervention. The strong franc remains convenient for the SNB for now given the prospects for a higher 2022 inflation trajectory from 1.0% to at least 2.0% (Citi 2.3%). More interesting is what happens thereafter – rising core inflation suggests the SNB is likely to change little in its assessment. We expect the SNB will ultimately follow the ECB on rate hikes, likely with a one-hike delay (March 2023 could be when SNB first hikes if the ECB commences lift-off in December) but if the ECB’s rate hike cycle gets stuck – then the SNB may shift towards sheet reduction. The SNB may only seek to weaken the franc to the 1.10 area vs EUR once global inflation rates decline next year.” 

Russian Deputy Prime Minister Alexander Novak said on Wednesday that he doesn't have any information to suggest someone at OPEC+ is proposing lifting oil output above the existing plan, reported Reuters. Novak continued that it is too early to talk about the need to adjust Russia's OPEC+ quota because of sanctions and said that Russian companies expect difficulties with logistics and payments on energy supplies in April and May. 

Market Reaction

Oil markets continue to tick higher, with front-month WTI futures currently at session highs in the $114.00 area and up about $5.50 on the day, with the latest headlines unlikely to do much to dissuade the bulls. 

New Home Sales in the US fell to 772K in February from 810K the month prior, corresponding to a 2.0% MoM decline, after declining 8.4% a month earlier, data released by the US Census Bureau on Wednesday showed. 

EUR/GBP remains in familiar ranges. In the view of analysts at Rabobank, the pair is likely to trend higher into the middle of the year and beyond. 

Even on the bleakest scenario growth, the eurozone would still achieve 2.3% this year

“Assuming the market retains its expectation that energy black-outs and stagflation will be avoided in the eurozone, EUR/GBP is likely to avoid another retreat towards the recent lows close to 0.82 and should head higher towards the middle of the year.”

“Stagflationary risks could come from a worsening in the energy crisis in Europe. This week ECB President Lagarde offered reassurances that this was not on the cards and that even on the bleakest scenario growth that the Eurozone would still achieve 2.3% this year. As long as the market holds on to this outlook, we expect EUR/GBP to push higher towards 0.85 on a three to six-month view.”

• AUD/USD witnessed modest intraday pullback from the fresh YTD top touched on Wednesday.
• The Fed’s hawkish outlook, elevated US bond yields underpinned the USD and capped the upside.
• The Russia-Ukraine crisis weighed on investors’ sentiment and also benefitted the safe-haven buck.
• Upward pressure on commodity prices helped limit deeper losses for the resources-linked aussie.

The AUD/USD pair remained on the defensive through the early North American session and was last seen hovering near the daily low, around mid-0.7400s.

The pair witnessed modest pullback from the 0.7480 area or the highest level since early November 2021 touched earlier this Wednesday and eroded a part of the previous day's strong gains. The recent blowout rally in the US Treasury bond yields, bolstered by the Fed's hawkish outlook, acted as a tailwind for the US dollar. This, in turn, was seen as a key factor that acted as a headwind for the AUD/USD pair.

It is worth recalling that the Fed last week indicated that it could raise rates at all the remaining six meetings in 2022. Moreover, Fed Chair Jerome Powell suggested that the US central bank could adopt a more aggressive policy response to combat stubbornly high inflation. This, in turn, pushed the yield on the benchmark 10-year US government bond to the highest level since 2019 earlier this Wednesday.

Apart from this, modest pullback in the equity markets drove some haven flows towards the greenback and weighed on the perceived riskier aussie. The lack of progress in the Russia-Ukraine peace negotiations kept investors on the edge and benefitted the safe-haven buck. Russian Foreign Minister Sergei Lavrov said that talks with Ukraine are difficult as Kyiv is constantly changing its position.

Separately, Italy's Prime Minister Mario Draghi noted that Russia is not showing interest in a truce for successful peace talks. This, in turn, tempered investors' appetite for riskier assets and exerted some downward pressure on the AUD/USD pair. The downside, however, remains cushioned amid rising commodity prices, which continued lending some support to the resources-linked Australian dollar.

In fact, commodity prices have been facing upward pressure amid concerns over global supply chain disruptions following Russia's invasion of Ukraine and the imposition of fresh COVID-19 restrictions in China. This, in turn, warrants some caution before confirming that the AUD/USD pair has topped out in the near term and positioning for any meaningful corrective slide amid absent economic releases.

Technical levels to watch

USD/CAD is little changed on the session as key trend support at 1.2575 continues to prop up the pair. A break below the latter would open up additional losses to the 1.24 level, economists at Scotiabank report.

Key support at 1.2575 under pressure

“Intraday and daily trend signals remain aligned bearishly for USD/CAD, which suggests ongoing downside pressure (and limited scope for USD rebounds at present).”

“We spot resistance at 1.2640/50 while a clear break under 1.2575 should see spot push lower to the 1.24 area fairly quickly.”

• EUR/USD fades Tuesday’s gains and refocuses on the downside.
• A drop to 1.0900 looks increasingly likely near term.

EUR/USD flirts with the weekly low around 1.0900 amidst the offered stance in the risk complex.

Extra weakness is expected to meet the next support at the weekly low at 1.0960 (March 22), while a breach of it should expose a potential retracement to another weekly low at 1.0900 (March 14).

The medium-term negative outlook for EUR/USD is expected to remain unchanged while below the key 200-day SMA, today at 1.1514.

EUR/USD daily chart

NATO Secretary-General Jens Stoltenberg said on Wednesday that NATO membership for Ukraine is not currently on the agenda, reported Reuters. Stoltenberg warned Russia that any use of chemical weapons in Ukraine would have far-reaching consequences. Stoltenberg also reiterated his clear message to Russia that a nuclear war cannot be won and that any use of nuclear weapons will change the nature of the conflict.  

Stoltenberg announced that he expects a major increase in the Eastern part of the NATO alliance's strength at tomorrow's meeting, saying that the military alliance needs to reset deterrence and defense for the longer term. He added that NATO leaders need to provide additional support, including cybersecurity assistance and equipment to protect against a chemical attack or nuclear attack. Stoltenberg added that NATO has a responsibility to ensure that the war doesn't escalate beyond Ukraine's borders. 

Stoltenberg added that NATO allies will address the role of China in the Ukraine crisis at tomorrow's summit and said that allies are concerned that China could provide material support to Russia for its invasion. 

• USD/JPY witnessed an intraday pullback from the fresh multi-year peak touched on Wednesday.
• The Russia-Ukraine crisis drove haven flows towards the JPY and exerted downward pressure.
• The Fed’s hawkish outlook, elevated US bond yields should help limit any meaningful pullback.

The USD/JPY pair surrendered its intraday gains to a fresh multi-year peak and retreated to the daily low, around the 120.70-120.65 region during the early North American session.

The pair prolonged its recent strong bullish trajectory witnessed over the past three weeks or so and gained strong follow-through traction during the first half of the trading on Wednesday. The momentum pushed the USD/JPY pair to the highest level since February 2016, though lost steam near the 121.40 region amid reviving safe-haven demand.

The market sentiment remain fragile amid the lack of progress in the Russia-Ukraine peace negotiations. Italy's Prime Minister Mario Draghi noted that Russia is not showing interest in a truce for successful peace talks. Separately, Russian Foreign Minister Sergei Lavrov said that talks with Ukraine are difficult as Kyiv is constantly changing its position.

The incoming geopolitical headlines tempered investors' appetite for perceived riskier assets. This was evident from modest intraday pullback in the equity markets, which drove some haven flows towards the Japanese yen and acted as a headwind for the USD/JPY pair. This, in turn, prompted some profit-taking amid extremely overbought conditions on short-term charts.

The downside, however, remains cushioned amid the divergence in the monetary policy stance adopted by the Fed and the Bank of Japan. The Fed indicated last week that it could raise rates at all the six remaining meetings in 2022. Moreover, Fed Chair Jerome Powell suggested that the US central bank could adopt a more aggressive policy to combat stubbornly high inflation.

The markets already seem to have started pricing in the possibility of a 50 bps rate hike at the next FOMC meeting and pushed the yield on the benchmark 10-year US government bond to the highest level since 2019. Conversely, the Japanese 10-year remained anchored below the BoJ's 0.25% ceiling amid the BoJ's ultra-loose policy announced on the last day of the week gone by.

The resultant widening of the US-Japanese bond yield spread should continue to lend support to the USD/JPY pair, warranting some caution before confirming a near-term top. In the absence of any relevant economic data, traders will take cues from developments surrounding the Russia-Ukraine saga. This, along with the US bond yields should produce some opportunities.

Technical levels to watch

Norges Bank meets on Thursday, March 24 at 09:00 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of seven major banks upcoming central bank's Interest Rate Decision. 

Norges Bank is set to raise interest rates by 25bps the focus will be on whether the central bank believes the current/expected situation, particularly inflation, justifies another hawkish tilt.

Nordea 

“Norges Bank will announce its latest interest rate decision and publish a new Monetary Policy report (including a rate path) on Thursday. The key rate will be raised from 0.5% to 0.75% in line with the clear signals from Norges Bank at the January meeting. We expect a significantly higher rate path throughout the forecast period, which will show three more rate hikes this year and four rate hikes next year – suggesting a key rate at 2.5% by end-2023.”

TDS

“A 25bps hike is fully expected, but rising inflation (core is now 1ppt above the latest Norges Bank forecast), high energy prices, and growing foreign demand for Norway's commodities are likely to push the projected policy path upward. However, we expect only one additional hike to be shown this year and another next, which might come as disappointment to markets.”

Danske Bank

“We expect Norges Bank to announce a 25bp rate hike to 0.75%. This is in line with both the consensus and market pricing. The question is which signals will be given about interest rates going forward. We think Norges Bank will use its judgement to signal a continued gradual normalisation of monetary policy with four rate hikes this year and two next year.” 

BBH

“New macro forecasts and an updated rate path will be released at this meeting.  Swaps market is pricing in a terminal policy rate of 1.75% over the next 24 months, which is consistent with the central bank’s December expected rate path.  Swaps market is pricing in nearly 100 bp of tightening over the next 12 months.  We concur and see the bank continuing with its current pace of quarterly 25 bp hikes.” 

ING

“We expect another 25bp rate hike from Norges Bank and for policymakers to signal rate rises in each of the remaining quarters this year. Markets are not pricing much more tightening than already signalled by the Bank, which leaves room for a hawkish surprise this week, and more NOK strength as a result.”

Swedbank

“NoBa’s rate path from December indicates that the policy rate will be hiked further in March, June and some time during second half this year. Further, gradual hikes are seen over the next year and half to reach close to 1.75% by the end of 2024. Our projection entails four hikes this year, one each quarter, to end at 1.50% in 2022 and another two-three hike during 2023 to reach a little over 2%. Market pricing is for close to five hikes this year and a target rate of 2.35%. We see little reason for Norges Bank to be this aggressive this time around, as it would risk stifling the upswing and short-term outlook is more uncertain.”

Credit Suisse

“The Norges Bank will likely hike its deposit rate by 25bps and upgrade its key forecast. All signs point to a relatively upbeat MPR presentation that will not interfere with the recent NOK rally. That being said, we see limited scope for this week’s Norges Bank meeting to provide fresh impetus for NOK strength.”

• DXY reverses Tuesday’s pullback and targets 99.00.
• Next on the upside aligns the weekly top at 99.29 (March 14).

DXY resumes the weekly recovery, although a test/surpass of the 99.00 still remains elusive for USD-bulls.

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). The breakout of this level should put a test of the 2022 peak at 99.41 (March 7) back on the radar sooner rather than later.

The current bullish stance in the index remains supported by the 6-month line just below 96.00, while the longer-term outlook for the dollar is seen constructive while above the 200-day SMA at 94.63.

DXY daily chart

• Wall Street futures trimmed Tuesday’s gains as optimism faded.
• The better performance of the US dollar undermines gold demand.
• Gold Price keeps hovering around a Fibonacci level at $1,925.00.

Gold Price continues to trade uneventfully above the $1,900 level, advancing on Wednesday amid the softer tone of equities as government bonds recover from Tuesday’s collapse. XAUUSD hit an intraday high of $1,936.04 a troy ounce, now trading around $1,928.

Tuesday’s optimism receded during the European session, with most major indexes trading in the red. Wall Street’s futures are also down, practically trimming their previous daily gains, resulting in a better performance of safe-haven assets. The greenback gains bullish traction across the FX board, partially weighing on Gold Price.

Also read: Gold attempts to rebound after testing key support

XAUUSD Technical Outlook

XAUUSD has spent the week hovering around a Fibonacci level, the 50% retracement of this year’s rally at $1,925.20. Movements away from the level have been shallow, although Gold Price bottomed the previous week near the next Fibonacci support level at $1,980.00, while intraday advances fell short of nearing the 38.2% retracement at $1,960.00. Market participants are looking for a clear break of any of those extremes for more sustained directional strength.

Technical readings in the daily chart suggest that Gold Price may come under further pressure, as it has been unable to move beyond a flat 20 DMA for over a week, meeting sellers around it. The same chart shows that technical indicators are directionless around their midlines, reflecting side-lined speculative interest.

From a fundamental perspective, however, XAUUSD has room to appreciate further and retest bears’ determination at around the $2,000 figure, while a break above the latter could result in a test of record highs in the $2,070 price zone.

UK Finance Minister (commonly referred to as the Chancellor of the Exchequer) Rishi Sunak confirmed on Wednesday that fuel duty taxes in the UK would be reduced by GBP 0.05 per liter as expected. The cut will remain in place until March 2023 and will take effect from 1800GMT on Wednesday. The tax relief is estimated to be around GBP 5B in total. 

• EUR/USD is back under 1.1000 as hawkish Fed speak and energy price gains weigh.
• Coming up, Fed speakers will remain in focus alongside geopolitics and March flash PMIs on Thursday.

EUR/USD has subsided back to sub-1.1000 levels for a second successive session having again been unable to break above its 21-Day Moving Average which currently resides near the 1.1050 mark. At current levels in the 1.0980s, the pair is trading lower by about 0.4% on the session and eyeing a test of weekly lows posted on Tuesday in the 1.1060 area, as traders digest the latest batch of commentary from Fed policymakers. Cleveland Fed President Lorretta Mester become the latest of a growing throng of FOMC members to announce support for potential 50bps rate hikes at upcoming meetings and FX strategists think the ongoing hawkish shift in market expectations for Fed tightening in the coming year is providing ongoing support to the US dollar.

Energy prices have also turned higher amid fiery rhetoric from Russian Foreign Minister Sergey Lavrov and further signs that Russo-Ukrainian peace talks are at a deadlock, coupled with fears about Russian exports. This is weighing on the euro and contributing to its relative underperformance on Wednesday versus most of its G10 peers. Coming up, Fed speakers remain in focus for the rest of the week and further hawkish leanings could continue to weigh on EUR/USD, perhaps tilting it towards last week’s near-1.0900 lows. Eurozone and US flash March PMIs will also be in focus on Thursday and will give an early insight as to how the Russo-Ukraine war has impacted business sentiment.

• USD/CAD gained some positive traction on Wednesday and snapped six days of the losing streak.
• The intraday recovery from the two-month low was fueled by modest pickup in the USD demand.
• Rising oil prices underpinned the loonie and might keep a lid on any meaningful gains for the pair.

The USD/CAD pair held on to its intraday gains heading into the North American session and was last seen trading near the daily high, around the 1.2600 round-figure mark.

The pair staged a modest recovery from the two-month low, around the 1.2565 region touched earlier this Wednesday and for now, seems to have snapped six successive days of the losing streak. The uptick was sponsored by the emergence of some US dollar buying, though rising crude oil prices underpinned the commodity-linked loonie and acted as a headwind for the USD/CAD pair.

The USD drew support from the recent blowout rally in the US Treasury bond yields, bolstered by the Fed's hawkish outlook. In fact, the Fed indicated last week that it could raise rates at all the six remaining meetings in 2022. Adding to this, Fed Chair Jerome Powell suggested that the US central bank could adopt a more aggressive policy response to combat high inflation.

Moreover, San Francisco Fed President Mary Daly noted that it was time to remove policy accommodation, while St. Louis Fed President James Bullard and Cleveland’s Loretta Mester called for faster hikes. The markets started pricing in a 50 bps rate hike at the next FOMC meeting and pushed the yield on the benchmark 10-year US government bond yield to the highest level since 2019.

Apart from this, the lack of progress in the Russia-Ukraine peace talks kept investors on the edge and benefitted the safe-haven buck. Italy's Prime Minister Mario Draghi noted that Russia is not showing interest in a truce for successful peace talks. Separately, Russian Foreign Minister Sergei Lavrov said that talks with Ukraine are difficult as Kyiv is constantly changing its position.

This, along with the disruption of Russian and Kazakh crude exports via the Caspian Pipeline Consortium (CPC), boosted crude oil prices and extended some support to the Canadian dollar. Given this week's sustained break and acceptance below the very important 200-day SMA, this might hold back traders from placing aggressive bullish bets around the USD/CAD pair and cap the upside.

Hence, it will be prudent to wait for strong follow-through buying before confirming that the recent pullback from the 1.2900 mark, or the YTD top has run its course. In the absence of any relevant economic data, the US bond yields and the broader risk sentiment will influence the USD. Traders will further take cues from oil price dynamics for some short-term opportunities around the USD/CAD pair.

Technical levels to watch

• EUR/JPY comes under pressure after new highs near 134.00.
• Further upside now targets the 2021 peak at 134.12.

EUR/JPY fails to extend the rally further north of the 134.00 barrier on Wednesday, sparking a corrective downside soon afterwards.

The cross has quickly left behind the previous YTD high beyond 133.00 the figure (March 10), although the subsequent bullish attempt faltered just ahead of the 134.00 mark. The door therefore remains open to a potential visit to the 2021 top at 134.12 (June 1).

In the meantime, while above the 200-day SMA (129.97), the outlook for the cross is expected to remain constructive.

EUR/JPY daily chart

A spokesperson for the German government said on Wednesday that they were not expecting a "big new sanctions package" on Russia to be announced at the EU summit, as reported by Reuters.

The spokesperson further confirmed that German Chancellor Olaf Scholz warned Russian President Vladimir Putin against using chemical or biological weapons in direct talks.

Market reaction

The market mood remains risk-averse on Wednesday and Germany's DAX 30 Index was last seen losing 0.45% on a daily basis. Meanwhile, EUR/USD trades near 1.1000, losing 0.3% on the day.

An adviser for Ukrainian President Volodymyr Zelenskyy said on Wednesday that they see the active phase of the war with Russia ending before the end of April, as reported by Reuters.

"Russia will definitely not wage nuclear war," the advised added and noted that the Russian army has halted in many directions.

Market reaction

These comments failed to help the market mood improve. As of writing, US stock index futures were down between 0.3% and 0.5%. Meanwhile, the US Dollar Index was up 0.22% at 98.65.

• Silver caught fresh bids on Wednesday and recovered a major part of the overnight losses.
• The mixed technical set-up warrants some caution before placing aggressive bullish bets.
• Sustained move beyond $26.00 will negate bearish bias and pave the way for further gains.

Silver regained positive traction on Wednesday and climbed back above the $25.00 psychological mark during the first half of the European session. The uptick allowed the white metal to reverse a major part of the overnight slide to a multi-day low.

From a technical perspective, the XAG/USD once again managed to find decent support and defend the 50% Fibonacci retracement level of the $22.00-$26.95 move up. The subsequent strength favours bullish traders and supports prospects for additional gains.

That said, neutral technical indicators on the daily chart warrants some caution. This makes it prudent to wait for some follow-through buying beyond the 38.2% Fibo. level before traders starts positioning for any further appreciating move for the XAG/USD.

The next relevant hurdle is pegged near the $25.40-$25.50 region, above which the momentum could get extended towards the $26.00 mark. The XAG/USD could then accelerate the move towards the $26.40 intermediate resistance en-route the $27.00 round-figure mark.

On the flip side, the $24.75 area now seems to protect the immediate downside ahead of the $24.55-$24.50 region (50% Fibo. level). A convincing break below would make the XAG/USD vulnerable to slide further towards testing sub-$24.00 levels, or the 61.8% Fibo. level.

The latter coincides with the 200-day SMA and should act as a pivotal point, which if broken will be seen as a fresh trigger for bearish traders. This would set the stage for an extension of the recent pullback from the $27.00 neighbourhood or the highest level since June 2021.

Silver 4-hour chart

Technical levels to watch

• GBP/USD witnessed a sharp pullback from the two-and-half-week top touched on Wednesday.
• A dovish assessment of the BoE decision last week acted as a headwind for the British pound.
• The emergence of some USD buying further contributed to the intraday slide of around 80 pips.

The GBP/USD pair edged lower through the first half of the European session and dropped to a fresh daily low, around the 1.3215 region in the last hour.

The pair witnessed an intraday turnaround from the 1.3200 neighbourhood, or a two-and-half-week high touched earlier this Wednesday and has now eroded a part of the previous day's strong gains. The fact that the Bank of England had softened its language around the need for future rate hikes at the last week's meeting turned out to be a key factor that acted as a headwind for the British pound.

This, to a larger extent, overshadowed hotter-than-expected UK consumer inflation figures and exerted some downward pressure on the GBP/USD pair amid the emergence of some US dollar buying. The headline CPI accelerated to the highest since March 1992 and came in at 6.2% YoY in February. This was above the expected rise to 5.9% from the 5.5% reported in January, though failed to impress bulls.

Conversely, the USD drew support from the recent rally in the US Treasury bond yields, bolstered by the Fed's hawkish outlook. It is worth recalling that the Fed indicated last week that it could raise rates at all the six remaining meetings in 2022. Adding to this, Fed Chair Jerome Powell suggested that the US central bank could adopt a more aggressive policy response to combat high inflation.

San Francisco Fed President Mary Daly noted that it was time to remove policy accommodation, while St. Louis Fed President James Bullard and Cleveland’s Loretta Mester called for faster hikes. The markets were quick to react and started pricing in a 50 bps rate hike at the next FOMC meeting. This, in turn, pushed the yield on the benchmark 10-year US government bond yield to the highest level since 2019.

Apart from this, the lack of progress in the Russia-Ukraine peace negotiations tempered investors' appetite for perceived riskier assets. This was evident from modest pullback in the equity markets, which further benefitted the greenback's relative safe-haven status against its British counterpart. The combination of factors contributed to the GBP/USD pair's intraday slide of around 80 pips.

Market participants now look forward to Fed Chair Jerome Powell and the BoE Governor Andrew Baily's remarks at the BIS innovation summit later today. Apart from this, traders will take cues from fresh developments surrounding the Russia-Ukraine saga. This, along with the US bond yields, will influence the USD price dynamics and produce some trading opportunities around the GBP/USD pair.

Technical levels to watch

Rising bond yields take their toll on gold. The yellow metal is less attractive as a non-interest-bearing alternative investment in this environment, strategists at Commerzbank report.

Ongoing buying interest by ETF investors prevent a more pronounced slide

“Higher bond yields and real interest rates in the US presumably began taking their toll yesterday. Several Fed representatives had likewise spoken out in favour of monetary policy being tightened more quickly or to a greater extent following the speech given by Fed Chair Powell. Yields on ten-year US Treasuries have now climbed further to 2.4%. Rising yields and real interest rates make gold less attractive as a non-interest-bearing alternative investment.”

“In view of the latest steep rise in yields, gold is still holding its own pretty well in our opinion. A more pronounced price slide is probably being prevented by the ongoing buying interest shown by ETF investors: according to Bloomberg, yesterday saw further inflows of nearly ten tons into the gold ETFs it tracks.”

The European Commission announced on Wednesday that European companies affected by sanctions imposed on Russia will get up to 400,000 euros under looser state aid rules, as reported by Reuters.

Additional takeaways

"Companies in agriculture, fisheries, aquaculture can get up to 35,000 euros."

"Companies facing cash crunch can get state guarantees on loans, subsidised loans."

"Companies facing high energy costs can get state aid up to 30% of costs, capped at 2 million euros."

Market reaction

This announcement doesn't seem to be helping the market mood improve and the Euro Stoxx 600 Index was last seen losing 0.2% on a daily basis.

• Gold regained traction on Wednesday amid the lack of progress in the Russia-Ukraine peace talks.
• The Fed’s hawkish outlook, elevated US bond yields could act as a headwind for the precious metal.
• The emergence of some USD buying might further contribute to capping the upside for the commodity.

Gold attracted some buying during the early part of the European session on Wednesday and steadily climbed back above the $1,930 level, hitting a fresh daily high in the last hour. The market sentiment remains fragile amid the lack of progress in the Russia-Ukraine peace negotiations. In fact, Italy's Prime Minister Mario Draghi noted that Russia is not showing interest in a truce for successful peace talks. Separately, Russian Foreign Minister Sergei Lavrov said that talks with Ukraine are difficult as Kyiv is constantly changing its position. This, in turn, tempered investors' appetite for perceived riskier assets, which was evident from modest pullback in the equity markets and benefitted the safe-haven precious metal.

The uptick assisted gold to recover a part of the overnight slide to the multi-day low, though the Fed's hawkish outlook might keep a lid on any meaningful upside. It is worth recalling that the Fed last week indicated it could raise rates at all the six remaining meetings in 2022. Adding to this, Fed Chair Jerome Powell suggested on Tuesday that the US central bank could adopt a more aggressive response to combat stubbornly inflation. Moreover, San Francisco Fed President Mary Daly noted that it was time to remove policy accommodation, while St. Louis Fed President James Bullard and Cleveland’s Loretta Mester called for faster hikes. The markets were quick to price in a 50 bps rate hike at the next FOMC meeting.

The prospects for a faster policy tightening by the Fed pushed the yield on the benchmark 10-year US government bond to its highest level since 2019. This, in turn, assisted the US dollar to attract some dip-buying and should act as a headwind for the dollar-denominated commodity. Hence, the focus will remain clued to Fed Chair Jerome Powell's remarks at the BIS innovation summit later this Wednesday, which might provide some impetus to the non-yielding gold. This, along with fresh developments surrounding the Russia-Ukraine saga, would be looked upon to grab some meaningful trading opportunities around the XAU/USD.

Technical outlook

From a technical perspective, the two-way price moves witnessed over the past one week or so points to indecision amid traders or the next leg of a directional move for gold. This comes on the back of the recent sharp pullback from the vicinity of the all-time high and could be categorized as a bearish consolidation phase. That said, it will be prudent to wait for some follow-through selling before positioning for any further depreciating move. In the meantime, the $1,912-$1,910 area seems to protect the immediate downside ahead of the monthly low, around the $1,895 region. Sustained weakness below will reaffirm the negative bias and drag gold prices towards the next relevant support near the $1,870-$1,868 zone.

On the flip side, immediate resistance is pegged near the $1,936-$1,938 area ahead of the $1,945-$1,950 region. The latter coincides with the top boundary of the aforementioned trading range, which if cleared decisively should pave the way for additional gains. The momentum could then push gold towards the $1,975-$1,976 intermediate hurdle, above which bulls might aim back to reclaim the key $2,000 psychological mark.

Gold 1-hour chart

Key levels to watch

Economist at UOB Group Lee Sue Ann comments on the upcoming Bangko Sentral ng Pilipinas (BSP) monetary policy meeting.

Key Quotes

“We see changes in the Feb MPS as a signal that the BSP is preparing for an earlier rate hike should conditions warrant and inflation surpasses its target range in the near term.”

“Hence, we have revised our outlook to three rate hikes this year with a 25 bps increase in each quarter starting from 2Q22.”

• EUR/USD fades Tuesday’s small advance and trades close to 1.1000.
• German 10y bund yields shed soe ground following recent tops.
• EMU Flash Consumer Confidence, Fed’s Powell next in the docket.

EUR/USD navigates a narrow range in the low-1.1000s amidst the resumption of the demand for the greenback on Wednesday.

EUR/USD looks to USD, yields, Ukraine

EUR/USD remains depressed and comes under renewed selling pressure against the backdrop of persistent geopolitical worries and firmer speculation that the Federal Reserve could now embark on a more aggressive tightening of its monetary conditions.

In addition, German 10y bund yields correct lower and retest the 0.48% area following recent fresh cycle highs. The knee-jerk in yields follows the same performance in the rest of the global cash markets.

In the domestic calendar, the European Commission (EC) will release the preliminary gauge of the Consumer Confidence in the region for the month of March. In the NA session, Chair Powell and San Francisco Fed M.Daly are due to speak along with releases of weekly Mortgage Applications and New Home Sales.

What to look for around EUR

EUR/USD comes under pressure and approaches the key support at the 1.1000 yardstick midweek. 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: EC Flash Consumer Confidence (Wednesday) – 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 1.1015 and faces the next up barrier at 1.1137 (weekly high March 17) followed by 1.1230 (55-day SMA) and finally 1.1277 (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).

" If Russian hydrocarbons are put under sanctions, global oil and gas markets would collapse," Russia’s Deputy Prime Minister Alexander Novak said on Wednesday, as reported by Reuters.

"Russian fuel and energy complex is operating as usual despite western sanctions," Novak further noted and added that the ban on the Nord Stream 2 gas pipeline was an "absurd and complete misunderstanding" of energy balances.

Market reaction

These comments don't seem to be having a noticeable impact on crude oil prices. As of writing, the barrel of West Texas Intermediate was trading near $110, rising 1.2% on a daily basis.

Germany's Ifo Institue announced on Wednesday that they revised the 2022 economic growth forecast lower to 2.2%-3.1% from 3.7% in December due to the Russa-Ukraine war, as reported by Reuters.

Assessing this revision, "the Russian attack is dampening the economy via significantly higher raw material prices, sanctions, increasing supply bottlenecks for raw materials and increased economic uncertainty," Ifo's chief economist Timo Wollmershaeuser.

Meanwhile, the German inflation forecast is revised higher to 5.1%-6.1% in 2022 from 3.3% in December.

Market reaction

Germany's DAX 30 Index showed no immediate reaction to this report and was last seen posting small daily gains at 14,520.

• USD/CHF regained positive traction on Wednesday amid the emergence of some USD buying.
• Elevated US bond yields, the Fed’s hawkish outlook continued acting as a tailwind for the buck.
• Modest pullback in the equity markets benefitted the safe-haven CHF and capped the upside.

The USD/CHF pair maintained its bid tone through the early European session and was last seen trading around the 0.9245 region, just a few pips below the daily high touched in the last hour.

Following the overnight sharp turnaround from the 0.9375 region, the USD/CHF pair regained positive traction on Wednesday and was supported by the emergence of some buying around the US dollar. The recent runaway rally in the US Treasury bond yields acted as a tailwind for the greenback. This, in turn, extended support to the major, though the uptick lacked bullish conviction.

The sell-off in the US bond market gathered pace after Fed Chair Jerome Powell suggested that the US central bank could adopt a more aggressive stance to combat inflation. Moreover, San Francisco Fed President Mary Daly noted that it was time to remove policy accommodation, while St. Louis Fed President James Bullard and Cleveland’s Loretta Mester called for faster hikes.

The markets were quick to price in a 50 bps rate hike at the next FOMC meeting and pushed the yield on the 10-year US bond to the highest level since 2019, which helped limit the downside for the buck. That said, a modest pullback in the equity markets drove some haven flows towards the Swiss franc and kept a lid on any meaningful upside for the USD/CHF pair, warranting caution for bulls.

Hence, it will be prudent to wait for strong follow-through buying before confirming that the pair has bottomed out and positioning for an extension of this week's bounce from sub-0.9300 levels. Nevertheless, the USD/CHF pair, so far, has managed to hold with modest intraday gains as traders look forward to Fed Chair Jerome Powell's remarks for some short-term opportunities.

Technical levels to watch

German Chancellor Olaf Scholz said on Wednesday that he will be discussing high energy prices and market speculation with European Union (EU) leaders this week, as reported by Reuters.

"We will build our own LNG terminals much faster than planned up to now," Scholz added. "Our goal for climate neutrality in Germany by 2045 is more important than ever today."

Market reaction

The shared currency stays on the back foot early Wednesday. The EUR/USD pair was last seen posting small daily losses near 1.1020. Meanwhile, Germany's DAX 30 Index is up slightly on the day at 14,495.

UOB Group’s FX Strategists still see USD/CNH navigating within the 6.3300-6.3900 range for the time being.

Key Quotes

24-hour view: “Our expectations for USD to ‘rise above 6.3800’ did not materialize as it traded sideways within a tight range of 6.3703/6.3779. The underlying tone still appears to be a tad firm and we continue to see chance for USD to rise above 6.3800. The next resistance at 6.3880 is unlikely to come under threat. Support is at 6.3650 followed by 6.3600.”

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.”

Russian Foreign Minister Sergey Lavrov said on Wednesday that talks with Ukraine were difficult because Kyiv was constantly changing its position, as reported by Reuters.

"Sending peacekeepers to Ukraine may lead to a direct confrontation between Russia and NATO," Lavrov added.

Market reaction

The market mood sours in the early European session on Wednesday. The Euro Stoxx 600 Index, which opened in positive territory, was last seen trading flat on the day and the US stock index futures were down between 0.2% and 0.3%.

• DXY trades with marginal gains in the mid-98.00s.
• Upside in US yields seem to have entered a pause mode.
• Powell, Daly, housing data next in the US calendar.

The US Dollar Index (DXY), which tracks the greenback vs. its main rivals, so far manages well to leave behind Tuesday’s pullback and chart decent gains around the 98.50 region.

US Dollar Index looks to geopolitics, Fed

The index regains upside traction and reclaims ground lost on Tuesday on the back of the offered tone in the risk-linked assets, while the recent strong upside in US yields appears to have run out of some steam for the time being.

Also collaborating with the bid bias in the buck appears the absence of news from the geopolitical scenario along with the lack of progress seen in the Russia-Ukraine peace talks in past hours.

Later in the US docket, Chief Powell will participate in a virtual discussion panel organized by the BIS. In addition, San Francisco Fed M.Daly is due to speak, while MBA Mortgage Applications, New Home Sales and the EIA’s report on US crude oil supplies will also be on tap later in the NA session.

What to look for around USD

The weekly recovery in the dollar met resistance near 99.00 so far. 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 0.15% at 98.56 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 continued its rally yesterday in line with yet another sell-off in bonds. Economists at ING expect the pair to reach the 125 level in the near-term. Meanwhile, the fierce hawkish re-pricing of Fed tightening expectations is set to offer a positive undercurrent to the dollar, mostly to the detriment of low-yielders. 

USD/JPY may touch 125 soon

“We still believe USD can count on the supportive undercurrent offered by rising hawkish bets on Fed tightening. Expectations about half-percentage increases have been boosted by recent comments by Chair Jerome Powell and other FOMC members (like James Bullard) and we are seeing markets moving to price in two back-to-back 50bp hikes in May and June (an option that is around 35% embedded into money market pricing).”

“Another question for the dollar is where markets find comfort with their expectations on the Fed’s terminal rate, which are currently around 2.75%, but may soon reach 3.00%. We think this is an environment that should favour the dollar, net of risk-sentiment swings, especially against low-yielders (exposed to higher yields) and European currencies (exposed to lingering uncertainty in Ukraine).”

“After easily breaking above 120, we think a USD/JPY move to 125 in the near-term is likely given the combination of upbeat risk sentiment and rising hawkish bets on the Fed.”

• GBP/JPY witnessed an intraday turnaround from the multi-year peak touched earlier this Wednesday.
• The downfall was exclusively sponsored by the emergence of some selling around the British pound.
• Modest pullback in the equity markets benefitted the safe-haven JPY and contributed to the decline.

The GBP/JPY cross surrendered its intraday gains to the multi-year peak and dropped to a fresh daily low, back closer to the 160.00 mark during the early part of the European session. 

The cross built on the previous day's blowout rally and gained some follow-through traction through the first half of the trading on Wednesday. This marked the fourth successive day of a positive move - also the eight in the previous nine - and was sponsored by the heavily offered tone surrounding the Japanese yen.

Despite worries about the economic impact of the war in Ukraine, an extended sell-off in the bond markets continued driving flows toward big tech and other beaten-down stocks. This, in turn, was seen as a key factor that weighed on safe-haven JPY and pushed the GBP/JPY cross to its highest level since May 2016.

Spot prices, however, struggled to find acceptance above the 161.00 round figure amid the emergence of some selling around the British pound. The fact that the Bank of England had softened its language around the need for future rate hikes at the last week's meeting held back the GBP bulls from placing fresh bets.

On the economic data front, the UK Office for National Statistics reported that the headline CPI accelerated to the highest since March 1992 and came in at 6.2% YoY in February. This was above the expected rise to 5.9% from the 5.5% reported in the previous month, though failed to provide impetus to sterling.

Apart from this, a modest pullback in the equity markets extended some support to the JPY and further contributed to the GBP/JPY pair's sharp intraday slide of nearly 100 pips from the daily peak. Traders now look forward to BoE Governor Andrew Bailey's remarks at the BIS innovation summit for some short-term opportunities.

Technical levels to watch

Gains in EUR/SEK over February and March signal that markets have priced a good deal of geopolitical risk out of the krona. The recent SEK moves have also been driven by a fierce hawkish re-pricing of Riksbank’s rate expectations. In the view of economists at ING, SEK's rally could pause soon.

End of the run?

“While markets appear quite comfortable for now with their optimistic stance on an eventual military de-escalation in Ukraine, their hawkish pricing for multiple hikes in 2022 by the Riksbank may fail to be met by a similar hawkish tone from the Riksbank.”

“In a still quite volatile environment for the pair, we think the risks are skewed to the upside for EUR/SEK as some hawkish expectations on Riksbank tightening may have to be scaled back in the coming weeks.”  

The pound was little moved this morning as annual inflation in the UK hit highest level in three decades at 6.2% in February. Economists at ING expect GBP to remain supported by comments from BoE's Bailey and Chancellor Rishi Sunak.

Focus on Bailey and Sunak

“CPI figures in the UK showed an above-consensus acceleration in inflation. The headline rate reached 6.2% vs the expected 6.0%, and the core advanced to 5.2% in February.”

“The combination of above-consensus inflation, some potential hawkish comments by Bailey and a pro-growth announcement by Sunak could support the view that the BoE will have more room for monetary tightening, ultimately helping the pound today.”

“We expect a decisive break in EUR/GBP below 0.8300. After that, the next big level to watch is the 0.8200 7 March low.”

EUR/USD reversed its direction after declining toward 1.0950 on Tuesday and managed to close above 1.10 with small daily gains. Economists at ING still expect the pair to move downward to the 1.09 level in the coming sessions.

Policy and growth divergence put a cap around the 1.11 zone

“Policy divergence and growth divergence (the latter exacerbated by the war in Ukraine) are, in our view, putting a cap on any recovery in EUR/USD around the 1.11 area.”

“We still see a move to 1.09 in the next few days as more likely.”

Economists at Credit Suisse expect the MAS to increase the slope of the SGD NEER policy band on 14 April and forecast USD/SGD to rise within a range of 1.3450-1.3750.

Hawkish expectations

“We and a majority of economic forecasters expect the MAS to increase the slope of the SGD NEER policy band on 14 April. Given that market expectations for tightening are high, we do not recommend being short USD/SGD or long SGD NEER ahead of the April MAS decision.” 

“USD strength against the NEER basket currencies (including EUR, JPY, MYR AUD and KRW) point to an increase in USD/SGD in the short-term. We forecast USD/SGD to rise within a range of 1.3450-1.3750 in the next three months.”

“The MAS will remain hawkish and will likely tighten again in October as energy prices remain elevated and Singapore’s output gap remains positive. As a medium-term view for further MAS tightening, we would look to receive SGD IRS vs USD, but prefer to wait until after the 14 April decision for better entry levels.”

Gold extends the rejection from its $2,075 record high as the trend shifts sideways again. This trend would be reinforced by a move below the $1,878/73 region, economists at Credit Suisse report.

Gold extends its sharp setback after $2,075 record high capped 

“Gold extends its sharp setback after being capped near exactly at its $2,075 record high and below support at $1,878/73 can reassert a broader sideways trend again.”

“Next support aligns at $1,845.”

The Norwegian krone has managed to rally against most majors in the past two weeks despite Brent crude selling off 10% in the same period. Strategists at Credit Suisse lower their EUR/NOK target range to 9.50-9.95.

Oil prices will remain the key determinant of NOK price action

“In the near-term, we struggle to see a catalyst for an idiosyncratic pullback in energy prices. As such, Norway’s oil exposure looks to continue to be a tailwind for NOK.”

“Disruptions to Russian energy supplies, the looming threat of EU sanctions, and attacks on Saudi oil facilities all suggest oil supply will remain tight. In absence of any indication of resolutions for the aforementioned issues, we are biased to expect more EUR/NOK downside in the near-term.” 

“We lower our EUR/NOK target range to 9.50-9.95, from 9.70-10.15 previously.”

The AUD/USD technical momentum is positive after the breach of the previous year-to-date high (0.7441). Economists at OCBC do not rule out further extension towards the 0.7550 zone.

Buoyant aussie

“The underlying environment – improving sentiment, stability in China, rising commodity prices, unwinding of AUD-shorts – is favourable for the AUD at this juncture.”

“The technical momentum for the AUD/USD could see the pair taken towards 0.7550.”

See: AUD/USD to advance nicely towards 0.7550 – Credit Suisse

EUR/USD has gathered recovery momentum on improving market mood. In case risk flows continue to dominate the financial markets, the pair could extend its rebound in the near-term, FXStreet’s Eren Sengezer reports.

Euro to extend recovery once 1.1040 turns into support

“Later in the day, FOMC Chairman Jerome Powell will deliver a speech. A hawkish tone should help the greenback find demand and vice versa. Additionally, the European Commission will release the preliminary Consumer Confidence data for March, which is expected to decline to -12.9 from -8.8.”

“1.1040 (Fibonacci 50% retracement of the latest downtrend) aligns as the first technical resistance. In case this level turns into support, the next bullish targets align at 1.1080 (Fibonacci 61.8% retracement) and 1.11 (psychological level).”

“Key support seems to have formed at 1.10 (psychological level, Fibonacci 38.2% retracement, 50-period SMA, 100-period SMA). If a four-hour candle closes below that level, sellers could look to take control and drag the pair toward 1.0940 (Fibonacci 23.6% retracement).”

See: EUR/USD to move within a 1.0960 to 1.1140 trading range in the coming sessions – OCBC 

EUR/USD’s dip below 1.10 was quickly reversed. Economists at OCBC Bank expect the pair to trade within a 1.0960-1.1140 range in the next few days.

Front-end yield differentials argue for further downside

“The quick reversals from levels above 1.11 and below 1.10 should reinforce the 1.0960 to 1.1140 trading range in the coming sessions.”

“Front-end yield differentials argue for further downside, but the still-hawkish ECB may hold the line on that front.”

• NZD/USD witnessed modest pullback from the four-month high touched earlier this Wednesday.
• Elevated US bond yields acted as a tailwind for the USD and prompted some intraday profit-taking.
• The risk-on mood, rising commodity prices should help limit losses for the resources-linked kiwi.

The NZD/USD pair edged lower through the early European session and dropped to a fresh daily low, around mid-0.6900s in the last hour.

The pair witnessed modest retracement slide from the four-month high, around the 0.6975 region touched earlier this Wednesday and eroded a part of the previous day's strong gains. The recent runaway rally in the US Treasury bond yields acted as a tailwind for the US dollar, which, in turn, prompted trades to take some profits off their bullish positions around the NZD/USD pair.

The sell-off in the US bond market picked up pace after Fed Chair Jerome Powell suggested that the US central bank could adopt a more aggressive stance to combat inflation. Moreover, San Francisco Fed President Mary Daly noted that it was time to remove policy accommodation, while St. Louis Fed President James Bullard and Cleveland’s Loretta Mester called for faster hikes.

Investors were quick to price in a 50 bps rate hike at the next FOMC meeting and pushed the yield on the 10-year US bond to the highest level since 2019, which helped limit the USD losses. That said, the prevalent risk-on mood, along with rising commodity prices, should lend support to the perceived riskier kiwi and warrants caution before confirming that the NZD/USD pair has topped out.

Even from a technical perspective, the overnight move beyond the 200-day SMA for the first time since November 2021 supports prospects for the emergence of some dip-buying around the NZD/USD pair. Market participants now look forward to Fed Chair Jerome Powell's remarks at the BIS innovation summit. Apart from this, the US bond yields might influence the USD price dynamics.

Traders will further take cues from fresh developments surrounding the Russia-Ukraine saga, which will drive the broader market risk sentiment and commodity prices. The combination of factors should provide some impetus to the NZD/USD pair and allow traders to grab some short-term opportunities.

Technical levels to watch

Strategists at Credit Suisse revise their bullish AUD/USD target from 0.7350 to 0.7550, as rising inflationary pressures point to risks of an earlier-than-expected hawkish turn in Reserve Bank of Australia (RBA) policy.

More upside down under

“We revise our bullish AUD/USD target from 0.7350 to 0.7550, we would look to buy dips below 0.73 and see the pair in a range between 0.72 and 0.76.”

“Second-tier data indicators show rising inflationary pressures, pointing to further risks of an earlier-than-expected hawkish turn in RBA policy rhetoric.”

“Markets will likely continue to view AUD as a clean expression of commodity price strength.”

Thursday’s Swiss National Bank (SNB) meeting could potentially result in some changes to the central bank’s long-term inflation forecast, given the recent positive inflation surprises. Economists at Credit Suisse stick to their 0.97 target in EUR/CHF.

A swift resolution in the Ukraine conflict would be detrimental to CHF

“In light of the increased inflation risks, we find it difficult to imagine a scenario in which the SNB can surprise on the dovish side tomorrow but instead see the risk tilted in the other direction. As such, we stick with our long-held bearish EUR/CHF view and still target 0.97. We would consider our scenario incorrect at levels above 1.0525.”

“The main risk to our outlook lies in a swift resolution in the Ukraine crisis, which would benefit the euro and could lead to a reversal of safe-haven demand for the Swiss franc.”

• GBP/USD struggled to capitalize on its modest intraday gains to a near three-week top.
• Elevated US bond yields acted as a tailwind for the USD and kept a lid on spot prices.
• Hotter-than-expected UK CPI also failed to impress bullish traders or provide impetus.

The GBP/USD pair surrendered its modest intraday gains to the two-and-half-week high and retreated closer to the daily low. The pair was last seen trading around the 1.3265-1.3260 region, nearly unchanged for the day and had a rather muted reaction to the UK consumer inflation figures.

The pair built on the previous day's breakout momentum through the top boundary of a multi-day-old trading range resistance and gained some follow-through traction on Wednesday. The prevalent risk-on mood continued acting as a headwind for the safe-haven US dollar, which, in turn, extended some support to the GBP/USD pair. The intraday uptick, however, lacked bullish conviction and faltered just ahead of the 1.3200 mark.

That said, the recent strong run-up in the US Treasury bond yields, bolstered by the prospects for a faster policy tightening by the Fed, helped limit deeper losses for the buck. In fact, the Fed last week indicated it could raise rates at all the six remaining meetings in 2022. Adding to this, Fed Chair Jerome Powell suggested that the US central bank could adopt a more aggressive response to combat stubbornly inflation.

Moreover, San Francisco Fed President Mary Daly noted that it was time to remove policy accommodation, while St. Louis Fed President James Bullard and Cleveland’s Loretta Mester called for faster hikes. The markets were quick to price in a 50 bps rate hike at the next FOMC meeting and pushed the yield on the 10-year US bond to the highest level since 2019. This seemed to have inspired the USD bulls and capped the GBP/USD pair.

On the economic data front, the UK Office for National Statistics reported that the headline CPI accelerated to 6.2% YoY in February from 5.5% in the previous month. Meanwhile, core CPI jumped to a 5.2% YoY rate during the reported month as against 4.4% in January. The readings were hotter than market expectations, though did little to provide any impetus to the British pound amid a dovish assessment of the recent BoE decision.

It is worth recalling that the UK central bank also softened its language around the need for future rate hikes at its meeting last week. Hence, the market focus now shifts to BoE Governor Andrew Bailey's remarks at the BIS innovation summit. This, along with comments by Fed Chair Jerome Powell at the same event, will influence the USD price dynamics and produce some meaningful trading opportunities around the GBP/USD pair.

Technical levels to watch

The strong upside momentum could push USD/JPY to the 121.50 region in the next weeks, commented FX Strategists at UOB Group.

Key Quotes

24-hour view: “We indicated yesterday that ‘the rapid improvement in upward momentum is likely to lead to further USD strength’. We added, ‘the next resistance is at 120.40’. While our view for a stronger USD was correct, we did not expect the outsized rally as USD rocketed to 121.03 before extending its gains after the end of NY session. Further USD strength is not ruled out but in view of the deeply overbought conditions, a sustained rise above the major resistance at 121.50 is unlikely. On the downside, a breach of 120.30 (minor support is at 120.55) would indicate that the current USD rally is ready for a breather.”

Next 1-3 weeks: “We turned positive in USD about two weeks ago. As USD rallied past our objectives, in our latest narrative from yesterday (22 Mar, spot at 120.00), we held the view that USD could continue to rise, albeit at a slower pace. However, USD blew past the 120.40 resistance and rocketed above 121.03. While it is left to be seen if USD can maintain the current frenetic pace of advance, the risk is clearly for further USD strength. The next resistance level of note is at 121.50 followed by 122.00. Only a breach of 119.60 (‘strong support’ level was at 118.90 yesterday) would indicate that the current strong upward pressure has eased.”

Considering preliminary readings from CME Group for natural gas futures markets, open interest reversed two daily pullbacks in a row and increased by around 2.7K contracts. Volume followed suit and rose by around 156.7K contracts, the largest single-day build since February 2.

Natural Gas: Next on the upside emerges the 2022 high

Tuesday’s moderate advance in prices of natural gas was in tandem with rising open interest and volume, opening the door to the continuation of the rebound to, initially, the YTD peak around $5.60 per MMBtu (February 2).

Here is what you need to know on Wednesday, March 23:

The dollar failed to preserve its strength in the second half of the day on Tuesday and the US Dollar Index ended up closing in negative territory. Although the benchmark 10-year US Treasury bond yield climbed to its highest level since May 2019, the risk-positive market environment made it difficult for the greenback to find demand. Markets remain relatively quiet early Wednesday as investors await FOMC Chairman Jerome Powell's speech, February New Home Sales data from the US and the European Commission's preliminary Consumer Confidence report for March.

The S&P 500 Index rose more than 1% on Tuesday and US stock index futures are posting small daily gains heading into the European session.

Ukrainian President Volodymyr Zelenskyy said on Tuesday that they were ready to discuss commitment not to join NATO and added that they could also discuss the status of Crimea and Donbass after the ceasefire. Meanwhile, the Wall Street Journal reported that US President Biden was planning to sanction "hundreds of Russian lawmakers" as early as Thursday. Commenting on the economic impact of the Russia-Ukraine conflict, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said that the war would slow economic growth but added that they were not yet expecting a global recession.

EUR/USD reversed its direction after declining toward 1.0950 on Tuesday and managed to close above 1.1000 with small daily gains. The pair continues to edge higher early Wednesday toward 1.1050.

GBP/USD rose toward 1.3300 but seems to have lost its bullish momentum. The data published by the UK's Office for National Statistics revealed that inflation, as measured by the Consumer Price Index (CPI), jumped to 6.2% on a yearly basis in February from 5.5% in January. 

Gold fell sharply on Tuesday and erased all the gains it registered on Monday. Surging US Treasury bond yield weighed heavily on the yellow metal and XAU/USD was last seen trading in negative territory below $1,920. 

USD/JPY extended its impressive rally and rose more than 100 pips on Tuesday. The pair preserves its bullish momentum and trades at its strongest level since February 2016. Earlier in the day, Japanese Prime Minister Fumio Kishida said that they were likely to order an additional economic stimulus package by the end of March to cushion the impact of the rising prices of oil and other goods.

NZD/USD advanced to its highest level since November before going into a consolidation phase near 0.6950 on Wednesday. New Zealand Prime Minister Jacinda Ardern announced earlier in the day that they decided to ease the COVID-linked activity restrictions from Wednesday morning in Auckland.

After managing to hold above $40,000 earlier in the week, Bitcoin gained more than 3% on Tuesday. BTC/USD is moving up and down in a narrow channel around $42,000 on Wednesday. Ethereum reached its highest level in more than a month at $3,050 on Tuesday but retreated below $3,000 early Wednesday.

In opinion of FX Strategists at UOB Group, further upside in AUD/USD is expected to meet a strong resistance around 0.7500 in the short term.

Key Quotes

24-hour view: “The sharp and swift rally in AUD that sent it soaring to 0.7472 came as a surprise (we were expecting sideway-trading). Conditions are deeply overbought and while further AUD strength is not ruled out, a break of the major resistance at 0.7500 appears unlikely for today (there is a minor resistance at 0.7480). On the downside, a breach of 0.7415 would indicate that the current upward pressure has eased (minor support is at 0.7435).”

Next 1-3 weeks: “We have expected a stronger AUD since late last week (see annotations in the chart below). In our latest narrative from yesterday (22 Mar, spot at 0.7395), we highlighted that AUD could consolidate for a couple of days first before moving higher to 0.7440. However, AUD was in a hurry as it cracked 0.7440 and surged to a high of 0.7472 during late NY hours. While shorter-term conditions are overbought, further AUD strength appears likely. That said, 0.7500 is a weekly resistance level (see 1-3 months view below) and may not be easy to break. Looking ahead, if there is a clear break of 0.7500, it could lead to a rapid rise to 0.7555. Overall, the current AUD strength could last for a while more and only a breach of 0.7360 (‘strong support’ level was at 0.7320) yesterday would indicate that the current upward pressure has eased.”

Inflation in the UK, as measured by the Consumer Price Index (CPI), jumped to 6.2% on a yearly basis in February from 5.5% in January. This print surpassed the market expectation of 5.9%.

Annual Core CPI, which excludes volatile food and energy prices, rose to 5.2% from 4.4%, compared to analysts' estimate of 5%. 

Further details of the report revealed that the annual Retail Price Index climbed to 8.2% from 7.8% as expected and the Producer Price Index (input) stretched higher to 14.7% from 14.2% in the same period.

Market reaction

These figures don't seem to be having a significant impact on the British pound's performance against its rivals. As of writing, the GBP/USD pair was posting small daily gains at 1.3277.

Gold price is defending the critical upward-sloping 200-Simple Moving Average (DMA) at $1,914 on the four-hour chart. XAU/USD would resume the downward momentum on a  break under the latter, FXStreet’s Dhwani Mehta reports.

The path of least resistance appears south

“If gold price yields a downside break of the 200-DMA at $1,914, then a test of the $1,900 barrier will be inevitable. The March 16 lows of $1,895 could then come to the rescue of gold bulls. Further down, the February 24 low of $1,878 will come into play once again.”

“Gold buyers need to find acceptance above the bearish 21-SMA at $1,928 to unleash the additional recovery towards the 50-SMA hurdle at $1,938. The recent range highs around $1,941 will be put to test, as bulls set their eyes on the horizontal 100-SMA at $1,955.”

See – Gold Price Forecast: XAU/USD to test record $3,100 should the Fed remain materially behind the curve – TDS

• WTI retreats from short-term key Fibonacci retracement level, stays near two-week top.
• MACD conditions, sustained trading beyond the key technical supports favor buyers.
• A convergence of 50-DMA, two-month-old rising support line challenges bears.

WTI crude oil prices pare intraday losses around $109.00 heading into Wednesday’s European session.

The black gold refreshed a fortnight top the previous day before taking a U-turn from $112.90. The pullback moves could be linked to the commodity’s inability to cross the 23.6% Fibonacci retracement (Fibo.) level of December 2021 to March 2022 upside.

However, the receding bearish bias of the MACD and the quote’s ability to stay successfully above the 50-DMA, as well as an upward sloping support line from late January, near $95.00-94 of late, keep the buyers hopeful.

Ahead of the $94.00 support, a monthly horizontal area between $100.00 and $101.00 will challenge the bears.

On the contrary, a clear upside break of the aforementioned Fibo level surrounding $111.50 could quickly jump to the early month peak near $114.50.

Following that, the $120.00 round figure and the monthly high of $126.51 should be eyed during the further upside momentum.

WTI: Daily chart

Trend: Further upside expected

CME Group’s flash data for crude oil futures markets noted open interest extended the downtrend for yet another session on Tuesday, now by around 2.4K contracts. Volume, instead, went up for the second consecutive session, this time by around 16.5K contracts.

WTI still targets the $115.00 level

Tuesday’s corrective downside in prices of WTI was on the back of diminishing open interest, indicative that a probable rebound could be shaping up in the very near term. Against that, further upside in crude oil prices continues to target the $115.00 region (March 10 high).

• Palladium prices fade bounce off multi-day-long support trend line.
• Bearish MACD, failures to cross 21-DMA keep sellers hopeful.
• Convergence of 50-DMA, 100-DMA appears tough nut to crack for bears.

Palladium (XPD/USD) retreats to $2,515 while paring the intraday gains ahead of Wednesday’s Asian session.

The precious metal bounced off an upward sloping support line from mid-December 2021 during the last week. However, the following rebound couldn’t even cross the 21-DMA.

That said, bearish MACD signals also favor sellers even if the quote stays 1.30% up intraday as the 50% Fibonacci retracement (Fibo.) of December-March upside, near $2,487, limits the short-term downside.

In a case where the quote drops below $2,487, the aforementioned support line from late 2021, around $2,455 by the press time, will be crucial to watch for the XPD/USD bears as a break of which will direct the quote towards 61.8% Fibonacci retracement level of $2,261.

Should palladium bears keep reins past $2,261, a confluence of the 100-DMA and the 200-DMA surrounding $2,160-70, will be on their radar.

Alternatively, recovery moves beyond the 21-DMA level of $2,682 needs validation from the $3,000 round figure to recall the XPD/USD buyers eyeing the monthly top near $3,411.

Palladium: Daily chart

Trend: Further weakness expected

Further upside momentum could push GBP/USD back above the 1.3300 mark in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “Yesterday, we expected GBP to ‘trade sideways within a range of 1.3120/1.3220’. GBP subsequently dipped to 1.3121 before staging a surprising strong rally that not only took out the top of the expected range at 1.3220 but also another strong resistance at 1.3260 (high has been 1.3274). The rally has room to extend but overbought conditions suggest that the major resistance at 1.3325 is likely out of reach for now (minor resistance is at 1.3300). On the downside, a breach of 1.3210 (minor support at 1.3235) would indicate that the current upward pressure has eased.”

Next 1-3 weeks: “We turned positive on GBP last Thursday (17 Mar, spot at 1.3150) where we indicated that the rebound in GBP could extend to 1.3320. As GBP strengthen, in our latest narrative from yesterday (22 Mar, spot at 1.3160), we indicated that there is room for GBP to move above 1.3220. We added, “any further advance is expected to face solid resistance at 1.3260”. GBP subsequently dipped to 1.3221 before rallying past both 1.3220 and 1.3260 (high of 1.3274). The strong boost in momentum is likely lead to further GBP strength to 1.3325, possibly 1.3365. The upside risk is intact as long as GBP does not move below the ‘strong support’ at 1.3160 (level was at 1.3090 yesterday).”

Open interest in gold futures markets resumed the downtrend and shrank by nearly 5K contracts on Tuesday according to advanced figures from CME Group. On the other hand, volume rose for the third session in a row, this time by around 4.5K contracts.

Gold remains supported near $1900

Tuesday’s downtick in gold prices was on the back of shrinking open interest, removing strength from a potential deeper pullback and allowing some consolidative move in the very near term. Against this, prices of bullion appear supported around the $1900 region so far.

• USD/CAD bears keep reins around the lowest levels in two months.
• US dollar fails to cheer multi-month high Treasury yields.
• Oil prices regain upside momentum on geopolitical fears, softer greenback.
• Fed’s Powell, risk catalysts eyed for fresh impulse.

USD/CAD licks its wounds around a two-month low, retreats to 1.2575 heading into Wednesday’s European session.

The Loonie pair broke key supports the previous day while refreshing multi-day low amid broad US dollar weakness. That said, firmer prices of Canada’s key export item WTI crude oil seem to keep the pair sellers hopeful of late.

It should be noted that no positive announcements from the Ukraine-Russia peace talks, as well as Moscow’s war in Mariupol, keep the oil prices firmer even as indecision over Europe’s sanctions previously triggered the black gold’s pullback.

At the latest, prices of WTI crude oil reverse the previous day’s pullback from a two-week high, up 1.30% daily near $109.70.

Additionally favoring the USD/CAD sellers could be the US dollar’s failures to cheer the multi-month high US Treasury yields. Though, the market’s anxiety ahead of the speech from Fed Chairman Jerome Powell, who triggered bond rout during the early-week appearance, seems to restrict the momentum traders of late.

Against this backdrop, the US 10-year Treasury yields renewed the highest levels since May 2019 earlier in Asia, around 2.40% at the latest while the stock futures struggle to track Wall Street’s gains by the press time.

In addition to the speech from Fed’s Powell, risk catalysts are also important for USD/CAD traders to watch.

Technical analysis

USD/CAD sellers cheer the previous day’s clear downside break of an ascending trend line from June 2021 and the 200-DMA, respectively around 1.2585 and 1.2615, while targeting the 50% Fibonacci retracement (Fibo.) of June to December 2021upside, near 1.2485. However, the yearly low surrounding 1.2450 will challenge the pair bears afterward.

FX Strategists at UOB Group still expect EUR/USD to trade within the 1.0950-1.1150 range for the time being.

Key Quotes

24-hour view: “We highlighted yesterday that EUR ‘could trade lower but any weakness is unlikely to challenge the major support at 1.0950’. While our view turned out to be correct as EUR dropped to 1.0959, we did not expect the subsequent sharp rebound from the low. Despite the rebound, upward momentum has not improved by much. That said, there is room for EUR to edge higher but any advance is likely limited to a test of 1.1070. Support is at 1.1005 followed by 1.0980.”

Next 1-3 weeks: “Our view from two days (21 Mar, spot at 1.1040) still stands. As highlighted, EUR appears to have moved into a consolidation phase and is likely to trade between 1.0950 and 1.1150 for now.”

• USD/TRY is juggling in a range of 14.80-14.84.
• The RSI (14) has shifted into 40.00-60.00, which signals a consolidation ahead.
• The major may expose to 200 EMA after slipping below last week’s low.

The USD/TRY pair is oscillating in a narrow range of 14.80-14.84 in the Asian session. The major has performed lackluster in March and has been stuck around 20-period Exponential Moving Average (EMA), which is trading near 14.80.

On a four-hour scale, USD/TRY is auctioning in a rising wedge in which the market participants consider pullback towards the lower end as a buying event. The upper end of the rising wedge is marked from February 24 high at 14.66 while the lower end is placed from January 28 low at 13.73.

The Relative Strength Index (RSI) (14) has shifted into the 40.00-60.00 range from the bullish range of 40.00-60.00, which indicates consolidation ahead. While the 200-period EMA at 14.25 will continue to act as major support going forward.

For the downside, the Turkish lira bulls need to violate March 17 low at 14.58, which will drag the asset near last week's low at 14.39. Breach of the latter will expose the pair to the 200-period EMA at 14.25.

On the contrary, greenback bulls can gain momentum if the asset surpassed March 14 high at 14.90, which will send the pair towards the upper end of the rising wedge near 15.35, followed by the 16 December 2021 high at 15.75.

USD/TRY four-hour chart

International Monetary Fund (IMF) Managing Director Kristalina Georgieva warned about risks to the global economic growth due to the Ukraine crisis while speaking in an online event hosted by Foreign Policy magazine on Tuesday.

The IMF “forecasts due in April will show that the war in Ukraine will slow global economic growth, but will not cause a global recession,” Georgieva said.

She added: “Some weak emerging economies still struggling with the COVID-19 pandemic face the risk of recession due to shocks from higher food and energy prices, and tighter financial conditions due to interest rate hikes in advanced economies.”

Market reaction

Despite several global agencies raising red flags on the global economic damage due to the Russian invasion of Ukraine, the market mood remains upbeat, reflective of the 0.20% gains in the S&P 500 futures. Meanwhile, the US dollar index remains on the backfoot below 98.50.

The UK CPIs Overview

The cost of living in the UK as represented by the Consumer Price Index (CPI) for February month is due early on Wednesday at 07:00 GMT. Given the recently strong employment data, coupled with the Bank of England’s (BOE) cautious rate-hike and expectations of higher inflation, today’s data will be watched closely by the GBP/USD traders.

In addition to the UK inflation data, British Spring Budget will also be released during the day, which in turn makes Wednesday the key data for GBP/USD traders.

The headline CPI inflation is expected to refresh 30-year high with a 5.9% YoY figure versus 5.5% prior while the Core CPI, which excludes volatile food and energy items, is likely to rise to 5.0% YoY during the stated month, from 4.4% previous readouts. Talking about the monthly figures, the CPI could increase to 0.6% versus -0.1% prior.

It’s worth noting that the recent pressure on wage prices and a light workforce also highlights the Producer Price Index (PPI) as an important catalyst for the immediate GBP/USD direction. That being said, the PPI Core Output YoY may rise from 9.3% to 10.0% on a non-seasonally adjusted basis whereas the monthly prints may ease to 0.9% versus 1.1% prior. Furthermore, the Retail Price Index (RPI) is also on the table for release, expected to rise to 8.2% YoY from 7.8% prior while the MoM prints could inflate to 0.8% from 0.0% previous readings.

In this regard, analysts at Westpac said,

Deviation impact on GBP/USD

Readers can find FXStreet's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined around 20-pips in deviations up to + or -2, although in some cases, if notable enough, a deviation can fuel movements over 60-70 pips.

How could it affect GBP/USD?

GBP/USD upside stalls around 1.3285-90 during Wednesday’s Asian session but the bulls keep reins around a 13-day high. The cable’s latest gains could be linked to the US-UK trade deal and hopes of firmer British inflation figures pushing the Bank of England (BOE) for faster rate hikes. Additionally, chatters that UK’s Chancellor Rishi Sunak will try their best to not disappoint votes during the Spring Budget communiqué also favor GBP/USD buyers.

That said, upbeat inflation data, which is more likely, can help the GBP/USD extend the latest advances. However, Treasury bond yields and GILTS are also likely to play an important role in determining short-term cable moves.

Technically, a clear upside break of the one-month-old horizontal resistance, now support around 1.3265-70,  directs GBP/USD buyers towards January’s low near 1.3360.

In this regard, FXStreet’s Dhwani Mehta says

Key notes

UK Inflation Preview: Another hit to British households, and to the pound?

GBP/USD marches towards 1.3300 ahead of UK’s CPI numbers

About the UK CPIs

The Consumer Price Index released by the Office for National Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as positive (or bullish) for the GBP, while a low reading is seen as negative (or Bearish).

Speaking in Indonesia, the Russian ambassador said that G20 is not a forum to discuss or solve the crisis in Ukraine.

Additional comments

“Moscow strongly supports Indonesia’s presidency of G20.”

Up to now President Vladimir Putin plans to attend the G20 summit.”

Related content

• Russia-Ukraine War: Five reasons a deal may be closer than it seems, what it means for the dollar
• Russia's Envoy in Indonesia: G20 is not a forum to discuss or solve crisis in Ukraine

• Gold prices remain pressured despite recent inaction as Treasury yields renew multi-month top.
• Stock futures print mild gains but USD bulls stay cautious ahead of Powell’s speech.
• Ukraine-Russia crisis continues to take a toll on sentiment, Western sanctions eyed.
• Gold Price Forecast: XAU/USD braces for another hit, with eyes on Powell and yields

Gold (XAU/USD) prices tread water around $1,920-25 heading into Wednesday’s European open. It should be noted that the metal dropped the most since June 2021 the previous week and stays depressed so far during the current week.

In doing so, the bright metal struggles for clear direction as the US dollar refrain from rising despite multi-month high Treasury yields. Also restricting the bullion’s immediate moves is the market’s anxiety ahead of a speech from Fed Chairman Jerome Powell and mixed concerns over the Ukraine-Russia stand-off.

The US Dollar Index (DXY) remains lackluster around 98.50 even as the US Treasury yields rally to a three-year high. The reason could be linked to the hopes that central bankers to return to normal after they’re done fighting the inflation woes. It’s worth noting that the global bond markets print the record loss if counted from 2021 top, per Bloomberg.

Other than the central bank chatters, the indecision over the Kyiv-Moscow story also limits XAU/USD moves. Recently, Ukraine’s easy stand fails to provide any positive impact as Russian ships play hardball in Mariupol. Also challenging the odds of improving are the Western sanctions. The Wall Street Journal (WSJ) signaled that the Biden administration is up for sanctioning over 300 Russian lawmakers while also showing readiness to seize Moscow’s gold with their Treasury.

Amid these plays, the US 10-year Treasury yields renew the highest levels since May 2019, around 2.41% at the latest while the 2-year counterpart prints 2.19% figure by the press time, after renewing three-year top to 2.198% before a few minutes. Also, the stock futures struggle to track Wall Street’s gains by the press time.

To gain more clarity over gold prices move, market players will keep eyes on today’s speech from Fed’s Powell as his early-week comments triggered the bond rout.

Technical analysis

Although sluggish MACD and steady RSI portray gold traders’ indecision, failures to cross the 100-SMA and a one-month-old horizontal area keep sellers hopeful.

That said, the 200-SMA defends intraday bulls around $1,914, a break of which will direct the quote towards an ascending support line from February 24, near $1,900 by the press time.

It should be noted, however, that the late February’s swing low surrounding $1,878 will act as the last defense for gold buyers.

Alternatively, the 100-SMA level near $1,955 restricts the XAU/USD upside ahead of the aforementioned horizontal resistance zone close to $1,970-75.

In a case where gold prices rally beyond $1,975, a run-up towards the $2,000 psychological magnet can’t be ruled out.

Gold: Four-hour chart

Trend: Further weakness expected

• XPT/USD has found extreme selling pressure near 200 EMA.
• Platinum has failed to sustain above 23.6% Fibo retracement at $1,031.80.
• The asset may likely revisit monthly lows after slipping below $1,000.

Platinum (XPT/USD) has witnessed a steep fall after failing to breach the previous two-day's high near $1,045.64. The precious metal has extended its weakness after violating Monday’s low at $1,032.39.

On an hourly scale, Platinum has sensed resistance while overstepping 200-period Exponential Moving Average (EMA), which has dragged the asset lower. The precious metal has failed to sustain above 23.6% Fibonacci retracement (placed from March 8 high at $1,182.49 to last week’s low at $984.35) at $1,031.80. The asset has witnessed some significant offers after violating the trendline on the downside placed from March 17 low at $1,012.45.

The 20-period EMA at $1,026 will continue to act as a major barricade going forward.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted to a bearish range of 20.00-40.00 from 40.00-60.00, which indicates a bearish setup and weakness ahead.

Should the asset drops below Tuesday’s low at $1,015.47, Platinum may observe selling pressure, which will drag the asset near the psychological support at $1,000, followed by last week’s low at $984.35.

On the contrary, bulls can obtain strength if they violate 23.6% Fibo retracement at $1,031.80, which will drive the pair towards Tuesday’s high at $1,045.64. Breach of the latter will expose it to an ultimate target of 38.2% Fibo retracement at $1,060.00.

Platinum hourly chart

• EUR/USD fades bounce off weekly low as traders await key catalysts.
• US Treasury yields refresh three-year high, global bonds mark biggest fall on record as central bankers brace for tighter monetary policy.
• Ukraine-Russia tussles continue, US braces for more sanction on Moscow but Europe remains divided.
• Covid resurgence adds to the list of catalysts needing attention, bears eye Powell’s hawkish remarks.

EUR/USD remains pressured around 1.1025 on the US dollar’s resistance to extending the previous day’s losses during Wednesday morning in Europe. Also challenging the major currency pair is the cautious mood ahead of the speech from Federal Reserve (Fed) Chairman Jerome Powell amid record losses in bond markets.

While Powell’s early-week comments are held responsible for the latest slump in the bond market, St Louis Fed President James Bullard and Cleveland Fed President Loretta Mester were the recent ones who favored 50 basis points (bps) of a rate lift. It’s worth noting that swirling money market bets of a 190 bps rate hike by the Fed during 2022 also weigh on the US Treasury yields.

That said, the US 10-year Treasury yields renew the highest levels since May 2019, around 2.41% at the latest while the 2-year counterpart prints 2.19% figure by the press time, after renewing three-year top to 2.198% before a few minutes.

Even so, the US dollar struggles to cheer the gain of the Treasury yields as market players do expect central bankers to return to normal after they’re done fighting the inflation woes, hopefully after the Ukraine-Russia war gets over.

Talking about the Moscow-Kyiv tussles, Ukraine’s recently easy stand fails to provide any positive impact as Russian ships play hardball in Mariupol. Also challenging the odds of improving are the Western sanctions. Recently, the Wall Street Journal (WSJ) signaled that the Biden administration is up for sanctioning over 300 Russian lawmakers while also showing readiness to seize Moscow’s gold with their Treasury.

On the contrary, European policymakers remain divided over the Russian sanctions due to their reliance on the oil imports from Moscow. The same propels the market’s criticism of the bloc and highlights this weeks’ Eurogroup meeting.

Elsewhere, rising covid variant numbers in Europe and China’s record high daily virus infections, as well as fresh lockdowns, challenge the market sentiment, as well as the EUR/USD buyers.

Amid these plays, the stock futures struggle to track Wall Street’s gains and exert downside pressure on the EUR/USD prices.

Looking forward, Fed’s Powell is less likely to surprise the markets, expected to reiterate his previous hawkish signals, which in turn can keep EUR/USD sellers hopeful. However, risk catalysts are important too.

Technical analysis

EUR/USD bounced off the support line of a 12-day-long rising wedge bearish chart pattern, near 1.0980 at the latest, the previous day. However, a downward sloping resistance line from February 10, close to 1.1065 by the press time, seems to challenge the bulls of late. Also important to note are the bearish MACD signals that hint at the quote’s further declines.

• Nikkie225 outperforms ahead of Fed Powell’s speech.
• Asian markets are shrugging off the aggressive hawkish stance from the Fed.
• US Treasury yields are gaining higher on expectations of a 50 bps rate hike in May’s monetary policy.

Markets in the Asian domain part ways with the Chinese stocks as the latter has shown subdued performance in the Tokyo session while other markets are performing stronger.

At the press time, Hang Seng surges 1.58%, Nifty 50 jumps 0.43% while Japan’s Nikkei225 outperforms by gaining 2.58%. Meanwhile, the China A50 is trading flat to negative.

It is worth noting that the global equities have shrugged off the pessimism due to the adaptation of an aggressive hawkish stance by the Federal Reserve (Fed) to corner the inflation. Usually, central banks start increasing interest rates when it finds inflation surging rooftops. Also, central banks stop providing helicopter money to the economy when they find that economy is strong enough and is able to perform itself without any material support. Asian markets are getting mature these days and are taking the announcement of six more interest rate hikes in a positive way. Therefore, a sense of optimism in the Asian markets has been witnessed from a spree of upticks in the last few trading sessions.

Meanwhile, the 10-year US Treasury yields are auctioning near 2.42% amid the expectation of a 50 basis point (bps) rate hike in May’s monetary policy.

Going forward, the speech from Fed Chair Jerome Powell will be the major event on Wednesday. It is highly likely that a roadmap of rate hikes will be dictated as six more rate hikes are to be allocated by the end of 2022. Apart from that the European Union (EU) leaders summit and NATO meeting will hold significant importance.

• GBP/JPY remains on the front foot around multi-month high, recently sidelined.
• Global Treasury yields drop 11% from 2021 peak, marking the biggest fall on record.
• Hopes of Japan stimulus, mixed headlines over Russia-Ukraine probe buyers of late.
• UK CPI, Spring Budget will be important to watch, yields are the key.

Having rushed to the highest levels since May 2016, GBP/JPY bulls take a breather around 160.90 as markets await the key British data/events up for publishing amid Wednesday’s London session.

Alike other yen pairs, GBP/JPY’s latest rally could well be linked to the strong Treasury yields across the board. “The Bloomberg Global Aggregate Index, a benchmark for government and corporate debt, has fallen 11% from a high in early 2021. That’s the biggest decline from a peak in data stretching back to 1990, surpassing a 10.8% drawdown during the financial crisis in 2008,” said Bloomberg.

It’s worth noting that the US 10-year Treasury yields renew the highest levels since May 2019, around 2.41% at the latest while the 2-year counterpart prints 2.19% figure by the press time, after renewing three-year top to 2.198% before a few minutes.

Underpinning the latest bond round is the Fedspeak that 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, which in turn adds to the GBP/JPY upside. On the same line was news of the US-UK deal to eliminate tariffs on British steel and aluminum.

That said, covid woes in China and an extended war between Ukraine and Russia weigh on the GBP/JPY upside.

Moving on, Britain’s Consumer Price Index (CPI) data for February will be crucial for the GBP/JPY prices amid hopes of a faster rate hike by the Bank of England (BOE). Additionally important will be the UK’s Spring Budget which will be weighed on the government spending amid ballooning deficit.

Read: UK Inflation Preview: Another hit to British households, and to the pound?

"Sunak is likely to announce a 'relatively modest' increase in defense spending, in line with inflation, after security became a priority for British voters following Russia’s invasion of Ukraine last month," said Citibank ahead of the event.

Technical analysis

A clear upside break of the 10-month-old rising trend line, around 160.30 by the press time, directs GBP/JPY buyers towards the May 2013 peak of 163.90.

• USD/INR remains depressed after declining the most in a week the previous day.
• 50-SMA pierces 100-SMA from above, suggesting further downside amid steady RSI, sluggish MACD.
• Failures to extend fortnight-old trend line break adds strength to the bearish bias.

USD/INR struggles to defend the 76.00 threshold, sidelined during the mid-Asian session on Wednesday.

That said, the Indian rupee (INR) pair portrayed a bear-cross moving average formation suggesting further downside the previous day while posting the biggest daily loss in a week.

However, sluggish MACD and the resistance-turned-support line from March 08, near 75.95, challenge the USD/INR sellers.

On a clear break of the 75.95, the pair will confirm the bear cross and decline further towards the 200-SMA level surrounding 75.65.

However, the monthly low near 75.20 and the 75.00 psychological magnet will test the USD/INR pair’s further declines.

Alternatively, recovery moves remain elusive until crossing the SMA convergence near 76.25-30.

Following that, a run-up towards the 77.00 round figure and then to the monthly high around 77.17 can’t be ruled out.

USD/INR: Four-hour chart

Trend: Further weakness expected

• Aussie bulls are hovering around the rising channel surface.
• The RSI (14) has displayed a loud move that indicates significant control of the bulls.
• The 100 and 200-period EMAs are scaling higher, which signals more gains ahead.

The AUD/USD pair has extended its gains after overstepping the last week’s high of 0.7418 on Tuesday. In the Tokyo session, the asset is performing lackluster, hovering around Tuesday’s high at 0.7477. The pair has been performing stronger after hitting a low of 0.7165 last week.

On a four-hour scale, AUD/USD is trading in a wider-than-normal rising channel in which the upper end is placed from January 13 high at 0.7315 while the lower end is marked from January 28 low at 0.6967. Generally, a rising channel indicates back and forth moves along with a positive bias. Every pullback towards the lower end of the rising channel originates as a buying event for the market participants.

The Relative Strength Index (RSI) (14) has entered into the bullish area of 60.00-80.00, which signals the continuation of a firmer rally ahead. The oscillator is not indicating any sign of divergence and overbought. It is worth noting that the oscillator has shown a loud move (entered into a bullish range from the bearish range of 20.00-40.00 without any pullback). Usually, these louder moves indicate significant control of the bulls on the asset.

The 100 and 200-period Exponential Moving Averages (EMAs) at 0.7358 and 0.7273 respectively are scaling higher, pointing more upside ahead.

For further upside, bulls need to violate the upper end of the rising channel and breach the 1 November 2021 low at 0.7485 on the upside, which will send the pair to 29 October 2021 high at 0.7556, followed by round level resistance at 0.7600.

Should the asset slip below Monday’s low at 0.7373, aussie bulls may witness significant offers, which will drag the pair near round level support and the 20-period EMA at 0.7300 and 0.7273 respectively.

AUD/USD four-hour chart

The Citigroup analysts believe that the European budget stocks are expected to benefit from UK Chancellor Rishi Sunak’s spring budget, which will be announced on Wednesday.

Key quotes (via Bloomberg)

Sunak is likely to announce a “relatively modest” increase in defense spending, in line with inflation, after security became a priority for British voters following Russia’s invasion of Ukraine last month.”

“The public desire for the government to take some sort of action will register very clearly.”

“With the Labour Party also calling for a rise in defense spending, the government is unlikely to want to look weak on this issue.”

“Sunak may feel that, irrespective of the political capital defense increases may generate for the government, it will soon be eroded if inflation gets out of control.”

“Among companies, QinetiQ Group Plc and BAE Systems Plc would likely be the biggest beneficiaries of a U.K. defense spending uplift, while Italy’s Leonardo SpA and France’s Thales also have exposure.”

US Commerce Secretary Gina Raimondo announced late Tuesday, America has struck a deal with the UK to end tariffs on British steel and aluminium.

"By allowing for a flow of duty-free steel and aluminium from the UK, we further ease the gap between supply and demand for these products in the United States," Raimondo said in a statement.

She added: "And by removing the UK's retaliatory tariffs, we reopen the British market to beloved American products."

In response to the US announcement, Anne-Marie Trevelyan, the UK Minister of International Trade, tweeted out, “The US and Britain had reached an agreement to eliminate high tariffs on British-made steel, aluminium and other products. At the same time, the British will simultaneously cancel retaliatory tariffs on some American goods.”

Meanwhile, British Prime Minister Boris Johnson said via Twitter: "This is fantastic news and a very welcome boost to our steel and aluminium industries." 

Market reaction

GBP/USD remains underpinned by the risk-on market mood and in anticipation of the UK inflation data. The US-UK trade deal also adds to the upbeat tone around cable.

As of writing, GBP/USD is trading at 1.3289, up 0.20% on the day.

“Russian and Kazakhstan oil exports via the Caspian Pipeline Consortium (CPC) may fall by up to 1 million barrels daily due to storm-damaged berths,” Energy Intel reported, citing Pavel Sorokin, Russia’s Deputy Energy Minister. 

The pipeline, shipping around 1.2 million barrels daily, or 1.2% of the global demand for oil, will be offline due to about two months of repair work.

Market reaction

The above piece of news is likely to accentuate the tightening of the global energy supplies, with the Western sanctions on Russia already leading a supply crunch.

WTI was last seen trading at $110.50, up 2.02% on the day.

• EUR/GBP has plunged near 0.8300 on expectations of higher UK inflation numbers.
• The BOE may prefer an interest rate hike fourth time to achieve price stability.
• EU members are mixed on banning the Russian oil imports.

The EUR/GBP pair has witnessed a steep fall after slipping below 0.8350, which acted as major support earlier and has been dragged near 0.8300. Investors have dumped the shared currency against the pound on expectations of a higher UK Consumer Price Index (CPI) figure on Wednesday.

As per the market estimates a preliminary estimate is 5.9% for yearly CPI, much higher than the prior print of 5.5%. It indicates that the Bank of England (BOE) will call for an interest rate hike to achieve price stability. Therefore, odds are claiming for an interest rate hike fourth time in a row. This is going to strengthen the pound against the shared currency further.

Apart from that, the UK Office for National Statistics will also report the Retail Price Index on Wednesday, which is likely to be recorded at 8.2% on yearly basis against the previous print of 7.8%.

On the Euro front, investors are eyeing the European Union (EU) leaders summit, which is due on Thursday. The summit will discuss the embargo on Russian oil. A mixed response from the Euro members has been observed by the time. Germany is notwithstanding on banning the Russian oil considering high dependency on oil and energy imports from Russia along with galloping oil prices. Should the embargo on Russian oil take place, the eurozone will face more carnage going forward.

The Western sanctions imposed on Russian energy imports could have a “catastrophic and long-lasting” effect if fully implemented, while the existing restrictions placed on Russia’s central bank are particularly effective, a report on the measures by the cross-party Treasury Committee showed on Wednesday.

Key takeaways

“Russia faces both a significant hit to the size of its economy and significant inflation.”

“The Committee will continue to investigate what additional tools we have in our armory to bear down on Putin’s aggression and to further damage the Russian economy and its ability to fund this war.” 

“This war will also have economic consequences here at home, and while these are worth bearing to support Ukraine in their fight for freedom, it’s becoming increasingly clear that the Government will need to support those who are hit hardest.”

“The UK should improve the clarity of its guidance on sanctions to help the private sector implement them.”

This report by the UK lawmakers come a few hours before the country’s Spring Budget release for 2022. Meanwhile, GBP traders also gear up for the month of February’s inflation data from the British economy.

Read: UK Inflation Preview: Another hit to British households, and to the pound?

Market reaction

GBP/USD is consolidating its rebound to 1.3300 amid an improved market mood and a minor pullback in the US dollar.

• USD/RUB remains sidelined after the previous day’s downbeat performance.
• Biden administration to extend Moscow crackdown on Thursday, NATO allies also search for China-Russia ties.
• Mixed sentiment over oil demand from Europe and optimism over future talks challenge the upside potential.
• Fed’s Powell, second-tier US data may entertain traders ahead of the key Thursday.

USD/RUB upside seems in the offing as bears struggle around 106.00 during Wednesday’s Asian session.

Expectations of further hardships for the Russian ruble (RUB), especially from the US and the North Atlantic Treaty Organization (NATO), seem to lure the pair buyers. Also challenging the USD/RUB sellers is the multi-month high US Treasury yields.

In addition to the Biden Administration’s preparations to sanction over 300 Russian lawmakers, the latest chatters suggesting the US readiness to seize Moscow’s gold with the Treasury hint at further RUB weakness. On the same line is criticism of the divide inside the European Union (EU) while taking punitive actions against Russia, mainly due to their reliance on Moscow’s oil, which in turn could push the bloc leaders towards further actions to criticize the Ukraine invasion.

Elsewhere, Bloomberg said, “Global bond losses deepen to 11% from 2021 high, most on record,” which in turn underpins the US Treasury yields and favors the greenback buyers.

Alternatively, Russia’s ability to pay two Eurobond coupons and avoid default speculations joins its membership to NATO and a friendship with China that might help the nation to defend itself on Thursday’s key meeting.

In addition to the NATO meeting and geopolitical updates, today’s speech from Fed Chair Jerome Powell will also be important to watch for near-term directions.

Technical analysis

USD/RUB remains elusive unless crossing the 21-DMA level surrounding 110.85. However, the 100.0 threshold and the latest swing low near 96.00 appear tough nuts to crack for the bears.

• AUD/JPY remains on the front foot for the seventh consecutive day while poking December 2015 top.
• Overbought RSI may trigger pullback moves but yearly support line defends bulls.
• Further upside has a bumpy road before hitting the ascending trend line from late 2019.

AUD/JPY rises to the fresh high in seven years during the one-week uptrend to Wednesday’s Asian session. That said, the quote rose to 90.66 while renewing the multi-day top, taking rounds to 90.50 by the press time.

Sustained trading beyond the one-year-old resistance line keeps AUD/JPY bulls hopeful inside a 27-month-old rising wedge bearish chart formation. However, overbought RSI conditions signal the quote’s pullback moves.

As a result, the 90.00 threshold gains the market’s attention before the early 2018 peak surrounding 89.00.

However, AUD/JPY bears remain cautious unless witnessing a daily closing below the aforementioned resistance-turned-support from March 2021, around 86.75 at the latest.

On the flip side, the December 2015 high of 90.72 and the 91.00 threshold challenges the immediate upside of the AUD/JPY prices.

Following that, the aforementioned wedge’s resistance line near 92.75 will be in focus.

AUD/JPY: Daily chart

Trend: Pullback expected

S&P Global Market Intelligence revised down its forecast for 2022 global GDP growth in its latest report published on Tuesday.

Key takeaways

“Its forecast of global real GDP growth in 2022 has been marked down to 3.3% from 4.1% in February.”

“Russia’s invasion of Ukraine has triggered a global commodities shock that will further dislocate global supply chains, drive up prices, and slow economic growth—especially in Europe.”

“Russia’s economy will suffer permanent losses through sanctions, an exodus of foreign businesses, and a new emphasis on energy security.”

“On an annual basis, the output will fall 11.1% in 2022 and 3.7% in 2023, with sharp declines in fixed investment, private consumption, and exports.”

“Eurozone consumer price inflation is expected to surge from 2.6% in 2021 to 6.9% in 2022, prompting the European Central Bank to start raising its deposit facility rate in December.”

“The forecast of real GDP growth in 2022 is revised down slightly to 5.1%.”

Related reads

• Russia has failed to achieve its goals in Ukraine
• Fitch cuts world growth forecasts as inflation soars due to Ukraine war

• USD/CNH takes the bids to refresh weekly high, up for the fifth consecutive day.
• China’s Tangshan witnesses virus-led lockdown, local media signals PBOC’s RRR, LPR cuts.
• Headlines concerning Ukraine-Russia also recently highlighted China due to its alleged ties with Russia, making them key to observe.
• US Treasury yields remain firmer at three-year high as Fedspeak hints at aggression in rate hikes, Powell’s speech eyed.

USD/CNH extends the four-day advances to $6.3800 during Wednesday’s Asian session while poking the weekly high of late.

The Chinese offshore currency (CNH) pair’s latest gains could be linked to the broad US dollar rebound tracking the firmer Treasury yields, as well as likely hardships for the dragon nation due to the COVID-19 resurgence and ties with Russia.

That said, the US 10-year Treasury yields renew the highest levels since May 2019, around 2.41% at the latest, whereas S&P 500 Futures and stocks in China portray traders’ indecision.

A steady increase in China’s daily covid infections, recently by 2,469 versus 2,432 prior, joins the news of a virus-led lockdown in Tangshan to weigh on the market sentiment. On the same line were chatters surrounding the faster spread of a new coronavirus variant called BA2 in Europe. Additionally favoring the USD/CNH bulls are chatters that the People’s Bank of China (PBOC) will announce rate cuts during the year, per multiple China media outlets. Furthermore, the North Atlantic Treaty Organization (NATO) leaders’ concern over China-Russia ties also exerts downside pressure on the CNH.

Alternatively, hopes that the global policymakers will overcome the reflation woes and will revert to normal rates following the likely upheaval seem to challenge the USD/CNH bulls of late.

That said, today’s speech from Fed Chairman Jerome Powell will be crucial amid firmer yields and can drive USD/CNH further towards the north on repeating the early-week hawkish comments. Also important will be second-tier US data and Ukraine-Russia headlines.

Technical analysis

USD/CNH’s sustained recovery from the 100-DMA, around 6.3640, allows buyers to again aim for the 200-DMA hurdle of $6.4100.

• USD/JPY hangs in the 121 area and at fresh highs.
• The Fed is driving sentiment with global yields on the rise.

USD/JPY is up on the day by some 0.3% at 121.07 and has travelled between a low of 120.75 and 121.41 so far in Asia. The pair has made a fresh high since January 2016 on growing expectations that the Fed will deliver a sharp response to the inflationary problem.

''It is a challenging time for fixed income markets as the combination of hawkish central banks, high commodity prices, ongoing supply chain issues and rising inflationary pressures are all putting strong upward pressure on bond yields. The lift in bond yields is effectively tightening monetary conditions,'' analysts at ANZ Bank said earlier.

Meanwhile, another round of hawkish Fed commentary kept global yields on the rise. However, Asia's rally extending to Europe and the US.

Risk-sensitive currencies outperformed which weighed on the yen. Hawkish FOMC member James Bullard said that the Fed needs to aggressively curb inflation risks and should not await an easing of geopolitical tensions, analysts at Westpac noted, explaining further: ''He wants to see an early reduction of the balance sheet, and a swift move to slightly restrictive policy levels. San Francisco Fed president Mary Daly said high inflation warrants having interest rates “marching up to neutral” and the Fed considering whether to make policy restrictive.''

• USD/CAD bulls moving in on the bearish impulse. 
• Bulls in anticipation of a break of hourly resistance. 

USD/CAD is decelerating in its daily decline from the 1.28 area as it moves in on 26 January lows at 1.2559. A significant correction could be in order with the neckline of the daily M-formation in focus:

USD/CAD daily chart 

Should the price begin to correct on a daily closing basis, traders will be observing the price action on lower time frames from which an optimal entry point will likely evolve from within a bullish market structure. 

USD/CAD H1 chart

The price could be argued to be in a phase of accumulation on the hourly chart and a break of the current resistance will be monitored for in the coming sessions. 

• Silver prices remain pressured around one-week low, down for the second consecutive day.
• RSI conditions, failure to cross 100-SMA hints at further downside but 200-SMA challenges the bears.
• 61.8% Fibonacci retracement level acts as the key support, bulls remain away below the previous support line from February.

Silver (XAG/USD) prices stay on the back foot around $24.75 during Wednesday’s Asian session, following the biggest daily fall in a week.

That said, the bright metal’s failure to cross the 100-SMA triggered the previous day’s heavy losses. The sellers were also backed by downbeat RSI conditions, not oversold.

However, an upward sloping trend line from February 25 challenges the quote’s latest declines around $24.68.

Even if the bullion prices drop below $24.68, the 200-SMA and 61.8% Fibonacci retracement of February-March downside, respectively around $24.55 and $23.90, will challenge the XAG/USD bears.

Alternatively, recovery moves may initially aim for the 100-SMA breakout, around $25.35 by the press time, before challenging the support-turned-resistance from early February near $26.00.

It should be noted, however, that the silver buyer’s ability to keep reins past $26.00 will allow them to refresh the monthly high, currently around $26.95.

Silver: Four-hour chart

Trend: Further weakness expected

• The cable has been underpinned against the greenback ahead of UK’s CPI print.
• Upbeat market mood has improved the demand for risk-sensitive assets.
• Investors will keep an eye on Fed Powell’s speech.

The GBP/USD pair has witnessed a strong upside move on Tuesday amid the improvement in demand for risk-sensitive assets after the DXY weakens as investors digested the announcement of seven interest rate hikes in 2022. The cable has gained almost 2% after printing a 52-week low near 1.3000 last week.

The major is performing stronger ahead of the disclosure of Consumer Price Index (CPI) numbers by UK Office for National Statistics on Wednesday. A preliminary estimate for the yearly UK’s CPI is 5.9% much higher than the previous print of 5.5%. The unfolding of the UK’s CPI above or near the preliminary estimate will trigger the odd of one more rate hike by the Bank of England (BOE).

It is worth noting that the BOE has increased its interest rates by 25 basis points (bps) three times in a row. Also, the BOE was the first central bank, which elevated its interest rates after the widespread of Covid-19.

Meanwhile, the US dollar index (DXY) is performing subdued near 98.50 ahead of the speech from the Federal Reserve (Fed) Chair Jerome Powell. The announcement of six more rate hikes by the end of 2022 has done the casualties however investors would look for the number of 50 bps interest rate hikes by the Fed in coming monetary policy announcements.

Although UK’s CPI print and Powell’s speech will remain the major drivers, investors will also focus on the NATO meeting on a diplomatic solution for the Russia-Ukraine war, which is due on Thursday.

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.3558 vs. the estimate of 6.3522 and close of 6.3660.

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.

• AUD/USD refreshes intraday low while consolidating recent gains around 2022 top.
• One more city in China announced virus-led lockdown, NATO leaders highlight Russia-China ties.
• US stock futures part ways from Wall Street’s gains as Biden administration braces for more Russian sanctions.
• Fed’s Powell, second-tier US data will join risk catalysts to direct short-term moves.

AUD/USD takes offers to refresh intraday low around 0.7450 as market players reassess the previous optimism during Wednesday’s Asian session. The risk-barometer pair refreshed the highest levels since November 2021 during the day-start advances before the latest downside to renew daily low.

Worsening virus woes in China and the recent covid fears in Europe seem to have underpinned the Aussie pair’s latest pullback. Also challenging the bulls are the likely further hardships for Russia and sustained invasion of Ukraine.

A steady increase in China’s daily covid infections, recently by 2,469 versus 2,432 prior, joins the news of a virus-led lockdown in Tangshan to weigh on the market sentiment, as wel las on the AUD/USD. On the same line were chatters surrounding the faster spread of a new coronavirus variant called BA2 in Europe. Also draggin the pair prices are chatters that China will announce rate cuts during the year, per multiple China media outlets.

Elsewhere, Ukraine’s President Volodymyr Zelenskyy 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.

It’s worth observing that the Wall Street Journal (WSJ) signaled heavy sanctions for Russian lawmakers will be unveiled by US President Joe Biden’s administration on Thursday. Additionally, Nikkei tried to portray challenges for China if the Beijing-Moscow links get identified as supporting the Ukraine war. “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.”

Amid these plays, S&P 500 Futures print mild losses of around 4,500 whereas the US 10-year Treasury yields renew the highest levels since May 2019.

Moving on, risk catalysts are likely to remain in the driver’s seat ahead of Thursday’s NATO meet and a slew of the key US data.

Technical analysis

A nine-month-old descending resistance line precedes an upward sloping trend line from mid-January, respectively around 0.7465 and 0.7485, to limit immediate AUD/USD upside. That said, a weekly support line near 0.7410 will challenge the pair’s short-term declines.

Representatives from Ukraine and Russia meet daily, but Ukrainian President Volodymyr Zelenskyy accuses Russia of coming to the table with nonstarters on his country's independence.

Meanwhile, Russia has failed to achieve its goals in Ukraine, US National Security Adviser Jake Sullivan has said although warns that the war will not end “easily or rapidly”.

Sullivan said Russia has thus far manifestly failed to accomplish all three of its objectives which are subjugating Ukraine, enhancing Moscow’s power and prestige, and dividing the West. Sullivan said it has thus far achieved the opposite adding that “brave” Ukrainians have refused to submit to Russian forces.

“Although Russia may take more territory in these brutal military operations, it will never take the country away from the Ukrainian people.”

To the contrary, President Vladimir Putin recently stressed that the war was unfolding “successfully, in strict accordance with pre-approved plans”.

For the days ahead, US President Joe Biden will make his way to Brussels to attend an emergency NATO summit on Thursday. He will also meet with G7 leaders and address the European Union at a session of the European Council.

Additionally, Biden and other Western leaders are prepared to announce new economic sanctions on Russia this week, according to the White House. US Senators are going to discuss freezing Russia's gold with US Treasury Secretary, Janet Yellen.

• NZD/USD has renewed monthly and yearly high at 0.6975.
• A bull cross, represented by the 100 and 200-period EMAs crossover on the upside, points to more gains ahead.
• The RSI (14) has shifted in a bullish range of 60.00-80.00, which adds to the upside filters.

The NZD/USD pair has witnessed a firmer move towards the north after violating January 13 high and March 7 high at 0.6891 and 0.6926 respectively. The pair has recorded a fresh monthly and yearly high at 0.6975 on Tuesday.

On a 4-hour scale, NZD/USD is auctioning in a rising channel formation, in which every pullback towards the lower end is considered as a buying opportunity by the market participants and a fresh impulse wave initiates towards the upper end. The upper end of the rising channel is placed from 30 December 2021 high at 0.6858 and the lower end is marked from January 28 low at 0.6529.

The 100 and 200-period Exponential Moving Averages (EMAs) at 0.6832 and 0.6795 respectively are scaling higher, which adds to the upside filters.

The Relative Strength Index (RSI) (14) has entered into a bullish range of 60.00-80.00, which signals a continuation of a firmer rally ahead. The oscillator is not indicating any sign of divergence and overbought.

Should the asset test its old resistance of March 7 high at 0.6926, kiwi bulls may witness build-up of fresh bids, which will drive the pair higher towards the round level at 0.7000, followed by the upper end of the rising channel at 0.7050, which coincides with 18 November 2021 high.

On the flip side, bulls can lose momentum if the asset slips below Tuesday’s average traded price at 0.6909, which will drag the pair to the 100 and 200-period EMA at 0.6832 and 0.6795 respectively.

NZD/USD four-hour chart

• USD/CHF remains mildly bid while keeping the week-start rebound from short-term key EMA.
• Strong RSI hints at another attempt to cross 0.9375 hurdle, 50% Fibonacci retracement will test bears below 21-day EMA.

USD/CHF picks up bids to renew intraday high around 0.9337 during Wednesday’s Asian session.

That said, the Swiss currency (CHF) pair portrayed a volatile move on Tuesday with an initial run-up to 0.9373 before ending the day on a negative note around 0.9330.

Even so, the quote holds onto Monday’s U-turn from the 21-day EMA amid firmer RSI conditions, not overbought, which in turn signals further upside for the USD/CHF prices.

Hence, the 23.6% Fibonacci retracement (Fibo.) of January-March advances, near 0.9375, lure short-term buyers ahead of the monthly peak of 0.9460.

It should be noted that the 0.9400 threshold will act as an intermediate halt during the rise.

On the contrary, a daily close below the 21-day EMA level near 0.9300 will recall the USD/CHF bears.

Following that, the 50% Fibonacci retracement level surrounding 0.9275 and 61.8% Fibo. of 0.9232 will test the downside momentum ahead of the key support line from January, near 0.9180 at the latest.

USD/CHF: Daily chart

Trend: Further upside expected

• Market sentiment remains mildly positive amid mixed concerns over Ukraine, Fed.
• US Treasury yields rise to the fresh high since May 2019, S&P 500 Futures track Wall Street gains.
• Fed’s Powell, second-tier US data will be eyed for fresh impetus.

Risk appetite remains firmer during Wednesday’s Asian session, despite the stellar run-up in the US T-bond yields.

That said, the US 10-year and 2-year Treasury yields remain firmer around the highest levels since May 2019 while the S&P 500 Futures print 0.12% intraday gains after the Wall Street counterpart renewed five-week top.

The Fedspeak keeps inflating expectations of faster rate hikes from the US central bank but hopes that the policymakers will be able to tame inflation and return to normal after the battle seems to have kept equities positive despite bond rout.

Among the latest hawks was St. Louis Fed President, James Bullard and Cleveland Fed President Loretta Mester clearly showed signals of 50 basis points (bps) of a rate lift.

Also keeping Asia-Pacific buyers hopeful are the chatters over Japanese Prime Minister (PM) Fumio Kishida’s additional economic stimulus package by the end of March, as well as New Zealand Prime Minister Jacinda Ardern’s easing of covid-linked activity restrictions.

Even so, a continuation of the Ukraine-Russia crisis and a light calendar in Asia challenges the market sentiment 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.

Looking forward, Fed Chairman Jerome Powell’s speech will be crucial for the markets amid aggressive rate-hike talks. Also important to watch are the headlines concerning Ukraine and Russia, as well as US New Home Sales for February.

Read: S&P 500 sits above the 200-DMA as dip buyers reclaim 4500

• EUR/JPY reaches fresh highs for 2022 as US dollar slides. 
• Asian equities opened firmly, weighing on the yen. 

EUR/JPY is trading at fresh highs for 2022 and the highest since June 2021 as it tests 133.90 resistance as the euro pops in Asia towards 1.1050 vs the US dollar which has fallen as the Federal Reserve's Jerome Powell boost fades. 

The dollar edged lower as a rise in equities markets help boost risk-on sentiment. The greenback had made its biggest one-day percentage gain since March 10 at the start of the week as the Fed opened the door for raising interest rates over several meetings. 

Last week, the Fed raised interest rates by a quarter-point and announced six more hikes this year. However, Powell is signalling that the bank is prepared to raise rates by 50 basis points at its next policy meeting if necessary. Derivative traders are pricing in around 7.5 quarter-point rate hikes, effectively allowing for moreover one half-point raise.

Meanwhile, equities were getting a lift, in part, from bank shares on Fed rate hike expectations and that weighed on the safe-haven US dollar, enabling the euro and EUR/JPY to move higher. In Japan, the Nikkei 225 opened higher as a softer yen boosts exports and oil stocks climb with global crude prices. 

However, markets are poised for extreme volatility until there is more clarity on Fed policy, inflation, and the Ukraine conflict, all of which has driven flows to the greenback and weighed on stocks in prior weeks. EUR/JPY would be expected to track the stock markets which have rallied firmly in March, so far. 

• XAU/USD is juggling near $1,920 as investors await the roadmap of six rate hikes from Fed’s Powell.
• More focus on price stability has opened doors for a 50 bps interest rate hike.
• Improvement in demand for risk-perceived assets has capped the movement of safe-haven counters.

Gold (XAU/USD) is oscillating in a narrow range of $1,919.64-1,922.20 on Wednesday. The precious metal is delivering limited range moves from the last four trading sessions after the Federal Reserve (Fed) turned aggressively hawkish to tame the galloping inflation.

It is visible from the announcement of six more interest rate hikes by the end of 2022 that the Fed is turning more cautious towards price stability rather than the maximum employment domain now. Well, price stability should be given priority now as a multi-decade high Consumer Price Index (CPI) figure is a casualty in the path of progress. At the last week’s Federal Open Market Committee (FOMC) meeting, the policymakers announced that they are looking to elevate interest rates by 25 basis points (bps) at each of the six FOMC meetings left in 2022. However, the recent comment from the Fed that it will take necessary steps to ensure price stability has opened doors for half of the percent rate hike.

Also, Goldman Sachs stated 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 cues from the opinion polls and authorized agencies pose much importance, however, the real insights over the policy-designing will be provided by the Fed Chair Jerome Powell in his speech on Wednesday.

Meanwhile, the US dollar index (DXY) has turned sideways around 98.50 amid an improvement in the risk appetite of investors. The 10-year US Treasury yields have claimed 2.81% on aggressive tightening stance by the Fed.

Gold Technical Analysis

On an hourly scale, XAU/USD is forming a symmetrical triangle pattern that signals an inventory distribution. Usually, the formation of a symmetrical triangle following a firmer bearish move indicates the continuation of weakness after a volatility expansion. The bearish cross obtained from 100 and 200-period Exponential Moving Averages (EMAs) adds to the downside filters.

Gold hourly chart

• EUR/USD struggles to extend the previous day’s rebound from weekly bottom.
• Six-week-old descending trend line tests buyers inside a bearish chart pattern.
• 200-SMA adds to the upside filters, clear downside below 1.0980 become the key for bears.

EUR/USD fades the latest recovery moves around 1.1030 during Wednesday’s Asian session.

The major currency pair bounced off the support line of a 12-day-long rising wedge bearish chart pattern the previous day but a downward sloping resistance line from February 10 seems to challenge the bulls of late. Also important to note are the bearish MACD signals.

However, the pullback move needs to conquer the 1.0980 support with a clear move, unlike the latest ones, to confirm the rising wedge.

Following that, a theoretical slump towards the 1.0800 can be imagined. During the fall, the mid-March bottom surrounding 1.0900 will act as an intermediate halt.

Meanwhile, the aforementioned resistance line near 1.1065 restricts the EUR/USD pair’s immediate upside ahead of the stated wedge’s upper line, near 1.1145 by the press time.

Even so, the 200-SMA level of 1.1175 will challenge the pair’s advances before welcoming the bulls.

EUR/USD: Four-hour chart

Trend: Further weakness expected