CFD Markets News and Forecasts — 25-03-2022

• The British pound barely advances 0.01% in the day.
• Dismal UK economic data weighed on the GBP/USD pair.
• GBP/USD Price Forecast: The path of least resistance is downward biased, as GBP bulls failed to reclaim 1.3200.

The British pound rebounded from intraday losses in the mid-North American session, though it failed to reclaim the 1.3200 mark, courtesy of a risk-on market mood, Fed hawkishness, and Bank of England’s rate hike, with one dissenter, perceived as a dovish increase. At the time of writing, the GBP/USD is trading at 1.3187.

Late in the North American session, the market sentiment improved, boosting appetite for risk-sensitive currencies like the GBP. Nevertheless, amid an increased appetite for the greenback, disappointing data coming from the UK put a lid on the GBP/USD recovery.

The UK economic docket reported the UK’s Retail Sales, which declined by 0.3% in February, lower than the 0.6% increase expected and trailed January’s 1.9% reading. Furthermore, sales excluding petrol fell 0.7% in February and missed forecasts with around a 0.5% increment estimate.

Meanwhile, across the pond, two commercial banks expect the US central bank to hike 50-bps. On Friday, Goldman Sachs and Citigroup expressed that they estimate that the Federal Reserve would hike 50-bps in the meetings of May and June, which would lift the Federal Funds Rate (FFR) to 1.50% by the end of the first half of the year.

The bank’s forecasts come at what Fed policymakers expressed during the week, led by Fed Chairman Jerome Powell, openness to increasing rates by more than 25 bps, as he spoke at the NABE conference on Monday.

The US economic docket featured Pending Home Sales for February shrank 4.1% from a 1% m/m increase expected. Furthermore, the University of Michigan Consumer Sentiment Final for March came at 59.4 from 59.7, while inflation expectations stayed at 5.4% vs. 4.9% on the previous report.

GBP/USD Price Forecast: Technical outlook

The GBP/USD failure to reclaim the 1.3200 mark for the second-consecutive day left the pair vulnerable to further selling pressure. Furthermore, the Relative Strenght Index (RSI) oscillator is at 44 at bearish territory, aiming down, signaling that the GBP/USD might add to losses in the coming days, as month-end flows towards the greenback might extend the fall.

That said, the GBP/USD first support would be December 8, 2021, a daily low at 1.3160. Breach of the latter would expose the 1.3105, followed by the 1.3000 mark.

• The shared currency barely moves vs. the greenback as traders head into the weekend.
• The EU and the US reached an agreement on natural gas supply.
• EUR/USD Price Forecast: Confined to the 1.0960-1.1000 range.

The EUR/USD remains subdued amid a choppy trading day, as the market mood swings from risk-on to off continue, on “hawkish” comments by Fed officials, stagnate peace talks discussions of Russia and Ukraine, and an attack on Saudi Arab Aramco installations on Friday. At 1.0992, the EUR/USD shows the resilience of the greenback, despite being softer in the day.

As the New York session progresses, the market sentiment is mixed. European and US equity indices fluctuate between gainers and losers, while the US Dollar Index, a gauge of the greenback’s value vs. a basket of six currencies, is barely flat at 98.787.

Russia – Ukraine and NATO updates

Meanwhile, the war in Eastern Europe extends to a whole month of hostilities between Russia and Ukraine. Although there have been peace discussions, both parties have disagreed on the primary issues, as said by the Russian negotiator, early in the day on wires. He added that Russia and Ukraine are getting closer on secondary matters. At the same time, NATO’s summit in Brussels came to an end, with the US and Europe reaching an agreement on natural gas so that Europe would cut energy dependence on Russia.

Although the news is good for the Eurozone, the EUR/USD failed to react positively to it, as the pair stays parked at the 1.0980-1.1000 area.

US commercial banks expect two 50-bps hikes

Earlier in the day, Citigroup and Goldman Sachs analysts expected that the Federal Reserve would hike 50-bps in the two following meetings, in May and June.

On the US front, Fed speaking continues with the New York Fed President John Williams also backing up a 50 bps increase, and he stated, “If it is appropriate to raise by 50 basis points at a meeting, I will do that.”

The US economic docker featured Pending Home Sales for February shrank 4.1% from a 1% m/m increase estimated. Furthermore, the University of Michigan Consumer Sentiment Final for March came at 59.4 from 59.7, while inflation expectations stayed at 5.4% vs. 4.9% on the previous report.

EUR/USD Price Forecast: Technical outlook

The EUR/USD is still downward biased, though, in the last four trading days, the EUR/USD has been trading in a narrow range, between 1.0960-1.1000. The lack of a catalyst, plus fluctuations in the market mood, might keep the shared currency trendless.

That said, the EUR/USD first support would be 1.0960. Breach of the latter would expose 1.0900, followed by the YTD low at 1.0806. On the flip side, the EUR/USD first resistance would be 1.1000. Once cleared, the next resistance would be 1.1050, followed by  1.1100.

The Bank of Canada is "prepared to act forcefully" to return inflation to its 2.0% target, said Deputy Governor Sharon Kozicki on Friday, reported Reuters. 

Additional Remarks:

"It’s important to be clear that returning inflation to the 2% target is our primary focus and unwavering commitment."

"The pace and size of rate hikes and the start of QT will be active parts of our deliberations at our next decision."

"Inflation in Canada is too high, labor markets are tight and there is considerable momentum in demand."

"Households on average appear to be in better financial shape now than at the start of our 2017–18 tightening cycle."

"Household indebtedness is now above pre-pandemic levels and its elevated level remains an important domestic vulnerability."

"High indebtedness could amplify the impact of rising interest rates, and it could also worsen the impact of a future shock."

"A key concern is the broadening of price pressures... around 2/3 of components in the Consumer Price Index are now exhibiting inflation above 3%."

"Persistently elevated inflation increases the risk that longer-run inflation expectations could drift upward."

"The nvasion of Ukraine is adding to inflationary pressures in Canada and the world... the bank is keeping close eye on events and impacts."

• The USD/CHF erases earlier losses but faces solid resistance, which could push the pair lower.
• The market sentiment shifted to a risk-off on an attack of a Saudi Aramco oil facility in Jeddah.
• USD/CHF Price Forecast: The USD/CHF is upward biased per the daily chart, but the pair is bearish in the near term, as shown by the 1-hour chart.

The USD/CHF snaps four days of losses and jumped off the day’s lows, around 0.9260, amid a mixed market mood and expectations of 50-bps increases by the US central bank on its May monetary policy meeting. At the time of writing, the USD/CHF is trading at 0.9304.

A risk-off market mood keeps US equity indices pressured while European bourses fluctuate. The greenback erases earlier losses, up 0.04%, sitting at 98.819, while US Treasury yields skyrocket, with the 10-year up 14 basis points at 2.489%, but short of daily highs around 2.503%.

The market mood dampened on reports that a Saudi Aramco oil facility located in Jeddah, Saudi Arabia, was hit by a missile launched by Yemen’s rebel Houthi militia on Friday, reports on social media suggested.

Read more: Saudi Aramco oil facility in Jeddah hit by Yemeni Houthi rebel missile

Overnight, the USD/CHF dropped from 0.9300ish towards 0.9260, the top of an eleven-month-old downslope trendline, previous resistance-turned-support, and jumped off as the North American session evolves, amid a softer demand for the greenback.

USD/CHF Price Forecast: Technical outlook

The USD/CHF daily chart depicts the pair as upward biased, despite breaking below the 0.9373 mark, though it would be resistance ahead of the YTD high around 0.9460.

However, the 1-hour chart depicts the USD/CHF as bearish biased in the near term. The USD/CHF  is probing a downslope trendline drawn from March 16 highs, unsuccessfully tested two previous times. If the trendline holds, the USD/CHF first support level would be 0.9300. Breach of the latter would expose Friday’s daily low at 0.9260, followed by March 9 low at 0.9250.

• Gold has seen two-way volatility on Friday and currently trades flat in the mid-$1950s.
• Spot prices are set to end the week up more than 2.0% despite the sharp rise in US yields.
• Geopolitical/inflation risk premia are keeping the precious metal underpinned with Russo-Ukraine peace talks showing no signs of progressing.

Spot gold (XAU/USD) prices have seen indecisive, two-way price action in recent trade, swinging between the mid-$1940s and $1960s. A sharp rally in US yields to fresh multi-year highs to reflect an upping of hawkish Fed bets as market participants reacted to a chorus of major US banks issues hawkish new Fed policy calls helped push XAU/USD back from weekly highs in the $1960s. But geopolitical uncertainty, this time regarding the security of Saudi Arabia’s oil infrastructure after a site in Jeddah was hit by a Houthi missile, is helping keep pricing underpinned above support in the form of recent highs in the $1940s area.

At current levels in the mid-$1950s, gold is trading flat on the day and looks set to post a weekly gain of just under 2.0%. That is quite remarkable given that, on the week, the US 2-year and 10-year yields are both up more than 30 bps as markets bet on a much more hawkish Fed tightening path following recent communications from Chairman Jerome Powell and his fellow FOMC policymakers. Typically, higher yields weigh on gold by raising the “opportunity cost” of holding non-yielding assets.

Gold’s resilience speaks to the mood of a market that is unwilling to relinquish inflation protection at a time when the Russo-Ukraine war continues to rage and the subsequent impact on the global economy is not yet known. The only thing that everyone currently agrees upon is the fact that the war and resultant Western sanctions on Russia are going to be inflationary. With peace talks showing no sign of progress judging by the rhetoric from Russian and Ukrainian negotiators on Friday, it makes sense for a significant degree of geopolitical/inflation risk premia to remain priced into gold.

Bloomberg reporter Javier Blas wrote in a tweet that the Saudi Aramco facility on fire in Jeddah has no impact on Saudi crude exports.

Gold spent the first half of the week fluctuating in a relatively tight range above $1,920 but regained its traction after breaking above $1,950 on Thursday. XAU/USD needs to use $1,950 as support in order to extend its rebound, FXStreet’s Eren Sengezer reports.

Bullish tilt after the move above $1,950

“Investors grow increasingly concerned over the potential negative impact of a prolonged Russia-Ukraine conflict on global economic activity. A further escalation of geopolitical tensions should help the yellow metal limit its losses and vice versa.”

“The 20-day SMA and the Fibonacci 38.2% retracement of the latest uptrend seem to have formed a key technical level at $1,950. In case gold starts using that level as support, it faces an interim resistance at $1,965 (static level) before it can target $1,990 (Fibonacci 23.6% retracement) and $2,000 (psychological level).”

“XAU/USD could face renewed bearish pressure if it fails to hold above $1,950 and decline toward $1,920 (static level, lower limit of the consolidation channel). With a daily close below that level, the pair could test $1,900 (Fibonacci 61.8% retracement, 50-day SMA).”

Deputy Bureau Chief & Chief OPEC correspondent Amena Bakr wrote in a tweet that "Fire at an Aramco facility in Jeddah (Saudi Arabia), missile attack suspected".

In a separate tweet, she added that "Looks like the Houthis will claim the attack on the Aramco facility in Jeddah".

A Saudi Aramco oil facility located in Jeddah, Saudi Arabia, was hit by a missile launched by Yemen's rebel Houthi militia on Friday, reports on social media suggested. 

Market Reaction

The news sent oil prices jumping higher, with WTI surging back to $112 from around $110 and also weighed on equities, with the S&P 500 dropping about 25 points to 4515 from around 4540. 

• The Loonie extends its weekly gains, so far up 0.78% vs. the US dollar.
• The Russia – Ukraine conflict is still stuck in negotiations, while the US and EU agreed on Natural gas supply.
• Goldman Sachs and Citigroup expect two 50-bps increases by the Fed.
• USD/CAD Price Forecast: Positive divergence between RSI and price action in the 1-hour chart suggests an upward move is on the cards.

The USD/CAD extends its losses in the week, however it appears to face strong support around the 1.2500 mark, amid a mixed market mood, “hawkish” Fed policymakers,  and two North-American-based banks, expecting two consecutive 50 bps increases by the US central bank in the May and June meetings. At the time of writing, the USD/CAD is trading at 1.2509.

The market sentiment remains fragile, though mixed as portrayed by US equities fluctuating, while European bourses stay in the green. The greenback is trading softer, as reflected by the US Dollar Index down 0.13%, at 98.660, while US Treasury yields keep portrays Fed’s hawkishness, with the 10-year T-note yield up eleven basis points, sitting at 2.453%.

The Russia – Ukraine war issues keep influencing the market mood, though on a lower note. The Russian negotiator said that Ukraine and Russia have agreed on secondary matters, but about primary issues, discussions languished. Meanwhile, the US and Europe reached an LNG (Liquified Natural Gas) agreement to cut the Eurozone dependence on Russia.

Oil prices eased from daily highs towards $110.25 on the headline, putting a lid on the Canadian dollar rise vs. the US Dollar.

Goldman Sachs and Citigroup amongst market players expecting 50 bps increases

Elsewhere, Goldman Sachs and Citigroup are the two mentioned banks in the first paragraph, which expect at least two 50-bps increases in the May and June meetings. Furthermore, in a note to clients, Citigroup said that they expect four 50-bps increases to the Federal Funds Rate in 2022.

The economic docket for Canada has the Budget Balance for January, and the Bank of Canada Governor Kozicki would cross wires. On the US front, Fed speaking continues with the New York Fed President John Williams also backing up a 50 bps increase, and he stated, “If it is appropriate to raise by 50 basis points at a meeting, I will do that.”

Also, Pending Home Sales for February shrank 4.1% from a 1% m/m increase expected. Furthermore, the University of Michigan Consumer Sentiment Final for March came at 59.4 from 59.7, while inflation expectations stayed at 5.4% vs. 4.9% on the previous report.

USD/CAD Price Forecast: Technical outlook

The USD/CAD fall extends in the week, though as appreciated by the 1-hour chart, the USD/CAD seems to have reached solid support at the 1.2500 area. Additionally, the Relative Strength Index (RSI), a momentum indicator, is at 38.31, though at a bearish area, shows a positive divergence with USD/CAD price action, suggesting that a move upwards might be on the cards.

If that scenario plays out, the USD/CAD first resistance would be the 50-hour simple moving average (SMA) at 1.2547. Breach of the latter would expose a six-month-old upslope trendline around 1.2570, followed by March 24 daily high at 1.2586 and March 23 daily high at 1.2605.

• DXY remains unable to regain upside traction on Friday.
• US yields reverse the initial drop and resume the uptrend.
• US Final Consumer Sentiment missed expectations at 59.4.

Sellers keep dictating the price action in the greenback, with the US Dollar Index (DXY) navigating the mid-98.00s in a context favourable to the riskier assets.

US Dollar Index appears capped by 99.00

Despite the negative performance, the index at least managed to bounce off daily lows in the 98.40 region, as the downside seems somewhat contained amidst persistent uncertainty in the geopolitical scenario.

The U-turn in US yields also appears to have pushed the buck from daily lows. Indeed, yields across the curve not only left behind the initial cautious stance but are also navigating in fresh highs at the time of writing.

In the US calendar, final prints of the U-Mich Index saw the Consumer Sentiment deflate to 59.4 for the current month, while Pending Home Sales contracted 5.4% in the year to February.

At his speech on Friday, NY Fed J.Williams subscribed to the view that future rate hikes remain data dependent.

What to look for around USD

The weekly recovery in the dollar failed to advance further north of the 99.00 mark, motivating sellers to return to the market on Friday. Concerns surrounding the geopolitical landscape are expected to keep propping up the demand for the buck in combination with prospects of extra tightening by the Fed. 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: 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 retreating 0.15% at 98.62 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).

• WTI has stabilised in the $110 area, down another $1 on the day after Thursday’s $3 drop.
• An easing of CPC pipeline disruption concerns plus the EU’s failure to agree on a Russian oil embargo triggered profit-taking.

Front-month WTI futures have stabilised in the $110 area on Friday, with Thursday’s modest bearish momentum continuing for a second day and prices currently down about $1.0 after the slightly more than $3 drop a day earlier. Supply concerns have eased somewhat in the latter half of the week after news broke of a partial resumption of oil flows through to Kazakhstan’s CPC pipeline. Earlier in the week, authorities had announced that oil flows through the 1.3M barrel per day pipeline had been halted due to the need to repair storm damages.

The supply disruption comes as global oil markets face massive uncertainty owing to Russia’s invasion of Ukraine and subsequent harsh sanctions placed on the Russian economy by Western nations. Speculation at the start of the week had been that the EU would on Thursday, following extraordinary NATO/EU leaders meetings, announce an embargo on all Russian oil imports. But this was not the case, with heavily Russia energy import dependant countries like Germany pushing back against this policy out of fear of causing economic self-harm.

The EU’s failure to implement a wider Russia oil import ban has liekly contributed to the further bout of profit-taking in the latter stages of the week. But it seems that traders remain keen to add to long positions in the $110 area. Commodity strategists think that as the impact of the Russo-Ukraine war on Russian oil exports becomes more evidence in the coming month, there remains plenty of room for further upside in WTI. The latest remarks from Russian negotiators suggest that a Russo-Ukraine peace deal, which could potentially precede an easing of Western sanctions, is not likely to be forthcoming any time soon.

NY Fed President and influential FOMC member John Williams said on Friday that the speed of interest rate hikes this year should be driven by the data, reported Reuters. 

Additional Remarks:

"The Fed needs to be clear that both balance sheet reduction and rising rates will affect financial conditions."

"Given supply/demand imbalances, we need to move rates steadily back to normal levels."

"I am very focused on thinking about real interest rates."

"We need to keep an eye on if supply chains ebb when deciding the path of rates."

"The war in Ukraine could also affect outlook, so the Fed has to be nimble."

When asked about a 50 bps rate rise in May, Williams says he "will watch data and analyse it."

"If it is appropriate to raise by 50bps at a meeting, I will do that."

"We need to make the right decisions based on what we are seeing in the economy."

• USD/TRY trades within a narrow range in the 14.80/85 band.
• Turkey 10y bond yields in all-time highs near 27.00%.
• Markets’ focus remains largely on the geopolitical landscape.

The Turkish lira depreciates marginally vs. the greenback and motivates USD/TRY to navigate a tight range in the 14.80 zone at the end of the week.

USD/TRY remains capped by 15.00

USD/TRY moved into a consolidative phase in past sessions, always below the 2022 peak around 15.00 recorded earlier in the month.

The monthly uptrend in the pair mirrored the performance of crude oil prices, as the lira is expected to suffer the consequences of higher crude prices, as Turkey’s energy sector largely hinges on imports of the commodity.

No news from the Turkish central bank (CBRT) at its latest meeting seems to have not impacted the currency despite there was no announcements whatsoever regarding measures to curb the rampant inflation.

Somewhat in contrast with the global selloff in bonds, Turkey 10y reference bond yields trade a tad lower from Thursday’s all-time high around 28.30%.

In the domestic calendar, Turkey’s Capacity Utilization improved to 77.3% in March (from 76.6%) and the Manufacturing Confidence eased a bit to 108.5 in the same period (from 109.8).

What to look for around TRY

The lira keeps the range bound theme unchanged vs. the greenback, always in the area below the 15.00 neighbourhood, or yearly lows. In the very near term, price action in the Turkish currency is expected to gyrate around the performance of energy prices, the broad risk appetite trends, the Fed’s rate path and the developments from the Russia-Ukraine peace talks. Extra risks facing TRY also come from the domestic backyard, as inflation gives no signs of easing, real interest rates remain negative and the political pressure to keep the CBRT biased towards low interest rates remain omnipresent.

Key events in Turkey this week: Capacity Utilization, Manufacturing Confidence (Friday).

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

USD/TRY key levels

So far, the pair is gaining 0.25% at 14.8491 and a drop below 14.5217 (weekly low March 15) would expose 13.8983 (55-day SMA) and finally 13.7063 (low February 28). On the other hand, the next up barrier lines up at 14.9889 (2022 high March 11) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level).

NY Fed President and influential FOMC member John Williams said on Friday that the economic implications of the Covid-19 pandemic and war in Ukraine are highly uncertain, reported Reuters. Many countries are confronting a sharp rise in inflation and the actions central banks take affect flows of capital across countries. Therefore, transparency in monetary policy can increase its effectiveness and reduce its unintended consequences, he added. 

Additional Remarks:

"Risk management at forefront of thinking among central bankers."

"Inflation is at the forefront of all of our thinking."

"We are watching inflation expectations and other indicators very closely."

"Medium and longer-run inflation expectations have stayed remarkably stable."

"Overall financial markets have adjusted expectations with minimal disruption."

The S&P 500 had another strong session on Thursday and closed above key resistance at 4477/81, which analysts at Credit Suisse look to be sustained into the weekly close, particularly given the fresh bullish cross in daily MACD momentum.

Support at 4424/18 needs to hold to keep the immediate risk higher

“S&P 500 closed above the key moving averages at 4477/81, which is a positive development, reinforced by the firm recent cross into positive territory for daily MACD momentum. We are now watching very closely whether the market sustains this move into the weekly close, which would be a significantly positive technical development.” 

“We believe the short-term risk stays skewed higher, with resistance seen next at 4522/30, ahead of the 61.8% retracement of the January/February fall at 4550. We see scope for a move above here to test the February highs at 4590/95, but would expect a fresh cap here.” 

“Near-term support moves to 4465/56. Below here and then the 13-day exponential moving average at 4424/18, on the back of a reversal below 4477/81 into the weekly close, would mark a more decisive rejection of the key medium and long-term averages. This would turn the short-term risk back lower for a move to 4347/52 next.”

EUR/USD has swung around the 1.10 mark for the better part of the past four days. Economists at Scotiabank note that a close below this level would stand out as a clear bearish signal for the euro.

Support is around the 1.10 figure area followed by 1.0960/65

“A close below 1.10 for the week would stand out as a clear bearish signal for the EUR.” 

“The EUR’s bearish trendline from mid-Feb comes in as resistance at ~1.1050, with the mid-figure area broadly set to limit upside followed by 1.1070 and the 1.11 zone.” “Support is around the 1.10 figure area followed by ~1.0960/65 that has held up the EUR in three consecutive sessions; ~1.0950 and ~1.0925 follow.”

According to the final version of the US University of Michigan Consumer Sentiment survey for March, the headline Consumer Sentiment index fell to 59.4 versus the flash estimate released earlier in the month of 59.7. That marked a substantial drop versus February's final estimate of the Consumer Sentiment index of 62.8 and marked the weakest such reading since August 2011. 

The final version of the Current Conditions index was revised lower to 67.2 from the flash estimate of 67.8, also below February's 68.2 reading and marking the lowest such reading since August 2011. The final version of the Consumer Expectations index came in at 54.3 versus the 54.4 flash estimate, well below February's 59.4 reading and marking the lowest such reading since October 2011. The One-year Inflation Expectations index also rose to its highest since November 1981 at 5.4%. 

Market Reaction

There was no notable market reaction to the latest US data with focus instead on upcoming Fed speak and on recent hawkish revisions to major US bank's forecasts for Fed policy in the coming years. 

The US Pending Home Sales index fell by 4.1% MoM in February to 104.9, data released by the National Association of Realtors on Friday showed, below the expected 1.0% MoM gain. Versus February 2021, the Pending Home Sales index was down 5.4%. 

Market Reaction

There was no notable market reaction to the latest US data with focus instead on upcoming Fed speak and on recent hawkish revisions to major US bank's forecasts for Fed policy in the coming years. The DXY continues to trade largely unchanged versus pre-data levels in the 98.60s. 

US money markets are pricing an additional 200bps in interest rate hikes from the US Federal Reserve by the end of 2022, Bloomberg reported citing Fed swaps. US yields have been moving higher in recent trade to reflect the ongoing hawkish repricing, with the 2-year hitting fresh multi-year highs above 2.25% and 10-year also hitting fresh multi-year highs above 2.45%. 

Analysts at Citi recently tweaked their Fed call and now see four successive 50bps hikes from the central bank at its next four policy meetings. Citi predicts there will be a total of 275bps in tightening in 2022 (meaning rates ending the year at 2.75-3.0%), followed by more hikes in 2023 that will see rates hit 3.50-3.75% but the year's end. Risks to the terminal rate remain to the upside given upside risks to inflation, the bank said. 

Market Reaction

Market commentators said the new call from Citi sparked the upside in US yields but, interestingly, this has not sparked further upside in the US Dollar Index (DXY), which, though off earlier sub-98.50 lows, has been unable to mount a sustained rally back towards 99.00. 

• AUD/USD was seen consolidating its recent strong gains recorded over the past two weeks or so.
• The Fed’s hawkish outlook acted as a tailwind for the USD and kept a lid on any meaningful gains.
• A positive risk tone, bullish commodity prices extended some support to the resources-linked aussie.

The AUD/USD pair seesawed between tepid gains/minor losses through the early North American session and for now, seems to have stabilized above the 0.7500 psychological mark.

The pair witnessed a range-bound price action on Friday and consolidated its recent strong bullish run of over 350 pips from the monthly low, around the 0.7165 region touched last week. The downside remained cushioned amid a generally positive tone around the equity markets, which tends to benefit the perceived riskier aussie.

Apart from this, bullish commodity prices turned out to be another factor that acted as a tailwind for the resources-linked Australian dollar. That said, the emergence of some US dollar dip-buying held back bulls from placing aggressive bets and kept a lid on any further gains for the AUD/USD pair, at least for the time being.

The greenback drew support from expectations that the Fed would adopt a more aggressive policy stance to bring down unacceptably high inflation. In fact, the markets have been pricing in the possibility of a 50 bps rate hike move at the May meeting. This was reinforced by elevated US bond yields, which underpinned the buck.

Nevertheless, the AUD/USD pair now seems to have found acceptance above the 0.7500 mark and remains on track to post strong gains for the second successive week. Bulls now await sustained break through a resistance marked by the top boundary of an ascending channel extending from the YTD low before placing fresh bets.

Technical levels to watch

According to a Russian negotiator at talks with Ukraine, the two sides have come closer together on secondary issues but are not really moving forward on key ones, reported Reuters citing Russia's Interfax.  

• EUR/USD clings to daily gains above the 1.1000 mark on Friday.
• The pair looks supported around 1.0960 so far.

EUR/USD reverses the recent weakness and manages to advance to the 1.1040 area, where some decent resistance seems to have turned up.

Further range bound looks likely amidst the ongoing alternating risk appetite trends, with the lower bound emerging around 1.0960 and gains limited by the 1.1140 area.

The medium-term negative outlook for EUR/USD is expected to remain unchanged while below the key 200-day SMA, today at 1.1505.

EUR/USD daily chart

The Russian Defense Ministry said on Friday that its forces will focus on the complete liberation of Donbas and that the army hasn't ruled out the possibility of storming blockaded Ukrainian cities, reported Interfax cited by Reuters. Russia was considering two options for its "special military operation", the Defense Ministry continued, one within the Donbas separatist republics and one within the whole territory of Ukraine.

Russian troops will react immediately to any attempts to close the airspace of Ukraine, the Russian Defense Ministry warned, adding that it is a big mistake that the West supplied weapons to Ukraine, given that it draws out the conflict. The main targets of the first phase of Russia's operation in Ukraine are complete, they added. 

• USD/JPY witnessed an intraday pullback from the multi-year peal touched earlier on Friday.
• Extremely overbought conditions prompted some profit-taking amid modest USD weakness.
• The Fed-BoJ monetary policy divergence supports prospects for the emergence of dip-buying.

The USD/JPY pair maintained its offered tone heading into the North American session and was last seen trading around the 121.70-121.75 region, down nearly 0.50% for the day.

The Bank of Japan provided a bullish signal on Friday and refrained from stepping into the markets to arrest the continuous rise in yields. In fact, the yield on the 10-year Japanese government bond (JGB) rose above the level at which the BoJ offered to buy an unlimited amount in February. This, in turn, provided a goodish lift to the Japanese yen. Apart from this, modest US dollar weakness prompted some profit-taking around the USD/JPY pair.

Spot prices witnessed a dramatic intraday turnaround and plunged over 125 pips from the vicinity of mid-122.00s, or the highest level since December 2015 touched earlier this Friday. That said, a combination of factors assisted the USD/JPY pair to find decent support near the 121.20-121.15 region. and stall the intraday corrective pullback. The Fed-BoJ policy divergence, along with a positive risk tone acted as a headwind for the JPY.

It is worth recalling that a slew of influential FOMC members, including Fed Chair Jerome Powell, left the door open for a larger rise in borrowing costs to bring down unacceptably high inflation. The markets were quick to price in the possibility of a 50 bps Fed rate hike move at the May policy meeting. This was reinforced by the fact that the yield on the benchmark 10-year US government bond stood tall near the highest level since 2019.

Elevated US Treasury bond yields attracted some USD dip-buying and further contributed to limiting the downside for the USD/JPY pair, at least for the time being. The fundamental backdrop favours bullish traders, suggesting that Friday's downfall could be categorized as a corrective pullback amid extremely overbought conditions. Hence, any subsequent slide might still be seen as a buying opportunity and is more likely to remain limited.

Technical levels to watch

White House National Security Advisor Jake Sullivan said on Friday that the US and its NATO allies are doing contingency planning for the possibility that Russia chooses to strike NATO territory, reported Reuters. 

• Silver stabilised above the $25.50 area on Friday amid a broadly subdued tone to trade across markets.
• Upcoming Fed speak and US data probably won’t impact markets much, with $26.00 likely to continue acting as a ceiling.

Spot silver (XAG/USD) prices have stabilised to the north of the $25.50 per troy ounce area on Friday amid a broadly subdued tone to trade across markets with conditions winding down ahead of the weekend. US bond markets have stabilised with yields broadly unchanged on the day but remaining close to recently hit multi-year highs, while FX markets are not seeing a great deal of action (apart from the yen gaining some ground as traders take profits on recent shorts). In pre-market trade, meanwhile, US equity markets are enjoying a further push higher led by the tech sector, but this doesn’t appear to be burnishing silver’s safe-haven appeal.

The week isn’t over just yet, with influential Fed policymakers Christopher Waller and John Williams scheduled to speak later in the session and US February pending home sales and March Michigan Consumer Sentiment survey data set for release. Rhetoric from Fed members this week has been hawkish leaning and Waller and Williams are unlikely to deviate from this line. This shouldn’t impact silver much, given there has been plenty of time by now for traders to price in Fed hawkishness.

The outlook for a fresh push higher in XAG/USD before the weekend probably isn’t the best. A test of Thursday’s weekly highs in the $25.80s is a possibility, but selling pressure ahead of the $26.00 level may well continue to cap the price action. To the downside, previous highs from recent session in the $25.50 area should continue to offer support, as has already been the case in recent hours.

US Treasury Secretary Janet Yellen on Friday said that it is not now appropriate to sanction China as a partner of Russia, reported Bloomberg. Yellen continued that she is not seeing the end of globalisation but that she is concerned that the situation in Ukraine will reduce the prospects for global growth over the near year.

Global growth will be hurt by the recent jump in oil and other commodity prices, Yellen noted, saying that she is concerned about the spillover to countries dependent on wheat imports. It is conceivable that oil prices could go even higher, she warned. On the US economy, Yellen said she is not seeing weakness, noting strong job gains. 

USD/MXN has returned back to its pre-war in Ukraine levels at around 20.30. Economists at CIBC Capital Markets expect the pair to edge higher toward the 20.90 mark.

Limited room for hawkish surprises

“A look at the ex-ante real policy rate shows that only 80- 160 bps in additional rate hikes (not counting the March decision) are needed to bring the real policy rate to the upper half of Banxico’s neutral real policy range, suggesting limited room for a further increase in rates in the 1Y range.” 

“We find it difficult to believe that the 50 bps pace of rate increases will be maintained for a prolonged period, a view backstopped by the current division among the board members and the negative surprises in economic activity numbers.” 

“Despite the attractiveness of the MXN carry on less convoluted local politics, we maintain our upward USD/MXN bias towards the 20.90 mark from current levels.”

The Swedish krona has proven to be the weakest performing major versus both the US dollar and the euro in the first quarter. But as rates are set to rise, economists at CIBC Capital Markets expect the EUR/SEK pair to trade back towards 2021 lows into the second half of the year.

SEK set for liftoff as Riksbank hike expectations rise

“Should CPI remain elevated and external risks moderate we would expect the market to increasingly price in a hawkish Riksbank bias, validating our positive SEK outlook.” 

“We anticipate EUR/SEK trading back towards 2021 lows into H2 2022.” 

• DXY’s weekly rebound met strong resistance at 99.00.
• The resumption of sellers could drag the index to 97.70.

The index reverses part of the weekly recovery and revisits the 98.40 zone at the end of the week.

The 99.00 region demonstrated to be quite a tough nut to crack for dollar bulls so far this week, allowing the re-emergence of some selling bias in DXY on Friday. Against that, a deeper retracement in the dollar could extend to the weekly low in the 97.70 region (March 17) in the near term.

The current bullish stance in the index remains supported by the 6-month line in the 96.00 area, while the longer-term outlook for the dollar is seen constructive while above the 200-day SMA at 94.70.

DXY daily chart

The dong has directionally moved in line with other Asian currencies amid the recent sell-off but has weakened by much less. Economists at ANZ Bank expect the VND to strengthen throughout the year and forecast USD/VND at 22,700 by end-2022.

Slower pace of reserve accumulation by the SBV to boost the dong

“We believe the recovery in Vietnam’s economy, aided by exports and resilient FDI inflows, will continue to buttress fundamentals. However, some risks are on the radar, especially from high oil prices and a potential slowdown in Europe that can weigh on exports.” 

“Our baseline forecasts project a decent BoP support, which, along with a slower pace of reserve accumulation by the SBV, means that the strengthening bias for VND will likely continue.” 

“We forecast USD/VND at 22,700 by year-end.”

The first quarter of 2022 has been marked with high volatility for the Thai baht. The currency lost about 2.7% of its value month-to-date in March. Looking ahead, economists at ANZ Bank expect THB to appreciate in the coming months and forecast USD/THB at 32.10 by end-2022.

Tourism sector expected to pick up pace

“Rising global commodity and oil prices will exert further strain on the current account balance, thereby weakening the baht. However, the tourism sector is expected to pick up pace as COVID-19 becomes endemic and countries relax travel rules.”

“We expect the currency to strengthen over the second half of 2022, backed by a recovery in tourism as tensions moderate, and end the year at 32.10.”

AUD/USD’s extension north of 0.75 is not surprising. Economists at OCBC believe that the aussie is set to test the October 2021 high of 0.7556.

Immediate support aligns at 0.7450

“The setup is favourably for a test of the Oct 2021 high at 0.7556. Nevertheless, the pace and extent of the up-move is stretched, and the next leg towards that target could be a grind, especially if recently established AUD-longs start to take profit at levels north of 0.75.”

“Immediate support enters at 0.7450.”

USD/JPY pushed through 122.00 on Thursday. Some retracement is seen today, though in the near-term, the focus will still be on USD/JPY upside as the pair pushes closer to mid-120s. 

Technical pull-backs on the cards

“Even as we are structurally positive on the USD/JPY towards the mid-120s, do not rule out technical pull-backs. The 121.00 locus may be the first support in that case.”

“For now, the BoJ and Fin Min have refrained from directly commenting on JPY weakness.”

• EUR/JPY fades the initial spike to fresh 2022 highs past 134.00.
• Next of relevance on the upside comes the 2018 tops near 137.50.

EUR/JPY returns to the negative ground after an auspicious start of the day lifted it to new 2022 peaks in the 134.70/75 band on Friday.

The upside momentum in the cross appears unabated for the time being, although the proximity of the overbought territory might spark a near-term correction. The continuation of the uptrend is expected to meet the next significant barrier at the 2018 high at 137.50 recorded on February 2 of that year.

In the meantime, while above the 200-day SMA (130.00), the outlook for the cross is expected to remain constructive.

EUR/JPY daily chart

EUR/USD closed virtually unchanged on Thursday and was last seen clinging to small daily gains above 1.10. Economists at OCBC Bank see risks tilted to the downside, with the 1.0950 and 1.0900 levels as next bearish targets.

Heavy within range

“Range-bound for now, but with a bias to search lower towards 1.0950 and 1.0900.”

“As the Russia-Ukraine concerns consistently fade from the market’s view, the focus will likely revert back to front-end yield differentials, which should point to further downside for the pair.”

• EUR/GBP gained some follow-through positive traction for the third successive day on Friday.
• The recent price action constitutes the formation of an inverted head and shoulders pattern.
• Neutral technical indicators on the daily chart warrant caution for aggressive bullish traders.

The EUR/GBP cross gained traction for the third successive day on Friday and built on this week's goodish rebound from sub-0.8300 levels. The cross maintained its bid tone through the first half of the European session and was last seen trading just a few pips below the multi-day peak, around mid-0.8300s.

A dovish assessment of the Bank of England decision last week, along with the disappointing release of the UK Retail Sales data on Friday, contributed to the British pound's relative underperformance. On the other hand, the shared currency drew support from modest US dollar weakness and extended support to the EUR/GBP cross.

Looking at the broader picture, the recent price action constitutes the formation of a bullish inverted head and shoulders pattern on the daily chart. The pattern, however, is not complete until the neckline resistance is broken. The said barrier is pegged just ahead of the very important 200-DMA, near the 0.8455-0.8460 region.

In the meantime, the 0.8400 round-figure mark could act as immediate strong resistance. Given that technical indicators on the daily chart are yet to confirm a bullish bias, the said handle is more likely to keep a lid on any meaningful upside for the EUR/GBP cross.

On the flip side, a cluster of support between the 0.8330-0.8300 area should protect the immediate downside. A convincing break below will negate the head and shoulders pattern and make the EUR/GBP cross vulnerable to resume its well-established bearish trend. The next relevant support is pegged near mid-0.8200s.

EUR/GBP daily chart

Technical levels to watch

The Federal Reserve is now very concerned with the acceleration in inflation and is saying it's full-steam ahead on tightening. In the view of economists at CIBC Capital markets, this is the denouement of the dollar dominance story as markets have moved to expect too much tightening from the Fed.

Peak hawkishness portends USD softening

“The big risk now for USD bulls is that we’re close to ‘peak hawkishness’ in terms of market pricing for the Fed. That skews the balance of risks to the USD to the downside for the latter part of the year.”

“As the Fed progresses on its path to hike rates and shrink its balance sheet via QT, investors should keep close tabs on the deceleration in inflation and growth, and the potential for a covid comeback, which would lend merit to our call for a more moderate dose of 150bps from the Fed this year, including the March hike.” 

“Currency markets will be especially sensitive to any shift in tone from Fed speakers should that be the case.”

The dollar is approaching the end of the week on a softer note. Nonetheless, economists at ING think that lingering Russia-related downside risk for sentiment and upside risk for commodity prices continue to warrant a stronger dollar and weaker European currencies.

Dollar softness looks unlikely to last

“The US and its allies have repeatedly warned that Russia may escalate the current conflict with a variety of different weapons, and Putin appears quite determined to use an unexpected range of tools to counter-sanctions. too. All this continues to signal significant upside risks for commodity prices and downside risks for risk sentiment.”

“Markets may find the current levels as relatively attractive to build back some defensive long-USD positions, mostly against European currencies.”

“We also think that a market that is inching closer to pricing in 100bp of rate hikes by the Federal Reserve at the next two meetings may favour the dollar.”

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest BSP event.

Key Takeaways

“As widely expected, Bangko Sentral ng Pilipinas (BSP) left its policy rates unchanged for the 11th straight meeting today (24 Mar). The overnight reverse repurchase (RRP) rate was maintained at 2.00%, overnight deposit rate at 1.50%, and overnight lending rate at 2.50%.”

“There are greater concerns about the potential broadening of price pressures disanchoring inflation expectations in today’s monetary policy statement, against signs of domestic economic activity gaining stronger traction. This is accompanied by a sharp upward revision in BSP’s inflation forecast for 2022 to 4.3% (from 3.7% projected in Feb; UOB est: 3.5%), surpassing its medium-term target range of 2%-4%, with a higher Dubai oil price assumption of USD102/bbl (previous est: USD83/bbl).”

“Although BSP continues to rely on non-monetary measures to tame inflation for now, it remains to be seen if these measures are enough to contain the potential second-round inflation effects amid petitions for a hike in minimum wage and public transport fare. This alongside a more hawkish Fed tilt and further improvement in domestic economic activities will likely prompt BSP to move up its timeline for rate hikes to 2Q22, in our view. The next Monetary Board meeting will be on 19 May.”

• GBP/USD turned lower for the third straight day following the early uptick to the 1.3225 region.
• Disappointing UK Retail Sales data weighed on sterling amid the emergence of some USD buying.
• The Fed’s hawkish outlook continued acting as a tailwind for the greenback and exerted pressure.

The GBP/USD pair extended its intraday descent through the first half of the European session and dropped back closer to the overnight low, around the 1.3160-1.3155 area in the last hour.

Following an early uptick to the 1.3225 area, the GBP/USD pair met with a fresh supply on Friday and drifted into the negative territory for the third successive day. The Bank of England's softer view on the need for further rate hikes acted as a headwind for the British pound, which was further pressured by the disappointing UK macro data.

In fact, the UK Office for National Statistics reported that monthly Retail Sales declined by 0.3% in February as against market expectations for a deceleration in growth to 0.6 from the 1.9% in January. Adding to this, sales excluding fuel fell 0.7% during the reported month and also missed consensus estimates pointing to a 0.5% increase.

On the other hand, the US dollar trimmed a part of its intraday losses and continued drawing some support from rising bets for a 50 bps Fed rate hike at the May meeting. This was seen as another factor that exerted some downward pressure on the GBP/USD pair, with bears now awaiting a convincing break below the ascending trend-channel support.

Sustained weakness below mid-1.3100s will mark a breakdown through the bearish flag pattern and pave the way for a slide towards challenging the post-BoE low, around the 1.3090 region. Some follow-through selling could drag the GBP/USD pair further towards challenging the YTD low, around the key 1.3000 psychological mark touched earlier this month.

Technical levels to watch

When asked about the refusal of some European countries to start paying for Russian gas in roubles, a Kremlin spokesperson said on Friday that President Vladimir Putin has ordered Gazprom to accept payment in roubles.

"Gazprom needs to work out how that can be done from a technical and logistical point of view," the spokesperson added. "Novatek was not instructed to accept payments in roubles."

Market reaction

The USD/RUB pair is pushing lower on Friday and was last seen losing 0.65% on a daily basis at 96.3630.

• Gold price is consolidating near weekly highs above $1,950 amid indecisive markets.
• The Ukraine updates, Fedspeak and yields’ price action will be closely followed.
• Gold price has room to rise towards $1,990 amid Ukraine woes, bullish technicals.

After two straight days of gains, gold price is consolidating the upside amid indecisive markets. The US dollar is recovering the early lost ground while the Treasury yields are stabilizing at higher levels. Investors are awaiting a clarity on the Russia-Ukraine crisis amid ongoing hostilities in Ukraine and a stronger Western response on Russia. Gold traders are also weighing in the recent hawkish Fedspeak against the US economic outlook and soaring inflation. Looking ahead, volatility in gold price could briefly return, as the focus now shifts towards next week’s US Nonfarm Payrolls (NFP) release.  

Read: This commodities boom is about to get even bigger – Are you ready? [Video]

Gold Price: Key levels to watch

The Technical Confluences Detector shows that gold price is looking to find acceptance above $1,960, the convergence of the Fibonacci 23.6% one-day, the previous year’s high and SMA5 four-hour.

Gold bulls will then target the previous day’s high of $1,966, with the $1,970 round level next in sight. The pivot point one-day R1 aligns at that point.

The previous month’s high of $1,975 will be the level to beat for bulls.

Alternatively, the immediate support awaits at the Fibonacci 61.8% one-week of $1,955, below which sellers will look out for the Fibonacci 61.8% one-day support at $1,949.

Failure to resist above the latter will kickstart a fresh downswing towards the pivot point one-day S1 at $1,942.

The confluence of the previous day’s low and SMA5 one-day at $1,937 will challenge the bullish commitments should the downside pick up steam.

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.

European Commission President Ursula von der Leyen said, via Reuters, "US LNG will replace that of Russia's,” after striking an LNG deal with the US on Friday.

"Europe will work towards ensuring stable demand for additional US LNG until at least 2030," von der Leyen said. 

Meanwhile, US President Joe Biden said that the US and EU are “coming together to reduce Europe’s dependency on Russian energy.”

Related content

• Germany’s Habeck: We hope that by summer we will have halved oil imports from Russia
• US President Biden: Announces US ban on Russian oil, gas and energy imports

• EUR/USD comes under pressure and retests 1.1000.
• The German IFO Business Climate dropped to 90.8 in March.
• US Consumer Sentiment, Fedspeak next of note across the pond.

The daily rebound in EUR/USD faltered just ahead of the 1.1040 level and sparked a subsequent corrective drop to the 1.1000 neighbourhood on Friday.

EUR/USD: Upside appears capped by 1.1040

Despite the retracement from daily peaks, EUR/USD kept the bid bias unchanged at the end of the week against the backdrop of the correction in the US dollar and the generalized better tone in the risk-linked galaxy.

Somewhat limiting the upside potential in the pair comes the drop in Germany’s Business Climate to 90.8 in March, as per the latest report by the IFO institute.

Later in the NA session, the final March U-Mich gauge is due along with Pending Home Sales and speeches by FOMC’s Williams, Barkin and Waller.

What to look for around EUR

EUR/USD retakes the 1.1000 mark and advances further north in tandem with the better mood among market participants. So far, pockets of strength in the single currency should appear reinforced by the speculation of the start of the hiking cycle by the ECB at some point by year end, while higher German yields, elevated inflation, the decent pace of the economic recovery and auspicious results from key fundamentals in the region are also supportive of a firmer euro for the time being.

Key events in the euro area this week: 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 up 0.14% at 1.1011 and faces the next up barrier at 1.1137 (weekly high March 17) followed by 1.1219 (55-day SMA) and finally 1.1266 (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).

• AUD/USD witnessed modest intraday pullback from the fresh YTD top touched earlier this Friday.
• The Fed’s hawkish outlook, elevated US bond yields underpinned the USD and acted as a headwind.
• Rising commodity prices continued lending support to the aussie and helped limit any further losses.

The AUD/USD pair extended its intraday retracement slide from the YTD top and dropped to sub-0.7500 levels or a fresh daily low during the first half of the European session.

The pair struggled to capitalize on its early gains and witnessed modest intraday pullback from the highest level since early November 2021, around the 0.7535 touched this Friday. The downtick could be attributed to the emergence of some dip-buying around the US dollar, which continued drawing support from the Fed's hawkish outlook.

In fact, influential FOMC members, including Fed Chair Jerome Powell, left the door open for a larger rise in borrowing costs to bring down unacceptably high inflation. Investors were quick to price in a 50 bps rate hike at the May meeting and pushed the yield on the benchmark 10-year US government bond back closer to the 22-month high.

Moreover, concerns that surging crude oil prices would continue to put upward pressure on consumer prices remained supportive of elevated US Treasury bond yields. This, in turn, acted as a tailwind for the buck and prompted some profit-taking around the AUD/USD pair, especially after the recent blowout rally of over 350 pips from the monthly low.

The downside, however, remains cushioned amid rising commodity prices, which continued lending some support to the resources-linked Australian dollar. Hence, it will be prudent to wait for strong follow-through selling before confirming that the AUD/USD pair has topped out in the near term and positioning for any meaningful corrective slide.

Nevertheless, the AUD/USD pair remains on track to post gains for the second successive week. Market participants now look forward to the US economic docket, featuring the release of revised Michigan Consumer Sentiment Index and Pending Home Sales data. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus.

Technical levels to watch

Following the release of the German IFO Business Survey, the institute’s Economist Klaus Wohlrabe said that “the economy faces uncertain times.”

Additional quotes

EUR/USD reaction

EUR/USD is testing bids at 1.1000 on the dismal German IFO Survey. The spot is currently trading at 1.1002, up 0.06% on the day.  

• German IFO Business Climate Index came in at 90.8 in March.
• IFO Current Economic Assessment fell to 97.1 this month.
• March German IFO Expectations Index arrived at 85.1.

The headline German IFO Business Climate Index slumped to 90.8 in March versus last month's 98.5 and the consensus estimates of 94.2.

Meanwhile, the Current Economic Assessment dropped to 97.1 points in the reported month as compared to last month's 98.6 and 96.5 anticipated.

The IFO Expectations Index – indicating firms’ projections for the next six months, worsened to 85.1 in March from the previous month’s 98.4 reading and much better than the market expectations of 92.0.

Market reaction

EUR/USD is paring back gains on the mixed German IFO survey.

At the time of writing, the pair is up 0.15% on the day, trading at 1.1011.

About German IFO

The headline IFO business climate index was rebased and recalibrated in April after the IFO research Institute changed series from the base year of 2000 to the base year of 2005 as of May 2011 and then changed series to include services as of April 2018. The survey now includes 9,000 monthly survey responses from firms in the manufacturing, service sector, trade and construction.

UOB Group’s FX Strategists noted USD/CNH faces extra consolidation in the near term, likely between 6.3450 and 6.4000.

Key Quotes

24-hour view: “Our expectations for USD to ‘advance to 6.4000’ did not materialize as it traded between 6.3798 and 6.3931 before closing little changed at 6.3840 (-0.09%). The underlying tone has softened and the bias is on the downside. However, any weakness is unlikely to break 6.3700. Resistance is at 6.3850 followed by 6.3900.”

Next 1-3 weeks: “Yesterday (24 Mar, spot at 6.3890), we highlighted that the bias for USD on the upside but the chance for a clear break of 6.4105 is not high. We added, “a breach of the ‘strong support’ level at 6.3730 would indicate that the build-up in momentum has fizzled out”. While our ‘strong support’ level is not breached, the build-up is momentum has fizzled out. In other words, USD is not ready to head higher and is likely to trade between 6.3450 and 6.4000 for now.”

• DXY reverses part of the recent advance and revisits 98.40.
• US yields lose some upside traction, although remain near recent highs.
• US final Consumer Sentiment, Fedspeak due next in the NA session.

The US Dollar Index (DXY), which tracks the greenback vs. a basket of its main competitors, faces some downside pressure and slips back to the 98.40 region at the end of the week.

US Dollar Index weaker on improved risk appetite

The index sheds ground following two daily gains in a row on Friday on the back of the better mood in the risk-associated universe and a mild corrective downside in US yields across the curve.

Indeed, US yields appear to have run out of upside traction so far, although they manage well to keep the trade in the area of recent highs and always underpinned by speculation of a faster and tighter Fed’s normalization in the next months.

In addition, the lack of news from the geopolitical scenario now seems to be lending some support to the risk complex, while investors continue to closely follow developments from President Biden’s meetings with European leaders, with further economic sanctions against Moscow on top of the agenda.

In the US calendar, the final prints of the Consumer Sentiment are due seconded by Pending Home Sales and speeches by NY Fed J.Williams (permanent voter, centrist), Chicago Fed C.Evans (2023 voter, centrist) and FOMC’s R.Waller (permanent voter, hawkish).

What to look for around USD

The weekly recovery in the dollar failed to advance further north of the 99.00 mark, motivating sellers to return to the market on Friday. Concerns surrounding the geopolitical landscape are expected to keep propping up the demand for the buck in combination with prospects of extra tightening by the Fed. 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: 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 retreating 0.17% at 98.61 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).

German Economy Minister and Vice-Chancellor Robert Habeck said on Friday, they hope that by summer oil imports from Russia will be halved.

Additional quotes

Market reaction

WTI oil is extending its pullback below $109.00, losing 1.75% on the day.

The start of the Ukraine conflict saw the SGD weaken further, pushing the S$NEER lower. But it has since rebounded. Economists at ANZ Bank expect the MAS to continue normalising monetary policy, leading to a stronger SGD. 

MAS will continue to normalise policy

“Our view that the MAS will continue to normalise policy and re-centre the policy band mean the S$NEER should continue to test the upper bound of the policy band. With MAS policy set on an appreciation path with further increases in the slope of the policy band likely, this will lead to a stronger Singdollar.” 

“We forecast SGD to appreciate towards 1.32 by the end of the year.”

• USD/CAD gained some positive traction on Friday and snapped seven days of the losing streak.
• Retreating oil prices undermined the loonie and assisted the pair to defend the 1.2500 mark.
• A positive risk tone weighed on the safe-haven USD and might keep a lid on any further gains.

The USD/CAD pair edged higher during the early part of the European session and climbed to a fresh daily high, around mid-1.2500s in the last hour.

Having defended the key 1.2500 psychological mark, the USD/CAD pair gained some bullish traction on Friday and recovered a major part of the overnight slide to the two-month low. This marked the first day of a positive move in the previous nine and was sponsored by modest downtick in crude oil prices, which tend to undermine the commodity-linked loonie.

The European Union remained split on imposing an oil embargo on Russia and eased growing market fears of a supply crunch. Adding to this, US energy secretary Jennifer Granholm said on Thursday that the United States and its allies were discussing a possible further coordinated release of oil from storage. This, in turn, weighed on the black liquid.

On the other hand, a generally positive tone around the equity markets undermined the safe-haven US dollar and held back bulls from placing aggressive bets around the USD/CAD pair. Even from a technical perspective, this week's convincing break and acceptance below the very important 200-day SMA warrants caution before confirming that the pair has bottomed out.

Market participants now look forward to the US economic docket, featuring the release of revised Michigan Consumer Sentiment Index and Pending Home Sales data. This, along with the broader risk sentiment and the US bond yields, will influence the USD. Traders will further take cues from oil price dynamics for some short-term opportunities around the USD/CAD pair.

Technical levels to watch

EUR/USD has benefited from some dollar softness to climb back above 1.10, although the pair is struggling to find enough bullish support to extend the run to 1.11. The balance of risks for EUR/USD remains skewed to the downside in the view of analysts at ING, who expect a drop to 1.08-1.09 in the coming weeks.

Not enough bullish steam

“The combination of lingering Russia-related risks, high energy prices and Fed-ECB policy divergence still points to a weaker, rather than stronger, EUR/USD.”

 “We continue to expect a drop to 1.08-1.09 in the coming weeks.”

In the view of economists at CIBC Capital Markets, financial markets look to be expecting too much tightening from the Bank of England (BoE) this year, which will weigh on sterling ahead as markets recalibrate.

Markets expecting too much from BoE

“The March BoE meeting resulted in a 25bps hike to 0.75%, marking three straight hikes. However, in view of BoE warnings over rising policy risks and adjustments to policy language, we view the move as a dovish hike, and we maintain a bias towards sterling weakness over the next few months.”

“We assume that once rates hit 1.0%, triggering the QT threshold, the bank will be reluctant to rush towards additional tightening. Hence if we see 1.0% in May, we would expect a protracted pause thereafter, likely extending into 2023.” 

“Our expectation for a less aggressive policy profile than what’s implied by the interest rate market underlines risks of GBP underperformance.”

FX option expiries for March 25 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0800 422m
• 1.0925 453m
• 1.1000 1.7b
• 1.1100 574m

- USD/JPY: USD amounts                     

• 117.80 440m
• 118.50 406m

- AUD/USD: AUD amounts

• 0.7375 411m

- USD/CAD: USD amounts       

• 1.2400 330m
• 1.2610 517m
• 1.2650 646m
• 1.2670 360m
• 1.2700 594m

EUR/GBP has climbed back to the middle of the 0.83-0.84 range after having failed to decisively break below the 0.83 support earlier this week. Meanwhile, cable seems, for now, stuck at 1.32 after having briefly traded around 1.33 again. Economists at ING expect EUR/GBP to break under 0.83 whereas GBP/USD is unlikely to slide below 1.30.

EUR/GBP set to break below the 0.83 level in the near-term

“The euro’s higher exposure to Russia-related and commodity-related risks warrants a break below the 0.83 level in the near-term.”

“Some support to the dollar may put some pressure on the cable in the coming days but there may not be enough bearish push to send it below 1.30.”

Norway’s central bank has hiked rates for the third time, taking the deposit rate up to 0.75%. But the bigger news is that Norges Bank has considerably upgraded the number of rate hikes it expects to implement by the end of 2023. Economists at ING think that the hawkish projections by Norges Bank all but reinforce the rate outlook for the krone.

EUR/NOK to trade below 9.50

“The 25bp hike and pledge to hike again in June was accompanied by a sizeable hawkish revision in rate projections, with a terminal rate now seen at 2.5% in 2023. The positive terms of trade shock along with rising domestic inflation leave little doubt that NB will follow through on its upgraded rate path.”

“NB’s hawkishness – paired with instability in the Russia-Ukraine situation which could continue to push energy prices higher – points to more EUR/NOK weakness in the coming weeks.

“We expect a decisive break below 9.50 very soon, with room for a move to the 9.30-9.40 region.”

Despite the eurozone being the area that is the most economically exposed to the war in Ukraine, the European Central Bank (ECB) has become increasingly hawkish of late. While the ECB will trail the Federal Reserve, the potential for greater fiscal support in the eurozone in the second half of 2022 could support gains in the euro, economists at CIBC Capital Markets report.

EUR/USD retesting YTS lows at 1.0806 should be a short-lived story

“Extended ECB inertia allied to ongoing Ukraine-related uncertainties points towards risks of EUR/USD potentially retesting year-to-date lows at 1.0806. But that should be a short-lived story.”

“A patient ECB, and the potential for Euro area fiscal support, should support both economic conditions and the euro in the latter half of the year. A more tempered pace for the first year of Fed hikes relative to current market expectations should work in the same direction.”

• USD/CHF drifted lower for the fourth successive day amid a broad-based USD weakness.
• The risk-on impulse undermined the safe-haven CHF and helped limit losses for the pair.
• The Fed’s hawkish outlook supports prospects for the emergence of some USD buying.

The USD/CHF pair now seems to have entered a bearish consolidation phase and was seen oscillating in a range just a few pips above the two-week low, around the 0.9270 area.

The pair prolonged its recent sharp retracement slide from the 0.9460 area or the highest level since April 2021 and continued losing ground on the last day of the week. This marked the fourth successive day of the negative move - also the seventh in the previous eight - and was sponsored by modest US dollar weakness.

That said, a generally positive tone around the equity markets undermined the safe-haven Swiss franc and extended some support to the USD/CHF pair. Apart from this, rising bets for a 50 bps Fed rate hike at the May policy meeting acted as a tailwind for the buck and helped limit further losses for the pair, at least for now.

It is worth mentioning that a slew of influential FOMC members, including Fed Chair Jerome Powell, left the door open for a larger rise in borrowing costs to contain unacceptably high inflation. The speculations were further fueled by surging oil prices, which could continue to put upward pressure on already elevated consumer prices.

This, in turn, assisted the yield on the benchmark 10-year US government bond to hold steady near the  22-month high touched earlier this week, which should act as a tailwind for the greenback. That said, the USD/CHF pair's inability to attract any buyers warrants some caution before positioning for any meaningful appreciating move.

Market participants now look forward to the US economic docket, featuring the release of revised Michigan Consumer Sentiment Index and Pending Home Sales data. The focus, however, will remain on geopolitical developments. Apart from this, the US bond yields will influence the USD and provide some impetus to the USD/CHF pair.

Technical levels to watch

Although EUR/USD seems to have steadied above 1.10, it could find it difficult to continue to push higher in case the data from Germany highlight the negative impact of the Russia-Ukraine conflict on business sentiment, FXStreet’s Eren Sengezer reports.

German Ifo survey could derail euro's recovery

“The Ifo Institute is expected to announce a deterioration in German business confidence. The Expectations Index is forecast to decline to 92 in March from 99.2 in February and the Current Assessment Index is expected to fall to 96.5 from 98.6. In case these data come in worse than analysts' estimate, the common currency could come under renewed selling pressure and vice versa.”

“1.1040 (Fibonacci 50% retracement of the latest downtrend) aligns as key resistance on the upside. In case this level turns into support, the pair could target 1.1080 (Fibonacci 61.8% retracement) and 1.11 (psychological level).”

“A four-hour close below 1.10 (psychological level, Fibonacci 38.2% retracement, 100-period SMA) could open the door for an extended slide toward 1.0960 (static level) and 1.0940 (Fibonacci 23.6% retracement).”

The Philippine peso came under pressure as the Russia-Ukraine conflict caused energy prices to spike and triggered negative risk sentiment worldwide. Economists at ANZ Bank expect the PHP to suffer further losses and forecast the USD/PHP pair at 52.90 by end-2022.

Expanding current account deficit poses a drag on the peso

“Over 2022, an expanding current account deficit on the back of rising imports will pose a drag on the peso.” 

“The Philippines will also hold its presidential elections in May, the period preceding which is typically marked by higher infrastructure-related imports and volatility in PHP.”

“Even though several factors will support the peso, the positive effects will likely be offset by the risks stemming from US monetary policy tightening, geopolitical risks, and high import prices.” 

“We forecast the PHP to weaken towards 52.90 at the end of 2022.”

The Japanese yen has depreciated markedly versus the US dollar since the Russian invasion into Ukraine. In the view of economists at CIBC Capital Markets, an unwinding of the aggressive Federal Reserve tightening priced in could cause the yen to retrace lost ground ahead despite the Bank of Japan (BoJ) being a policy laggard.

Yen to regain some of its recent lost ground from here to year-end

“We expect the BoJ to maintain an ultra-easy policy stance into 2023. Although Governor Kuroda anticipates CPI testing the 2% target threshold into April, he does not expect inflation to remain at such levels, even factoring in the surge in energy prices and base effects from lower mobile phone fees dropping out from April. It’s therefore unsurprising that the market is pricing only a 10% risk of a hike by the end of the year.” 

“The combination of widening front-end spreads versus the USD, as the market prices in additional Fed hikes and BoJ inertia, has been favouring near-term USD/JPY gains. But we don't see that momentum extending over our forecast horizon, as the market may soon come to question the pace for US tightening, prompting a correction in recent spread widening.” 

“We look for the yen to regain some its recent lost ground from here to year-end.”

The Indian rupee continues to underperform as oil prices remain elevated. Nonetheless, economists at ANZ Bank expect INR to stabilize and forecast the USD/INR pair at 76.00 by end-2022.

RBI to utilise its large FX reserves to keep the INR stable

“We do not expect much more weakness from current levels as it will aggravate inflationary pressures. We, therefore, expect the RBI to utilise its large FX reserves to keep the INR stable at around current levels.” 

“A stable rupee will also help anchor return expectations for foreign investors amid volatile markets.”

“We forecast USD/INR at 76.00 by year-end.”

USD/CAD losses have extended well below trend support at 1.2575 off of last summer’s low now. Economists at Scotiabank think the overall backdrop for the CAD is bullish and forecast the USD/CAD pair at 1.20 in the second half of the year.

Slide to extend to the 1.24 zone

“With equity markets more comfortable – for now – with the global risk backdrop, we expect fundamental drivers to support a stronger CAD in the coming weeks.”

“We think USD/CAD should decline to 1.2400/50 fairly quickly.”

“We look for USD/CAD resistance around 1.2575/1.2625 and anticipate limited scope for counter-trend corrections in the USD while the broader risk backdrop remains relatively friendly.”

“Our forecast for USD/CAD remains bearish; we expect USD/CAD to reach 1.21 in Q2 and look for USD/CAD to fall a little more (to 1.20) in Q3 and Q4.”

In opinion of FX Strategists at UOB Group, the upside momentum could push USD/JPY to the 123.00 region in the short-term horizon.

Key Quotes

24-hour view: “The manner by which USD leaped to 122.40 came as a surprise (we were expecting USD to trade sideways). While deeply overbought, the rally has scope to advance to 122.60 first before the current upward pressure should ease. The next resistance at 123.00 is unlikely to come into the picture. Support is at 121.70 followed by 121.40.”

Next 1-3 weeks: “Two days ago (23 Mar, spot at 121.05), we highlighted that risk for USD ‘is still clearly on the upside’. We indicated that ‘the next resistance level of note is at 121.50 followed by 122.00’. USD cracked both resistance levels yesterday (24 Mar) as it jumped to a high of 122.40. The USD rally that started about three weeks ago (see annotations in the chart below) appears to have room to extend further. The next level to focus on is at 123.00. On the downside, a breach of 121.00 (‘strong support’ level was at 120.00 yesterday) would indicate that the USD rally is ready to take a breather.”

• GBP/USD gained some positive traction on Friday amid a broad-based USD weakness.
• The uptick met with a fresh supply in reaction to disappointing UK Retail Sales figures.
• The Fed’s hawkish outlook should underpin the USD and cap the upside for the major.

The GBP/USD pair trimmed a part of its intraday gains and retreated to the 1.3200 round-figure mark in reaction to weaker UK macro data.

The pair gained some positive traction during the early part of the trading on Friday and was supported by modest US dollar weakness, though bulls struggled to capitalize on the move. The uptick, however, lacked bullish conviction and ran out of steam near the 1.3225 region. The Bank of England's softer view on the need for further rate hikes turned out to be a key factor that acted as a headwind for the British pound.

The intraday pullback gathered some momentum following the disappointing release of the UK Retail Sales figures, which fell 0.3% in February. This was below market expectations for modest growth of 0.6% and marked a sharp deceleration from the 1.9% rise reported in January. Adding to this, sales excluding fuel declined by 0.7% during the reported month as against the 1.7% growth recorded in January and the 0.5% rise anticipated.

That said, a generally positive risk tone continued undermining the safe-haven US dollar and extended some support to the GBP/USD pair, at least for the time being. The Fed's more hawkish outlook, however, should help limit deeper losses for the buck. This, in turn, suggests that the path of least resistance for spot prices is to the downside. Hence, any positive move is more likely to get sold into and fizzle out rather quickly.

Technical levels to watch

According to advanced prints from CME Group for natural gas futures markets, open interest increased for the third straight session on Thursday, now by around 3.5K contracts. Volume followed suit and rose by around 98.7K contracts.

Natural Gas: Green light to the $5.60 area

Prices of natural gas extended the rally well past the $5.00 mark per MMBtu on Thursday against the backdrop of increasing open interest and volume, paving the way for a potential test to the area of 2022 highs around the $5.60 region in the near term.

Further upside in AUD/USD appears likely and should face the next resistance at the 0.7555 level, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that ‘there is room to edge higher 0.7520 before the current upward pressure should ease’. We added, ‘the next major resistance at 0.7555 is unlikely to come under threat’. AUD subsequently rose to 0.7528 before pulling back slightly. While upward momentum has not improved by much, AUD could edge higher from here. That said, the major resistance at 0.7555 is unlikely to come under threat (0.7530 is already a strong resistance level). Support is at 0.7480 followed by 0.7460.”

Next 1-3 weeks: “Our update from yesterday (24 Mar, spot at 0.7490) still stands. As highlighted, further AUD strength is not ruled out but the chance for a rise to the next resistance at 0.7555 is not very high. On the downside, a breach of 0.7440 (‘strong support’ level was at 0.7420 yesterday) would indicate that the AUD strength that started about a week ago has run its course.”

CME Group’s flash data for crude oil futures markets noted traders added around 8.9K contracts to their open interest positions for the first time after eight consecutive daily drops on Thursday. Volume, instead, shrank by around 51.6K contracts after two consecutive daily builds.

WTI could revisit recent lows near $93.50

Thursday’s knee-jerk in prices of the barrel of West Texas Intermediate was accompanied by rising open interest, indicative that a potential decline remains well on the cards in the very near term. That said, crude oil prices could move back to recent lows in he $93.50 area.

Here is what you need to know on Friday, March 25:

The US Dollar Index retreats early Friday after closing the previous two days in positive territory as markets remain choppy while assessing the latest geopolitical developments. The Ifo institute will release the business sentiment data for Germany later in the session and the US economic docket will feature February Pending Home Sales and the University of Michigan's final Consumer Sentiment Index for March. Several FOMC policymakers, including New York Fed President John Williams and  Fed Governor Christopher Waller, will be delivering speeches ahead of the weekend as well.

US President Joe Biden said late Thursday that he thinks Russia should be removed from the G20. Biden further noted that they were coordinating with the G7 and the European Union on food and energy security. Risk flows continued to dominate the financial markets and the S&P 500 rose more than 1%. Heading into the European session, US stock index futures are up 0.2%.

Meanwhile, the benchmark 10-year US Treasury bond yield is edging lower after gaining more than 3% on Thursday. Chicago Fed President Charles Evans said that a 50 basis points rate hike could help them move rates close to neutral. Moreover, Minneapolis Fed President Neil Kashkari noted that he pencilled in seven rate hikes for 2022.

EUR/USD closed virtually unchanged on Thursday and was last seen clinging to small daily gains above 1.1000, supported by the modest selling pressure surrounding the greenback.

 GBP/USD started to edge higher during the Asian trading hours on Friday and seems to have steadied above 1.3200. The data published by the UK's Office for National Statistics showed on Friday that Retail Sales contracted by 0.3% on a monthly basis in February, compared to the market expectation for an increase of 0.6%.

Fueled by the rising US T-bond yields, USD/JPY extended its impressive rally and climbed to its strongest level since December 2015 at 122.42 late Thursday. The pair is trading in negative territory below 122.00 early Friday. Commenting on the heightened volatility, "I don't think weak yen reflects eroding market trust in the value of the yen," Bank of Japan Governor Haruhiko Kuroda said. "Market's view is that the weak yen is due to Japan importers' dollar demand, prospects of US interest rate hikes."

Gold ignored rising yields and rose to its highest level in 10 days above $1,960 on Thursday. XAU/USD is consolidating its recovery gains early Friday and stays afloat above $1,950.

Bitcoin continues to push higher toward $45,000 after closing the last three days in positive territory and gaining nearly 7% in that period. Mirroring the upbeat mood surrounding cryptocurrencies, Ethereum is trading at its highest level in more than a month near $3,100.

• The UK Retail Sales came in at -0.3% MoM in February, a negative surprise.
• Core Retail Sales for the UK dropped by 0.7% MoM in February.
• The cable pares gains towards 1.3200 on the disappointing UK data.

The UK retail sales came in at -0.3% over the month in February vs. 0.6% expected and 1.9% previous. The core retail sales, stripping the auto motor fuel sales, stood at -0.7% MoM vs. 0.5% expected and 1.7% previous.          

On an annualized basis, the UK retail sales rose by 7% in February versus 7.8% expected and 9.4% prior while the core retail sales increased by 4.6% in the reported month versus 5.6% expectations and 7.5% previous.

Main points (via ONS)

“Food store sales volumes fell by 0.2% in February 2022 with large falls in alcohol and tobacco stores, which may be linked to higher spending in pubs and restaurants as confidence increased in going out; food store sales volumes were 0.1% below pre-coronavirus February 2020 levels.”

“Non-food stores sales volumes rose by 0.6% in February 2022 with growth in clothing (13.2%) and department stores (1.3%), with wider socialising and the return to the office following the lifting of Plan B restrictions at the end of January potential factors; these increases were partly offset by falls in other non-food stores (negative 7.0%) and household goods stores (negative 2.5%) with some retailers suggesting the stormy weather during the month had impacted footfall.” 

“Automotive fuel sales volumes rose by 3.6% in February 2022 as the lifting of Plan B restrictions in England at the end of January 2022 increased travel; sales volumes were above pre-coronavirus February 2022 levels (0.9%) for the first time.”

FX implications

GBP/USD is trimming gains towards 1.3200 on poor UK Retail Sales data. The spot was last seen trading at 1.3204, up 0.16% on the day.

• NZD/USD pokes weekly high inside a bullish chart formation.
• Firmer RSI, sustained trading beyond the key HMAs keep buyers hopeful.
• Channel’s resistance, November 2021 peak will challenge further upside.

NZD/USD hovers around weekly top close to 0.6990, easing to 0.6980 heading into Friday’s European session.

Even so, the kiwi pair remains firmer inside a one-week-old ascending trend channel bullish formation.

That said, the pair’s successful trading above the 200 and 100 HMAs join firmer RSI, not overbought, to keep buyers hopeful of crossing the 0.6990 immediate hurdle.

Following that, the 0.7000 threshold and upper line of the stated channel near 0.7030 will lure the NZD/USD bulls.

Although the RSI is likely to turn overbought by reaching 0.7030, any further upside will be challenged by the mid-November 2021 peak surrounding 0.7080.

Alternatively, pullback remains elusive until the quote stay above the support line of the aforementioned channel, near 0.6950.

Also acting as the downside filter is the 100-HMA and 200-HMA level, respectively around 0.6935 and 0.6885.

Even if the NZD/USD bears conquer the 200-HMA support, the weekly low of 0.6864 will act as an extra filter to the south.

NZD/USD: Hourly chart

Trend: Further upside expected

On Thursday, gold price finally broke the weekly consolidative mode to the upside. The yellow metal eyes more gains as bulls are gathering pace before the next push higher, FXStreet's Dhwani Mehta reports.

XAU/USD has room to rise towards $1,990 

“The focus will continue to remain on risk trends, Ukraine updates and Fedspeak for fresh trading opportunities in gold price.”

“Buying resurgence could see the price resuming the uptrend towards the $1,970 round level, above which the February highs at $1,975 will lure buyers. Bulls will then gear up for a test of the pattern target measured at $1,988.”

“A firm break below the 100-SMA resistance now support will trigger a steep decline towards the 21-SMA at $1,939. The next support of the 50-DMA awaits at $1,933, a breach of which will allow bears to flex their muscles towards the bullish 200-SMA at $1,923. March 22 lows of $1,911 will be the level to beat for gold sellers.”

GBP/USD is now expected to navigate between 1.3100 and 1.3235 in the next weeks, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “Yesterday, we highlighted that ‘the rapid decline appears to be overdone and GBP is unlikely to weaken much further’ and we expected GBP to ‘trade between 1.3160 and 1.3260’. GBP subsequently dipped to 1.3157 during early London hours before rebounding to trade sideways for the rest of the sessions. Momentum indicators appear to be flattish and GBP is likely to trade sideways for today. Expected range for today, 1.3165/1.3235.”

Next 1-3 weeks: “GBP dipped below our ‘strong support’ level of 1.3160 yesterday (low of 1.3157). The breach of the ‘strong support’ indicates that the GBP strength that started late last week has come to an end. To look at it another way, GBP appears to have moved into a consolidation phase and is likely to trade between 1.3100 and 1.3300 for now.”

• USD/JPY corrected sharply from the fresh multi-year peak touched earlier this Friday.
• Modest USD weakness turned out to be a key factor that prompted some profit-taking.
• The Fed-BoJ monetary policy divergence, elevated US bond yields helped limit losses.

The USD/JPY pair quickly recovered a few pips from the daily low and was last seen trading just below the 122.00 round-figure mark, still down over 0.35% for the day.

The pair witnessed an intraday turnaround from the vicinity of mid-122.00s, or the highest level since December 2015 touched earlier this Friday and reversed a major part of the overnight strong gains. The sharp pullback could be solely attributed to some profit-taking amid extremely overbought conditions and modest US dollar weakness.

That said, a combination of factors helped limit deeper losses and assisted the USD/JPY pair to attract some buying near the 121.20-121.15 region. A generally positive tone around the equity markets, along with the divergence between the Bank of Japan and the Fed monetary policy outlooks, acted as a headwind for the safe-haven Japanese yen.

In fact, a slew of influential FOMC members, including Fed Chair Jerome Powell, left the door open for a larger rise in borrowing costs to bring down unacceptably high inflation. The markets were quick to react and started pricing in the possibility of a 50 bps rate hike at the upcoming policy meeting in May. This, in turn, pushed the yield on the benchmark 10-year US government bond back closer to the 22-month high touched earlier this week.

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 favours bulls and supports prospects for an extension of the USD/JPY pair's strong bullish trend.

Nevertheless, the pair, for now, seems to have snapped five successive days of the winning streak and remains at the mercy of the USD price dynamics. Market participants now look forward to the US economic docket, featuring the release of revised Michigan Consumer Sentiment Index and Pending Home Sales data later during the North American session.

Apart from this, the US bond yields will influence the USD and provide some impetus to the USD/JPY pair. Traders will further take cues from fresh developments surrounding the Russia-Ukraine saga, which will continue to play a key role in driving the broader market risk sentiment and demand for traditional safe-haven assets, including the JPY.

Technical levels to watch

• Platinum prices remain positive for the second consecutive day inside rising wedge bearish formation.
• Convergence of 100-SMA, 200-SMA appears tough nut to crack for bulls.
• Downside break of $1,020 will challenge the yearly low.

Platinum (XPT/USD) extends the previous day’s rebound from a weekly low, up 0.54% intraday around $1,030 heading into Friday’s European session.

Despite rising for the second day in a line, the precious metal portrays a one-week-old rising wedge bearish chart pattern, which in turn tests the upside momentum around $1,051.

Even if the commodity prices rally beyond $1,051, a convergence of the 100 and 200 SMAs will join the 38.2% Fibonacci retracement (Fibo.) of early March downturn to highlight the $1,061 as a crucial resistance.

It’s worth noting that the MACD conditions signal that the buyers don’t have control, which in turn suggests the pullback moves.

However, the quote’s run-up beyond $1,061 won’t hesitate to challenge the March 10 swing high near $1,105.

Meanwhile, pullback moves remain less important until staying above the stated wedge’s lower line, at $1,020 by the press time.

Following that, a south-run towards the $1,000 psychological magnet and then to the yearly bottom surrounding $922 can’t be ruled out.

Platinum: Four-hour chart

Trend: Pullback expected

Open interest in gold futures markets went up for the second session in a row on Thursday, this time by just 932 contracts considering preliminary readings from CME Group. In the same line, volume extended the uptrend for yet another session, this time by around 43.3K contracts.

Gold now retargets $2000

Thursday’s move higher in gold prices was amidst rising open interest and volume, allowing for the continuation of the uptrend in the very near term. Against that, the precious metal now looks to retake the key barrier at the $2000 mark per ounce troy.

FX Strategists at UOB Group see no changes to the consolidative phase in EUR/USD for the time being.

Key Quotes

24-hour view: “We highlighted yesterday that ‘the bias for today is on the downside’ but ‘a sustained drop below the major support at 1.0950 is unlikely’. EUR subsequently dipped to 1.0964 before rebounding to close little changed at 1.0996 (-0.07%). The underlying tone has firmed somewhat and EUR could edge higher today. However, any advance is expected to face solid resistance at 1.1045. Support is at 1.0985 followed by 1.0965.”

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.”

As per the European media Spiegel, Germany is up for reducing its energy dependency on Russia by autumn.

“According to SPIEGEL information, oil imports from Russia should be halved in the summer and hard coal should be replaced by autumn,” said the piece published on early Friday in Europe.

The news also adds, “Dependence on natural gas will drop to just 30 percent by the end of the year – thanks to three special ships.”

Market reaction

Germany’s energy dependency on Russia has been the key factor that restricts Europe from announcing strong sanctions on Moscow. With this news, market sentiment should worse and may probe the EUR/USD bulls. That said, the major currency pair retreats to 1.1025, up 0.27% intraday at the latest.

Read: EUR/USD bulls approach 1.1050 amid softer USD, Eurogroup meetings, yields eyed

• EUR/GBP is advancing towards 0.8360 on the expectation of weak UK Retail Sales.
• Delay on the immediate embargo of Russian oil has supported Euro.
• Germany has advocated a gradual shift to other oil importers.

The EUR/GBP pair is scaling towards 0.8360 as investors are awaiting monthly and yearly Retail Sales from UK’s Office for National Statistics. The cross is holding its two-day winning streak on Friday and is likely to extend its gains after surpassing Thursday’s high at 0.8350 decisively.

A preliminary estimate for the monthly and yearly UK’s Retail Sales is 0.6% and 7.8% respectively. However, the previous prints were 1.9% for monthly Retail Sales and 9.1% for the yearly period. Therefore, an underperformance is expected from the UK’s Retail Sales macro indicator, which is underpinning the shared currency against the sterling.

The shared currency has witnessed a broad-based buying on Friday as European Union (EU) leaders summit failed to settle on the decision of banning Russian oil with immediate effect. Views from the EU players were contrasting as some members were favoring an overnight ban on Russian oil while others were favoring stability in their respective economies. Nations that are more dependent on Russian oil in comparison with the EU’s average Russian oil imports have advocated a gradual shift to other oil importers citing devastating effects on their economy in case the embargo on Russian oil gets approval. Germany, which caters 55% of its gas demand from Russia, will face rapid unemployment on the immediate prohibition of Russia’s black gold.

Going forward, investors will focus on Euro’s Consumer Confidence, which is due next week. The previous print of Euro’s Consumer Confidence remained at -18.7.

• GBP/JPY bulls take a breather around the highest levels since May 2016, rebound from intraday low of late.
• Upbeat JGB, hawkish BOJ comments and Ukraine-led risk aversion renew JPY strength.
• UK Retail Sales, risk catalysts are in focus for fresh impetus.

GBP/JPY pares intraday losses around the multi-day high as traders in London await Friday’s bell. That said, the yen cross reversed from the six-year high earlier in the day, down 0.37% around 160.75 by the press time, before bouncing off the daily low afterward.

Even so, fears of Japanese policymakers’ market intervention and cautious mood ahead of the UK Retail Sales for February, expected to ease to 7.8% YoY, from 9.1%, seem to keep intraday sellers of GBP/JPY hopeful.

Yields on the Japanese Government Bonds (JGBs) rallied to the levels where the Bank of Japan (BOJ) activated bond buying the previous time in 2015. Also fueling the JGB yields were upbeat inflation data from Japan, per Tokyo Consumer Price Index for March. “The yield on the 10-year Japanese government bond (JGB) rose to 0.235% on Friday, exceeding the level at which the Bank of Japan offered to buy an unlimited amount of JGBs at 0.25% on Feb. 10,” said Reuters.

Additionally, BOJ Governor Haruhiko Kuroda also favored expectations of a further increase in the inflation levels, which in turn helped the JPY to extend gains. It should be observed that sluggish markets and indecision over the Ukraine-Russia stand-off also contribute towards the yen’s strength.

The Western push to take collective measures to stop the Russian invasion of Ukraine weighs on the market sentiment and underpins the JPY’s safe-haven demand. However, the divide among the Eurozone members restricts the likely risk-off mood. On the same line are hopes that the latest compulsion on Russia may result in positive progress in the peace talks.

Against this backdrop, stock futures and yields remain indecisive ahead of the UK data and Eurogroup meetings, which in turn highlights risk catalysts as an extra directive.

Technical analysis

Unless crossing the mid-2016 peak surrounding 163.90, GBP/JPY remains vulnerable to revisit the late 2021 high near 158.20. During the fall, the 160.00 round figure may act as an intermediate halt.

• EUR/USD reclaims ground lost above the 1.1000 mark.
• The dollar’s upside takes a breather on Friday.
• Germany IFO Business Climate next of note in the docket.

The single currency regains upside traction and lifts EUR/USD to the area of 2-day peaks near 1.1040 at the end of the week.

EUR/USD looks bid on risk-on trade

EUR/USD regains the smile after two consecutive daily pullbacks and looks to consolidate the recovery of the 1.1000 mark and above on Friday, always against the backdrop of an improved sentiment in global markets.

By the same token, the greenback flirts with multi-day lows in the 98.50 region when tracked by the US Dollar Index (DXY) in a context of mixed performance of US yields across the curve.

The decent advance in spot comes along another positive performance of German 1oy bund yields, this time surpassing the 0.50% for the first time since October 2018.

In the domestic calendar, Germany’s Business Climate gauged by the IFO survey will be the salient event in the euro area, whereas the final Consumer Sentiment print for the month of March will grab all the attention across the Atlantic along with another round of Fed-speakers (Williams, Barkin, Waller).

What to look for around EUR

EUR/USD retakes the 1.1000 mark and advances further north in tandem with the better mood among market participants. So far, pockets of strength in the single currency should appear reinforced by the speculation of the start of the hiking cycle by the ECB at some point by year end, while higher German yields, elevated inflation, the decent pace of the economic recovery and auspicious results from key fundamentals in the region are also supportive of a firmer euro for the time being.

Key events in the euro area this week: 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 up 0.31% at 1.1030 and faces the next up barrier at 1.1137 (weekly high March 17) followed by 1.1219 (55-day SMA) and finally 1.1266 (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).

• Silver retreats from intraday high during three-day uptrend.
• Bearish MACD signals, failure to cross 23.6% Fibonacci retracement tease sellers.
• The previous support line from February adds to the upside filters, 50-DMA appears strong support.

Silver (XAG/USD) remains pressured around $25.50 heading into Friday’s European session. Even so, the bright metal remains positive on a day for the third consecutive time at the latest.

The quote rose to the fresh high nearly two weeks the previous day. However, failures to cross the 23.6% Fibonacci retracement (Fibo.) of February-March upside, near $25.80, joined bearish MACD signals to challenge XAG/USD upside afterward.

That said, the quote’s latest weakness eyes to retest the 10-DMA level of $25.16 before directing bears toward the 50% Fibo. level and the 50-DMA, respectively around $24.50 and $24.20.

On the contrary, fresh recovery may aim for a clear break of the 23.6% Fibo. level surrounding $25.80 before targeting the $26.00 threshold.

Even so, the support-turned-resistance line from early February, near $26.25 at the latest, becomes a tough nut to crack for the XAG/USD bulls.

In a case where the commodity prices rally beyond $26.25, the odds of witnessing an upside to the monthly high near $26.95 can’t be ruled out.

Silver: Daily chart

Trend: Pullback expected

• USD/RUB has found bids near 95.88, which has triggered double bottom formation.
• Asset auctioning below 61.8% Fibo retracement adds to the downside filters.
• Oscillation of the RSI (14) in a 40.00-60.00 range signals consolidation ahead.

The USD/RUB pair has witnessed some significant bids near 95.88 on Thursday after falling around 38.10% from its monthly high at 155.00. The pair has been bounced sharply after the successful test of March 16 lows at 96.00.

On the daily scale, USD/RUB has formed a double bottom pattern at March 16 and March 21 lows of 96.00. Usually, a double bottom formation signifies less pessimism on the retest of the previous lows. The asset is auctioning below 61.8% Fibonacci retracement (placed from March 7 high at 155.00 to March 21 low at 96.00) at 105.23. The asset has sensed support from the 50-period Exponential Moving Average (EMA), which is trading near 95.88.

A bear cross is likely amid 10 and 20-period EMAs, which will add to the downside filters.

The Relative Strength Index (RSI) (14) is oscillating in a range of 40.00-60.00, which advocates consolidation going forward.

For the upside, bulls need to overstep Wednesday’s high at 107.00, which will drive the asset towards a round level barricade at 110.00, followed by 50% Fibo retracement at 115.00.

On the flip side, bears may find grip if the pair violates March 21 low at 96.00 on the downside, which will drag the major near monthly lows at 89.40. Breach of the latter will send the asset towards round level support at 85.00.

USD/RUB daily chart

• AUD/JPY remains on the back foot while snapping eight-day uptrend near the highest levels since August 2015.
• Fears of BOJ intervention, steady US T-bond yields trigger yen’s rebound.
• Ukraine-Russia woes, covid resurgence also challenge the buyers.

AUD/JPY prints the first daily loss in nine as market sentiment sours during Friday’s Asian session. That said, the quote drops 0.58% intraday around 91.40 ahead of the European session.

The risk barometer pair’s latest weakness could be linked to the broad recovery in the Japanese yen, as well as the market’s fears due to the Ukraine crisis.

Upbeat prints of Japan’s inflation data fuelled yields on the Japanese Government Bonds (JGBs) and triggered the market’s fears that the Bank of Japan (BOJ) will intervene soon, which in turn weighed on the Japanese equities and the national currency yen. “The yield on the 10-year Japanese government bond (JGB) rose to 0.235% on Friday, exceeding the level at which the Bank of Japan offered to buy an unlimited amount of JGBs at 0.25% on Feb. 10,” said Reuters.

Elsewhere, market conditions remain choppy as traders await more clues on the Ukraine-Russia stand-off. The Western push to take collective measures to stop the Russian invasion of Ukraine weighs on the market sentiment and underpins the JPY’s safe-haven demand. However, the divide among the Eurozone members restricts the likely risk-off mood. On the same line are hopes that the latest compulsion on Russia may result in positive progress in the peace talks.

Also challenging the AUD/JPY buyers are the coronavirus fears and Japan’s upbeat Tokyo inflation data.

It should be noted, however, that firmer prices of iron ore, Australia’s key export keeps AUD/JPY buyers hopeful.

Technical analysis

AUD/JPY pullback remains elusive unless breaking the 90.00 psychological magnet. That said, overbought RSI conditions hint at a pullback towards 2017 peak surrounding 90.35.

• GBP/USD takes the bids to refresh intraday high, prints the biggest daily gains in three.
• Sluggish Asian session triggered market’s consolidation amid steady yields.
• UK, US PMIs came in mixed to challenge central bankers but Ukraine-led risk-aversion favored bears previously.
• UK Retail Sales for February, Fedspeak and Eurogroup meetings will be important to watch for intraday directions.

GBP/USD bulls retake controls after a two-day absence, up 0.26% intraday around 1.3220 during early Friday morning in Europe.

The cable pair’s latest gains could be linked to the market’s paring of the recent losses amid USD pullback, as well as pre-data anxiety. However, cautious sentiment prevails over the Ukraine-Russia fears, also due to the recently mixed UK data, to challenge the pair buyers.

The US Dollar Index (DXY) drops 0.38% intraday to 98.41 at the latest as the market’s struggles to extend the weekly gains amid inactive yields. That said, the US 10-year Treasury yields remain sidelined around 2.36% by the press time while the S&P 500 Futures fail to track Wall Street’s gains, nor does it portray the risk-off mood, by taking rounds to 4,510-15.

It’s worth noting that the GBP/USD bears cheered mixed UK data and the broad US dollar strength the previous day.

The UK’s Markit Manufacturing PMI  declined to 55.5 for March versus 58.0 prior readings and the market expectation of 56.7. Further, the Services PMI rose beyond 60.5 previous outcomes and 58.0 market forecasts to 61.0 during the stated month. Earlier of Friday, Reuters said, “The GfK Consumer Confidence Index fell for the fourth month in a row to -31 from -26 in February, its lowest since November 2020, deep in the coronavirus pandemic.”

On the other hand, Markit Manufacturing PMI for the US rose to 58.5 in March compared to 57.3 prior and 56.3 market forecasts. On the same line, Services PMI also rose to 58.9 versus a softer forecast of 56.0 versus 56.5 prior. With this, the Composite PMI increased to 58.5 from 55.9 previous. However, US Durable Goods Orders printed -2.2% MoM growth figures for February versus forecast of -0.5% and January's 1.6% gain.

The Western push to take collective measures to stop the Russian invasion of Ukraine weighs on the market sentiment and underpins the US dollar’s safe-haven demand. However, the divide among the Eurozone members restricts the likely risk-off mood. On the same line could be hopes that the latest compulsion on Russia may result into positive progress in the peace talks.

In addition to the risk catalysts, the UK Retail Sales for February, expected to ease to 7.8% YoY, from 9.1%, will also be important as downbeat figures may join the likely resurgences of risk-off mood to weigh on the GBP/USD prices.

Technical analysis

Successful trading beyond the 10-DMA level of 1.3156 directs GBP/USD buyers towards the weekly top surrounding 1.3300.

• USD/TRY continues to auction in a range of 14.77-14.87 the whole week.
• Contraction of Bollinger Bands (20,2,-2) signals more consolidation ahead.
• The major is trading above 200 EMA, which adds to the upside filters.

The USD/TRY continues to oscillate in a 10 pips range amid the absence of any potential trigger that could dictate prices in either direction.

On an hourly scale, USD/TRY is auctioning in a range of 14.77-14.87 the whole week. Bollinger Bands have been contracted, which signifies a consolidation ahead. Usually, a squeeze in volatility is followed by a breakout in the same.

The major has been stabilized above 200-period Exponential Moving Average (EMA), which is trading near 14.75. Auctioning of an asset above the 200 EMA adds to the upside filters.

Meanwhile, the Relative Strength Index (RSI) (14) is juggling in a range of 40.00-60.00, which advocates consolidation going forward until the oscillator breaches the consolidation range decisively.

Should the asset violates March 14 high at 14.90, bulls may attract bids and will send the pair towards March 11 high at 15.06. Breach of the latter will send the asset to its ultimate target of 16 December 2021 average traded price at 15.27.

On the flip side, a slippage below the 200 EMA at 14.75 will activate bears and the asset may drop to March 17 low at 14.58. If the asset fails to find ground near 14.58, it will get exposed to March 15 low at 14.39.

USD/TRY hourly chart

• USD/CAD treads water around the lowest levels in two months.
• Oil prices recover amid Russia-Ukraine woes but market’s indecision limit the pair’s moves.
• Risk catalysts, speeches from BOC/Fed policymakers remain in focus for fresh impetus.

USD/CAD treads water around 1.2530 during Friday’s Asian session. In doing so, the Loonie pair pays a little heed to firmer prices of Canada’s key export, as well as the US dollar pullback, amid the market’s inaction.

The quote refreshed a two-month low the previous day as markets feared further hardships for Russia due to the invasion of Ukraine. The reason could be linked to the Western sanctions and recently chattered inaccuracy in Moscow’s military measures.

The latest upside in oil prices, however, has roots in the expectations that Europe’s reliance on Russian oil, which restricts the US to take stronger action against Russia, might not be able to solver the supply crunch fears. Among the latest challenges to the global supply chain are the recent covid resurgence and North Korea’s missile tests.

Against this backdrop, the S&P 500 Futures and the US Treasury yields remain indecisive with eyes on the Eurogroup meetings, as well as oil prices. It’s worth noting that WTI crude oil prices rise 0.76% intraday to $111.75 by the press time.

Also likely to direct intraday USD/CAD moves are the comments from Bank of Canada’s (BOC) Deputy Governor Toni Gravelle and a slew of Fed policymakers.

Technical analysis

A clear downside break of the 61.8% Fibonacci retracement (Fibo.) of October-December 2021 upside and bearish MACD signals joins sustained trading below the 200-DMA and multi-day-old rising trend line to keep USD/CAD bears hopeful to aim for January 2022 low surrounding 1.2450.

• Asian shares drift lower amid inflation, Ukraine woes.
• Aussie stocks up for second weekly gain on firmer iron ore prices, RBA’s inaction.
• Japan’s Nikkei 225 print mild losses as fears of BOJ intervention mount.
• China, Hong Kong remain in the red as global leaders criticize Beijing’s friendship with Moscow.

Asia-Pacific equities remain on the back foot, except for Australia, as pessimism surrounding a broad jump in inflation and the Ukraine-Russia crisis mount during early Friday. Also challenging the market sentiment are fears of North Korea’s missile launch.

Not only the hawkish Fedspeak but policymakers from the European Central Bank (ECB) and the Bank of Japan (BOJ) also conveyed inflation woes of late, which in turn propel fears of faster monetary policy normalization.

Though, a rally in the metal prices, mainly in Australia’s key earner iron ore, helps Australia’s ASX 200 to remain on the way to the second weekly gains, up 0.35% by the press time. “The metals and mining sub-index, which gained 0.9% to hit its highest in more than two weeks, was set for a 6% surge this week on strong iron ore prices as well as surging nickel that hit its upper trading limit on Wednesday,” said Reuters.

That said, the MSCI’s index of Asia-Pacific shares outside Japan drops around 0.80% while Japan’s Nikkei 225 prints 0.30% intraday loss.

Upbeat prints of Japan’s inflation data fuelled yields on the Japanese Government Bonds (JGBs) and triggered the market’s fears that the Bank of Japan (BOJ) will intervene soon, which in turn weighed on the Japanese equities.

Elsewhere, China couldn’t digest global criticism of its Russian ties, especially from the West, whereas economic fears due to the covid resurgence add to the woes of stocks in Beijing and Hong Kong. The stocks in Indonesia, India and South Korea were also down amid broad pessimism and firmer oil prices.

It’s worth observing, however, that the US Dollar Index (DXY) retreats and the Treasury yields also remain sluggish while the S&P 500 Futures print mild gains at the latest. The reason could be linked to Thursday’s positive closing of Wall Street, as well as mixed US data.

Moving on, headlines over Ukraine will be the key as the European leaders will have another day jostling over the Russia-Ukraine crisis. Further, the German IFO sentiment data for March and the US Pending Home Sales for February will decorate the calendar. Also important are the scheduled speeches from the Fed policymakers.

Read: S&P 500 Futures, yields retreat as Ukraine woes jostle inflation fears

• USD/INR may find bids near 76.00 amid a rebound in oil prices.
• Rising hopes of progress in the Russia-Ukraine peace talks have undermined the DXY.
• The risk-on impulsive has underpinned the risk-perceived currencies.

The USD/INR pair is likely to attract significant bids near 76.00 as oil prices have rebounded from $110.00 after failing to surpass $115.00. India, being a major oil importer holds an inverse relationship with oil prices.

The oil prices are trading positive in the Asian session as investors shrugged off the delay of the European Union (EU) embargo on Russian oil. The EU leaders summit on Thursday ended without any decision on banning the Russian oil imports and EU members dropped mixed responses on the agenda. Economies like Germany and Belgium, which have a higher dependency on Russian fossil fuels rather than the average import figures of the EU have cited concerns. The former believes that an immediate ban on Russian oil may send the European economy into recession. Apart from the event, oil prices are in a strong bull run amid a wide deviation in the demand-supply mechanism.

Meanwhile, the US dollar index (DXY) is auctioning near the day low at 98.52 amid an improvement in the demand for risk-sensitive currencies. Rising hopes for progress in peace talks between Russia and Ukraine have brought some offers in the greenback. Adding to that, the impact of a 50 basis point (bps) interest rate hike expectation by the Federal Reserve (Fed) in May monetary policy has been trimmed.

Although headlines from the Russia-Ukraine peace talks will remain a major driver, investors will also focus on the US Pending Home Sales data and Michigan Consumer Sentiment Index, which are due on Friday.

• Rising channel breakout has exposed higher levels for the asset.
• A bullish cross of 20 and 200-period EMA at 0.7300 signals more upside.
• Bulls are firmer above 50% Fibo retracement at 0.7492.

The AUD/USD pair is continuing its three-day winning streak and is hovering around Thursday’s closing price at 0.7513. The major has extended its gains this week after surpassing March 7 high at 0.7441.

On the daily scale, AUD/USD has advanced above 50% Fibonacci retracement (placed from 25 February 2021 high at 0.8008 to January 28 low at 0.6966) at 0.7492. The major has given a breakout of a rising channel, which signals an expansion in ticks and volumes going forward. The lower end of the rising channel is placed from January 28 low at 0.6966 while the upper end is marked from January 13 high at 0.7315.

A bullish cross of 20 and 200-period Exponential Moving Averages (EMAs) at 0.7300 signals more upside.

The Relative Strength Index (RSI) (14) has registered a fresh high at 69.70, which signals a bullish rally ahead. The oscillator is not showing any sign of divergence and an oversold situation.

For more upside, bulls need to violate Thursday’s high at 0.7528, which will send the asset towards 28 October 2021 high at 0.7557. Breach of the latter will drive the asset to 61.8% Fibo retracement at 0.7613.

On the flip side, bulls may lose control if the major slip below Wednesday’s low at 0.7450. This will drag the asset towards 38.2% Fibo retracement and 200 EMA at 0.7369 and 0.7300 respectively.

AUD/USD daily chart

Beefing up its wishlist of military assistance from the US government, Ukraine has now asked for hundreds more anti-aircraft and anti-tank missiles than previously requested, CNN reports on Friday, citing an unnamed source with knowledge of both requests.

Additional takeaways

“The Ukrainians have submitted similar lists in recent weeks but a recent request provided to US lawmakers appears to reflect a growing need for American-made Stinger anti-aircraft missiles and Javelin anti-tank missiles -- with Ukraine saying it urgently needs 500 of each, daily.”

“In both cases, Ukraine is asking for hundreds more missiles than were included in a similar list recently provided to US lawmakers.”

Market reaction

Amidst prolonging Russia-Ukraine conflict and stronger NATO response to Russia, the market mood remains damp, reflective of negative Asian stocks. The S&P 500 futures are trading little changed on the day, around 4,520.

• Gold prices rise for the third consecutive day as buyers approach two-week high.
• Hidden bullish RSI divergence, break of short-term SMAs favor bulls.
• USD pullback adds strength to the upside momentum, yields, Fedspeak and Ukraine headlines are the key catalysts.
• Investors are aware of the Fed's bark, but are not pricing in their bite just yet

Gold (XAU/USD) remains on the front foot for the third consecutive day, taking the bids near $1,963 by the press time of Friday’s Asian session. The yellow metal rose to the fresh high in nearly two weeks the previous day amid escalating fears concerning the Ukraine-Russia war. The metal’s latest strength, however, could be linked to a pullback in the US dollar.

That said, The US Dollar Index (DXY) drops 0.30% intraday to 98.50 while snapping a two-day uptrend by the press time. The greenback’s latest weakness could be linked to the sluggish yields in Asia and the market’s inflation fears, as well as indecision concerning Ukraine’s struggle with Russia.

It’s worth noting that most of the global policymakers, not just from the Fed, have recently highlighted the inflation fears, which in turn underpins the gold’s safe-haven demand. The latest among the central bankers were from Japan. Also to note are the hints of a 0.50% rate hike by the US Federal Reserve (Fed) and chatters over the Quantitative Tightening (QT).

Elsewhere, a Senior US Official was quoted by Reuters saying, “Russia will emerge from Ukraine conflict weaker militarily and politically.” On the same line was a news piece from Reuters suggesting a lack of accuracy in Russia’s precision missiles and a likely dearth of the same in recent days. Australia and Japan also joined the West in sanctioning Russia and intensified fears over the Moscow-Kyiv woes.

On Thursday, US President Joe Biden pushed the European leader, the Group of Seven (G7) and North Atlantic Treaty Organization (NATO) members to announce more sanctions on Russia for its invasion of Ukraine. While his NATO friends could arrange battles guards for four of the Ukrainian cities and criticized Beijing’s ties with Moscow, the rest mostly refrained from major punitive actions against Russia.

Despite the escalating fears of inflation and the geopolitical woes from the Russia-Ukraine crisis, the latest measures do suggest a ray of hope for a positive turn in the peace talks between Moscow and Kyiv, which in turn requires gold traders to remain cautious.

Other than the geopolitical headlines and Fedspeak, covid updates and the US Pending Home Sales for February will also entertain gold traders.

Technical analysis

Gold prices stay comfortably beyond the 10-DMA and 21-DMA while justifying the hidden bullish RSI divergence on the daily chart. The oscillator pattern is formed when prices make higher low but RSI prints lower low, which in turn keeps XAU/USD buyers hopeful.

That said, the current upside eyed the 23.6% Fibonacci retracement (Fibo.) of December 2021 to March 2022 upside, around $1,995. However, the previous support line from early February, close to $2,000 by the press time, will challenge gold buyers afterward.

On the flip side, pullback moves may initially aim for a convergence of the 21-DMA and 38.2% Fibo. level surrounding $1,950.

Following that, the 10-DMA and 50% Fibonacci retracement level, close to $1,938 and $1,912 will challenge the gold sellers.

It’s worth noting that the XAU/USD bearish move remains elusive beyond the 50-DMA level of $1,888.

Gold: Daily chart

Trend: Further upside expected

“Japan's consumer inflation may accelerate to around 2% from April but it will be driven mainly by rising energy costs,” Bank of Japan (BOJ) Governor Haruhiko Kuroda said on Friday.

Additional quotes

The recent fall in the yen's real, effective level reflects Japan’s low inflation compared with that of its trade partners.

BOJ’s goal is to generate a positive cycle under which corporate profits, jobs and wages rise in tandem with a gradual increase in inflation.

Market reaction

USD/JPY is trading near-daily lows of 121.74, having witnessed a quick retracement from six-year highs of 122.43 in the last hours.

The spot is down 0.40% on the day, as the yen rebounded on higher Japanese inflation.

• EUR/USD takes the bids to refresh intraday high, prints the biggest daily jump in a week.
• US dollar struggles to capitalize on hawkish Fedspeak on steady yields, mixed sentiment.
• West versus Russia story fails to extend risk-off mood amid hopes of progress on peace talks.
• German IFO, US housing data and Fed policymakers’ speech will offer additional catalysts to watch for fresh impulse.

EUR/USD refreshes intraday high around 1.1035 as buyers cheer USD weakness to print the biggest daily gains in a week during the mid-Asian session on Friday. In doing so, the major currency pair rises for the first time in the last three days while consolidating the weekly losses.

The US Dollar Index (DXY) drops 0.30% intraday to 98.50 while snapping a two-day uptrend by the press time. The greenback’s latest weakness could be linked to the sluggish yields in Asia and the market’s indecision over the next moves concerning the Ukraine-Russia crisis.

That said, the US 10-year Treasury yields remain inactive near the previous day’s close surrounding 2.37% even as the latest comments from the Fed policymakers kept pushing for aggressive monetary policy normalization. It’s worth noting that a lower print of the US Weekly Jobless Claims since 1956 favors the market’s cautious optimism, coupled with the absence of major negatives from US President Joe Biden’s European visit to push leaders for more sanctions on Russia.

Talking about data, the preliminary Markit PMI figures for Eurozone and Germany came in softer for March while the US activity numbers were positive for the stated month. Also, US Durable Goods Orders printed -2.2% MoM growth figures for February versus the forecast of -0.5% and January's 1.6% gain. Further, Core Durable Goods Orders, which excludes Transportation, flashed -a 0.6% MoM number for the stated month versus an expected gain of 0.6% and upwardly revised 0.8% growth seen in January. 

Amid these plays, S&P 500 Futures print mild gains amid expectations that the latest push on Russia may result in a positive change in the peace talks between Moscow and Kyiv. Also favoring the cautious optimism are the headlines from Reuters quoting the US officials who forecast a dearth and inaccuracy of Russian missiles.

Looking forward, European leaders will have another day jostling over the Russia-Ukraine crisis while the German IFO sentiment data for March and the US Pending Home Sales for February will decorate the calendar. Also important are the scheduled speeches from the Fed policymakers.

Technical analysis

Although a clear upside break of the weekly symmetrical triangle keeps EUR/USD buyers hopeful, the previous support line from March 07, close to 1.1075, will challenge the upside momentum.

Meanwhile, pullback moves remain elusive beyond the stated triangle’s support line, around 1.0965 by the press time.

Japanese Finance Minister Shunichi Suzuki cross the wires once again this Friday morning, via Reuters, now commenting on the fx market volatility and its impact on the country’s current account deficit, which in turn impacts the economy.

Key quotes

Earlier on, Suzuki spoke about the measures to counter rising inflation, especially after Tokyo core CPI hit two-year highs, arriving at -0.4% compared to -0.7% market consensus and -0.6% previous.

Bank of Japan (BOJ) Governor Haruhiko Kuroda is speaking on the importance of stability in the forex market, in light of the ongoing depreciation in the yen.

Kuroda said, “watching FX moves carefully,” adding that “stability is desirable.”

Additional quotes

• USD/JPY Price Analysis: Pullback from multi-year high teases rising wedge confirmation below 122.00

• USD/JPY takes offers to refresh intraday low, snaps five-day uptrend while retreating from December 2015 levels.
• MACD, RSI also favor sellers eyeing rising wedge bearish chart pattern’s confirmation.
• Bulls need a clear break of 122.55 to retake controls.

USD/JPY consolidates recent gains around 121.85, down 0.40% intraday during Friday’s Asian session. In doing so, the yen pair reverses from the highest levels in almost seven years while refreshing daily low of late.

The pullback moves become interesting as the prices portrayed a rising wedge bearish chart pattern in the last week.

Given the RSI decline from the overbought territory and the most bearish MACD signals in a few days, the USD/JPY prices are likely to confirm further downside by breaking the 121.80 nearby support.

Following that, the 100 and 200 HMAs, respectively near 120.70 and 119.60, may challenge the pair’s south-run targeting the mid-March bottom around 118.20.

On the contrary, recovery moves need to defy the bearish wedge formation, with an upside break of 122.55, to convince USD/JPY buyers for re-entry.

Should the quote remains firmer past 122.55, the 123.00 threshold and late 2015 peak surrounding 123.60 will lure the bulls.

USD/JPY: Hourly chart

Trend: Further weakness expected

China’s 21st Century Business Herald carried an editorial story on Friday, citing that the yuan should be allowed to appreciate, as the country’s inflation is more stable while other major economies battle soaring inflation and growth risks.  

Additional takeaways

“China can maintain self-sufficiency in agricultural products including grain and fertilizer, although it needs imports of cooking oil and animal feed.”

“China may however be pressured by a global recession, so it should actively improve income distribution and promote the "inner circulation" of its domestic economy.”

Market reaction

USD/CNY was last seen trading at 6.3620, down 0.08% on a daily basis.

• USD/RUB fades rebound from three-week low, pressured around intraday low of late.
• US anticipates Russia’s economic, military weakness after the war with Ukraine, also hints at dearth and inaccuracy of Moscow’s missiles.
• NATO offers four battle guards to Ukraine for defense, Western leaders eye more steps to sanction Russia.
• Australia, Japan join the West but China remains supportive of Moscow.

USD/RUB pares the biggest daily gains in two weeks around 102.50 during Friday’s Asian session.

The Russian ruble (RUB) pair bounced off the lowest levels since March 01 the previous day as the US-led global alliances announced multiple measures to criticize Moscow’s invasion of Ukraine. Also favoring the USD/RUB rebound was a pullback in oil prices, Russia’s key earner, from a fortnight high.

Senior US Official was quoted by Reuters saying, “Russia will emerge from Ukraine conflict weaker militarily and politically.” On the same line was a news piece from Reuters suggesting a lack of accuracy in Russia’s precision missiles and a likely dearth of the same in recent days. Furthermore, Australia and Japan also joined the West in sanctioning Russia.

On Thursday, US President Joe Biden pushed the European leader, the Group of Seven (G7) and North Atlantic Treaty Organization (NATO) members to announce more sanctions on Russia for its invasion of Ukraine. While his NATO friends could arrange battles guards for four of the Ukrainian cities and criticized Beijing’s ties with Moscow, the rest mostly refrained from major punitive actions against Russia.

That said, WTI crude oil prices took a U-turn from $116.61 the previous day, up 0.50% around $111.75 by the press time, as firmer US Dollar and Treasury yields weighed on the oil prices. Also challenging the energy prices are covid fears from China and Europe, as well as concerns that supply crunch will fade soon.

Amid these plays, S&P 500 Futures drop 0.15% intraday to 4,506, consolidating the heaviest daily gains in a week, whereas the US 10-year Treasury yields retreat from the previous daily close around 2.37% at the latest. It’s worth noting, however, that Australia’s ASX 200 have so far managed to push back the bears but Japan’s Nikkei 225 prints 0.20% intraday losses by the press time.

Moving on, Eurogroup meeting and oil price moves may direct USD/RUB. Also important to watch is the Fedspeak and the second-tier US data.

Technical analysis

Unless crossing 21-DMA level surrounding 122.20, USD/RUB remains pressured towards the $100.00 threshold.

• EUR/JPY has prints fresh 40-week high at 134.70 on broader underperformance of yen.
• The EU leaders summit ended without a material decision on the embargo on Russian oil.
• Rising commodity prices may intensify sell-off in Japanese yen.

The EUR/JPY pair has recorded a fresh 40-week high at 134.70 as rising metal prices are hurting the Japanese yen. The cross has witnessed a three-day winning streak and is hovering around Thursday’s high at 134.40. The asset is expected to extend its gains amid broader weakness in the Japanese yen.

Global metal prices are having a devastating impact on the Japanese yen. The currency has been depreciating after Russia’s invasion of Ukraine as the event has underpinned the oil and base metal prices. Japan, being a major importer of oil and metals is facing some serious cash outflows on galloping commodity prices, which eventually is widening the fiscal deficit of its economy.

Meanwhile, the shared currency is underpinned against the Japanese yen on a delay in confirmation of the embargo on Russian oil. The European Union (EU) leaders summit on Thursday remained unsettled on contrasting views from the EU members. Germany has denied an immediate ban on Russian oil amid its higher dependency. The former fetches more than 50% of its gas imports from Moscow and its immediate prohibition would lead to massive unemployment in its region. Belgium has favored Germany's claim and has warned about the devastating effect of the embargo on Russian oil overnight.

Going forward, the next round of the EU leaders summit on the embargo on Russian oil will remain the major driver. But before that, investors will focus on the Unemployment Rate by the Statistics Bureau of Japan, which is due next week.

The People’s Bank of China (PBOC) set the yuan (CNY) reference rate at 6.3739 versus the previous release of 6.3640, while crossing the market expectations of 6.3639 during Friday's Asian session.

"China central bank injects 100 billion yuan via 7-day reverse repos at 2.10% vs prior 2.10%," said Reuters. The update also includes, "China central bank says sets 7-day reverse repo rate at 2.10% vs 2.10% previously."

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.

“Senior Pentagon Official: The Ukraine war makes Russia more of a strategic burden for China,” an anonymous official from Pentagon said late Thursday, per Reuters.

On the same line were comments from another US official, whose name wasn’t revealed in Reuters’ piece, mentioned, “Russia will emerge from Ukraine conflict weaker militarily and politically.”

The diplomat also added, “The Pentagon's new strategy will describe Russia as an 'acute threat' but one that cannot pose long-term systemic challenge.”

It’s worth noting that Reuters also mentioned, “US assesses up to 60% failure rate for some Russian missiles,” while also suggesting a dearth in the precision-guided munitions.

FX reactions

While following the news, market sentiment remains sour with the S&P 500 Futures printing mild losses around 4,505 by the press time.

Read: S&P 500 Futures, yields retreat as Ukraine woes jostle inflation fears

• Pound bulls are testing the Inverted H&S formation to resume upside.
• The RSI (14) needs to overstep 60.00 for a fresh impulsive wave.
• The 200-period EMA will act as a major barricade going forward.

The GBP/USD pair has witnessed a steep fall after struggling to breach 1.3300. The cable is oscillating in a narrow range of 1.3158-1.3215 in early Tokyo and is likely to consolidate further.

On a four-hour scale, the cable has witnessed a firmer upside after an inverted head and shoulder formation, which signals a bullish reversal. Usually, a head and shoulder formation denote a sustained inventory distribution from institutional investors to retail participants. The asset has already given a breakout and is retesting the right shoulder congestion zone, which is in a range of 1.3088-1.3211.

The cable has sensed barricades near 200-period Exponential Moving Average (EMA), which is trading near 1.3285.

The Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, which signals for consolidation going forward. However, a breach above 60.00 will add to the upside filters.

Should the asset overstep Thursday’s high at 1.3214 sterling bulls will send the pair towards 200-period EMA at 1.3285, followed by 50% Fibonacci retracement at 1.3322.

On the flip side, bears may dictate the price if the cable drops below March 22 low at 1.3120, which will drag the asset towards March 17 low at 1.3088. Breach of the latter will expose the cable to psychological support at 1.3000.

GBP/USD four-hour chart

• Market sentiment dwindles amid mixed concerns over Russia-Ukraine crisis, inflation jitters.
• S&P 500 Futures, US 10-year Treasury yields consolidate recent gains.
• Japan’s Nikkei 225 print mild gains despite fears of BOJ intervention.
• US hints at further challenges for Russia, Fedspeak keeps favoring aggressive rate hikes.

Market sentiment remains sour during Friday’s Asian session as geopolitical headlines challenge the bulls amid an absence of major data/events.

That said, S&P 500 Futures drop 0.15% intraday to 4,506, consolidating the heaviest daily gains in a week, whereas the US 10-year Treasury yields retreat from the previous daily close around 2.37% at the latest. It’s worth noting, however, that Japan’s Nikkei 225 and Australia’s ASX 200 have so far managed to push back the bears with mild intraday gains by the press time.

US President Joe Biden pushed the European leader, the Group of Seven (G7) and North Atlantic Treaty Organization (NATO) members to announce more sanctions on Russia for its invasion of Ukraine. While his NATO friends could arrange battles guards for four of the Ukrainian cities and criticized Beijing’s ties with Moscow, the rest mostly refrained from major punitive actions against Russia.

Recently, a Senior US Official was quoted saying, per Reuters, “Russia will emerge from Ukraine conflict weaker militarily and politically.” On the same line was a news piece from Reuters suggesting a lack of accuracy in Russia’s precision missiles and a likely dearth of the same in recent days. Furthermore, Australia and Japan also joined the West in sanctioning Russia.

Elsewhere, Japanese Government Bond (JGB) yield reach the levels that pushed the Bank of Japan (BOJ) towards a market intervention in 2015 while North Korea’s missile launch add to the risk-off mood.

That said, the risk-aversion wave favors the gold prices but the US Dollar Index (DXY) retreats despite the recent hawkish comments from the Fed policymakers. It should be noted that WTI crude oil remains pressured amid indecision over the Ukraine-Russia crisis and the US readiness to help European when it comes to energy usage, to overcome the supply crunch due to political jitters with Moscow.

Moving on, a light calendar may allow markets to consolidate the latest moves but covid headlines from China and Europe, as well as Fedspeak, will keep the traders busy.

• USD/JPY has climbed above 122.00 on rising metal prices.
• The DXY is approaching 99.00 amid rising odds of a 50 bps interest rate hike.
• Japan’s administration is likely to consider steps to cope with price hikes next week.

The USD/JPY pair has continued its five-day winning streak and seems stable above 122.00. The asset is witnessing a juggernaut rally and has registered a fresh six-year high at 122.43. The broader weakness in the Japanese yen is weighing pressure on the asset.

Rising metal prices in the global markets are hurting the Japanese economy to a major extent. Japan, being one of the major importers of oil and metals is facing some serious dents in its exchange flows. Every increasing cent in the prices of commodities is widening the fiscal deficit of Japan, which eventually is hurting Japanese economics.

The outperformance of the US dollar index (DXY) is also dragging the pair. The DXY is gradually moving higher as investors have started betting on a 50 basis point (bps) interest rate hike by the Federal Reserve (Fed). The inflation mess in the US is getting out of the grip and Fed policymakers are left with no other option than to elevate the interest rates swiftly. The 10-year US Treasury yields have advanced near 2.37% on the expectation of seven interest rate hikes by Fed Chair Jerome Powell by the end of 2022.

Meanwhile, Japanese Finance Minister Shunichi Suzuki has announced that the administration will consider steps to cope with price hikes after PM instruction expected next week. This may bring some stability to the Japanese yen.

Going forward, investors will focus on the US Pending Home Sales and Michigan Consumer Sentiment Index, which is due on Friday while the Statistics Bureau of Japan will report the Unemployment Rate next week.

• EUR/USD remains mildly bid inside short-term triangle as bulls attack the resistance line.
• Steady RSI suggests further recovery but 50-SMA adds to the upside filters.
• 61.8% Fibonacci retracement level, mid-March low can lure bears on breaking triangle to the south.

EUR/USD dribbles around 1.1010, up 0.10% intraday during Friday’s Asian session. In doing so, the major currency pair remains inside the weekly symmetrical triangle while keeping the previous day’s rebound.

Although steady RSI suggests the continuation of the EUR/USD recovery, the aforementioned triangle’s upper line and the 50-SMA, respectively around 1.1010 and 1.1020, challenge the pair’s short-term advances.

In a case where EUR/USD rises past 1.1020, the previous support line from March 07, close to 1.1075, will challenge the bulls before directing them to the monthly peak of 1.1137.

Alternatively, pullback moves remain elusive beyond the stated triangle’s support line, around 1.0965 by the press time.

Also acting as a downside filter is the 61.8% Fibonacci retracement of early-month advances, near 1.0930.

Should EUR/USD drop below 1.0930, the March 14 swing low near 1.0900 becomes the key hurdle for the bears targeting the monthly bottom of 1.0800.

EUR/USD: Four-hour chart

Trend: Further upside expected

As Japanese Government Bond (JGB) yields rally to the highest levels since 2015, market speculations over the Bank of Japan (BOJ) intervention mount.

“The yield on the 10-year Japanese government bond (JGB) rose to 0.235% on Friday, exceeding the level at which the Bank of Japan offered to buy an unlimited amount of JGBs at 0.25% on Feb. 10,” said Reuters.

The analytical piece also adds, “Markets are on the lookout for whether the central bank would make the same kind of offer to defend the 0.25% upper limit of the band at which it allows the 10-year JGB yield to move around its 0% target.”

FX reaction

With fears of BOJ intervention, USD/JPY retreats from a seven-year high of 122.43 to 122.25 by the press time of Friday’s Tokyo open.

Also read: Japan FinMin Suzuki hints at steps to tackle price hike on PM instruction during next week