CFD Markets News and Forecasts — 24-03-2022

“Will consider steps to cope with price hikes after PM instruction expected next week,” said Japanese Finance Minister Shunichi Suzuki during early Friday morning in Asia.

More to come

• AUD/USD bulls await fresh catalysts at 2022 peak, retreats after three-day uptrend.
• Australia follows the West to announce fresh sanctions on Russia, Belarus.
• Market sentiment dwindles as geopolitical, inflation fears join firmer equities, gold.
• Light calendar in Asia may allow traders to consolidate recent gains.

AUD/USD dribbles around 0.7510-20 but stays close to the four-month high during Friday’s Asian session. The risk barometer pair struggles to find traction following a three-day uptrend to refresh the yearly peak.

The market sentiment recently worsened as Australia levied fresh sanctions on Russia and Belarus while taking clues from the Western leaders who criticized Moscow’s invasion of Kyiv the previous day. Australian Foreign Minister Marise Payne announced fresh punitive measures on Belarusian President Lukashenko and members of his family, in addition to unveiling sanctions on Russian diplomats.

On Thursday, US President Joe Biden’s European visit offered multiple macros suggesting the Western readiness for more sanctions for Russia but the bloc’s leaders and other G7 members showed mixed reactions. That said, US President Biden pushed for removing Moscow from the Group of 20 (G20) whereas the North Atlantic Treaty Organization (NATO) members criticized the Russian invasion of Ukraine, as well as China’s friendly relations with Russia, by offering battle groups to defend Kyiv. It’s worth noting that the Russian Foreign Ministry denounced NATO’s artillery help to Ukraine and turned down the US decision to levy sanctions on gold transactions with the Russian central bank.

The fears underpinned gold prices to renew weekly top around $1,960 while the lowest weekly prints of US Jobless Claims since 1969 favored equities to rebound. With this, the AUD/USD prices could ignore firmer yields and refresh yearly highs.

That said, Wall Street ended Thursday on a positive note after snapping a six-day uptrend the previous day while the US 10-year Treasury yields remained firmer around 2.37% by the end of Thursday’s North American session. However, the S&P 500 Futures remain pressured of late, down 0.05% around 4,510 by the press time.

To sum up, challenges to sentiment may test AUD/USD prices but firmer gold can keep buyers hopeful. However, recently covid woes from China and Europe, as well as global dislike for China’s ties with Russia, may trigger consolidation of the weekly gains.

Technical analysis

Although an upward sloping trend line from mid-March restricts immediate AUD/USD declines around 0.7490, the October 2021 peak surrounding 0.7560 challenges the bulls.

• The DXY is approaching 99.00 on tailwinds of higher rate hike expectations.
• NATO community has decided to establish four new battle groups to strengthen their collective defense.
• The outperformance of the US economic indicators is raising the odds of a 50 bps rate hike.

The US dollar index (DXY) is gradually advancing towards the round level resistance of 99.00 as the Federal Open Market Committee (FOMC) members have started preparing investors to brace a 50 basis point (bps) interest rate hike in May monetary policy. To tame the galloping inflation, Federal Reserve (Fed) policymakers are welcoming a healthy interest rate elevation. Apart from that, the headlines coming from Brussels where US President Joe Biden is discussing further sanctions on Russia and strategy to strengthen NATO with its NATO counterparts are improving the appeal for the greenback.

Minutes from the NATO meeting

To retaliate against Russia’s invasion of Ukraine, Western leaders in Brussels have decided to establish four new battle groups in Slovakia, Romania, Bulgaria, and Hungary, which may strengthen their collective defense, particularly on the Eastern flank. This has further escalated tensions for Russia, which may cause a minor delay in the ceasefire between Russia and Ukraine.

Performance of Economic Indicators

The US docket reported Initial Jobless Claims and Markit (Manufacturing and Services) PMI on Thursday. The Initial Jobless Claims landed at 187k much lower than the preliminary estimate and previous figure of 212k and 215k respectively.

While the Markit Manufacturing and Services PMI were printed at 58.5 and 58.9 outperformed the market consensus of 56.3 and 56 respectively. The outperformance from economic indicators has underpinned the greenback.

Key events in the US on Friday: Pending Home Sales, Michigan Consumer Sentiment Index, and Fed Governor Christopher Waller’s speech.

DXY Technical Analysis

On an hourly scale, the DXY is approaching towards the upper trendline, which is placed from March 7 high at 99.41 while the lower trendline placed from February 23 low at 95.77 will continue to act as major support going forward. The greenback-based index has stabilized above the 200-period Exponential Moving Average, which is hovering around 98.50.

DXY hourly chart

• The AUD/JPY has printed five-year-highs in the last seven trading days.
• Market sentiment shifts have not been an excuse for the AUD/JPY to keep trading higher.
• AUD/JPY Price Forecast: The bias is upwards as bulls prepare an assault towards 92.00.

AUD/JPY rally extends to nine-straight days, despite days of risk-off market mood with Thursday’s not being the case, as US stocks finished in the green, while Asian equity futures fluctuate, painting a mixed sentiment. At the time of writing, the AUD/JPY is trading at 91.95.

The AUD/JPY has been reaching new year-to-date (YTD) highs in the last seven trading days, breaking on its way north, some critical resistance levels, like Pitchfork’s channel central line around 89.50 and the psychological 90.00 mark.

However, as the Relative Strength Index (RSI) reaches readings above 86,90 and the AUD/JPY is about to pierce the mid-line between the central-top trendlines of Pitchfork’s channel around the 92.00-15 area, the AUD/JPY might be subject to a correction. Nevertheless, the path of least resistance is upwards.

AUD/JPY Price Forecast: Technical outlook

That said, the AUD/JPY first resistance would be the mid-line between the central-top trendlines of Pitchfork’s channel around 92.00-15. Breach of the latter would expose 93.00, followed by the 78.6% Fibonacci retracement at 93.39.

On the flip side, In the event of a pull-back, the AUD/JPY first support would be 91.00. Once cleared, the next support would be the 90.00 mark, followed by Pitchfork’s channel central line around 89.50, and then the 89.00 figure.

• USD/CAD remains on the back foot around nine-week low.
• Clear break of 61.8% Fibonacci retracement level directs bears to January’s low.
• RSI conditions may test bears around yearly low, 78.6% Fibo.
• Previous support line, 200-DMA adds to the upside filters.

USD/CAD struggles to defend the 1.2500 threshold around a two-month bottom, despite picking up bids around 1.2530 during the initial Asian session on Friday.

The loonie pair dropped to the lowest levels since January 21 the previous day on breaking the 61.8% Fibonacci retracement (Fibo.) of October-December 2021 upside amid bearish MACD signals. That said, the south-run previously gained support from a clear break of the 200-DMA and multi-day-old rising trend line.

With this, USD/CAD seems to have a smooth journey towards January 2022 low surrounding 1.2450.

However, 78.6% Fibo. level near 1.2430 will challenge the pair bears as the RSI inches closer to the oversold territory.

In a case where the USD/CAD bears conquer the 1.2430 support, the pair becomes vulnerable to test the late 2021 bottom surrounding 1.2290.

Alternatively, the corrective pullback may initially aim for the nearby key Fibonacci retracement resistance level of 1.2545.

Following that, the support-turned-resistance line and the 200-DMA, respectively around 1.2575 and 1.2615, will challenge the USD/CAD bulls.

It should be observed that February’s low near 1.2635 will act as an additional filter to the north during the pair’s upside past 1.2615.

USD/CAD: Daily chart

Trend: Further weakness expected

• NZD/USD fades recent recovery following a volatile day with the first negative close in three.
• NATO criticized Russian invasion and braced for Ukraine help, G7 showed diplomacy while US pushed to remove Moscow from G20.
• Yields stayed firmer even as US data came in mixed, Jobless Claims favored equities.
• Light calendar keeps focus on the risk catalysts for fresh impulse.

NZD/USD dribbles around 0.6960 during the early Friday morning in Asia, after an active Thursday that snapped a two-day uptrend. The market sentiment remains mixed with a rebound in equities failing to justify firmer yields amid indecision over the key risk catalysts surrounding Ukraine and inflation.

US President Joe Biden’s European visit offered multiple macros suggesting the Western readiness for more sanctions but the bloc’s leaders and other G7 members showed mixed reactions. That said, US President Biden pushed for removing Russia from the Group of 20 (G20) whereas the North Atlantic Treaty Organization (NATO) members criticized the Russian invasion of Ukraine, as well as China’s friendly relations with Russia. It’s worth noting that the Russian Foreign Ministry denounced NATO’s artillery help to Ukraine and turned down the US decision to levy sanctions on gold transactions with the Russian central bank.

Elsewhere, fresh fears of covid in China and Europe, with the BA.2 variant tightening grip in the bloc, also weigh on the NZD/USD prices.

On the positive side, a slump in the Weekly Jobless Claims to the levels not seen since 1969 joined firmer US Markit PMIs for February to favor the market’s optimism. However, downbeat prints of US Durable Goods Orders and fears of inflation weighed on the sentiment.

Additionally defending NZD/USD prices are the comments from ANZ saying, “Yesterday the IMF published its regular Article IV report on the NZ economy. It concluded that ‘significant increases in the official cash rate in the near term are appropriate,’ but warned that a weakening global economy and the withdrawal of monetary and fiscal stimulus would contribute to moderating growth, predicting 2.7% in 2022 (ANZ: 2.1%).”

Amid these plays, Wall Street benchmarks ended Thursday on the positive side whereas the US 10-year Treasury yields rose 3.5% around 2.37% by the end of Thursday’s North American session.

Moving on, second-tier US data may entertain NZD/USD traders but headlines concerning Russia and Inflation will be crucial to watch for fresh impulse.

Technical analysis

Although overbought RSI triggered the mid-week pullback from 0.6989, the 61.8% Fibonacci retracement (Fibo.) of October 2021 to January 2022 downside and the 200-DMA, respectively around 0.6950 and 0.6910, limit the short-term downside of the NZD/USD prices.

• USD/CHF is likely to break below the descending triangle formation.
• Bears are firmer below 200 EMA, eyes more downside.
• Slippage of the RSI (14) below 40.00 will strengthen the bears further.

The USD/CHF pair is oscillating in a range of 0.9300-0.9376 this week after sensing intensified selling pressure from March 16 high at 0.9460. It is worth noting that the pair registered a fresh yearly high at 0.9460 but failed to sustain the momentum.

On an hourly scale, the major is auctioning in a descending triangle formation in which the downside remains capped while the asset updates its highs after some intervals. The downside of the descending triangle formation is capped around Monday’s low at 0.9294 while the downward trending trendline is placed from Tuesday’s high at 0.9376.

The pair has failed to defend its 200-period Exponential Moving Average (EMA), which is trading at 0.9332.

Meanwhile, the Relative Strength Index (RSI) (14) is on the verge of surrendering its 40.00-60.00 range and is likely to settle below 40.00. A slippage below 40.00 may attract significant offers and bears will dictate the prices going forward.

Should the asset drops below Monday’s low at 0.9294, bears may strengthen and the pair will drag towards March 7 high at 0.9272, followed by March 2 high at 0.9240.

On the contrary, bears may lose grip if the asset oversteps the 200-period EMA at 0.9332, which will send the pair towards March 18 high at 0.9383. Breach of the latter will expose the greenback bulls to March 15 high at 0.9432.

USD/CHF hourly chart

“The European Central Bank would consider extending its money-printing programme beyond this summer if the eurozone economy fell into a 'deep recession' because of the conflict in Ukraine,” said ECB board member Isabel Schnabel said on Thursday, per Reuters.

Additional quotes

Market reaction

EUR/USD failed to cheer the news amid mixed concerns over Ukraine-Russia and the market’s anxiety over inflation. That said, the quote was last seen taking rounds to 1.1000 after a volatile day, with mild losses.

Read: EUR/USD braces to 1.1000 amid a firm US dollar

• Gold prices have surpassed $1,950.00 despite rising odds of a 50 bps interest rate hike.
• The precious metal is underpinned after investors prefer bullions as an inflation hedge.
• US Initial Jobless Claims and Markit PMI Composite post robust figures on Thursday.

Gold (XAU/USD) has extended its gains after overstepping the round level resistance of $1,950.00 as investors have underpinned the precious metal on a hawkish stance of US President Joe Biden in NATO meeting on Thursday. Also, the market participants parked their funds in precious metal counter on inflationary pressures.

Uncertainty surrounding the Ukraine crisis escalated on Thursday when Russia’s invasion of Ukraine completed its first month. The aggressive approach adopted by the Western leaders in Brussels to establish four new battle groups in Slovakia, Romania, Bulgaria, and Hungary, which may strengthen their collective defense, particularly on the Eastern flank looks to hold their grip on Russia. This has escalated geopolitical tensions and has underpinned gold prices further.

A case of rising US Treasury yields along with gold prices reflects that investors are pouring funds into the precious metal as an inflation hedge. There is no denying the fact that inflation is skyrocketing in the world economy. Every country is coming forward with inflation mess and messages of hawkish stances on their monetary policies.

Gold prices are rising higher despite the rising odds of a 50 basis point (bps) interest rate hike by the Federal Reserve (Fed) in May monetary policy. Fed policymakers have clearly mentioned that the economy is strong enough to withstand the aggressive interest rate elevation approach. Also, the outperformance of US Initial Jobless Claims and Markit PMI composite has failed to restrict the upside in the gold prices.

Gold Technical Analysis

XAU/USD has witnessed a strong upside after violating March 14 high at $1,949.80. The trendline placed more March 16 low at $1,895.15 has acted as major support for the counter.  The precious metal is auctioning above the 200-period Exponential Moving Average (EMA), which adds to the upside filters. The Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, which signals the continuation of a bullish trend going forward.

Gold hourly chart

• Precious metals benefit from a risk-on market mood amid elevated US Treasury yields.
• US President Biden supported more NATO troops in Eastern Europe while calling Russia to be removed from the G-20 group.
• XAG/USD Price Forecast: The decisive break above $25.40 could lead to a move towards $26.00 and beyond.

As the Asian Pacific session begins, Silver (XAG/USD) advances for the second straight day but retreated from daily highs around $25.85, amidst high US Treasury yields and an upbeat market. At the time of writing, XAG/USD is trading at $25.55.

Global equities overnight were mixed, as European equities fluctuated, while US stocks indices finished Wall Street with gains. Discussions between Russia and Ukraine have failed to progress, extending the war for a fourth-consecutive week. Meanwhile, NATO’s two-day summit kicked in. Worth noting that US President Joe Biden supported the increase of NATO troops on the eastern front, a senior US official reported. Moreover, Biden and European NATO members assessed the risks of Russia’s launching a biological, chemical, or nuclear attack, while Biden called for Russia to be removed from the G-20.

The US Dollar Index, a gauge of the greenback’s value against a basket of peers, has been supported throughout the day, up 0.18%, at 98.789, underpinned by high US Treasury yields. The 10-year benchmark note yield is up to five basis points, sitting at 2.370%, putting a lid on the XAG/USD rally.

Gold (XAU/USD) is also up in the day, some 0.68%, at $1957.88 a troy ounce, despite elevated US Treasury yields.

Aside from this, Fed speakers have continued to grab headlines. Chicago Fed President Charles Evans said he is “comfortable” with 25 bps increases to the Federal Funds Rate but remains “open” to 50 bps increases if needed. Earlier, Minnesota Fed President Neil Kaskari said that 10-year Treasury yields remain low while emphasizing a risk of overdoing it on rate hikes. Kashkari further added that neutral rates

XAG/USD Price Forecast: Technical outlook

Silver (XAG/USD) bias is still upwards. As mentioned on yesterday’s note, “on Monday, 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.”

On Thursday, XAG/USD broke November 16, 2021 resistance level at $25.40, leaving it as support. With that said, XAG/USD’s first resistance would be March 24 daily high at $25.85. Once cleared, the next supply zone would be August 4, 2021, a daily high at $26.00, followed by July 16, 2021, at $26.45.

• The EUR/USD has been trading in a 50-60 pip range in the last three days.
• The greenback stays firm amid a positive market mood
• Russia – Ukraine war remains, though peace talks stagnate.
• EUR/USD Price Forecast: Downward biased, but as the EUR/USD trades above 1.0960, upside risks remain.

The shared currency seesaws on Thursday North American session, courtesy of a positive market mood, while broad US dollar strength across the board helps the greenback to keep the EUR/USD pair confined to the 1.0960-1.1000 area. At press time, the EUR/USD is trading at 1.1000.

The US Dollar remains resilient amid a risk-on market

Risk appetite improved in the New York session, as portrayed by US equities rising, contrarily to European bourses, which fluctuated. The greenback has been supported throughout the day, as reflected by the US Dollar Index up 0.16%, at 98.766, underpinned by elevated US Treasury yields, with the 10-year benchmark note yield up to four basis points, sitting at 2.348%.

On the Geopolitical front, Russia – Ukraine hostilities remain, while peace talks languished. Meanwhile, the NATO two-day summit has not provided EUR/USD tradable news just yet. Worth noting that according to a US official, US President Joe Biden supported the increase of NATO troops on the eastern front. Furthermore, Biden and European NATO members assess the risks of Russia’s launching a biological, chemical, or nuclear attack. Also,  Biden called for Russia to be removed from the G-20.

Aside from this, Fed speakers have continued to grab headlines. Chicago Fed President Charles Evans said he is “comfortable” with 25 bps increases to the Federal Funds Rate but remains “open” to 50 bps increases if needed. Earlier, Minnesota Fed President Neil Kaskari said that 10-year Treasury yields remain low while emphasizing a risk of overdoing it on rate hikes.

On Friday, the Eurozone economic docket will unveil March’s IFO Business, Current Conditions, and Expectations for Germany. Across the pond,  Pending Home Sales for February, the Universit of Michigan Consumer Expectations for March, and Fed speakers would grab the headlines.

EUR/USD Price Forecast: Technical outlook

The EUR/USD pair remains downward biased. However, as portrayed by the daily chart, in the last two days’ EUR/USD price action, the pair faltered of breaking below Tuesday’s daily low at 1.0960, leaving the EUR/USD exposed for an upward move.

If that scenario plays out, the EUR/USD first resistance would be 1.1043. Breach of the latter would expose Pitchfork’s parallel-line between the top and central ones around 1.1080, followed by 1.1100. On the flip side, the EUR/USD path of least resistance, the first support, would be 1.0960. A decisive break would expose the 1.0901 March 11 low, followed by the YTD low at 1.0806.

What you need to take care of on Friday, March 25:

The American dollar finished the day mostly lower across the FX board, although it managed to keep advancing versus the Japanese yen, with USD/JPY hitting a fresh multi-year high of 122.40.

The EUR/USD pair is still struggling with the 1.1000 threshold, unable to extend gains beyond the level. GBP/USD settled around 1.3180, while commodity-linked currencies keep advancing against their American rival. AUD/USD topped at 0.7527 while USD/CAD bottomed at 1.2509.

US President Joe Biden and European NATO counterparts are preparing for the risk of Moscow launching a nuclear attack. They have also discussed assisting Ukraine with anti-ship missiles and clarified that any gold transaction involving Russia's central bank is subject to existing sanctions. The headline boosted the bright metal, which surged to a fresh weekly high of $1,966.14 a troy ounce, ending the day nearby.

Crude oil prices, on the other hand, consolidated their recent gains, ending the day little changed. WTI trades at around $113.20 a barrel at the time being.

French President Emmanuel Macron later announced that there had been no decision on penalties against Russian oil, gas, and coal. US President Joe Biden said he believes Russia should be removed from the G-20.

Meanwhile, the number of new coronavirus cases, blamed on the Omicron BA.2 variant, are on the rise in Germany, the UK, France and Italy, the top European countries suffering from this new wave. So far, no restrictive measures have been put in place, but on the contrary, the latest of restrictions is being lifted.

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Mexico's central bank announced on Thursday that it hiked its policy rate by 50 basis points to 6.5% following its march meetings, as expected.

Key takeaways from policy statement

"Board was unanimous on rate decision."

"Available indicators suggest that the Mexican economy might have resumed its recovery during early 2022."

"With this action, the monetary policy stance adjusts to the trajectory required for inflation to converge to its 3% target within the forecast horizon."

"An environment of uncertainty and ample slack conditions prevails, although the latter is expected to be less ample than in the previous quarter."

"Medium-term expectations for headline inflation were revised upwards at the margin, while those for core inflation were left unchanged and longer-term expectations have remained stable at levels above the target."

"For the next monetary policy decisions, the board will monitor thoroughly the behaviour of inflationary pressures and factors impacting foreseen path for inflation and its expectations."

"Given greater inflation pressures, forecasts for headline and core inflation were revised significantly upwards for the entire horizon and convergence to the 3% target is now expected to be attained in the first quarter of 2024."

"In addition to shocks that have affected inflation throughout the pandemic, there are pressures associated with the geopolitical conflict."

"Balance of risks for the trajectory of inflation within the forecast horizon has deteriorated and remains biased to the upside."

Market reaction

The USD/MXN pair showed no immediate reaction to the rate hike decision and was last seen losing 0.4% on a daily basis at 20.1325.

• The Australian dollar advances during the week, so far up 1.30%.
• The US Dollar remains close to the 99.00 mark, though it falters to weigh on the AUD/USD pair.
• US President Biden called for Russia to be removed from the G20.
• AUD/USD Price Forecast: Bias is upwards unless it trades below 0.7440, meaning that a correction is underway.

The AUD/USD edges higher, but the rally appears to be stalling, as shown by Thursday’s price action, about to form a doji candle, meaning the tug-of-war between bulls and bears started, as uncertainty looms. At the time of writing, the AUD/USD is trading at 0.7510.

The greenback stays firm amid a positive market mood

The market mood is risk-on in the North American session, despite that European stocks indices finished with losses. Across the pond, US equities are rising, while the buck shows some resilience to fall, as it trades with gains reflected by the US Dollar Index up 0.20%, at 98.82. US Treasury yields resume their advance after Wednesday’s losses, with the 10-year T-note yield up almost five basis points, sitting at 2.341%.

There has not been any market-moving news on the geopolitical front, with the Russia – Ukraine war still underway. The US President Joe Biden arrived at NATO’s two-day summit in Brussels. According to a senior US official, Biden told NATO that he supported increased NATO troops on the eastern front. Also,  Biden called for Russia to be removed from the G-20.

Aside from this, Fed speakers have continued to grab headlines. Chicago Fed President Charles Evans said he is “comfortable” with 25 bps increases to the Federal Funds Rate but remains “open” to 50 bps increases if needed. Earlier, Minnesota Fed President Neil Kaskary said that 10-year Treasury yields remain low while emphasizing a risk of overdoing it on rate hikes.

An absent Australian economic docket would leave AUD/USD traders adrift to US data on Friday. Meanwhile, across the pond,  Pending Home Sales for February, the Universit of Michigan Consumer Expectations for March, and Fed speakers would provide a catalyst for AUD/USD traders.

AUD/USD Price Forecast: Technical outlook

The AUD/USD is upward biased, as shown by the daily chart, and with the 50-day moving average, crossing over the 100-DMA, each one sitting at 0.7223 and 0.7216, respectively. Nevertheless, due to the steepness of the rally, plus the Relative Strength Index (RSI) near 68, accelerating toward overbought conditions, the AUD/USD might correct in the near term. However, unless the AUD/USD breaks below 0.7440, the AUD/USD will keep going up.

That said, the AUD/USD first resistance would be October 28, 2021, high at 0.7555. Breach of the latter would expose 0.7600, followed by 0.7700.

• GBP/USD’s failure to reclaim 1.3300 exacerbated the downward move below 1.3200.
• Market sentiment is mixed, as European bourses fluctuate while US stocks advance.
• Positive news from the Russia-Ukraine front could aim for a ceasefire between both countries.
• GBP/USD Price Forecast: Downward biased, as the pair aims towards 1.3100.

The GBP/USD pair slides for the second consecutive day on Thursday and drops below the 1.3200 mark amid a risk-on market mood, which usually favored the British pound, but US central bank hawkishness and broad US dollar strength weighed on the pair. At the time of writing, the GBP/USD is trading at 1.3173.

As abovementioned, the market sentiment turned sour of late. European indices closed Thursday session with losses, though US stocks keep in the green. In the FX space, the greenback stays firm around 98.89 per the US Dollar Index, approaching the 99.00 mark, while US Treasury yields rise.

The Russia-Ukraine conflict is back at the forefront of headlines, with reports that NATO’s two-day summit is underway. According to a senior US administration official, US President Biden told NATO that he supported increased NATO troops on the eastern front. However, it is worth noting that there has been some positive news from Eastern Europe. The Ukrainian Chief of Staff, Andriy Yermak, said there was progress in the ceasefire negotiations with Russia and expressed “careful optimism,” as reported by Axio’s correspondent.

Fed’s Kashkari and Evans crossed wires

Early in the North American session, Minnesota Fed President Neil Kashkari expressed that the risk of overdoing it on rate hikes exists. Furthermore, he added that he sees neutral rates at around 2%. Later, Chicago Fed President Chris Evans said that the Fed first rate hike was the “first of many,” while saying that he’s open to 50 bps increased “if needed.”

In the meantime, the UK economic docket featured March Composite PMI for the UK, dipped to 59.7 vs. February’s 59.9 figure, though higher than the 57.8 foreseen.

The US economic docket featured Initial Jobless Claims for the week ending on March 19, which fell the most since 1969. The reading came at 187K lower than the 212K foreseen. Later in the day, the Markit PMIs for March were revealed, which came better than expected.

GBP/USD Price Forecast: Technical outlook

The GBP/USD is tilted downwards, as noted by the daily chart. Tuesday’s rally stalled around November 26 low at 1.3275, though the pair pierced the 1.3300 mark on Wednesday, as the 50-day moving average (DMA) is about to cross under the 100-DMA, each at 1.3402 and 1.3400, respectively.

With that said, the GBP/USD first support would be December 8, 2021, low at 1.3160. Breach of the latter would expose November’s 13, 2020 daily low at 1.3105, followed by the bottom-trendline of a descending channel around the 1.3020-40 region and the 1.3000 mark.

US President Joe Biden said on Thursday that he thinks Russia should be removed from G20, as reported by Reuters.

Additional takeaways

"Asked that Ukraine be able to attend G20 meetings."

"Ukraine's judgment to make whether it cedes territory to Russia."

"Talked about how major wheat producers US, Canada could increase and disseminate more rapidly food abroad."

"Determined to sustain efforts with allies on Ukraine and build on them."

"Coordinating with G7, EU on food and energy security."

"Russian President Putin didn't think we could sustain this cohesion among allies."

"NATO is more united than ever."

"China understands its economic future is more closely tied to the West than to Russia."

"Discussed need for a system to see who violates sanctions."

"Made no threats to Chinese President Xi but pointed out the number of American and foreign companies that had left Russia."

Market reaction

These remarks had little to no impact on risk sentiment and the S&P 500 Index was last seen rising 1% on the day at 4,500.

Russia's foreign ministry said on Thursday that NATO is reaping terrible results from the decision to pump Ukraine with weapons, Reuters reported citing RIA news agency.

"NATO summit decision to keep providing support to Ukraine confirms alliance wants the conflict to continue," the ministry added.

Market reaction

These comments don't seem to be having a noticeable impact on the market mood. As of writing, the US Dollar Index was up 0.2% on the day and the S&P 500 Index was rising nearly 1%.

European Central Bank (ECB) governing council member Mario Centeno said on Thursday that a recession in the eurozone was not in the ECB's scenario, as reported by Reuters.

"The situation is delicate, it has to be followed very carefully," Centeno further added.

Market reaction

These comments don't seem to be having a noticeable impact on the shared currency's performance against its major rivals. At the time of press, the EUR/USD pair was trading at 1.0985, where it was down 0.15% on a daily basis. 

• Silver prices rallied into the upper $25.00s on Thursday amid focus on further upside in US breakeven inflation expectations.
• Silver’s resilience to the higher dollar and yields amid the Fed’s hawkish shift is likely due to ongoing geopolitical concerns.

Spot silver (XAG/USD) prices rallied to ten-day highs on Thursday, breaking back above the $25.50 mark and at one point nearing the $26.00 per troy ounce level. Prices have subsequently leveled off in the $25.60s where they trade higher by about 2.1% on the day, taking gains since Tuesday’s weekly lows in the $24.50s to more than 4.0%. Silver prices were up alongside other precious metals despite a stronger US dollar and higher US yields (both of which would normally weigh on silver). Focus was instead on long-term US inflation expectations after the 5-year break-even rate hit a record high above 3.6%. That implies US bond market participants see US CPI averaging 3.6% over the next five years.

The rise in inflation expectations since Russia’s invasion of Ukraine has been steep and has unsurprisingly been a key factor underpinning precious metals, which are viewed as an asset class that provides inflation protection. Indeed, silver's (and gold’s) resilience in recent days despite the rally in US yields and the USD as a result of the Fed’s latest hawkish shift has been quite remarkable. Was it not for recent geopolitical developments and the stagflationary risks that Russia’s war in Ukraine creates, the likes of silver would likely be substantially lower at this point.

With commodity strategists fearing that the worst is yet to come regarding the recent rise in energy prices and with Russo-Ukraine peace talks showing no signs of headway whilst Western nations continue to toughen their Russia sanctions, precious metals are likely to remain underpinned. Thursday push back above the 21-Day Moving Average in the $25.25 area for XAG/USD will raise confidence amongst the bulls that a near-term rally back above $26.00 is possible. That would reopen the door to a retest of earlier monthly highs near-$27.00.

• The USD/JPY maintains the foot in the metal, extending its rally to five straight days.
• Fed officials maintain the view that 50 bps increases are not bad.
• US Initial Jobless Claims declined under the 200K mark, the lowest level since 1969.

The USD/JPY pair keeps extending its rally, breaking the 122.00 mark, underpinned by hawkish Fed speaking preparing to hike rates 50 bps in the May meeting, which spurred a jump in US Treasury yields amidst an upbeat mood in the financial markets. At the time of writing, the USD/JPY is trading at 122.30 at new YTD highs,

Of late, the market mood improved, as Europen equities made a U-turn after recording losses earlier in the North American session. Meanwhile, US stocks consolidated in the green, despite growing concerns of high inflation as the US central bank began its tightening cycle.

Firmer US Dollar keeps the Japanese yen pressured

In the meantime, the greenback remains resilient to fall, as it clings to gains, up 0.12%, sits at 98.724, while the US 10-year Treasury yield gains two and a half basis points, up at 2.341%.

Elsewhere, the Russia-Ukraine conflict is grabbing attention as NATO’s two-day summit is underway. Of note is that according to a senior US administration official, US President Biden told NATO that he supported increased NATO troops on the eastern front. The positive news on the front is that Ukrainian Chief of Staff Andriy Yermak said there was progress in the ceasefire negotiations with Russia and expressed “careful optimism,” as reported by Axio’s correspondent.

US central bank policymakers crossed the wires

Meanwhile, Fed speaking continued. The first policymaker to cross the wires was Minnesota’s Fed President Neil Kashkari. He said that there is a risk of overdoing it on rate hikes while reiterating that a neutral interest rate is around 2% for him. Later, Chicago Fed President Chris Evans said that the Fed’s first rate hike was “the first of many this year.” Evans added that he’s open to a 50 bps hike if needed and emphasized that the central bank may begin reducing the balance sheet while raising rates at the same meeting.

The US economic docket featured Initial Jobless Claims for the week ending on March 19, which fell the most since 1969. The reading came at 187K lower than the 212K foreseen. Later in the day, the Markit PMIs for March were revealed, which came better than expected.

Technical levels to watch

Polish PM Mateusz Morawiecki said on Thursday that he would tell EU leaders about the need for a NATO humanitarian mission in Ukraine, given what's happening there is a massacre, reported Reuters.

NATO needed to apply more sanctions on Russia than have currently been agreed, like cutting off port access for Russian ships as well as rail, he added, saying that Russia must also be cut off from financing and from buying oil and gas. The costs of war will be even higher if Russia is allowed to have its way, he warned. 

Chicago Fed President Charles Evans said on Thursday that the Fed can begin its balance sheet reduction and raise interest rates in the same meeting, reported Reuters. The risk of slowing the economy into recession isn't high, Evans said. The Fed won't need asset sales until it is well into its balance sheet reduction, Evans added but may need a "cleanup operation" to remove mortgage-backed securities.  

Separately, Evans also noted that the data will be an important part of the decisions on the pace and steepness of rate hikes. Evans added that he supports starting to reduce the balance sheet relatively quickly and favours a "pretty brisk pace". 

• The Loonie keeps rallying vs. the greenback, as shown by the USD/CAD down 0.27%.
• A mixed market mood keeps the CAD in the driver’s seat amid a firm US dollar.
• USD/CAD Price Forecast: Downward biased, threatening to break below 1.2450.

USD/CAD post modest losses as Thursday North American session kicks in, after overnight’s a subdued session that witnessed the pair fluctuating in the 1.2550-80 range. At the time of writing, the USD/CAD is trading at 1.2525.

Market sentiment is mixed. European stocks fluctuate while US equities are gaining, except for the Russell 2000. The greenback remains firm in the session, as the US Dollar Index shows, barely up 0.08%, sitting at 98.685. US Treasury yields recover from Wednesday’s drop, led by the 10-year benchmark note at 2.357%, up three-and-half basis points.

Developments in Eastern Europe grabbed the headlines

The Russia-Ukraine conflict remains unchanged. Although of late, at press time, Barak Ravid Axio’s reported via Twitter that Ukrainian’s Chief of Staff Andriy Yermmak said there was progress in ceasefire negotiations with Russia. If that is achieved, the market sentiment will react positively to the news.

Meanwhile, the NATO two-day summit in Brussels began. According to a senior US administration official, US President Biden told NATO that he supported increased NATO troops on the eastern front. Furthermore, the US has spoken with allies about assisting Ukraine in obtaining anti-ship missiles.

Aside from this, the US crude oil benchmark WTI falls almost 0.90% in the day, below the $113.50 mark, stopping Canadian dollar appreciation due to its correlation with oil prices.

The US economic docket featured Initial Jobless Claims for the week ending March 17, which fell to the lowest since 1969 as demand for labor far exceeds supply and rampant inflation keeps the incentive to work high.

USD/CAD Price Forecast: Technical outlook

The USD/CAD has been falling steadily for five consecutive days in chunks of 50-60 pips and is about to challenge September 3, 2021, support at 1.2493. Also, the USD/CAD broke below a five-month-old upslope trendline on Wednesday, exerting additional downward pressure on the pair.

With that said, the USD/CAD first support would be the 1.2500 figure. Once cleared, it would immediately test the 1.2493 level abovementioned, followed by the YTD low achieved on January 19 at 1.2450. Breach of the latter would open the door for a renewed test of October 21, 2021, at 1.2288.

• WTI has been choppy on Thursday, swinging between the $112s area to upper $116.00s as traders weigh various themes.
• Traders continue to fret about Russian supply disruptions due to Western sanctions as US/Iran talks falter.

Oil markets have seen volatile trade thus far this Thursday, with traders juggling a multitude of themes. WTI swung between multi-week highs in the upper $116.00s and $112 area and at current levels around $113 trades about a buck lower on the session. Dips toward $110 attracted solid demand as energy market participants continue to weigh up the size of the loss of Russian oil supply. Executive Director of the IEA Fatih Birol said on Thursday that IEA countries were united in seeking to radically reduce Russian oil and gas imports, with Western nations have imposed harsh sanctions on the Russian economy over its invasion of Ukraine.

On which note, Thursday saw a flurry of NATO and EU summits where those sanctions were marginally toughened, though there was no EU announcement of an EU embargo on Russian oil. Whilst the lack of embargo will come as a disappointment to the oil bulls, Russia’s new demand on Wednesday for so-called “unfriendly” countries to pay for Russian energy purchases in roubles may itself act to significantly reduce EU imports. The extent to which this will be the case remains unclear, with traders also needing to weigh up the loss to global supply after it was announced earlier in the week that Russian crude oil exports from Kazakhstan's Caspian Pipeline Consortium (CPC) terminal had been halted due to storm damage.

Updates regading US/Iran negotiations for a return to the 2015 nuclear pact and removal of sanctions on Iranian oil exports have also been downbeat as of late, reducing the chances that 1.3M barrels per day or more of much needed Iranian exports return to global markets any time soon. “Unless Iran is allowed back to the market quickly it is hard to see how to further price increase, potentially above the recent peaks, can be avoided,” said analysts at PVM.

Though chatter about another coordinated crude oil reserve release appeared to cap WTI gains in the $116 area on Thursday, any bearish impact is likely to be limited/short-lived, given official inventory data on Wednesday showed the US Strategic Petroleum Reserve (SPR) at its lowest since 2002. WTI bulls will likely be looking for a run into the $120s and back towards multi-year highs in the $130 area printed earlier on in the month.

Ukrainian President Volodymyr Zelenskyy's chief of staff Andriy Yermmak said on Thursday that there was progress in ceasefire negotiations with Russia and expressed "careful optimism", reported Axios's Barak Ravid via Twitter. Barak said more would be explained in an upcoming Axios article.   

Market Reaction

After days of apparent deadlocks in talks, headlines such as this might well contribute to an upturn in risk appetite. That hasn't been the case just yet, with US equities broadly unreactive thus far to the latest news. 

EUR/JPY has surged above its 10-month downtrend. Analysts at Credit Suisse look for a test of the 2021 high at 134.14.

Support is seen at 132.33 

“We look for a test of the 2021 high at 134.14. Whilst a fresh rejection from here should be allowed for, with the JPY expected to stay weak in outright terms, we are biased to a sustained break higher in due course. This should then clear the way for a move to trend resistance at 134.41.” 

“Through 134.41 is needed to curtail thoughts of a broader mean-reverting range with resistance seen next at 135.85, potentially the 137.50 high of 2018.” 

“Support is seen at 132.95 initially, with 132.33 needing to hold to keep the immediate risk higher. Below can see a pullback to 131.99/92, potentially 131.53, but with buyers expected here.”

GBP/USD has failed to recoup the 1.32 handle. Cable needs to close the week above the latter to reinforce its drive higher, economists at Scotiabank report.

Support under the 1.3150/60 zone is at 1.3120 

“A convincing break above the 1.32 mark and a close above it for the week would reinforce the pound’s drive higher since mid-month.”

“Resistance past the figure and ~1.3215 is the mid-1.32s, while support under the ~1.3150/60 zone is 1.3120 and 1.3100/10.”

Gold price extends its advance amid mounting tensions in Eastern Europe. What’s more, the yellow metal shrugs off expectations of a hawkish Federal Reserve, strategists at TD Securities report.

Safe-haven demand is trumping a hawkish Fed

“While gold markets could be reflecting a growing cohort of participants interpreting the Fed's hiking path as being behind the curve on inflation, we also see rising risks of that the Fed will deliver a hawkish surprise to markets.”

“We expect the Fed to raise rates by 50bps in both May and June, and to deliver a 25bp hike at each meeting between July and December. And yet, prices have remained incredibly resilient despite this historically negative scenario for gold, as safe-haven flows have trumped fears of a hawkish Fed, with demand for gold surging in response to the war in Ukraine.”

• EUR/USD remains on the defensive for the second straight session.
• A deeper decline to 1.0900 remains well on the table so far.

EUR/USD extends Wednesday’s bearish move to the 1.0970 region, where some contention seems to have emerged.

The pair, in the meantime, remains under pressure and the breach of the weekly low at 1.0960 (March 22) should initially spark further weakness 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 1.1510.

EUR/USD daily chart

The EUR’s negative trend since the late-week break past 1.11 is continuing today. Economists at Scotiabank expect EUR/USD to slide towards 1.08 on a weekly close below the 1.10 level.

Tuesday and Wednesday lows of ~1.0960/5 stand as key support

“The Tuesday and Wednesday lows of ~1.0960/5 stand as key support ahead of the 1.0950 mark and ~1.0926.”

“Resistance after 1.1000/10 is ~1.1025 and the mid-figure area.”

“A close below 1.10 for the week would signal that EUR losses back to 1.08 is set to resume.”

Chicago Fed President and FOMC member Charles Evans on Thursday said that the Fed needs to move interest rates back up to neutral and that his own view is that, given the pressures he sees, would be comfortable with 25bps hikes, reported Reuters. By next March, Evans continued, rates would be back to neutral at that pace, he continued, adding that we want to be careful. However, Evans signalled an openness to a 50bps rate hike, saying maybe it helps and he would be open minded. 

• DXY adds to Wednesday’s advance and flirts with 99.00.
• Next on the upside aligns the weekly top at 99.29 (March 14).

DXY extends the upside momentum and trades at shouting distance from the key 99.00 barrier on Thursday.

Further advance in the index now looks increasingly likely and a break above the 99.00 zone should put a test of the weekly high at 99.29 (March 14) back on the investors’ radar prior to the 2022 peak at 99.41 (March 7).

The current bullish stance in the index remains supported by the 6-month line just above 96.00, while the longer-term outlook for the dollar is seen constructive while above the 200-day SMA at 94.67.

DXY daily chart

• GBP/USD witnessed some follow-through selling for the second successive day on Thursday.
• The risk-on impulse capped the safe-haven USD and helped limit deeper losses for the major.
• The set-up favours bearish traders and supports prospects for a further depreciating move.

The GBP/USD pair witnessed some follow-through selling for the second straight day on Thursday and retreated further from a nearly three-week high, around the 1.3300 mark touched overnight. The downward trajectory dragged spot prices to a two-day low, though stalled ahead of mid-1.3100s.

A generally positive tone around the equity markets capped gains for the safe-haven US dollar, which, in turn, was seen as a key factor that extended some support to the GBP/USD pair. That said, elevated US Treasury bond yields, bolstered by the Fed's hawkish outlook, acted as a tailwind for the buck and failed to assist the pair to register any meaningful recovery.

From a technical perspective, oscillators on the daily chart are still holding in the bearish territory and support prospects for further losses. Some follow-through selling below the 1.3150 area will reaffirm the negative outlook and make the GBP/USD pair vulnerable to retest sub-1.3100 levels, touched in reaction to a dovish assessment of the BoE decision last week.

Acceptance below the 1.3100 round figure will suggest that the recent recovery move from the YTD low has run its course. This, in turn, will set the stage for the resumption of the prior well-established bearish trend witnessed over the past one month or so. The GBP/USD pair could then accelerate the downfall and aim to challenge the key 1.3000 psychological mark.

On the flip side, sustained strength back above the 1.3200 mark might trigger a short-covering move and lift the GBP/USD pair back towards the 1.3255-1.3260 region. Some follow-through buying could allow bulls to make a fresh attempt to conquer the 1.3300 round-figure mark and lift spot prices to the next relevant resistance near the 1.3320-1.3325 region.

GBP/USD 4-hour chart

Technical levels to watch

Chicago Fed President and FOMC member Charles Evans on Thursday said that his view on the appropriate path for Fed policy is in line with the median view at the Fed (i.e. six more 25bps hikes in 2022 and a further four in 2023), reported Reuters. 

Additional Remarks:

"Monetary policy must shift to a 'timely' removal of accommodation."

"Higher inflation would become embedded in expectations if monetary policy doesn't respond."

The Fed's recent rate hike was the first of many this year."

"The US economy has solid momentum and the labor market is 'downright tight' by some measures."

"The Ukraine crisis and the pandemic both pose upside risk to inflation, downside risk to growth."

"The Fed must be cautious, humble, nimble and policy must not be on a preset course."

Activity growth in the US manufacturing sector accelerated in March, according to the preliminary version of IHS Markit's PMI survey. The "flash" headline Manufacturing PMI rose to 58.5 in March from 57.3 a month earlier, above the expected drop to 56.3. Service sector growth was also stronger than expected with flash PMI coming in at 58.9 versus forecast for a drop to 56.0 from 56.5 in February. That meant the composite PMI measure rose to 58.5 from 55.9 last month. 

Market Reaction

There was no FX market reaction to the latest more robust than expected PMI survey results. 

US President Joe Biden said on Thursday that, at the NATO summit in Brussels, the alliance had discussed ways to bolster their collective defense, particularly on the Eastern flank, reported Reuters. NATO had agreed to establish four new battle groups in Slovakia, Romania, Bulgaria and Hungary, Biden added, saying that between now and the NATO summit in June, we will develop plans to additional forces and capabilities to strengthen NATO's defenses. 

• Despite multiple attempts so far this session, EUR/USD has not been able to break back above the 1.1000 level.
• The euro shrugged off strong Eurozone PMIs with traders concerned about Russia’s new demand for energy payments in roubles.
• The strong buck amid the Fed hawkish shift and safe-haven demand is also weighing on the pair.

Despite multiple attempts so far this session, EUR/USD has not been able to break back to the north of the 1.1000 level and is currently trading closer to session lows in the 1.0980 area, down about 0.25% on the day. The pair saw some strength in early European trade as a result of stronger than forecast flash Eurozone PMI figures for March, but this euro strength was short-lived, with traders very much still focused on the Ukraine war. The risks of an energy crunch in Europe has risen after Russian President Vladimir Putin announced on Wednesday that unfriendly countries (including the EU) would have to purchase Russian energy (including gas) in roubles.

EUR/USD also finds itself weighed upon amid the broadly strong US dollar which 1) reflects safe-haven demand amid the ongoing Ukraine crisis and 2) reflects the recent hawkish shift in Fed communications and subsequent move higher in US yields. With the 21-Day Moving Average (now at 1.1034) continuing to act as a strong level of resistance, EUR/USD downside at this point feels more likely than a sustained break back towards last week’s highs in the 1.1100s. Bears will be eyeing a potential retest of recent near-1.0800 lows.

Ahead, US flash PMIs for March are out next at 1345GMT followed by more Fed speak and given the hawkish shift seen by other policymakers who have spoken thus far, the recipe remains towards a stronger buck. Geopolitics, of course, remains a key theme to watch as well as the G7 and EU announce tougher sanctions against Russia and NATO announces a bolstering of its forces on its Eastern flank.

Barnabas Gan, Economist at UOB Group, comments on the latest release of inflation figures in Singapore.

Key Takeaways

“Singapore’s consumer prices rose at its fastest rate since Feb 2013 at 4.3% y/y (+0.9% m/m nsa) in Feb 2022, due to higher food and oil prices. This is slightly higher compared to market expectations for a 4.2% y/y print. Core inflation decelerated to 2.2% in the same month (Jan: +2.6% y/y).”

“Headline inflation has climbed for six straight months, suggesting that inflation risks stay magnified. Meanwhile, core inflation is above the 2.0% handle for the third straight reading. The authorities have kept their headline and core inflation outlook unchanged at 2.5 - 3.5% and 2.0 - 3.0% respectively.”

“On the back of higher consumer prices, we have upgraded our inflation outlook to average 3.5% in 2022 in our UOB 2Q22 Quarterly Report. Coupled with the strong S$NEER seen at the time of writing (1.91% above the mid-point), we maintain our call for MAS to “slightly” steepen the S$NEER gradient in April 2022 while there is also a material risk for the MAS to recentre its policy band higher.”

• Gold Price resumes its advance amid mounting tensions in Eastern Europe.
• Mixed US data had no impact on the bright metal as the focus remains on sentiment.
• XAUUSD is nearing a solid static resistance around $1,960 with a near-term bullish stance.

Gold Price nudges higher and currently trades at around $1,955, after hitting a fresh weekly high of $1,957.84 a troy ounce mid-European session. Volatility around XAUUSD increased alongside its near-term bullish potential as investors try to asset the latest developments in the Russia-Ukraine crisis. 

A sour market mood boosted demand for XAUUSD throughout the first half of the day amid headlines coming from the war front. US President Joe Biden has met with other European leaders to discuss the situation, and, alongside NATO, are preparing for a risk of Moscow launching a nuclear attack. They have also discussed assisting Ukraine with anti-ship missiles. The sentiment improved a bit on headlines signaling they would announce a major initiative to direct shipments of liquified natural gas to Europe, to replace that usually coming from sanctioned Russia.

European indexes have managed to trim most of their early losses, now trading mixed not far away from their opening levels. The bounce in EU indexes has also provided support to US ones, which are starting the day with modest losses after plummeting on Wednesday. Overall, risk-off will likely prevail as market participants see the crisis in the Old Continent steepening, without no diplomatic resolution at sight. 

Also read: XAUUSD price moves: A consequence of conflict or/and interest rate increases?

Gold Price Technical Outlook

Gold Price neared a strong static resistance level, the 38.2% retracement of the 1,799.38/2,070.50 rally at around $1,960.00. The bright metal is up for a second consecutive day, currently crossing above a mildly bullish 20 DMA. Technical indicators in the daily chart fall short of confirming a bullish continuation, as the Momentum heads lower within neutral levels, while the RSI indicator is stable at around 55.

XAUUSD turned bullish in the near term, and according to the 4-hour chart, which shows that the price is challenging bears’ determination around the 100 SMA, while the 20 SMA picks up below the current level.

Once $1,960 is cleared, the next relevant resistance level for Gold Price is $1,970.03, March 10 daily low, followed by the $1,992.00 price zone. Support levels are at the daily low of $1,937.33, and the next Fibonacci support is at $1,925.20.

• EUR/JPY extends the upside to the vicinity of 134.00.
• Bulls’ immediate target emerges at the 2021 high (134.12).

EUR/JPY advances for the third session in a row, although a breakout of 134.00 the figure remains elusive for the time being.

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 (129.98), the outlook for the cross is expected to remain constructive.

EUR/JPY daily chart

• USD/JPY continued scaling higher on Thursday and shot the highest level since December 2015.
• The divergent Fed-BoJ monetary policy outlooks weighed on the JPY amid a positive risk tone.
• Elevated US bond yields underpinned the USD and remained supportive of the strong move up.

The USD/JPY pair maintained its strong bid tone through the early North American session and climbed to a fresh multi-year top, closer to the 122.00 round-figure mark in the last hour.

A combination of supporting factors assisted the USD/JPY pair to build on this week's breakout momentum through the 120.00 psychological mark and scale higher for the fifth successive day on Thursday. A generally positive risk tone undermined the safe-haven Japanese yen, which was further weighed down by the divergence between the Bank of Japan and the Fed monetary policy outlooks.

In fact, a slew of influential FOMC members, including Fed Chair Jerome Powell, raised the possibility of a 50 bps rate hike at the upcoming policy meeting in May. This, along with concerns that surging crude oil prices would put upward pressure on the already high inflation, pushed the yield on the benchmark 10-year US government bond back closer to the highest level since 2019.

Conversely, the Japanese 10-year bond yield remained anchored below the BoJ's 0.25% ceiling amid the ultra-loose policy stance adopted by the Japanese central bank. This, in turn, resulted in the further widening of the US-Japanese bond yield spread, which was seen as another factor that drove flows away from the Japanese yen and contributed to the USD/JPY pair's strong bullish trajectory.

The relentless rally witnessed over the past three weeks or so, which sums up to gains of nearly 700 pips, lifted spot prices to levels not seen since December 2015. It, however, remains to be seen if bulls are able to retain their dominant position or opt to take some profits off the table amid extremely overbought conditions on short-term charts.

On the economic data front, the US Durable Goods Orders fell short of market expectations, though the disappointment was offset by a larger than anticipated fall in the Weekly Initial Jobless Claims. Given that the focus remains glued to fresh developments surrounding the Russia-Ukrain saga, the mixed releases did little to provide any meaningful impetus to the USD/JPY pair.

Technical levels to watch

In the view of strategists at ANZ Bank, tightening monetary policies could dampen investors’ appetite for gold. However, the yellow metal is unlikely to slide below the $1,900 level.

XAU/USD to trade near $1,950 over next three months

“Global central banks are beginning to tighten monetary policy in a bid to contain inflation. Worsening supply chain disruptions and elevated commodities prices may prompt the US Fed to make more aggressive rate hikes through the year. This could dampen investors’ appetite for gold, but its downside looks protected near $1,900/oz over the next six months.”

“We expect gold prices to trade near $1,950/oz over next three months and average $1,900/oz for this year.”

According to a US official on Thursday, the US announced new sanctions on Russia's state Duma as an entity and its 328 members, reported Reuters. The US also announced new sanctions on Russian oligarchs Herman Gref, the head of Sberbank and Gennady Timchenko, as well as the 17 board members of the Russian financial institution Sovcombank. The 48 largest Russian state-owned defense enterprises that form a part of Russia's defense industrial base were all also sanctioned, the US official announced. 

According to a US official, the G7 and EU will announce a new initiative aimed at stopping Russia from evading sanctions, reported Reuters. The G7 and EU will engage with other countries to urge them to adopt similar sanctions against Russia and will make clear that any transaction involving gold related to Russia's central bank is covered by existing sanctions.  

Fed board of governors member Christopher Waller said on Thursday that he is looking closely at rea estate to judge the appropriateness of the Fed's monetary stance, reported Reuters.  

Additional Remarks:

"I am watching whether the sharp, ongoing increase in home prices poses financial stability risks."

"The rising cost of rent has implications for monetary policy."

"The Fed's purchases of mortgage-backed securities in response to pandemic reduced mortgage rates by 40 basis points."

"The recent rebound in mortgage rates, house price rises have made home-buying less affordable."

"Demand for houses is up, supply is constrained... the home price rise isn't fueled by excessive leverage or easy lending."

"I am hopeful that the pandemic-specific factors pushing up home prices and rents will ease in next year or so."

In a joint statement released following Thursday's extraordinary meeting of NATO heads of state, NATO said that Russia's attack on Ukraine threatens global security. The statement condemned Russia's attack on civilians and said it would also hold Belarus to account. The statement called on China to abstain from supporting Russia's war in any way. NATO reiterated that it will continue to protect and defend every inch of allied territory. 

Minneapolis Fed President Neil Kashkari said on Thursday that inflation is very high and he has thus pencilled in seven rate hikes for this year, reported Reuter. 

• Gold Price resumes its advance amid mounting tensions in Eastern Europe.
• Mixed US data had no impact on the bright metal as the focus remains on sentiment.
• XAUUSD is nearing a solid static resistance around $1,960 with a near-term bullish stance.

Gold Price surged to $1,948.56 a troy ounce on Wednesday amid a souring market’s mood that sent Wall Street into the red. XAUUSD accelerated its advance during London trading hours to hit a fresh weekly high of $1,957.84, approaching a robust static resistance area. It quickly retreated from the level ahead of US data releases, holding nearby afterwards, as the figures had no impact on the bright metal.

The dismal market mood that boost demand for XAUUSD is directly linked to the ongoing developments in Eastern Europe. US President Joe Biden has met with other European leaders to discuss the situation and, alongside NATO, are preparing for a risk of Moscow launching a nuclear attack. They have also discussed assisting Ukraine with anti-ship missiles.

Also read: XAUUSD price moves: A consequence of conflict or/and interest rate increases?  

XAUUSD Technical Outlook

Gold Price neared a strong static resistance level, the 38.2% retracement of the 1,799.38/2,070.50 rally at around $1,960.00. The bright metal is up for a second consecutive day, currently crossing above a mildly bullish 20 DMA. Technical indicators in the daily chart fall short of confirming a bullish continuation, as the Momentum heads lower within neutral levels, while the RSI indicator is stable at around 55.

XAUUSD turned bullish in the near term, and according to the 4-hour chart, which shows that the price is challenging bears’ determination around the 100 SMA, while the 20 SMA picks up below the current level.

Once $1,960 is cleared, the next relevant resistance level is $1,970.03, March 10 daily low, followed by the $1,992.00 price zone. Support levels are at the daily low of $1,937.33, and the next Fibonacci support is at $1,925.20.

• AUD/USD struggled to find acceptance above the 0.7500 mark and edged lower on Thursday.
• The Fed’s hawkish outlook, elevated US bond yields underpinned the USD and exerted pressure.
• A positive risk tone extended support to the perceived riskier aussie and helped limit the downside.
• The pair reacted little to mixed US macro data as the focus remains on geopolitical developments.

The AUD/USD pair recovered a few pips from the daily low and was last seen trading around the 0.7480 region, down nearly 0.20% for the day.

Having struggled to find acceptance above the 0.7500 psychological mark, the AUD/USD pair edged lower on Thursday and eroded a major part of the overnight gains to the highest level since November 2021. The intraday downtick was sponsored by a broad-based US dollar strength, though a generally positive risk tone helped limit deeper losses for the perceived riskier aussie.

The USD continued drawing support from growing acceptance that the Fed would adopt a more aggressive policy response to combat stubbornly high inflation. In fact, a slew of influential FOMC members, including Fed Chair Jerome Powell, raised the possibility of a 50 bps rate hike at the upcoming policy meeting in May. This continued acting as a tailwind for the buck.

The Fed's hawkish outlook was reinforced by elevated US Treasury bond yields, which were further supported by concerns that surging oil prices would put upward pressure on already high inflation. This, along with the lack of progress in the Russia-Ukraine peace negotiations, further benefitted the greenback's relative safe-haven status and weighed on the AUD/USD pair.

On the economic data front, the US Durable Goods Orders fell short of market expectations and declined sharply by 2.2% in February as against the 1.6% rise reported in the previous month. Orders excluding transportation items also contracted 0.6% during the reported month as compared to consensus estimates pointing to modest deceleration in growth to 0.6% from the 0.8% in January.

This, however, was offset by the Weekly Initial Jobless Claims, which fell to 187K during the week ended March 18 from the previous week's upwardly revised reading of 215K. The mixed releases did little to influence the USD or provide any meaningful impetus to the AUD/USD pair as the focus remains glued firmly to fresh developments surrounding the Russia-Ukraine saga.

Technical levels to watch

There were 187,000 initial jobless claims in the US in the week ending on 19 March, less than the 212,000 expected and below the week prior, when there were 215,000 claims (revised up from 214,000), data published by the US Department of Labor (DOL) revealed on Thursday. The four-week moving average of initial claims thus fell to 211,750 from 223,250 the week before. 

Continued claims in the week ending on 12 March fell to 1.35M, much less than the expected drop to 1.41M from 1.417M the week prior (which was revised down from 1.419M). The Insured Unemployment rate in the week ending on 12 March remained at 1.0% versus 1.0% the week before.

Market Reaction

The US dollar hasn't reacted to the latest mixed US data, where Durable Goods Orders figures underwhelmed, but weekly jobless claims were much stronger than forecast. The DXY remains contained 99.00 level. 

According to the latest release by the US Census Bureau, US Durable Goods Orders fall by 2.2% MoM in February, compared to market expectations for a 0.5% decline. That marked a sharp reversal after January's 1.6% gain. Core Durable Goods Orders, meanwhile, fell 0.6% MoM versus an expected gain of 0.6%, also a sharp reversal from the 0.8% growth seen in January. 

Market Reaction

The US dollar hasn't reacted to the latest mixed US data, where Durable Goods Orders figures underwhelmed, but weekly jobless claims were much stronger than forecast. The DXY remains contained 99.00 level. 

• EUR/NOK accelerates losses to multi-year lows around 9.4500.
• The Norges Bank raised the policy rate by 25 bps to 0.75%.
• Higher crude oil prices also lent support to NOK.

The Norwegian krone appreciates further and drags EUR/NOK to fresh lows around 9.4500, an area last visited back in October 2018.

EUR/NOK weaker on Norges Bank, Brent

EUR/NOK dropped to fresh multi-year lows after the Norges Bank raised the policy rate by 25 bps to 0.75% at its meeting on Thursday, broadly in line with market expectations.

However, the Nordic central bank sounded more hawkish than expected following its upbeat assessment of the domestic economic growth prospects and after it acknowledged that rates could go up to “around 2.5% at the end of 2023.”

Also collaborating with the acute uptrend in NOK appears the recovery in prices of the European reference Brent crude, which surpassed the $123.00 mark per barrel earlier on Thursday.

EUR/NOK significant levels

As of writing the cross is losing 1.04% at 9.4643 and faces the next resistance at 9.6921 (weekly high March 22) followed by 9.9802 (monthly high March 15) and then 10.0978 (200-day SMA). On the other hand, a breach of 9.4514 (2022 low March 24) would open the door to 9.4176 (monthly low October 16 2018) and finally 9.3866 (2018 low July 10).

• Gold hit more than one-week highs above $1950 on Thursday as focus remains on geopolitical risk.
• Focus now turns to whether XAU/USD can press on towards $2000 with more Fed speak and US PMIs upcoming.

Spot gold (XAU/USD) prices recently hit fresh more than one-week highs to the north of the $1950 level, despite the slightly stronger US dollar, higher US yields and subdued tone to global equity and commodity market trade. Typically, a slightly stronger US dollar would weigh on USD-denominated gold by making it more expensive for the holders of foreign currency, while higher yields increase the “opportunity cost” of holding onto the precious metal. It thus appears that traders are buying gold as a hedge ahead of important upcoming geopolitical risk events in Europe.

Coming up, NATO’s Secretary-General Jens Stoltenberg will be partaking in a press conference following an extraordinary meeting of the NATO Heads of State earlier in the day. At that meeting, as well as Thursday’s EU Council Meeting, Western nations are expected to announce further sanctions on Russia and support for Ukraine. One of the key themes if whether the EU will embargo Russian oil, with initial reports suggesting the bar for this is high.

Meanwhile, the situation on the ground in Ukraine doesn’t give any cause for optimism with the war having seemingly entered a stalemate and the Ukrainians now accusing the Russians of using white phosphorous in the east amid stalled peace talks. Traders clearly view gold as good value at current levels given these risks, hence why XAU/USD was able to push convincingly back above its 21-Day Moving Average for the first time since the middle of the month. Ahead of more Fed speak and US March flash PMIs, focus will be on whether the precious metal can make further headway back towards the $2000 mark.

• USD/CAD attracted some buying on Thursday amid a broad-based USD strength.
• An uptick in oil prices underpinned the loonie and capped the upside for the pair.
• The focus remains on fresh developments surrounding the Russia-Ukraine saga.

The USD/CAD pair quickly retreated a few pips from the daily high touched in the last hour and was last seen trading with modest intraday gains, around the 1.2565-1.2570 region.

The pair gained some positive traction during the first half of the trading on Thursday and was supported by a broad-based US dollar strength, underpinned by the Fed's hawkish outlook. Growing acceptance that the Fed will adopt a more aggressive policy response to combat stubbornly high inflation turned out to be a key factor that acted as a tailwind for the buck.

In fact, a slew of influential FOMC members, including Fed Chair Jerome Powell, raised the possibility of a 50 bps rate hike at the upcoming policy meeting in May. This, along with concerns that surging oil prices might put upward pressure on the already high inflation, pushed the US Treasury bond yields higher. The combination of factors continued to underpin the greenback.

That said, an uptick in crude oil prices underpinned the commodity-linked loonie and kept a lid on any meaningful upside for the USD/CAD pair. The markets remain worried about the lack of progress in the Russia-Ukraine peace negotiations. Apart from this, the stoppage of crude exports from Kazakhstan's Caspian Pipeline Consortium (CPC) terminal underpinned crude oil prices.

The mixed fundamental backdrop and the lack of any follow-through buying warrant some caution before confirming that the recent pullback from the 1.2900 mark, or the YTD top has run its course. Market participants now look forward to the US economic docket, featuring the release of the flash PMI prints, Durable Goods Orders and the usual Weekly Initial Jobless Claims.

The focus, however, will remain on geopolitics amid expectations that US President Joe Biden will announce new sanctions targeting Russian politicians. The incoming headlines will influence the broader market risk sentiment and drive the USD demand. Traders will further take cues from oil price dynamics for some short-term opportunities around the USD/CAD pair.

Technical levels to watch

Germany’s Finance Minister Christian Lindner announced on Thursday that coalition parties have agreed to provide temporary energy relief for consumers, as reported by Reuters.

Additional takeaways

"Package includes measures to diversify energy imports."

"Petrol and diesel prices will be reduced for commuters over three months period."

"Petrol price to fall by 30 euro cents per litre, diesel 14 cents per litre for three months."

"Costs of energy package is part of the supplementary budget under discussion."

Market reaction

These remarks don't seem to be helping the market mood improve during the European trading hours. Germany's DAX 30 was last seen losing 0.5% on a daily basis.

• USD/CHF attracted fresh buying on Thursday, albeit the uptick lacked bullish conviction.
• The Fed’s hawkish outlook underpinned the USD and remained supportive of the move.
• Stability in equity markets, SNB’s decision to maintain the status quo weighed on the CHF.
• The lack of follow-through buying warrants cautions before positioning for further gains.

The USD/CHF pair held on to its modest intraday gains through the first half of the European session and was last seen trading a few pips below the daily high, around the 0.9325-0.9330 region.

The pair once again showed some resilience below the 0.9300 round-figure mark and attracted some dip-buying on Thursday amid a broad-based US dollar strength. The recent remarks by a slew of influential FOMC members, including Fed Chair Jerome Powell, boosted market bets for a 50 bps rate hike move at the upcoming policy meeting in May. This was reinforced by elevated US Treasury bond yields, which, in turn, continued acting as a tailwind for the greenback.

Conversely, the Swiss National Bank (SNB) left its ultra-expansive monetary policy unchanged at the end of March policy meeting on Thursday and kept policy rates locked down at -0.75%. Adding to this, the SNB reiterated its commitment to conduct currency interventions to stem the rise of the domestic currency. This, along with signs of stability in the equity markets, undermined the safe-haven Swiss franc and extended additional support to the USD/CHF pair.

The uptick, however, lacked any follow-through buying, which might hold back bullish traders from placing aggressive bets around the USD/CHF pair. That said, repeated failures to find acceptance below the 0.9300 round-figure mark suggests that the recent pullback from the 0.9460 area or the highest level since April 2021 has run its course. Sustained strength beyond the 0.9355-0.9360 zone will reaffirm the outlook and set the stage for some meaningful gains.

Investors, however, seemed reluctant and preferred to wait for fresh developments surrounding the Russia-Ukraine saga. US President Joe Biden will meet NATO and European leaders in an emergency summit on the Ukraine War. The incoming headlines will influence the risk sentiment and drive the USD demand, which, in turn, should provide some impetus to the USD/CHF pair.

Technical levels to watch

• A broad-based USD strength dragged GBP/USD lower for the second straight day on Thursday.
• The mixed UK PMI prints failed to impress bullish traders or provide any impetus to the major.
• The market focus remains glued to fresh developments surrounding the Russia-Ukraine saga.

The GBP/USD pair maintained its offered tone through the first half of the European session and had a rather muted reaction to mixed UK PMI prints. The pair was last seen trading just above mid-1.3100s, down nearly 0.35% for the day.

The pair extended the previous day's sharp retracement slide from the vicinity of the 1.3300 mark, or over two-week high and witnessed some follow-through selling for the second straight day on Thursday. The downtick was exclusively sponsored by a stronger US dollar, which continued drawing support from the Fed's hawkish outlook.

In fact, comments by influential FOMC members, including Fed Chair Jerome Powell, have been fueling speculations that the Fed would adopt a more aggressive policy response to combat high inflation. The markets were quick to react and started pricing in the possibility of a 50 bps rate hike at the upcoming meeting in May.

This was reinforced by elevated US Treasury bond yields, which were further underpinned by concerns that surging crude oil prices could put further upward pressure on already high consumer prices. Apart from this, the lack of progress in the Russia-Ukraine peace negotiations further benefitted the safe-haven greenback.

On the other hand, the British pound was pressured by a dovish assessment of the Bank of England policy decision last week and its view around the need for future rate hikes. Bulls failed to gain any respite from an unexpected rise in the UK Services PMI, which was offset by a larger drop in the gauge for the manufacturing sector.

Market participants now look forward to the US economic docket, featuring the release of the flash PMI prints, Durable Goods Orders and the usual Weekly Initial Jobless Claims. The focus, however, will remain on geopolitics amid expectations that US President Joe Biden will announce new sanctions targeting Russian politicians.

Technical levels to watch

Gold gained by over 1% to reach a good $1,940 on Wednesday. Strategists at Commerzbank expect the yellow metal to extend its advance as critical NATO Summit on Ukraine could result in further sanctions against Russia. 

Gold in demand as safe-haven and store of value

“The gold ETFs tracked by Bloomberg have registered inflows of nearly 33 tons this week. Inflows since the beginning of the month have totalled over 150 tons. In all likelihood, this month will be one of the most robust ever in terms of inflows.” 

“The ongoing high safety needs of market participants are probably behind the buying interest, as the war in Ukraine is continuing unabated and the West may well agree on new sanctions against Russia today.”

“A high-level NATO meeting will be taking place today in Brussels, its main focus being on Russia. Further sanctions could fuel the inflation expectations of market participants, which would benefit gold in its role as a store of value. The gold price is therefore likely to continue rising for the time being.”

European Central Bank (ECB) Executive Board Member Frank Elderson said on Thursday that the latest analysis confirms that the present circumstances represent new headwinds to growth in the euro area, as reported by Reuters.

Additional takeaways

"Outlook that prevailed before the Russian invasion was quite favourable."

"Our commitment to medium-term price stability is unwavering."

"We are not yet observing stronger second-round effects than projected."

"Financial volatility has so far not caused severe strains in money markets or liquidity shortages in the euro area banking system."

"We stand ready to adjust our instruments."

Market reaction

The shared currency struggles to find demand on Thursday and EUR/USD pair was last seen losing 0.12% on the day at 1.0990.

• EUR/USD revisits 1.0970 before attempting a mild bounce.
• German 10-y bund yields regain the upside and the 0.50% zone.
• Germany, EMU Flash PMIs surprised to the upside in March.

Sellers remain well in control of the sentiment surrounding the single currency, motivating EUR/USD to keep the bearish bias unchanged on Thursday.

EUR/USD meets daily support near 1.0970

EUR/USD loses ground for the third session in a row on Thursday, although it managed to rebound from earlier lows in the wake of better-than-forecast preliminary results from PMIs in both Germany and the broader Euroland.

In the meantime, no news in the geopolitical front appears to keep lending support to the dollar in the very near term, which remains already underpinned by the Fed-ECB divergence in monetary policy and the US-EU economic growth prospects.

The daily pullback in spot came in contrast with the resumption of the uptrend in German 10y benchmark yields, which have retested the 0.50% zone so far on Thursday.

Data wise on the US docket, flash Manufacturing and Services PMIs are due, seconded by Initial Claims, Durable Goods Orders and speeches by FOMC’s Waller, Evans and Bostic.

What to look for around EUR

EUR/USD stays under scrutiny and keeps the downside bias well and sound below the 1.1000 yardstick. So far, pockets of strength in the single currency should appear reinforced by 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: 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 0.12% at 1.0989 but faces the next up barrier at 1.1137 (weekly high March 17) followed by 1.1224 (55-day SMA) and finally 1.1271 (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).

• Business activity in UK manufacturing sector lost momentum in early March.
• GBP/USD continues to push lower toward 1.3150 after the data.

The Manufacturing PMI in the UK declined to 55.5 in early March from 58 in February, the data published jointly by S&P Global and CIPS showed on Thursday. This print missed the market expectation of 56.7.

On a positive note, the Services PMI improved to 61 from 60.5, surpassing analysts' estimate of 58. 

Commenting on the data, "the UK PMI surveys indicated a sustained robust pace of expansion in March as the further reopening of the economy from COVID-19 containment measures helped offset headwinds from the Ukraine war, Brexit and rising prices," said Chris Williamson, Chief Business Economist at S&P Global.

"However, the outlook darkened as concerns over Russia's invasion exacerbated existing worries over soaring prices, supply chains and slowing economic growth," Williamson added. "Business expectations are now at their lowest for almost one and a half years, pointing to a marked slowing in the pace of economic growth in coming months."

Market reaction

GBP/USD stays on the back foot after this report and was last seen losing 0.3% on the day at 1.3165.

• EUR/GBP edged higher for the second straight day and built on the overnight bounce from sub-0.8300 levels.
• The shared currency’s relative outperformance could be attributed to better-than-expected German PMI prints.
• A dovish assessment of the BoE decision last week kept the GBP bulls on the defensive and extended support.

The EUR/GBP cross edged higher during the early part of the European session and climbed to a two-day high, closer to mid-0.8300s in the last hour.

The cross attracted some dip-buying near the 0.8315 area on Thursday and turned positive for the second successive day, with bulls now looking to build on the overnight bounce from sub-0.8300 levels. The latest leg up followed the release of better-than-expected German PMI prints. The preliminary report showed that business activity in Germany's manufacturing and services sectors continued to expand in March, albeit at a slower pace than recorded in the previous month.

In fact, the Markit Manufacturing PMI declined to 57.6 as against market expectations for a fall to 55.8 from 58.4 in February. Adding to this, the gauge for the services sector fell from 55.8 in the previous month to 55 in March, though was better than consensus estimates pointing to a reading of 53.8. This, in turn, was seen as a key factor behind the shared currency's relative outperformance against its British counterpart and pushed the EUR/GBP cross higher.

On the other hand, sterling was undermined by a dovish assessment of the Bank of England policy decision last week. It is worth recalling that the UK central bank softened its language around the need for future rate hikes. This was seen as another factor that extended some support to the EUR/GBP cross. That said, concerns that the European economy would suffer the most from the spillover effects of the Ukraine crisis could cap gains for the EUR/GBP cross.

Hence, the market focus will remain on fresh developments surrounding the Russia-Ukraine saga. US President Joe Biden will meet with NATO and European leaders in an emergency summit on the Ukraine War. Given its geographical proximity, the incoming headlines will influence the sentiment surrounding the euro and provide some impetus to the EUR/GBP cross.

Technical levels to watch

• Eurozone PMI declined in early March but came in higher than expectations.
• EUR/USD continues to fluctuate around 1.1000 after the data.

Manufacturing PMI in the eurozone edged lower to 57 in early March from 58.2 in February, the data published jointly by IHS Markit and S&P Global showed on Thursday. This print came in better than the market forecast of 56.

Further details of the report revealed that the Services PMI declined to 54.8 from 55.5 and the Composite PMI fell to 54.5 from 55.5. Both of these readings surpassed analysts' estimates.

Commenting on the data, "the survey data underscore how the Russia-Ukraine was is having an immediate and material impact on the eurozone economy and highlights the risk of the eurozone falling into decline in the second quarter, said Chris Williamson, Chief Business Economist at S&P Global. 

Market reaction

EUR/USD continues to trade in a relatively tight range near 1.1000 after these data.

After a tough start to the year, the AUD has rebounded convincingly to become one of the leaders in the G10. Economists at ANZ Bank expect the AUD/USD to move sideways in the near-term before staging a leg higher to the 0.75 level by year-end.

Challenging risk environment will keep rallies capped 

“The terms of trade improvement and a strong domestic economy are likely to keep the AUD well supported, though a challenging risk environment will keep rallies capped.”

“We believe the aussie will be mostly rangebound through the middle part of 2022 before a global growth recovery helps propel a move back to 0.75 by year-end.”

Economists at HSBC expect USD/CAD to push higher given a lot of hawkishness is already in the price.

Rates rather than riks is likely to remain dominant for the loonie

“The market has priced in marginally in favour of a 50bp hike (rather than a 25bp hike) at the Bank of Canada (BoC)’s 13 April meeting, in addition to a sequence of rate hikes that will see the policy rate rise by 175bp by the end of the year. As Canada is a highly indebted economy, the scope for dovish disappointment is evident in either April or later this year, creating an asymmetric downside for the CAD.” 

“We assume that geopolitical risk remains at its current level which means USD/CAD will likely be driven by rates rather than risk appetite.”

In sympathy with the euro, sterling has fallen against the dollar since the Ukraine conflict started. Economists at ANZ Bank expect the GBP to perform well against the shared currency in the coming months.

Better prospects on crosses

“The UK’s geographical proximity to the uncertainty overhanging Europe imply sterling will continue to be influenced by the path of the conflict. However, in the crosses, the prospects for sterling are brighter.”

“The Bank of England is primarily focused on inflation and we expect further focused monetary tightening. On the positive side, the high weight of services in the economy will help to insulate it from energy-related manufacturing fragility; demand for labour is very strong and business and government investment are rising.” 

“Our forecasts predict the UK will outperform many other major economies this year.” 

“Against the euro, we anticipate further modest gains in coming months.”

US Treasury yields remain at the core of USD/JPY fortunes, in the view of economists at HSBC. They expect the pair to inch higher in the coming weeks 

Shift in terms of trade may have contributed to some JPY weakness

“As the USD and JPY have similar risk profiles, geopolitical risk seems less likely to hit USD/JPY than other currencies unless another bout of risk aversion were to prompt a renewed drop in US yields.”

“The shift in terms of trade may have contributed to some JPY weakness, given Japan is a large net commodity importer. Perhaps the less supportive trade and current account balances leave the JPY more vulnerable to the spike in US Treasury yields.”

“Monetary policy wise, the Bank of Japan left policy unchanged on 18 March as expected. With underlying price pressures subdued, we expect policy to remain unchanged in 2022.”

UOB Group’s FX Strategists noted USD/CNH faces a strong resistance at the 6.4105 level in the next weeks.

Key Quotes

24-hour view: “We highlighted yesterday that USD ‘could rise above 6.3800’. We added, ‘the next resistance at 6.3880 is unlikely to come under threat’. The anticipated USD strength exceeded our expectations as USD rose to 6.3906. Upward momentum is building and USD could advance to 6.4000. The month-to-date high at 6.4105 is unlikely to come into the picture. Support is at 6.3850 followed by 6.3800.”

Next 1-3 weeks: “Last Thursday (17 Mar, spot at 6.3600), we highlighted that USD ‘is likely to consolidate and trade within a broad range of 6.3300/6.3900 for now’. After trading sideways for several days, USD edged above the top of the expected range at 6.3900 (high of 6.3906). Shorter-term upward momentum is beginning to build and the bias is on the upside. However, the chance for a clear break of 6.4105 is not high for now. On the downside, a breach of the ‘strong support’ level, currently at 6.3730 would indicate that the build-up in momentum has fizzled out.”

• SNB left its policy rate unchanged in March as widely expected.
• USD/CHF continues to trade in positive territory above 0.9300.

The Swiss National Bank (SNB) announced on Thursday that it left the interest rate on sight deposits unchanged at -0.75% as expected. In its policy statement, the SNB reiterated it remains willing to intervene in the foreign exchange market as necessary to counter the upward pressure on the Swiss franc.

Additional takeaways

"In so doing, it takes the overall currency situation and the inflation rate differential with other countries into consideration."

"The Swiss franc remains highly valued."

"Russia’s invasion of Ukraine has led to a strong increase in uncertainty worldwide."

"Against this backdrop, the SNB with its monetary policy is ensuring price stability and supporting the Swiss economy."

"Difficult to assess the future course of the war and its economic impact."

"The risks to growth are considerable and to the downside."

"Will continue to monitor developments on the mortgage and real estate markets closely."

"A further escalation of the war and a widening of the sanctions could weigh more heavily on economic activity worldwide and in Switzerland than assumed in the baseline scenario."

"Renewed deterioration in the pandemic situation cannot be ruled out."

"A worsening in the tight supply of raw materials could lead to a further rise in inflation globally."

Market reaction

The USD/CHF pair showed no immediate reaction to the SNB's policy announcements and was last seen rising 0.3% on the day at 0.9335.

• DXY adds to Wednesday’s advance and approaches 99.00.
• US yields resume gains supported by Fed’s tightening speculation.
• Durable Goods Orders, weekly Claims, Flash PMIs next on tap.

The greenback, in terms of the US Dollar Index (DXY), keeps the bid tone unchanged and trades close to the key barrier at the 99.00 barrier on Thursday.

US Dollar Index looks to data, Ukraine, yields

The index is up for the second session in a row so far on Thursday. The upside bias in the dollar remains underpinned by the resumption of the uptrend in US yields across the curve and firmer prospects for a faster/tighter normalization by the Federal Reserve, all seasoned by persistent geopolitical concerns.

On the latter, the probability of a 50 bps interest rate hike at the May meeting is now at around 68%, more than doubling the probability of just a week ago according to CME Group’s FedWatch Tool.

In the meantime, yields continue its flattening process after the 2y note retest the 2.15% area and the 10y bond hover around the 2.35% region.

In the US data space, Markit will publish the preliminary Manufacturing and Services PMIs for the current month. In addition, usual Initial Claims are due seconded by Durable Goods Orders and speeches by FOMC’s R.Waller (permanent voter, hawkish), Chicago Fed C.Evans (2023 voter, centrist) and Atlanta Fed R.Bostic (2024 voter, centrist).

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: 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 0.11% at 98.71 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).

• Private sector's business activity continued to expand in early March in Germany.
• EUR/USD trades little changed on the day near 1.1000.

Business activity in Germany's manufacturing sector continued to expand in March albeit at a softer pace than it did in February with Markit Manufacturing PMI declining to 57.6 (preliminary) from 58.4. This reading came in better than the market expectation of 55.8.

IHS Markit further reported that the Services PMI edged lower to 55 from 55.8 in the same period, compared to the market expectation of 53.8.

Commenting on the data, "manufacturing is already starting to drag on overall growth, due to its greater exposure to the supply chain disruption and drop in export demand that have resulted from the War in Ukraine and sanctions on Russia," said Phil Smith, Economics Associate Director at S&P Global.

Market reaction 

EUR/USD edged slightly higher with the initial reaction to the PMI data and was last seen posting small daily losses near 1.1000.

• Silver oscillated in a narrow trading band through the early European session on Thursday.
• The recent range-bound price action could be categorized as a bearish consolidation phase.
• Neutral technical indicators warrant some caution before positioning for a meaningful slide.

Silver lacked any firm directional bias on Thursday and seesawed between tepid gains/minor losses through the early European session. The white metal was last seen trading just above the key $25.00 psychological mark, nearly unchanged for the day.

From a technical perspective, the XAG/USD has been oscillating in a familiar trading range over the past one-and-a-half week or so. Given the recent sharp pullback from the vicinity of the $27.00 mark or the highest level since June 2021, the range-bound price action could be categorized as a bearish consolidation phase.

That said, technical indicators on the daily chart - though have been losing positive traction - are yet to confirm a bearish bias. Moreover, the emergence of some dip-buying near the 50% Fibonacci retracement level of the $22.00-$26.95 move up warrants caution before placing aggressive bearish bets around the XAG/USD.

In the meantime, immediate resistance is pegged near the $25.40-$25.50 region, above which the momentum could get extended towards the $26.00 mark. Some follow-through buying should accelerate the momentum and lift the XAG/USD towards an intermediate resistance near the $26.40 area en-route the $27.00 round-figure mark.

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

Silver 4-hour chart

Technical levels to watch

Renewed geopolitical tensions are set to weigh on the euro. What’s more, the EUR/USD pair points to the downside as the European Central Bank (ECB) is to remain dovish, according to economists at HSBC.

EUR to remain on the defensive

“Were things to improve on the geopolitical front, then EUR/USD could move sharply higher, though clearly renewed deterioration would also likely be echoed in a lower EUR/USD.”

“Beyond geopolitical developments, we look for EUR/USD to resume its downward trajectory over the coming weeks, amid the relative outlook for monetary policy. The ECB guidance is likely to remain mostly dovish, stressing a likely pause between the end of QE and the first rate hike in the run-up to the 14 April meeting. However, any progress towards further EU common bond issuance could be supportive.”

Although the EUR has stabilised recently as the focus turns to peace talks, it is difficult to construct a positive case for the currency. In the view of analysts at ANZ Bank, EUR/USD could fall and stay lower for longer.

Alert to the potential for swings in price action

“The exogenous shock to Europe’s energy supply and urgent need to diversify away from Russia, the sharp deterioration in the region’s terms of trade and intensified supply-chain disruptions are all negatives for the economy.”

“We have cut our 2022 GDP outlook for the euro area by 1.5% and expect the region to lag the US and China in the global growth league tables.”

“We remain very alert to the potential for swings in price action as the market is reactive and awaits greater certainty. A 1.05-1.15 range may therefore prevail in coming months.”

GBP/NZD has seen a sharp drop from mid-February’s 2.0534. The drop is starting to see initial but tentative signs of stability. A fully throttled 1.764% Fibonacci extension can eye a retest of last November’s 1.8854 lows, Benjamin Wong, Strategist at DBS Bank, reports.

Downward pressure to abate

“On the daily Ichimoku chart, the technical indicators are starting to signal tentative and light signs of stability. Nonetheless, the moving average convergence divergence signal has yet to deliver an affirmed turnaround. Hence, the market can push towards 1.8871 or more – this price zone calibrates the 1.764% price extensions of the break of a 1.9944 neckline in late February.”

“Over the course of time, 200-day moving average has been a useful guide in placing localised shifts in direction hence 1.9660 should at least exert an influence in any price recovery.”

“Downward pressure remains relevant, and this could still lead GBP/NZD lower to retest last November lows placed at 1.8854. Thereafter, we will wait for this pressure to abate; after all seasonality going into April favours a more constructive outlook.”

The US dollar is set to see some benefits from new energy-related tensions, Subsequently, economisst at ING expect the EUR/USD pair to slump towards the 1.09 level.

A move to 1.09 on the cards

“We think downside risks should prevail today for EUR/USD, given the resurgence of Russia-related risk premium on energy prices and the longer-term policy divergence/growth story.” 

“Data-wise, we’ll take a look at the eurozone’s PMIs, which may have weakened on the back of geopolitical events and high energy costs. While the FX impact should not be sizeable, it will likely endorse the market’s recent repricing of the eurozone’s growth expectations.”

“We still expect a move to 1.09 in EUR/USD by the end of the week, with any decision among EU countries to reduce exposure to Russian commodities that could weigh on the common currency.”

Sterling weakened more than its peers yesterday despite an above consensus UK CPI read. However, economists at ING still expect the EUR/GBP pair to slide below the 0.83 level.

EUR/GBP still looks headed below 0.83

“Despite a small rebound, we still see a move in EUR/GBP below 0.83 as likely in the near term given policy divergence and the euro’s greater exposure to fresh Russia-related downside risks.”

“PMIs will be in focus also in the UK today, and like in the rest of Europe, we should see indications that the war in Ukraine and high energy prices have worsened the economic outlook in the country.  BoE’s Catherine Mann is the only noteworthy central bank speaker in the calendar today.”

Norges Bank will once again hike its key rate by 25bp to then 0.75% today. The Norwegian krone should benefit from a hawkish hike, economists at ING report.

Norges Bank to hike and review rate path higher

“Norges Bank is highly likely to follow up on recent hawkish communication and hike interest rates by another 25bp. We expect the new projections to signal rate rises at each of the remaining quarters, with risks skewed towards more hikes rather than fewer.”

“We think there’s a non-negligible risk that the NB will raise the projected terminal rate to 2.25% or higher, and considering that the markets are pricing slightly less than 2% as a terminal rate at the moment, there is room for a hawkish surprise. All this suggests that the risks are skewed to the upside for NOK, although external drivers should once again prevail.”

“With the EU taking steps to reduce exposure to Russian gas, Norway’s energy exports are likely going to emerge as the major alternative: in our view, the current environment fully warrants a break below 9.50 in EUR/NOK, with the next key support at the 9.4130 2018 lows.”

See – Norges Bank Preview: Forecasts from seven major banks, hiking rates and plenty more to come

US Dollar Index (DXY) forward progress remains inconsistent despite ongoing waves of fiercely hawkish Fedspeak and an aggressive front-loaded rate hike profile. According to analysts at Westpac, DXY could test lower levels near-term but a move above 100 is on the cards in coming weeks.

Weakness should prove fleeting with the Fed sticking resolutely to a hawkish path

“DXY could test lower levels near term if momentum toward de-escalation in Ukraine continues, but weakness should prove fleeting with the Fed sticking resolutely to a hawkish path.”

“DXY 100+ on the cards in coming weeks.”

The kiwi has held up well despite global risk sentiment fading. Economists at ANZ Bank expect the NZD/USD pair to trade at 0.70 by the end of 2022.

Still mixed views on how things will unfold

“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.” 

“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).”

UK’s Spring Statement (Budget Update) set out a solid stance for UK finances whilst supporting cost-of living pressures. In the opinion of economists at Westpac, GBP is likely to remain steady in its recent range.

UK’s public debt edges lower despite Ukraine impacts for projected peak of 95.6% in 2022

“Peak debt to GDP has been lowered to 95.6% in the current 2021-22 tax year from over 97% and down significantly from over 100% projected at the height of the pandemic. The Office for Budget Responsibility also profiles the BoE’s Bank Rate to rise gradually to a peak of almost 1.9% into 3Q 2023 before gliding back to just below 1.25% into 2027.”

“UK Feb inflation data was slightly above consensus at 6.2%, but markets are factoring in the BoE and now OBR projections (peak inflation of 8.7% in 4Q 2022) of much higher levels through this year. Speeches by BoE’s Bailey and Broadbent will now be keenly awaited for any further insight on the potential policy path.” 

“Although OBR projections provided some support to UK Gilts, the impact on GBP/USD was minor and prospect of testing 1.30-1.33 range resistance is building.”

• A broad-based USD strength prompted some selling around NZD/USD on Thursday.
• The Russia-Ukraine stand-off, Fed’s hawkish outlook benefitted the safe-haven USD.
• Investors eye US macro data and fresh geopolitical developments for a fresh impetus.

The NZD/USD pair maintained its offered tone through the early European session and was last seen trading near the daily low, around mid-0.6900s.

The pair witnessed some selling on Thursday and for now, seems to have stalled its recent bullish trend closer to the key 0.7000 psychological mark, or the four-month peak touched in the previous day. The downtick was exclusively sponsored by a broad-based US dollar strength, underpinned by the Fed's hawkish outlook.

In fact, comments by influential FOMC members, including Fed Chair Jerome Powell, have been fueling speculations that the Fed would adopt a more aggressive policy response to combat high inflation. Investors were quick to react and have started pricing in the possibility of a 50 bps rate hike at the May meeting.

The expectations were reinforced by elevated US Treasury bond yields, which were further supported by concerns that surging oil prices would continue to put upward pressure on already high inflation. This, along with the lack of progress in the Russia-Ukraine peace negotiations, further benefitted the safe-haven greenback.

Moving ahead, the market focus will remain glued to fresh geopolitical developments and US President Joe Biden's meeting with NATO/European leaders in an emergency summit on the Ukraine War. The incoming headlines will play a key role in influencing the broader market risk sentiment and drive demand for the buck.

Later during the early North American session, traders will take cues from the US macro releases - flash PMI prints, Durable Goods Orders and the usual Weekly Initial Jobless Claims. Apart from this, the US bond yields and the USD price dynamics should produce some meaningful trading opportunities around the NZD/USD pair.

Technical levels to watch

GBP/USD has steadied near 1.32 following Wednesday's decline. Sellers could take action in case the pair drops below 1.3160, FXStreet’s Eren Sengezer reports.

Sellers await a drop below 1.3160

“Several FOMC members, including Atlanta Fed President Raphael Bostic and Fed Governor Christopher Waller, will be delivering speeches. Hawkish Fed commentary has been helping the dollar outperform its rivals by lifting US T-bond yields higher and a similar market reaction could be witnessed in the second half of the day.”

“In order to attract bulls, GBP/USD needs to reclaim 1.32 (psychological level, Fibonacci 50% retracement of the latest downtrend) and start using that level as support. In that case, the pair could regain its traction and eye 1.3250 (Fibonacci 61.8% retracement) and 1.33 (psychological level, weekly high).”

“On the downside, key support aligns at 1.3160 (Fibonacci 38.2% retracement, 100-period SMA on the four-hour chart). With a four-hour close below that level, 1.31 (psychological level) could become the next bearish target.”

Norges Bank is set to raise interest rates by 25bps today. The actual question is whether it will raise its rate path which currently assumes a key rate of just above 1% until year-end. In the view of economists at Commerzbank., it is easy to identify reasons for a more rapid rate cycle.

Norges Bank and NOK likely to remain in the lead

“The companies expect stronger growth than in November and at the same time they see wages rising. The main uncertainty results from the rapid rise in prices and capacity constraints.”

“Following the pandemic, the Norwegian economy experienced a solid recovery. The current boom of the oil and gas sector is likely to trickle through to the other sectors and lead to solid growth in 2022.”

“I could easily imagine that Norges Bank will signal further rate hikes for this year, in line with front-loading efforts, thus providing additional support for NOK, as the market is currently only pricing in little more than Norges Bank is currently signalling (just above 1%).”

See – Norges Bank Preview: Forecasts from seven major banks, hiking rates and plenty more to come

AUD/GBP trended lower in the first few weeks of 2022 but Russia’s invasion of Ukraine four weeks ago kicked off strong aussie outperformance on crosses. In the view of economists at Westpac, the pair may hit the 0.5740 January 2021 highs but move back lower to 0.55-0.56 by mid-year if energy prices ease.

AUD/GBP to trend back lower to 0.55-0.56 by mid-year if energy prices ease

“UK yields are still tilted higher, but near-term, risks are probably for the scale of BoE tightening to be trimmed as war continues, along with the energy price squeeze.”

“Australia in stark contrast is a massive net exporter of energy products. Its recent large trade surpluses will only grow, while the RBA deems the domestic economy to be resilient.”

“The jump in AU yields has boosted its pickup versus GBP to highs since 2018. Near-term scope to 0.5740 (Jan 2021 highs) but back to 0.55-0.56 by mid-year if energy prices ease.”

We will have to wait and see what exactly the US and the EU will decide today and tomorrow in terms of further measures and sanctions against Russia. The US is expected to announce additional sanctions but the EU is not looking to introduce big new sanctions. All in all, the euro is set to remain under pressire, economists at Commerzbank reprot.

Times remain difficult for the euro

“The fact that the US wants to reach an agreement with the EU that will reduce the latter's dependence on gas supplies from Russia possibly indicates that the pressure on the EU to sanction energy supplies from Russia is increasing, which several EU states are still resisting. They would probably prefer only a sharpening of existing sanctions.”

“Russia can drive up the price of energy and hurt the EU economy badly, even if it continues to supply gas. I would therefore think that with each new sanction, the risk of an energy price shock increases, which would hit the EU economy and thus the euro harder. Hence, the risks remain on the downside for the euro for now.”

Four weeks since Russia’s invasion of Ukraine and the aussie is comfortably strongest. Persistent energy price strength means AUD/USD may test fresh multi-month highs around 0.7550, but it seems due for some consolidation in the week ahead, economists at Westpac report.

Hedge funds have slashed AUD shorts 

“As the tragic war has continued, the pressure on energy prices has been maintained, insulating AUD from its traditional vulnerability to equity jitters.” 

“AUD/USD above 0.75 this week is the area we were looking for but much earlier than expected. One factor helping short-term is the belated covering of hedge funds shorts.” 

“Admittedly the contrast between RBA and Fed rhetoric is not helping AUD, but the damage is limited by market eagerness to price in RBA hikes earlier than official commentary indicates.” 

“AUD/USD may probe fresh multi-month highs around 0.7550, but seems due for some consolidation in the week ahead.”

EUR/USD has been having a difficult time shaking off the bearish pressure following Wednesday's decline. The pair is to continue to suffer losses as long as 1.10 resistance holds, FXStreet's Eren Sengezer reports.

Near-term technical outlook points to a bearish shift

“IHS Markit will release the preliminary March Manufacturing and Services PMI reports for Germany, the euro area and the US. In case these data show that the war is having a bigger impact on the private sector's business activity in Europe than in the US, EUR/USD could face renewed bearish pressure.”

“Federal Reserve Governor Christopher Waller, Chicago Fed President Charles Evans and Atlanta Fed President Raphael Bostic will speak later in the day. Another leg higher in US Treasury bond yields on hawkish remarks should provide an additional boost to the dollar in the second half of the day and vice versa.”

“1.0960 (static level) aligns as interim support before 1.0940 (Fibonacci 23.6% retracement of the latest downtrend). In case the latter support fails, the pair could extend its slide toward 1.09 (psychological level).”

“Strong resistance seems to have formed at 1.10 (psychological level, Fibonacci 38.2% retracement, 100-period SMA). Above that level, 1.1020 (descending trend line, 50-period SMA) could be seen as the next hurdle before 1.1040 (Fibonacci 50% retracement).”

FX Strategists at UOB Group believe USD/JPY could advance further and visit the 122.00 region in the next weeks.

Key Quotes

24-hour view: “We highlighted yesterday that ‘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’. USD subsequently rose to 121.40 before pulling back. Conditions remain overbought and upward momentum is showing tentative signs of easing and USD is unlikely to advance much further. For today, USD is more likely to trade sideways between 120.70 and 121.50.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (23 Mar, spot at 121.05). As highlighted, 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. On the downside, a breach of 120.00 (‘strong support’ level was at 119.60 yesterday) would indicate that the upward pressure that started two weeks ago has eased. 

Open interest in natural gas futures markets increased for the second session in a row on Wednesday, this time by around 5.7K contracts according to advanced prints from CME Group. Volume, on the other hand, shrank by around 117.5K contracts following two consecutive daily builds.

Natural Gas now looks to $5.50

Prices of natural gas rose for the third straight session on Wednesday, extending the move further north of the $5.00 mark per MMBtu. The uptick was in tandem with another build in open interest, suggesting that extra gains remain in the pipeline for the time being and with the next resistance at the YTD peak at $5.501 (February 2).

In opinion of FX Strategists at UOB Group, NZD/USD could push higher and retest the 0.7025 level in the near term.

Key Quotes

24-hour view: “Yesterday, we highlighted that there is scope for NZD to ‘continue to advance’. We added, ‘the major resistance at 0.7025 is unlikely to come under threat’. NZD subsequently rose to 0.6988 before easing off. Upward momentum is beginning to wane and this coupled with overbought conditions suggest that NZD is unlikely to strengthen further. For today, NZD is more likely to trade between 0.6930 and 0.6990.”

Next 1-3 weeks: “Our update from yesterday (23 Mar, spot at 0.6960) still stands. As highlighted, while NZD strength is still intact, any further advance is expected to face solid resistance at 0.7025. Overall, only a breach of 0.6890 (no change in ‘strong support’ level from yesterday) would indicate that the current NZD strength that started late last week has come to an end.”

Considering preliminary readings from CME Group for crude oil futures markets, traders added just 432 contracts to their open interest positions on Wednesday, the first build since March 10. Volume followed suit and went up for the third straight session, this time by around 28.3K contracts.

WTI: Next on the upside comes the 2022 high

Prices of the WTI charted a moderate uptick on Wednesday amidst rising open interest and volume. Against that, crude oil prices look poised to extend the uptrend with the next barrier of note at the multi-year peaks near the $130.00 mark per barrel (March 8).

• GBP/USD edged lower for the second successive day on Thursday amid modest USD strength.
• The Fed’s hawkish outlook, Russia-Ukraine crisis continued acting as a tailwind for the buck.
• The downside remains cushioned ahead of the NATO meeting, UK PMI and the US macro data.

The GBP/USD pair remained on the defensive heading into the European session and was last seen trading just below the 1.3200 mark, down 0.10% for the day.

The pair struggled to capitalize on the overnight late rebound of around 30 pips from the 1.3175 area and edged lower for the second successive day on Thursday. The downtick was sponsored by some follow-through US dollar buying, though lacked any follow-through or bearish conviction.

The buck continued drawing support from growing acceptance that the Fed would adopt a more aggressive policy response to combat stubbornly high inflation. In fact, influential FOMC members, including Fed Chair Jerome Powell, raised the possibility of a 50 bps rate hike at the May meeting.

On the other hand, the British pound was weighed down by the fact that the Bank of England had softened its language around the need for future rate hikes at the last week's meeting. That said, stability in the equity markets capped gains for the USD and extended support to the GBP/USD pair.

The sentiment, however, remains fragile amid concerns about the lack of progress in the Russia-Ukraine peace negotiations. Apart from this, worries that surging crude oil prices would put additional upward pressure on the already high inflation should keep a lid on any optimistic move.

The fundamental backdrop seems tilted in favour of the USD bulls and supports prospects for some meaningful downside for the GBP/USD pair. That said, traders seemed reluctant to place aggressive directional bets and preferred to wait for fresh developments surrounding the Russia-Ukraine saga.

US President Joe Biden has arrived in Brussels and will meet NATO/European leaders in an emergency summit on the Ukraine War. The incoming geopolitical headlines will influence the risk sentiment, which, in turn, will drive the USD demand and provide some impetus to the GBP/USD pair.

In the meantime, traders will take cues from the release of the flash UK/US PMI prints. The US economic docket also features the release of Durable Goods Orders and Weekly Initial Jobless Claims, which might further contribute to produce some trading opportunities around the GBP/USD pair.

Technical levels to watch

Gold price defied the bearish odds and rebounded firmly towards $1,950 on Wednesday. XAU/USD is set to remain choppy ahead of critical NATO Summit on Ukraine, FXStreet’s Dhwani mehta reports.

Attention turns towards the US top-tier events ahead of the key NATO meeting

“Attention now turns towards a batch of significant US economic releases, including the Durable Good Orders, Markit Preliminary Manufacturing and Services PMIs for fresh trading impetus in gold price. The main event risk, however, for Thursday remains the NATO Summit on Ukraine, in which US President Joe Biden is set to attend with his European counterparts. Ukrainian President Volodymyr Zelensky is invited to address the summit via a video link.”

“If the bullish momentum picks up, then XAU/USD could resume its upside towards the horizontal 100-SMA at $1,956. Ahead of that, gold bulls need to clear the powerful resistance near $1,950 on a sustained basis.”

“21 and 50-SMAs at at $1,930 and $1,933 respectively will limit the declines, below which a retest of the 200-SMA at $1,917 will be on the cards. The March 22 lows of $1,910 will be back on the sellers’ radars should the bears remain unstoppable. The line in the sand for gold optimists emerge at the $1,900 round level.”

One-month risk reversal (RR) of USD/TRY, a gauge of calls to puts, braces for the second weekly decline ahead of Thursday’s European session.

That said, the weekly figures came in as -0.100 as per the latest data from Reuters. The daily RR, however, snaps the two-day declines with a +0.025 figure.

It’s worth noting that the options market keeps a bearish bias for the USD/TRY but the charts aren’t favoring the sellers.

On the chart, an upward sloping trend line from late February, around 14.80 at the latest, defends USD/TRY bulls even if the pair failed to cross the 14.86 hurdle twice in the week.

• Platinum remains pressured towards refreshing intraday low, down for the third consecutive day.
• Bearish MACD, failures to cross 50-DMA keep sellers hopeful.
• Convergence of 100-DMA, 200-DMA challenge further downside, previous support line from December 2021 adds to the upside filters.

Platinum (XPT/USD) takes offers to refresh intraday low near $1,017, down 0.61% intraday ahead of Thursday’s European session.

In doing so, the precious metal drops for the third consecutive day as it approaches the $1,008 support confluence, including the 100-DMA and 200-DMA.

The quote’s inability to cross the 50-DMA during the last week’s rebound joins a bearish MACD signal to favor sellers.

It should be noted, however, that the $1,000 threshold and the monthly bottom around $985 will challenge the XPT/USD bears afterward.

Meanwhile, recovery moves remain elusive below the 50-DMA level of $1,051.

Even if the platinum buyers manage to cross the $1,051 hurdle, the support-turned-resistance line from December 2021, close to $1,074, will act as the last defense for the XPT/USD sellers.

Platinum: Daily chart

Trend: Further weakness expected

Prospects for GBP/USD to break above the 1.3300 barrier seem to have lost momentum as of late according to FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected GBP to strengthen yesterday but we were of the view that ‘the major resistance at 1.3325 is likely out of reach’. We highlighted that ‘there is a minor resistance at 1.3300’. GBP subsequently rose to 1.3299 before staging a surprisingly sharp and swift sell-off (low has been 1.3175). The rapid decline appears to be overdone and GBP is unlikely to weaken much further. For today, GBP is more likely to trade between 1.3160 and 1.3260.”

Next 1-3 weeks: “Yesterday (23 Mar, spot at 1.3265), we highlighted strong boost in momentum is likely to lead to further GBP strength to 1.3325, possibly 1.3365. GBP subsequently rose to 1.3299 before dropping sharply to a low of 1.3175. While our ‘strong support’ level at 1.3160 is not breached, the rapid loss in momentum has diminished the odds for GBP to advance to 1.3325. In order to rejuvenate the flagging momentum, GBP has to move and stay above 1.3260 or a break of 1.3160 would not be surprising. Looking ahead, a break of 1.3160 would indicate that the GBP strength that started late last week has run its course.”

• USD/JPY rises for the fifth consecutive day while poking 2016 peak.
• Hawkish Fedspeak underpins US Treasury yields ahead of PMI, Durable Goods Orders.
• BOJ’s Kataoka, Minutes of latest meeting favor yen bears.
• Biden’s Europe visit for NATO Summit will be crucial, grim news for Russia-Ukraine can extend latest run-up.

USD/JPY buyers keep reins for the fifth day in a row, up 0.20% intraday around 121.40 heading into Thursday’s European session.

In doing so, the yen pair renews the highest levels since January 2016 during the five-day uptrend.

The underlying strength in the US Treasury yields seems to have favored the USD/JPY bulls of late. Also supporting the bulls are the headlines from the Bank of Japan.

That said, the US 10-year Treasury yields rise 2.2 basis points (bps) near 2.34% at the latest, following a pullback from a three-year high on Wednesday. The hawkish Fedspeak has been the key reason for the latest bond rout that propelled yields and favors the greenback buyers. The talks over 50 basis points (bps) of a Fed rate-lift and Quantitative Tightening (QT) in May were recently backed by St Louis Fed President James Bullard and Cleveland Fed President Loretta Mester.

On the other hand, the Bank of Japan’s (BOJ) readiness to extend the easy money policies joins comments from BOJ board member Goushi Kataoka, to weaken the JPY prices. BOJ’s Kataoka said, “Weak JPY positive for the economy as a whole.”

Elsewhere, the US readiness to levy more sanctions on Russia, as well as help Ukraine, weigh on the market sentiment ahead of President Biden’s meeting with the North Atlantic Treaty Organization (NATO) allies in Europe. Russian President Vladimir Putin’s readiness to ask for oil payment in ruble to ‘unfriendly’ nations and covid woes in China, as well as Europe, also challenges the mood.

In addition to the Fedspeak and risk catalysts, the preliminary reading of the US Markit PMIs for March and Durable Goods Orders for February will also be important for USD/JPY traders to track.

Forecasts suggest that the US Markit Manufacturing PMI may weaken to 56.3 from 57.3 previous readouts whereas the Services PMI seemed to have dropped to 56.0 from 56.5. Further, the US Durable Goods Orders growth for February is likely turned negative with -0.5% forecasts versus 1.6% prior.

Technical analysis

January 2016 top surrounding 121.70 seem to lure the USD/JPY buyers while the overbought RSI may test the pair’s upside afterward. Alternatively, pullback moves may aim for the year 2017 peak of 118.60.

CME Group’s flash data for gold futures markets noted open interest partially reversed the previous daily drop and rose by nearly 3K contracts. In the same direction, volume rose for the fourth consecutive session, this time by around 8.6K contracts.

Gold: Immediately to the upside comes $1950

Wednesday’s decent uptick in gold prices was accompanied by increasing open interest and volume, allowing for extra gains in the very near term and with the next hurdle of note at the $%1950 mark per ounce troy.

EUR/USD remains side-lined within the 1.0950-1.1110 range for the time being, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our expectations for EUR to ‘edge higher’ was incorrect as it dropped to 1.0962 before rebounding. Downward momentum has improved a tad and EUR the bias for today is on the downside. That said, a sustained drop below the major support at 1.0950 is unlikely. Resistance is at 1.0020 followed by 1.0045.”

Next 1-3 weeks: “On Monday (21 Mar, spot at 1.1040), we highlighted that EUR ‘appears to have moved into a consolidation phase and is likely to trade between 1.0950 and 1.1150’. EUR traded in a relatively quiet manner the past few days and we continue to expect EUR to consolidate. That said, we have narrowed the expected range to 1.0950/1.1110.”

• Gold prices stay above short-term key resistance, now support, despite retreating from weekly top.
• Yields underpin USD rebound but all depends upon today’s NATO summit, US data.
• Intraday bears may take entries below $1,937 but $1,930 holds the key for further weakness.

Gold (XAU/USD) bulls faced rejection around $1,949 heading into Thursday’s European session, having cheered the pullback in US Treasury yields with the biggest daily jump in two weeks the previous day.

That said, the yellow metal’s pullback could be linked to the firmer US dollar and a rebound in the T-bond yields, which in turn take clues from hawkish Fedspeak and fears of an escalation in the Ukraine-Russia war.

Also underpinning the US dollar’s safe-haven demand is the covid resurgence in China and Europe, as well as market’s anxiety ahead of the US preliminary PMIs for March and Durable Goods Orders for February.

Additionally, risk-negative headlines ahead of US President Biden’s meeting with the North Atlantic Treaty Organization (NATO) allies in Europe also challenge gold prices of late.

Read: Gold Price Forecast: XAU/USD to remain choppy ahead of critical NATO Summit on Ukraine

Gold Price: Key levels to watch

The Technical Confluences Detector shows that the gold prices struggle to keep the upside break of the short-term key hurdle surrounding $1,937 comprising the Fibonacci 38.2% level on one-day and lower Bollinger Band on 15-minute play.

Also acting as the key downside filter is the $1,930 level that includes SMA50 and SMA100 in one-hour, as well as Fibonacci 38.2% level on one-week timeframe.

Should gold sellers conquer the $1,930 support, the metal becomes vulnerable to drop towards the $1,918 mark including the SMA200 on four-hour and Fibonacci 23.6% level on one-week.

On the contrary, the bullion has a smooth run until reaching the $1,960-61 zone that encompasses the previous yearly high.

Though, daily and four-hour tops surrounding $1,950 and Fibonacci 23.6% level on one-week, close to $1,956, could offer breathing space to gold buyers.

Here is how it looks on the tool

About Technical Confluences Detector

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

• Oil prices are boiling ahead of the EU leaders summit.
• An embargo on Russian oil by the EU will elevate the supply worries.
• Slippage in weekly oil stockpiles has spurred the oil prices too.

West Texas Intermediate (WTI), futures on NYMEX, is scaling higher as investors have started raising bets on the embargo of Russian oil ahead of the European Union (EU) leaders summit.

The EU leaders summit on Thursday is going to revolve around the decision of banning Russian oil imports in the eurozone. To retaliate against Russia’s invasion of Ukraine, the EU is planning to drop Russia from its oil importers list. Investors should be aware of the fact that Europe covers its 25% oil demand from Russia only. The statements from the Euro members are parting ways as Germany is notwithstanding the US to ban Russian oil with immediate effect. Gauging oil producers that could substitute Russian oil on very short notice is not practicable. Therefore, the shared currency region should ditch Moscow as an oil supplier gradually.

Adding to that, oil prices are approaching $120.00 amid a significant slippage in the oil stockpiles. The Energy Information Administration (EIA) on Wednesday reported the weekly oil stock at -2.508M, much lower than the market consensus of 0.114M and the previous print of 4.345M. This has underpinned the oil prices.

Meanwhile, the US dollar index (DXY) is also marching towards the north after a hawkish stance from the Fed Open Market Committee (FOMC) members. This has raised the chances of a 50 basis point (bps) interest rate hike from the Federal Reserve (Fed).

Bank of Japan (BOJ) board member Goushi Kataoka said on Thursday that a weak Japanese yen was positive for Japan's economy as a whole, as reported by Reuters.

"The negative impact of the weak yen on the economy comes mainly through rising import costs," Kataoka added. Earlier in the day, Kataoka noted that he was not expecting inflation to gain momentum to sustainably head toward the bank's 2% target.

Market reaction

The USD/JPY pair continues to push higher following these comments and was last seen trading at its highest level in six years at 121.40, rising 0.2% on a daily basis.

Here is what you need to know on Thursday, March 24:

The dollar capitalized on safe-haven flows on Wednesday and the US Dollar Index (DXY) closed in positive territory. The cautious market mood helps the greenback preserve its strength against its rivals early Thursday and the DXY continues to push higher toward 99.00. IHS Markit will release the preliminary Manufacturing and Services PMI data for Germany, the euro area, the UK and the US later in the day. The US economic docket will also feature February Durable Goods Orders and the weekly Initial Jobless Claims data. Several FOMC members will be delivering speeches during the American trading hours as well.

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

Russia’s Deputy Prime Minister Alexander Novak warned on Wednesday that global oil and gas markets would collapse if Russian hydrocarbons were to be sanctioned. On top of Russia-related supply concerns, the worsening energy demand outlook amid China's strict COVID restrictions caused crude oil prices to push higher mid-week. The barrel of West Texas Intermediate, which rose more than 5% on Wednesday, was last seen trading flat on the day near $114.00.

The S&P 500 lost more than 1% on Wednesday and US stock index futures post small gains heading into the European session.

Meanwhile, ahead of US President Joe Biden's meeting with NATO, EU and G7 members on Thursday, US Secretary of State Anthony Blinken announced that the US government formally accused Russian troops of committing war crimes in Ukraine. The US is expected to announce additional sanctions but Reuters reported on Wednesday that the EU was not looking to introduce a "big new sanctions package."

EUR/USD closed in negative territory on Wednesday despite staging a recovery in the late American session. The pair stays on the back foot and trades below 1.1000 in the European morning.

GBP/USD lost more than 50 pips on Wednesday and seems to have gone into a consolidation phase below 1.3200.

Gold took advantage of the risk-averse market environment on Wednesday and rose toward $1,950. The benchmark 10-year US Treasury bond yield is up 2% at 2.35% early Thursday, forcing gold to edge lower. XAU/USD was last seen trading near $1,940.

USD/JPY closed the fourth straight day in the positive territory on Wednesday and trades near six-year highs above 121.00 early Thursday. In the minutes of its latest policy meeting, the Bank of Japan reiterated that they will not hesitate to ease the policy further if needed.

USD/CHF trades in a narrow channel above 0.9300 on Thursday ahead of the Swiss National Bank's monetary policy announcements.

SNB Preview: Forecasts from four major banks, rising inflation pressures to result in some changes.

Bitcoin rose more than 1% and consolidates near $43,000 early Thursday. Ethereum registered gains for three straight days and seems to have steadied above $3,000.

• AUD/USD snaps two-day uptrend while reversing from 2022 high.
• Doji candlesticks near triangle’s resistance line, overbought RSI favor sellers.
• Sellers need validation from 21-SMA, recovery moves may aim for late 2021 swing high.

AUD/USD remains on the back foot near the support line of a fortnight-long rising triangle heading into Thursday’s European session. That said, the Aussie pair prints the first negative day in three despite the latest bounce off intraday low to 0.7480, down 0.27% on a day by the press time.

The pair’s latest weakness could be linked to the overbought RSI and Doji candlestick near the upper line of the stated triangle. However, further downside needs to conquer the 0.7470 support line to convince AUD/USD sellers.

Also challenging the pair bears is the 21-SMA level of 0.7440, a break of which can direct the quote towards the 50-SMA level of 0.7350.

In a case where AUD/USD prices remain weak past 0.7350, the monthly low surrounding 0.7165 will be in focus.

Meanwhile, recovery moves need to cross the aforementioned triangle’s resistance line, at 0.7515 by the press time, to reject the bearish bias.

Following that, October 2021 peak near 0.7560 will challenge the AUD/USD bulls ahead of the late June 2021 swing high around 0.7620.

AUD/USD: Four-hour chart

Trend: Further weakness expected

• USD/CHF is juggling in a range of 0.9295-0.9356 on descending triangle formation.
• The 50 and 200-period EMAs are overlapping each other.
• The major is likely to expose to 61.8% Fibo retracement at 0.9270.

The USD/CHF pair is oscillating in a narrow range of 0.9295-0.9356 after sensing significant bids near Monday’s low at 0.9294. The pair has been plunging from the last week after registering a fresh yearly high at 0.9460.

On an hourly scale, USD/CHF has been bounced sharply after sensing ground near 50% Fibonacci retracement (placed from monthly low at 0.9150 to March 16 high at 0.9460) at 0.9307. The asset is auctioning in a descending triangle formation in which the downside remains capped while the asset updates its highs after some intervals until it breaks. The downside of the descending triangle formation is capped around Monday’s low at 0.9294 while the downward trending trendline is placed from Tuesday’s high at 0.9376.

The 50 and 200-period Exponential Moving Averages (EMAs) are overlapping each other, which signals a consolidation ahead.

Also, the Relative Strength Index (RSI) (14) has entered into a consolidation range of 40.00-60.00.

Should the asset violate Wednesday’s high at 0.9358, the major will be driven towards 23.6% Fibo retracement at 0.9388. Breach of the latter will expose the greenback bulls to March 15 high at 0.9432.

On the flip side, if the asset drops below Monday’s low at 0.9294, bears may get control and the pair will slip face 61.8% Fibo retracement at 0.9270, followed by March 2 high at 0.9240.

USD/CHF hourly chart

• EUR/USD remains pressured for the second consecutive day, sidelined near daily low of late.
• Risk-aversion, firmer yields underpin USD strength ahead of a long day.
• EU/US Markit PMIs for March precede US Durable Goods Orders for February to decorate calendar.
• Biden’s visit to Brussels for NATO will be the key event as more Russian sanctions, Moscow-Beijing ties loom.

EUR/USD renews intraday low around 1.0980 during the early European morning on Thursday, extending the previous day’s losses amid sour sentiment.

The major currency pair’s latest weakness could be linked to the firmer US Treasury yields, which in turn joins the risk-off mood to underpin the US dollar strength.

That said, the US 10-year Treasury yields rise 1.5 basis points (bps) near 2.33% at the latest, following a pullback from a three-year high on Wednesday. Firmer US Treasury yields favor the US Dollar Index (DXY) bulls to eye the 99.00 threshold at the latest.

It’s worth noting that hawkish Fedspeak has been the key reason for the latest bond rout that propelled yields and favor the greenback buyers. The talks over 50 basis points (bps) of a Fed rate-lift and Quantitative Tightening (QT) in May were recently backed by St Louis Fed President James Bullard and Cleveland Fed President Loretta Mester.

Elsewhere, the UK and the US readiness to send more help to Ukraine, despite Russian handling of a list of diplomats termed as ‘persona non grata’ to the US embassy, weigh on market sentiment and favor the USD. Recently, US Senator John Cornyn said he met with US Treasury Secretary Janet Yellen to discuss Russian gold sanctions, which in turn flags risk-off mood ahead of President Biden’s meeting with the North Atlantic Treaty Organization (NATO) allies in Europe. Russian President Vladimir Putin’s readiness to ask for oil payment in ruble to ‘unfriendly’ nations and covid woes in China, as well as Europe, also challenges the mood.

Amid these plays, stock futures remain directionless after Wall Street snapped the six-day winning streak.

Although the risk-aversion wave may keep weighing on the EUR/USD prices, moves of the yields will be crucial to follow for clear directions. Forecasts suggest that the US Markit Manufacturing PMI may weaken to 56.3 from 57.3 previous readouts whereas the Services PMI seemed to have dropped to 56.0 in March, from 56.5. Further, the US Durable Goods Orders growth for February is likely turned negative with -0.5% forecasts versus 1.6% prior.

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

Technical analysis

The EUR/USD pair’s sustained weakness below the 21-DMA and a downward sloping resistance line from early February, as well as the 13-day-old previous support line, joins sluggish RSI to keep sellers hopeful to aim for short-term horizontal support near 1.0900.

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.

• EUR/JPY seeks fresh impetus from EU leaders summit and NATO meeting.
• EU leaders are mixed on the embargo on Russian oil.
• Europe’s higher dependency on Russia may weigh pressure on its economy if an embargo takes place.

The EUR/JPY pair is consolidating in a narrow range of 133.10-133.28 as investors await a fresh trigger for further guidance. The outcome of the European Union (EU) leaders summit and NATO meeting are going to expand uncertainty on Thursday. The pair has been rallying in the last few trading sessions amid broader weakness in the Japanese yen.

The EU leaders summit is going to revolve around the likely decision of the embargo on Russian oil. Russia’s invasion of Ukraine forced the Western leaders to impose sanctions on Moscow. To retaliate against elevated military activity by Russia in Ukraine, the EU planned to ban Russian oil. However, the EU leaders have signaled a mixed response on the agenda. Germany would not withstand the decision as the nation believes that the decision would dampen the related economic activities in the current scenario, which have already been impacted by supply chain bottlenecks and rising oil prices.

It is worth noting that Europe addresses 30% of its energy requirements and 25% of its oil demand from Russia. Therefore, finding a substitute on too short notice won’t be a cakewalk.

Apart from that, US President Joe Biden's meeting with his NATO counterparts will also weigh pressure on the shared currency in case the outcome calls for more sanctions on Russia. On Japan’s docket, investors will focus on Tokyo Consumer Price Index (CPI), which is due on Thursday. A preliminary estimate for the Tokyo CPI is 1.5% higher than the prior print of 1%.

• USD/CAD rebounds from two-month low, picks up bids to refresh daily high of late.
• WTI crude oil prices ease from two-week top as sour sentiment underpins USD strength.
• NATO action on Russia, US data will be crucial for near-term directions.

USD/CAD snaps seven-day downtrend while bouncing off late January’s levels during Thursday’s Asian session. That said, the Loonie pair picks up bids to refresh intraday high near 1.2580 by the press time.

The quote’s latest rebound could be linked to the market’s risk-off mood that underpins the US dollar run-up. Also supporting the pair buyers is the firmer US Treasury yields and a pullback in prices of Canada’s main export item, namely WTI crude oil.

It’s worth noting that the WTI crude oil renews intraday low to $112.65 by the press time, down 0.73% on the day whereas the US 10-year Treasury yields rise 1.5 basis points (bps) near 2.33% at the latest, following a pullback from three-year high on Wednesday. Firmer US Treasury yields favor the US Dollar Index (DXY) bulls to eye the 99.00 threshold at the latest.

While the hawkish Fedspeak could be linked to the bond rout, the market’s anxiety ahead of the key US data and President Biden’s meeting with the North Atlantic Treaty Organization (NATO) allies in Europe add to the US Treasury yields. The same helps the DXY to stay firmer and weigh on commodity prices.

Recently, the UK and the US readiness to send more help to Ukraine, despite Russian handling of a list of diplomats termed as ‘persona non grata’ to the US embassy, weigh on market sentiment. On the same line is news that US Senator John Cornyn said he met with US Treasury Secretary Janet Yellen to discuss Russian gold sanctions. Additionally, Russian President Vladimir Putin’s readiness to ask for oil payment in ruble to ‘unfriendly’ nations and covid woes in China, as well as Europe, also challenges the mood.

Looking forward, US preliminary PMIs for March and Durable Goods Orders for February will decorate the calendar while US President Biden’s meeting with the North Atlantic Treaty Organization (NATO) allies in Europe will be crucial as well. Forecasts suggest that the US Markit Manufacturing PMI may weaken to 56.3 from 57.3 previous readouts whereas the Services PMI seemed to have dropped to 56.0 from 56.5. Further, the US Durable Goods Orders growth for February is likely turned negative with -0.5% forecasts versus 1.6% prior.

Technical analysis

Recovery remains elusive below a six-month-old previous support line, around 1.2600 by the press time. Meanwhile, January’s bottom surrounding 1.2450 lures sellers of late.

• GBP/USD is trading lackluster around 1.3200 as investors await the outcome of the NATO meeting.
• The cable faced intensified selling pressure on higher UK’s CPI print at 6.2%.
• The BOE may resort to a fourth interest rate hike to contain the inflation mess.

The GBP/USD pair is auctioning near bearish Wednesday’s low at 1.3180 as investors await the outcome of US President Joe Biden’s meeting with its NATO counterparts on Thursday. The outcome of the NATO meeting is likely to settle the next phase of the Russia-Ukraine war as the market participants are expecting a diplomatic solution to bring a ceasefire between Moscow and Kyiv.

Apart from that, the European Union (EU) leaders summit will also take place on Thursday in which the EU members will discuss the embargo on Russian oil.

The cable witnessed a steep fall on Wednesday after printing a high near 1.3300 as higher UK inflation numbers soured the mood of investors. The UK’s Office for National Statistics reported the yearly Consumer Price Index (CPI) at 6.2% much higher than the preliminary estimate of 5.9% and prior print of 5.5%. This has raised the odds of an interest rate hike by the Bank of England (BOE) in its May monetary policy. It is worth noting that the BOE has increased its interest rates to 0.75%, elevated interest rates by 25 basis points (bps) three times in a row.

Meanwhile, the US dollar index (DXY) is advancing towards 99.00 despite subdued expectations from the US Markit Manufacturing and Services PMI.  A preliminary estimate for the Market Manufacturing and Services PMI is 56.3 and 56 respectively. The estimates for Market Manufacturing and Services PMI are lower than previous figures of 57.3 and 56.5 respectively.

• USD/INR consolidates the biggest daily jump in a fortnight.
• WTI crude oil prices ease around 11-day top amid risk-off mood, USD rebound.
• Upside momentum likely to remain intact as Indian economy faces the heat of rising prices, China fears.
• US data, Biden’s talks with NATO allies will be crucial for fresh impulse.

USD/INR remains pressured around an intraday low of 76.46 during the initial hour of the Indian trading session on Thursday.

The rupee (INR) pair rose the most in two weeks the previous day as the US dollar tracked firmer Treasury yields. Also favoring the USD/INR bulls were firmer crude oil prices.

That said, the WTI crude oil renews intraday low to $112.65 by the press time, down 0.73% on the day as downbeat market sentiment underpins the US dollar’s gains, which in turn tests energy bulls. Also likely to have helped USD/INR sellers is the latest pause in the exodus of foreign investments in India.

Even so, fears of an escalation in the Ukraine-Russia crisis and likely hardships for the Indian economy, due to higher prices and its burden on private consumption that contributes nearly 60% to GDP.

Amid these plays, the US 10-year Treasury yields rise 1.5 basis points (bps) near 2.33% at the latest. It should be noted that the benchmark bond coupons rallied to the three-year high before reversing from 2.417% the previous day. The softer yields fail to tame the S& 500 Futuresbut Nikkei 225 drops more than 1.25% daily loss by the press time.

Moving on, US preliminary PMIs for March and Durable Goods Orders for February will decorate the calendar while US President Biden’s meeting with the North Atlantic Treaty Organization (NATO) allies in Europe will be crucial as well.

Technical analysis

Unless declining below the 21-DMA and previous resistance line from March 08, respectively around 76.15 and 76.00, USD/INR stays on the way to the latest swing top surrounding 76.80.

• AUD/USD is hovering around 0.7500 on modest PMI performance and positive DXY.
• The aussie has been a performer in the Fx domain on galloping metal prices recently.
• The DXY may trace bulls on hawkish stance from the FOMC members.

The AUD/USD pair is consolidating around 0.7500 and is hoping for a fresh impulse wave after overstepping Wednesday’s high at 0.7508. The asset is trading lackluster on Thursday after the IHS Markit unfolded Composite, Manufacturing, and Services Commonwealth Bank PMI report.

The Manufacturing and Services PMI have landed at 57.3 and 57.9 against the previous print of 57 and 57.4 respectively while the Composite PMI has been recorded at 57.1 in comparison with the prior figure of 56.6.

The pair has been performing stronger from the last week despite the headwinds of risk-off impulse and hawkish monetary policy from the Federal Reserve (Fed). The reason behind the recent rally could be tagged to the rising metal prices. Prices of the metals are rallying sharply, which are bringing more flows for the aussie and hence underpinning it against the greenback.

The US dollar index (DXY) has surpassed its previous consolidation range of 98.60-98.67 and is moving towards the north. The hawkish stance from the Fed policymakers is likely to keep the greenback in a bullish trajectory. While the 10-year US Treasury yields have reclaimed 2.33% after a significant fall on Wednesday.

Going forward, the major is likely to witness high uncertainty as Thursday’s calendar is full of macro events. The US docket will report Initial Jobless Claims, Durable Goods Orders, and Markit (Manufacturing and Services) PMI on Thursday, which will keep investors on the sidelines.

Key quotes

"Slowing growth and uncertainty around the outlook keep the BoE, which delivered a 25bp hike in March, cautious. UK growth is likely to weaken with a sizeable hit to real disposable income as energy prices continue to rise.”

“As such, we think markets are still pricing in too much policy tightening, with another five hikes priced in for this year."

"A cautious BoE, should weigh on UK 2y yield differentials, which puts downward pressure on GBP. We like to express our GBP bearish view via short GBP/NOK, targeting 11.30, as growth and policy differentials widen."

• Asia-Pacific stocks track Wall Street losses amid cautious markets.
• Yields rebound as Fedspeak remains hawkish ahead of key data.
• Ukraine-Russia headlines, covid news add to the risk-aversion wave but mixed concerns restrict moves.

Global markets print losses as US Treasury yields’ rebound joins firmer oil prices during Thursday’s Asian session. Also underpinning the bearish bias in Asia-Pacific bourses is Wall Street’s first negative day in seven.

That said, the MSCI’s index of Asia-Pacific shares ex-Japan drops 0.70% whereas Japan’s Nikkei 225 printed a 1.0% loss by the press time.

Chinese stocks remain on the back foot with over 1.0% losses even as the US Trade Representative’s (USTR) office mentioned that it will reinstate 352 expired product exclusions from US ‘Section 301’ tariffs on imported goods from China.

Downbeat performance in China joins escalating covid woes in Beijing and Europe to exert additional downside pressure on the stocks in New Zealand, NZD 50 marks 1.07% intraday loss of late. However, Australia’s ASX 200 joins Indonesia’s IDX 50 to buck the trend with mild gains.

Elsewhere, South Korea’s KOSPI also fails to cheer a new appointment at the Bank of Korea (BOK), down 0.80% at the latest.

It’s worth noting that the Wall Street benchmarks dropped more than 1.0% while the US 10-year Treasury yields retreated from a three-year high to 2.30% before regaining a 2.33% level at the latest. That said, S&P 500 Futures seesaws between gains and losses, up 0.11% intraday around 4,452 by the press time.

Further, WTI crude oil also rises over 1.0% as Russian President Vladimir Putin has said, “Russia will seek payment in roubles for gas sold to ‘unfriendly’ countries.”

Moving on, US President Joe Biden’s meeting with European counterparts from the North Atlantic Treaty Organization (NATO) will be the key. Also important will be the US PMIs for March and Durable Goods Orders for February.

Read: S&P 500 Futures print mild gains, Nikkei 225, yields stay pressured ahead of Biden-NATO meet

• DXY picks up bids to renew intraday high inside weekly rising channel.
• A U-turn from 50-SMA, bullish MACD signals also keeps buyers hopeful.
• Monthly horizontal support defends bulls, descending resistance line from early March in focus.

US Dollar Index (DXY) refreshes intraday high around 98.80 during Thursday’s Asian session, up for the second consecutive day inside a short-term bullish channel formation.

In addition to the weekly ascending trend channel, bullish MACD signals and the quote’s latest rebound from 50-SMA also hint at the further upside.

As a result, a 13-day-old resistance line, near 99.10, gains the market’s attention with the 99.00 threshold likely restricting immediate upside.

It should be noted, however, that the upper line of the stated channel, close to 99.25 at the latest, will challenge the DXY bulls afterward.

On the contrary, pullback moves remain elusive until breaking 98.55 level, comprising 50-SMA and the aforementioned channel’s lower line.

Even so, a horizontal area from late February and a six-week-long ascending trend line, respectively around 97.70 and 97.50, will challenge the US Dollar Index declines.

US Dollar Index: Four-hour chart

Trend: Further upside expected

The People's Bank of China (PBOC) remains poised to slash the reserve requirement ratios (RRR) soon to help boost banks' long-term funding, the China Securities Journal said citing an analysts’ survey.  

Key takeaways

Market reaction

USD/CNY has picked up fresh bids in tandem with the US dollar, despite the risk-off tone in the global equities.

The spot was last seen trading at 6.3762, up 0.06% on the day.

AUD/USD is trading on the defensive near 0.7500, modestly flat so far.  

• Silver prices refresh intraday low to consolidate biggest daily gains in two weeks.
• Western pressure on Russia escalates ahead of Biden’s Europe trip, Moscow hands over Persona Non Grata to US Embassy.
• US PMIs, Durable Goods Orders also become important to watch.

Silver (XAG/USD) takes offers to renew intraday low around $25.05, down 0.12% on a day as traders pare the biggest daily gains in a fortnight during Thursday’s Asian session.

The metal’s recent losses could be linked to the US dollar’s strength amid a risk-off mood. That said, the US Dollar Index (DXY) rises for the second consecutive day while renewing an intraday high of around 98.80, up 0.14% on a day at the latest.

Market sentiment sours as grim concerns surrounding the Ukraine-Russia crisis escalate ahead of US President Biden’s meeting with the North Atlantic Treaty Organization (NATO) allies in Europe. Among them, the UK and the US readiness for more help to Ukraine despite Russia’s handling of a list of diplomats termed as ‘persona non grata’ to the US embassy, gain major attention. On the same line were comments from US Senator John Cornyn who recently said he met with US Treasury Secretary Janet Yellen to discuss Russian gold sanctions. Also adding to the risk-off mood is the worsening virus woes in China and Europe.

Furthermore, hawkish Fedspeak and firmer US data have been underpinning the US dollar, as well as the Treasury yields, which in turn weigh on silver prices.

Additionally, the market’s anxiety ahead of the key US preliminary PMIs for March and Durable Goods Orders for February also weaken the risk appetite. Forecasts suggest that the US Markit Manufacturing PMI may weaken to 56.3 from 57.3 previous readouts while the Services PMI seemed to have dropped to 56.0 from 56.5. Further, the US Durable Goods Orders growth for February is likely turned negative with -0.5% forecasts versus 1.6% prior.

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

On the positive side, news from the US Trade Representative’s (USTR) office surrounding the Sino-American trade pact seems to have helped the market sentiment. 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.

Amid these plays, the US 10-year Treasury yields pause the early Asian session pullback around a three-year high while the S&P 500 Futures struggle for clear direction after Wall Street’s first negative day in seven.

Moving on, US data and risk catalysts will be crucial for silver traders with a rush to risk-safety likely benefiting the bears.

Technical analysis

Wednesday’s rebound failed to cross the 21-DMA hurdle surrounding $25.25, which in turn directs silver sellers towards monthly support near $24.75.

Fed’s Bullard: Part of US economy might be overvalued

more to come ...

• EUR/USD is weighted in Asia as the US dollar remains firm. 
• The focus is on US pres Biden#s trip to Brussels and Fed hawkishness.

EUR/USD is trading lower by some 0.13% after falling from a high of 1.1013 to a low of 1.0982 so far.  The US dollar climbed on Wednesday as oil prices rallied again with US President Joe Biden poised to announce, alongside European leaders, new sanctions against Russia during his trip to Europe.

Traders are awaiting Biden to arrive in Brussels later on Wednesday to meet with NATO and European leaders in an emergency summit at the Western military alliance's headquarters. Sources said the US package would include measures targeting Russian members of parliament, Reuters reported. 

US stocks fell on the news while treasuries recovered from record losses ahead of tighter monetary policy to combat inflation. The S&P 500 lost 1.2%, led by losses in financials, while the 10-year Treasury yield dropped to 2.30% after reaching highs not seen since mid-2019. Traders are moving into bonds as Federal Reserve officials are indicating they are willing to raise rates aggressively to tame inflation, and the war in Ukraine has driven commodity prices up 26% this year.

Meanwhile, the Federal Open Market Committee member Loretta Mester favoured some 50bp hikes this year, adding that the economy has excess demand. She doubts rate hikes will cause a recession and that unwinding the balance sheet will help reduce distortions in the yield curve. St. Louis Federal Reserve President James Bullard's messaging remains as hawkish as ever also:

Fed's Bullard: US economy will continue to grow above trend this year and next

Bank of Japan (BOJ) board member Goushi Kataoka said on Thursday, “risks to the economy are skewed to downside due to the pandemic impact and geopolitical risks.”

Additional quotes

Market reaction

USD/JPY is testing daily highs near 121.30 on these discouraging comments from the BOJ policymaker.

As of writing, the pair is trading at 121.27, up 0.10% on the day.

Japanese Finance Minister Shunichi Suzuki is responding to Russia’s change in payment method overnight.

Key quotes

“Currently looking into the situation with relevant ministries regarding Russia's statement on paying for oil in roubles.”

“Will respond to the situation while evaluating wider impact our sanctions against Russia have on Japan's economy and market.”

“Have no idea on Russia's intention, how they would carry out, when asked about rouble payment for energy sales to unfriendly countries.”

• USD/JPY renews intraday high above 121.00 on BOJ minutes, ignores softer yields

• USD/RUB consolidates recent losses around weekly low, remains below the key support trend line.
• Bearish MACD, trend line break directs bears towards 50-DMA.
• 21-DMA, 61.8% Fibonacci retracement level restrict recovery moves.

USD/RUB consolidates weekly losses around 98.25, up 1.55% intraday during Thursday’s Asian session.

The Russian ruble pair dropped to the lowest in one week after breaking an ascending trend line from mid-February.

As the trend line breakdown joins bearish MACD signals, the USD/RUB prices are likely to fade the latest corrective pullback.

Hence, the 50-DMA surrounding 91.40 and the 90.00 threshold gain the seller’s attention ahead of the last monthly bottom near 75.00.

Alternatively, further recovery needs to cross the previous support line, close to 102.15 at the latest, to convince buyers.

Even so, 61.8% Fibonacci retracement level of February-march upside, around 105.00, will precede the 21-DMA figures close to 111.25 to challenge the USD/RUB bulls.

USD/RUB: Daily chart

Trend: Further weakness expected

• The gold price has moved higher on hawkish Fed policymakers.
• EU leaders summit and Biden meeting with its NATO counterparts will remain in focus.
• Gold bulls are firmer above 21 EMA.

Gold (XAU/USD) was juggling in a narrow range of $1,911.10-1,941.56 since the last week but now seems to come out of the woods and rally further despite headwinds of hawkish stance from the Federal Reserve (Fed)’s policymakers.

The precious metal seems underpinned by the market participants despite the rising odds of a 50 basis point (bps) interest rate hike by the Fed. San Francisco Fed Bank President Mary Daly in her speech on Wednesday claimed that interest rates may settle around 2.5%, which will be required to corner the soaring inflation while Cleveland Fed Bank President Loretta Mester favored 50 bps interest rate hikes by the Fed more than once by the end of 2022. It looks like the aggressive tightening stance from the Fed members has failed to tighten the gold prices.

The US dollar index (DXY) has been stuck near 98.50 and awaits a fresh wave in the risk-aversion theme for attracting bids. Meanwhile, the 10-year US Treasury yields have sensed minor weakness from its fresh two-year high at 2.42%.

Going forward, the economic calendar is full of mega-events on Thursday. US docket will reveal Initial Jobless Claims, Durable Goods Orders, and Market (Manufacturing and Services) PMI on Thursday. However, the spotlight will remain on the EU leaders summit to discuss the embargo on Russian oil and US President Joe Biden meeting with his NATO counterparts to discuss the Russia-Ukraine tensions and approach for a diplomatic solution.

Gold Technical Analysis

XAU/USD has given a breakout of the falling channel, which has sent the gold prices near $1,945. The upper end of the falling channel is placed from March 17 high at $1,949.80 while the lower end is marked from March 18 low at $1,918.21. 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. The 21-period Exponential Moving Average (EMA) at $1,937.15 will act as major support for the counter.

Gold hourly chart

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.3640 vs. the last close of 6.3733 and estimates of 6.3640.

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.

A retreat in the US Treasury yields and market anxiety fails to justify the firmer US inflation expectations during Thursday’s Asian session.

That said, the US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, rose to the all-time high level of 2.94% marked earlier in the month by the end of Wednesday’s North American trading session.

In doing so, the inflation gauge rose for three consecutive days while justifying hawkish comments from the Fed speakers, mainly St Louis Fed President James Bullard and Cleveland Fed President Loretta Mester.

Other than the inflation expectations, today’s US PMIs for March and Durable Goods Orders for February, as well as US President Joe Biden’s meeting with Atlantic Treaty Organization (NATO) friends, will also highlight Thursday as the key day of the current week.

Read: S&P 500 Futures print mild gains, Nikkei 225, yields stay pressured ahead of Biden-NATO meet

• WTI breaks to fresh daily highs in Asian markets. 
• There is an immense scale of supply disruption facing energy markets.

WTI is making fresh highs for the week at $116.61 with energy markets leading the broader commodity sector higher as Russia threatened to shake up the natural gas market. 

Russian President Vladimir Putin said Wednesday that Russia will insist that "unfriendly countries" pay for Russian natural gas exports only in rubles going forward, according to reports. Putin explained that it "made no sense" to supply Russian goods to the European Union and the United States and receive payment in euros, dollars and a number of other currencies.

''While it named the US, UK and members of the European Union as such, it said it will continue to supply gas in line with requests. Germany said the shift to roubles is a breach of contract, while Italy said it’s not inclined to pay in that currency,'' analysts at ANZ Bank explained.

''This comes as the US and European nations meet to discuss further action aimed at enhancing energy security in the region. The parties are working on an agreement that would aim to ensure a supply of US LNG and hydrogen to EU member states which would allow it to diversify away from Russia energy.''

''The moves in gas markets spilled over into the rest of the energy market with crude oil rising sharply. Markets were roiled on reports that a major Black Sea oil export terminal halted loadings and faces weeks of disruptions.''

Meanwhile, analysts at TD Securities explained an immense scale of supply disruption facing energy markets:

''Energy traders are both stockpiling and bidding up cargoes in anticipation of disruptions, reflecting an elevated convenience yield associated with holding the physical commodity, as the world is short of substitutes.''

''After all, effective spare capacity across OPEC+ is stretched thin, while OECD inventories reach their lowest since the Arab Spring and US shale's position as a swing producer is constrained by a growing focus on ESG along with supply chain bottlenecks in energy equipment and labour. In this context, a disruption of oil flows from Kazakhstan's Black Sea export terminal may result in weeks of additional disruptions.''

• GBP/JPY extends pullback from six-year high, takes offers to refresh intraday low of late.
• Bearish candlestick, overbought RSI hints at further weakness.
• 10-month-old rising trend line limits immediate upside ahead of May 2016 peak.

GBP/JPY takes offers to refresh intraday low around 159.70, down 0.20% on a day during Thursday’s Asian session.

In doing so, the yen cross justifies the previous day’s bearish spinning top candlestick, as well as overbought RSI, to extend pullback from a six-year high.

That said, the quote’s latest weakness directs bears towards the previous resistance line from October 2021, around 157.30. However, the last year’s high of 158.21 may act as an intermediate halt.

Should the GBP/JPY prices drop below 157.30, the sellers may not hesitate to revisit the early March’s swing high near 155.25.

Meanwhile, the pair’s further upside momentum will initially be challenged by an ascending resistance line from May 2021, around 160.55 by the press time.

Following that, the latest high near 161.10 and May 2016 top surrounding 163.90 will be on GBP/JPY bull’s radar.

GBP/JPY: Daily chart

Trend: Further weakness expected

• Kiwi bulls are firmer above 61.8% Fibo retracement at 0.6957.
• Driving with the upper Bollinger Band (20, 2) adds to the upside filters.
• The RSI (14) has climbed above 60.00 and has set a bullish stage for the asset.

The NZD/USD pair has witnessed a strong upside move after hitting a low of 0.6728 last week. This week the major has extended its gains after overstepping March 7 highs at 0.6926 and has registered fresh yearly highs at 0.6989.

On the daily scale, kiwi bulls are holding above 61.8% Fibonacci retracement (placed from 21 October 2021 high at 0.7219 to January 28 low at 0.6529) at 0.6957. The trendline placed from January 28 low at 0.6529, adjoining the February 14 low at 0.6593, and February 24 low at 0.6630 will continue to provide cushion to the pair.

It is worth noting that the asset is holding the upper band of Bollinger Bands (20, 2), which signals the continuation of a bullish rally.

The Relative Strength Index (RSI) (14) has registered a fresh high at 68.18 which signals more upside ahead. The oscillator is not showing any sign of divergence and an overbought situation.

Should the asset violate Wednesday’s high at 0.6989, the major will be driven towards 18 November 2021 high at 0.7054. Breach of the latter will send the kiwi bulls to the round level at 0.7100.

On the flip side, if the asset slips below weekly lows at 0.6864, bears may get the driving seat and the asset may fall near 20-period Exponential Moving Average (EMA) at 0.6840, followed by 38.2% Fibo retracement at 0.6790.

NZD/USD daily chart

• Market sentiment remains cautiously optimistic ahead of key data/events.
• S&P 500 rise 0.20 but Nikkei 225 drop more than 1.0%, US 10-year Treasury yields retest 2.30% level.
• USTR announcement, pullback in yields favor bulls even as escalation in the Ukraine-linked fears test market’s optimism.
• Preliminary readings of US PMIs for March, February’s Durable Goods Orders and Biden’s Europe visit will be crucial.

Global markets remain cautious, despite mildly positive S&P 500 Futures, heading into the key data/events on Thursday. Other than the pre-event anxiety, mixed signals concerning the Ukraine-linked market fears and the Sino-American trade relations also challenge the market participants of late.

That said, the US 10-year Treasury yields decline 1.5 basis points (bps) near 2.30% at the latest. It should be noted that the benchmark bond coupons rallied to the three-year high before reversing from 2.417% the previous day. The softer yields help the S& 500 Futures to print mild gains around 4,450 but Nikkei 225 tracks Wall Street’s losses to mark a 1.25% daily loss by the press time.

Looking for the catalysts, the negatives include the UK and the US readiness for more help to Ukraine even as Russia hands over a list of diplomats termed as ‘persona non grata’ to the US embassy. Further, US Senator John Cornyn recently said he met with US Treasury Secretary Janet Yellen to discuss Russian gold sanctions. The news becomes more worrisome ahead of Biden’s meeting with Atlantic Treaty Organization (NATO) friends. On the other hand, Russian President Vladimir Putin has said, “Russia will seek payment in roubles for gas sold to ‘unfriendly’ countries.” It should be observed that fresh virus woes in China and Europe also weigh on the risk appetite.

Alternatively, news from the US Trade Representative’s (USTR) office surrounding the Sino-American trade pact seems to have helped the market sentiment. 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.

In addition to the mixed headlines, caution ahead of the US PMIs for March and Durable Goods Orders for February also challenge the market’s mood. Forecasts suggest that the US Markit Manufacturing PMI may weaken to 56.3 from 57.3 previous readouts while the Services PMI seemed to have dropped to 56.0 from 56.5. Further, the US Durable Goods Orders growth for February is likely turned negative with -0.5% forecasts versus 1.6% prior.

To sum up, jittery markets are in fashion and volatility could increase looking forward. As a result, safe-havens may have an upper hand over the other financial assets.

Read: Forex Today: More turmoil around the corner

• AUD/USD bears are lurking around 0.75 the figure.
• 0.7480s guard a breakdown in price towards 0.7425.

AUD/USD is attempting to break higher with 0.75 the figure residing progress. The following illustrates a meanwhile bearish bias from both the daily and hourly chart's perspectives: 

AUD/USD daily chart

The daily chart shows that the price is reaching into old daily highs and should the bears move in, then a downside correction would be expected. The prior market structure from the 21st March's business could prove as a target for the bears but offer support with the confluence of the 0.7425 61.8% golden ratio of the current range of the daily bullish impulse. 

AUD/USD H1 chart

From an hourly chart's perspective, the bears will need to get below both the horizontal and dynamic support as illustrated above. The 0.7480s are key in this regard. 

• USD/JPY bulls keep reins at six-year high, picks up bids of late.
• BOJ Minutes repeat policymakers’ readiness to ease if needed.
• Market sentiment remains sluggish with eyes on the key US data, Biden’s meeting with NATO allies from Europe.
• Yields retreat from three-year high, Japan’s Nikkei 225 drops 1.0% tracking Wall Street.

USD/JPY remains on the front foot around the highest levels since early 2016, picking up bids to refresh daily high around 121.20 as Tokyo opens for Thursday.

The risk barometer pair recently rose after the Bank of Japan (BOJ) policymakers flagged concerns over inflation but showed readiness to extend an easy-money policy if needed, per the Minutes of the latest BOJ meeting.

Read:

The yen major refreshed multi-day high the previous day as the US Treasury yields rallied to a three-year top. However, the bond coupons’ pullback from the 2.417% level, down 1.5 basis points (bps) near 2.30% at the latest, failed to weigh on the USD/JPY prices. The reason could be linked to the market’s anxiety ahead of the key data/events.

Talking about the important ones, preliminary readings of the US PMIs for March and US President Joe Biden’s meeting with European counterparts from the North Atlantic Treaty Organization (NATO) will be the key. Also important will be the US Durable Goods Orders for February.

Forecasts suggest that the US Markit Manufacturing PMI may weaken to 56.3 from 57.3 previous readouts while the Services PMI seemed to have dropped to 56.0 from 56.5. Further, the US Durable Goods Orders growth for February is likely turned negative with -0.5% forecasts versus 1.6% prior.

Elsewhere, risk catalysts flash mostly negative signals as the UK and the US ready more help for Ukraine while Russia hands over a list of diplomats termed as ‘persona non grata’ to the US embassy. Also, US Senator John Cornyn recently said he met with US Treasury Secretary Janet Yellen to discuss Russian gold sanctions. The news becomes more worrisome ahead of Biden’s meeting with NATO friends. On the other hand, Russian President Vladimir Putin has said, “Russia will seek payment in roubles for gas sold to ‘unfriendly’ countries.”

On the positive side, news from the US Trade Representative’s (USTR) office surrounding the Sino-American trade pact seems to have helped the market sentiment. 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.

Amid these plays, the S&P 500 Futures print mild gains but Japan’s Nikkei 225 dropped -1.26% intraday by the press time.

Moving on, USD/JPY may remain firmer ahead of the key catalysts as the market’s rush towards the US dollar is less likely to fade amid geopolitical fears.

Technical analysis

January 2016 top surrounding 121.70 seem to lure the USD/JPY buyers while the overbought RSI may test the pair’s upside afterward. Alternatively, pullback moves may aim for the year 2017 peak of 118.60.

• USD/CHF has retested Monday’s low and has rebounded ahead of the SNB’s interest rate decision.
• Fed policymakers have raised the odds of a 50 bps interest rate hike significantly.
• SNB is more likely to maintain the status quo despite a higher February inflation print.

The USD/CHF pair has attracted some bids near 0.9300 and has managed to defend Monday’s low in a similar area as investors are on the sidelines before the announcement of the interest rate decision by the Swiss National Bank (SNB).

The major has remained in the negative territory after printing a fresh 50-week high at 0.9460 last week. More likely, the SNB will keep its monetary policy unchanged and interest rates stable at -0.75%. It is worth noting that the SNB has been keeping its borrowing rates unchanged since the mid of 2015. However, the SNB may turn to a hawkish stance for June’s monetary policy as the annual inflation rate in Switzerland climbed to 2.2% in February of 2022, the highest since October of 2008. The inflation print of 2.2% is above the targeted cap of 2%, which may force the SNB policymakers to tone hawkish going forward.

Meanwhile, the US dollar index (DXY) is facing barricades near 99.00 but rising odds of a 50 basis point (bps) interest rate hike in May’s monetary policy may fetch a fresh impulsive wave further. The speeches from the Federal Open Market Committee (FOMC) have underpinned the chances of an aggressive hawkish stance from the Fed.

San Francisco Fed Bank President Mary Daly has claimed that interest rates may settle around 2.5%, which will be required to corner the inflation mess while Cleveland Fed Bank President Loretta Mester has advocated 50 bps interest rate hikes by the Fed more than once by the end of 2022.

• GBP/USD remains sidelined after reversing from three-week high.
• Market’s anxiety ahead of key data/events test pair traders even as yields retreat, stock futures print mild gains.
• UK inflation rallied but Sunak failed to impress with Spring Budget the previous day.
• Biden’s meeting with NATO friends, US data also highlight Thursday.

GBP/USD licks its wounds around 1.3200 during a quiet Asian session on Thursday, following the U-turn from a three-week high.

In addition to a lack of major data/events in Asia and light macro, the market’s anxiety ahead of the key catalysts scheduled for publishing during the European and the US session recently restricts the cable pair’s moves.

Among them, preliminary readings of the UK and the US PMIs for March and US President Joe Biden’s meeting with European counterparts from the North Atlantic Treaty Organization (NATO) will be the key. Also important will be the US Durable Goods Orders for February.

Ahead of the events, risk catalysts flash mostly negative signals as the UK and the US braces for more help to Ukraine while Russia hands over a list of diplomats termed as ‘persona non grata’ to the US embassy. Also, US Senator John Cornyn recently said he met with US Treasury Secretary Janet Yellen to discuss Russian gold sanctions. The news becomes more worrisome ahead of Biden’s meeting with NATO friends. To counter the same, Russian President Vladimir Putin has said, “Russia will seek payment in roubles for gas sold to ‘unfriendly’ countries.”

On the other hand, UK Manufacturing PMI is expected to ease to 56 from 58.2 prior whereas the Services PMI may drop to 54.2 from 55.5. Further, the US Markit Manufacturing PMI may also weaken to 56.3 from 57.3 previous readouts while the Services PMI seemed to have dropped to 56.0 from 56.5. Additionally, the US Durable Goods Orders growth for February is likely turned negative with -0.5% forecasts versus 1.6% prior.

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

It should be noted that a fresh 30-year high of the UK Consumer Price Index (CPI) for February, 6.2% YoY versus 5.9% expected and 5.52% prior, failed to underpin the GBP/USD buying the previous day. The reason could be linked to UK Chancellor Rishi Sunak’s failure to impress traders with a downward revision to the growth forecast in the Spring Budget.

That said, the US Dollar Index (DXY) fades the previous day’s recovery moves even as the US Treasury yields retreat from a three-year high. It’s worth noting that the US 10-year Treasury yields rose to the highest level since May 2019 before reversing from 2.417%, down 1.5 basis points (bps) near 2.30% at the latest. Though, the weakness in the yields could be witnessed in mild gains of the S&P 500 Futures.

Moving on, GBP/USD is likely to witness a volatile day and needs caution in trading.

Technical analysis

The weekly support line defends GBP/USD buyers around 1.3170 but recovery remains elusive until crossing January’s low near 1.3360.