• Silver price remains sidelined after rising the most in a week, prods bearish chart formation on hourly play.
• Sustained trading beyond key HMAs, upbeat RSI favor XAG/USD buyers.
• Fortnight-old ascending support line acts as an extra filter towards the south.
• Silver buyer can aim for April 2022 peak on clear break of $25.15.

Silver price (XAG/USD) seesaws around $25.00 after posting the biggest daily gains in a week the previous day. In doing so, the bright metal braces to reject the “Double top” bearish chart formation on the hourly play.

It’s worth noting that the quote’s sustained trading above the 100 and 200 Hourly Moving Averages (HMAs) join firmer RSI (14), not overbought, to keep the Silver buyers hopeful of breaking the double tops near $25.15 and reject the bearish chart pattern.

Following that, a run-up toward April 2022 high near $26.25 can’t be ruled out. However, the RSI may turn overbought afterward and can prod the Silver buyers before they approach the previous yearly top surrounding $27.00.

Meanwhile, the 100-HMA and a two-week-old ascending trend line, respectively near $24.90 and $24.70, restrict the short-term downside of the XAG/USD price.

Should the quote breaks the $24.70, the previous Thursday’s low of $24.60 and the 200-HMA level of near $24.35 will be crucial as a break of which can direct Silver price toward the sub-$24.00 zone.

Overall, the Silver price is likely to remain firmer but the quote’s further upside hinges on a clear break of $25.15.

Silver price: Hourly chart

Trend: Further upside expected

• GBP/USD is making efforts for a breakout of the Falling Channel pattern.
• An absence of anxiety among investors ahead of US CPI conveys that they have digested expectations of the Fed’s rate hikes.
• Wednesday’s inflation data carries higher value as it will be the last inflation data before Fed’s May meeting.

The GBP/USD pair has rebounded to near 1.2430 in the early Asian session after defending the round-level support of 1.2400. The Cable is gathering strength for extending its rally amid an upbeat market mood ahead of the release of the United States inflation. An absence of anxiety among investors ahead of the US Consumer Price Index (CPI) indicates that investors have digested expectations of consecutive 25 basis points (bps) rate hike from the Federal Reserve (Fed).

Despite knowing the fact that Wednesday’s inflation data carries higher value as it will be the last inflation data before May’s monetary policy meeting, investors are hammering the US Dollar Index. The USD Index has turned sideways after a corrective move from 102.30 and is expected to test the critical support of 102.00.

Apart from the US inflation data, the speech from Bank of England (BoE) Governor Andrew Bailey will be keenly watched. BoE Bailey is expected to provide guidance about the likely monetary policy action ahead. A hawkish guidance is expected from BoE Bailey amid an absence of evidence of United Kingdom inflation softening.

GBP/USD is gathering strength to deliver a breakout of the Falling Channel formed on an hourly scale. The Cable is hovering near the edge of the upper portion of the aforementioned chart pattern. The asset looks confident above the 20-period Exponential Moving Average (EMA) at 1.2420 as it indicates that the short-term trend is bullish.

Meanwhile, the Relative Strength Index (RSI) (14) is eyeing a decisive break above 60.00 for activation of the bullish momentum.

For an upside move, the Cable needs to surpass April 11 high at 1.2457, which will trigger short coverings and will drive the major toward the psychological resistance of 1.2500 followed by April 04 high at 1.2525.

On the flip side, a break below the round-level support of 1.2400 will expose the asset to April 10 low at 1.2344 and March 30 low at 1.2294.

GBP/USD hourly chart

• AUD/USD eases near one-month low after snapping five-day downtrend.
• Cautious mood ahead of the key catalyst, mixed sentiment challenge Aussie pair buyers.
• Upbeat Aussie data, barley deal supersede price-negative catalysts surrounding China to keep buyers hopeful.
• RBA’s Bullock needs to follow Lowe’s footsteps to defend AUD/USD rebound.

AUD/USD retreats to 0.6650, after bouncing off the lowest level in one month, as traders await the top-tier data/events during early Wednesday. In doing so, the Aussie pair portrays the market’s cautious mood even as upbeat catalysts at home joined US Dollar weakness to lure the bull previously.

That said, Australia’s Westpac Consumer Confidence for April rallied to the highest levels since June 2022, printing 9.4% figure versus 0.8% expected and 0.0% prior. Further, the National Australia Bank’s (NAB) Business Conditions matched the forecast figure of 16.0, versus 17.0 prior, whereas NAB Business Confidence eased to -1.0 versus 0.0% expected and -4.0% previous readings.

On the same line, Australia's Foreign Minister Penny Wong said on Tuesday, "We reached an agreement with China to settle the dispute over Australian barley.” “China agreed to review the duties levied on Australian barley,” Wong added.

Further, China’s ending of military strikes near Taiwan and mixed comments from the US Federal Reserve (Fed) officials also allowed the AUD/USD bulls to remain firmer. However, the market’s receding optimism towards the further rate hikes and mixed comments from the International Monetary Fund (IMF), as well as softer China inflation, to prod the AUD/USD.

However, downbeat China inflation numbers prod the AUD/USD bulls as headline inflation numbers for March, namely the Consumer Price Index (CPI) and Producer Price Index (PPI), came in 0.7% YoY and -2.5% YoY versus 1.0% and -1.4% respective priors.

Recently, Philadelphia Fed President Patrick Harker said on Tuesday that the Federal Reserve will continue to look closely at available data to determine what, if any, additional actions they may need to take. Before him, Federal Reserve (Fed) Bank of New York President John Williams said that if inflation comes down, we will have to lower rates. Furthermore, Chicago Fed President Austan Goolsbee, said on Tuesday that they need to be cautious about raising interest rates after recent development in the banking sector.

On the other hand, Reuters said that China ended three days of military drills around Taiwan on Monday saying they had tested integrated military capabilities under actual combat conditions, having practiced precision strikes and blockading the island that Beijing views as its own.

Elsewhere, IMF revised down global real Gross Domestic Product (GDP) growth forecast for 2023 to 2.8% from 2.9% in January's report. However, the global lender kept growth estimations for China intact as 5.2% for 2023 and 4.5% for 2024.

Amid these plays, Wall Street closed with minor gains and the yields also marked mild run-up while the US Dollar Index (DXY) snapped four-day uptrend on Tuesday.

Moving on, RBA Assistant Governor (Financial System) Michele Bullock could offer immediate directions to AUD/USD pair ahead of the key US CPI and the Fed Minutes.

Also read: US CPI Preview: US Dollar on the back foot and poised to fall further

Technical analysis

AUD/USD recovery remains elusive unless it bouncing back beyond the one-month-old previous support line, around 0.6700 by the press time.

"Euro zone inflation is at risk of getting entrenched above 2% so the European Central Bank will keep fighting excessive price growth, even as its policy response is shifting gears," said French central bank chief Francois Villeroy de Galhau late Tuesday per Reuters.

Additional comments

EUR/USD grinds higher

EUR/USD holds onto the previous day’s recovery moves from a one-week low to 1.0915 by the press time.

Philadelphia Fed President Patrick Harker said on Tuesday that the Federal Reserve will continue to look closely at available data to determine what, if any, additional actions they may need to take.

Additional comments

US Dollar stays pressured

Given the recently mixed comments from various Fed policymakers, US Dollar Index (DXY) remains pressured around 102.10 by the press time, after snapping a four-day winning streak the previous day.

• EUR/USD has demonstrated a recovery move from 1.0900 as investors seem not worried about the US inflation release.
• S&P500 remained choppy on Tuesday as technology stocks dragged on expectations of weaker revenue guidance.
• The European Central Bank will keep on hiking rates despite evidence of a decline in retail demand.

The EUR/USD pair has shown a recovery move after a minor correction to near the round-level support of 1.0900 in the early Asian session. The major currency pair is looking to extend its recovery above the immediate resistance of 1.0928 as investors don’t seem anxious ahead of the release of the United States Inflation data.

S&P500 remained choppy on Tuesday as technology stocks dragged on expectations of weaker revenue guidance. Investors are hoping for weak guidance from tech-savvy stocks amid higher rates from the Federal Reserve (Fed). Also, recent banking turmoil could impact the quarterly result of the banking sector, portraying a cautious market mood.

The US Dollar Index (DXY) has dropped to near 102.15 after failing to extend its recovery above 102.30. The USD Index is likely to extend its downside below the 102.00 support as investors have digested expectations of more rate hikes from the Federal Reserve (Fed).

Meanwhile, the commentary from Chicago Fed President Austan Goolsbee has also weighed on the US Dollar. Fed policymakers have advised a cautious approach as the combination of tight credit conditions and further restrictive monetary policy can hit sectors and regions differently than if monetary policy was acting on its own.

For further guidance on the US Dollar, US Consumer Price Index (CPI) will be keenly watched. Analysts at Danske Bank expect “While lower energy prices will ease March headline inflation to around +0.2% MoM, we expect core inflation to remain elevated at +0.4%.”

On the Eurozone front, monthly Retail Sales contracted by 0.8% as expected by investors. And, annual Retail Sales contracted by 3.0% while the street was anticipating more contraction to 3.5%. However, the European Central Bank (ECB) will keep on hiking rates despite evidence of a decline in retail demand.

ECB Governing Council member Francois Villeroy de Galhau warned that “Inflation is becoming more prevalent and potentially more persistent.” He further added, “The impact of rate hikes will be amplified in the coming months.”

• Gold price bulls holding the fort at a critical support area. 
• Gold price bulls eye a break of $2,020 for prospects to $2,050. 
• Gold price traders eye US Consumer Price Index for the next clues with regard to Federal Reserve interest rates. 

Gold price finished the day on Tuesday tailing off from the New York session highs that were put in on a soft US Dollar ahead of Wednesday's US inflation report. Holiday markets made for a mixed day as traders wait in anticipation of the main event for the week making for uneven price action across the asset classes. 

The Greenback gave back the bulk of Easter Monday's gains after the robust Nonfacr Payrolls report released on the Good Friday holiday cemented the notion that the Federal Reserve has one more rate hike left in its toolbox. The job numbers showed that employers added 236,000 jobs while the unemployment rate fell to 3.5%. This has led the market to believe that the Federal Reserve will hike rates by an additional 25 basis points at its May 2-3 meeting, before pausing in June. Markets are also pricing for the Fed pivot where a rate cut by year-end could be on the cards to combat the risks of a recession.

US Consumer Price Index will be key

In this regard, the March Consumer Price Index inflation data will be closely watched to see if it is near the 6% annualized rate reported in February, which would likely mean higher interest rates are coming from the central bank. However, analysts at TD Securities argued that core prices likely cooled off modestly in March, with the index still rising a strong 0.4% MoM, as they look for recent relief from goods deflation to turn into inflation this month. ´´Shelter prices likely remained the key wildcard, while slowing gas prices and softer food-price gains will likely dent non-core inflation,´´ they said. ´´Our MoM forecasts imply 5.1%/5.6% YoY for total/core prices.´´

We will also get the minutes of the Federal Open Market Committee, FOMC, on Wednesday and the analysts at TD Securities explained that the rate hike at the March FOMC meeting was widely viewed as dovish.´´ The analysts added that ´´the distribution of the March dot plot for 2023, however, suggested a more hawkish sentiment across the FOMC. With banking stress now appearing to be somewhat contained, the minutes for this meeting might emphasize this hawkish sentiment given continued elevated inflationary pressures.´´

Overall, with the June Federal Open Market Committee, FOMC, meeting remaining in play for a final 25bp rate increase, investors will have lightened their exposure to the Gold price in anticipation of profit-taking. However, as the analysts at TDS argued, ´´with Wednesday´s CPI print top of mind, the market has been unwilling to convincingly break lower, with CTAs needing to see prices below $1980/oz to further reduce length.´´

As for Federal Reserve chatter, the officials continue to stress that the central bank's policy path will depend on incoming data. For instance, Chicago Fed President Austan Goolsbee said the Fed should be cautious about raising rates in the face of recent banking stress. Meanwhile, New York Fed President John Williams explained that the prospect of the Fed raising its benchmark interest rate only once more and in a 25 basis point increment is a useful starting point.

Gold price technical analysis

In a series of analyses for Gold price tracking the live Gold price market, it stated the following:

´´The Gold price doji is a stalling candle and it could be followed by a bearish engulfment on Thursday that could give way to the prospects of a move lower in the Gold price as the bias. However, so long as the Gold price bulls stay committed, this bullish cycle will have further to run for the Gold price.´´

Gold price update, live chart

We are seeing the Gold price bulls commit to the support area with the $2,050s on the radar. 

Gold price H4 chart

The Gold price four-hour chart shows that the bulls are holding the fort at key support with $2,010/20 now eyed as the next major Gold price resistance area guarding $2,050. 

During the Asian session, Japan will release the Producer Price Index and RBA’s Bullock will participate in a panel. The key event on Wednesday will be US consumer inflation data. Later, the Federal Reserve will publish the minutes of the latest FOMC meeting. The Bank of Canada will have its monetary policy meeting. The Dollar looks weak ahead of busy hours. 

Here is what you need to know on Wednesday, April 12:

The US Dollar Index dropped after rising for four days on the day before the release of the March US Consumer Price Index (CPI). Also on Wednesday, the minutes of the latest FOMC will be published. The economic figures and the minutes could have large implications for markets and monetary policy expectations. 

US CPI Preview: US Dollar on the back foot and poised to fall further

US yields rose on Tuesday but did not help the Greenback. The US 10-year yield reached levels above 3.45% and the 2-year peaked at 4.08%. Stocks in Europe finished higher after Easter Monday and Wall Street posted mixed results. The International Monetary Fund downwardly revised its global growth forecast for 2023 to 2.8%. 

USD/JPY erased losses during the American session rising back to the 133.70 zone. Bank of Japan’s Ueda signaled they are not in any hurry to change the current stance of monetary policy. Japan's Producer Price Index is due on Wednesday. 

EUR/USD rebounded on Tuesday, retaking 1.0900; the move higher was capped by 1.0930. The pair looks bullish supported by a weaker US Dollar and expectations of another rate hike from the European Central Bank (ECB). The Euro outperformed most of its major rivals.

GBP/USD rose on Tuesday after four days of losses, ending above 1.2400. Market participants continue to see a new rate hike from the Bank of England in May. 

NZD/USD extended the slide from last week's spike and broke below 0.6200, to the lowest level in two weeks. The Kiwi was the worst G10 performer. New Zealand Credit Card spending data is due on Wednesday. EUR/NZD rose above 1.7600, to the highest level since November 2020. 

AUD/USD peaked at 0.6680 and then pulled back to 0.6650. The short-term bias point to the downside ahead of the Australian Employment report due on Thursday. 

USD/CAD resumed the downside on Tuesday and dropped toward 1.3450. On Wednesday, the Bank of Canada will announce its decision on monetary policy. No change in rates is expected. The focus will be on projections and the presser. 

Gold rose above $2,000 despite higher yields, and Silver above $25.00. Bitcoin reached $30,000 for the first time since June of last year. 

• USD/JPY bulls stay in the market on interest rate differentials. 
• All eyes turn to the US CPI data on Wednesday. 

USD/JPY bull has stayed with the course despite an initial drop in the European session and in Asia´s start of the day. The price recovered from late London's lows of 132.97 and printed a high of 133.80 in New York´s midday trading and despite some dovish comments from US central bank officials that weighed on the DXY index. 

USD/JPY remains bid as the Greenback remains supported on the interest rate differentials with higher T-note yields on Tuesday weighing on the yen, along with news that Japan’s March machine tool orders posted their biggest decline in 2-1/2 years. Japan Mar machine tool orders fell -15.2% YoY, the third consecutive monthly drop and the largest decline in 2-1/2 years. Additionally, Bank of Japan Governor Kazuo Ueda signaled no hurry to dial back its massive stimulus. 

All eyes on US CPI and Fed sentiment

Meanwhile, the Consumer Price Index on Wednesday is expected to show that headline inflation rose by 0.2% in March, while core inflation rose 0.4%. This follows a series of data leading up to the event on Wednesday, including Friday´s Nonfarm Payrolls that have added to expectations that the Federal Reserve will complete one more rate hike. The data showed that employers added 236,000 jobs while the unemployment rate fell to 3.5%.

Consequently, The Federal Reserve is expected to hike rates by an additional 25 basis points at its May 2-3 meeting, before pausing in June. Markets are also pricing for the Fed pivot where a rate cut by year-end on could be on the cards to combat the risks of a recession. Nevertheless, Fed officials have stressed that the central bank's policy path will depend on incoming data. Chicago Fed President Austan Goolsbee said the Fed should be cautious about raising rates in the face of recent banking stress. Meanwhile, New York Fed President John Williams explained that the prospect of the Fed raising its benchmark interest rate only once more and in a 25 basis point increment is a useful starting point.

• NZD/USD bears are still in the market, taking on fresh cycle lows. 
• The US Dollar is a touch softer heading into the US CPI data.

NZD/USD was trying to recover some ground after falling to as low as 0.6193 the prior day and reached a high of 0.6233 before collapsing yet again to mark a fresh low of 0.6184. 

Despite a soft across most other currencies, the Kiwi took the brunt of the selling on Tuesday with little rhyme nor reason behind the moves other than the escalating US-China tensions over Taiwan. China simulated precision strikes against key targets on and around Taiwan on Monday, the 2nd day of exercises near the island.

Domestically, the Reserve Bank of New Zealand said in its latest meeting minutes that it is expecting to see a further easing in domestic demand as well as a slowdown in core inflation and inflation expectations. However, last week, the central bank delivered a larger 50bps rate hike amid overheated inflation and employment and shattered market consensus of a 25bps rise. The central bank also said in its April monetary meeting minutes that there is no material conflict between lowering inflation and maintaining financial stability in New Zealand. The RBNZ called out a larger inflationary impact from the cyclone rebuild and upside risks to the fiscal outlook and does not want to see any fall in lending rates. 

US CPI eyed as key event

For the day ahead on Wednesday, the focus will be on US core and headline Consumer Price Index inflation which is expected to increase by 0.5% MoM in March. Some may argue that there have been signs of inflation intensifying again and labour market conditions remain too tight for the Fed. However, analysts at TD Securities said ´´core prices likely cooled off modestly in March, with the index still rising a strong 0.4% MoM,´´ as they look for recent relief from goods deflation to turn into inflation this month. ´´Shelter prices likely remained the key wildcard, while slowing gas prices and softer food-price gains will likely dent non-core inflation. Our m/m forecasts imply 5.1%/5.6% YoY for total/core prices,´´ the analysts explained. 

Meanwhile, solid jobs data in the Nonfarm Payrolls on Friday for March added to expectations that the Federal Reserve will complete one more rate hike. The data on Friday showed employers added 236,000 jobs while the unemployment rate fell to 3.5%. The central bank is expected to hike rates by an additional 25 basis points at its May 2-3 meeting, before pausing in June. Markets are also pricing for the Fed to pivot by year-end on an expected recession.

• WTI jumps to test resistance again as US Dollar retreats.
• Production cuts keeps the black gold better bid. 

WTI oil prices climbed over 2% to $81.55 a barrel on Tuesday while investors get set for data that may show further declines in US oil and fuel inventories. Additionally, a weaker US Dollar ahead of potentially cooling inflation data on Wednesday has been bullish for energy prices.

The US reports its Consumer Price Index on Wednesday and analysts at TD Securities argued that ´´core prices likely cooled off modestly in March, with the index still rising a strong 0.4% MoM.´´ Ebbing price pressures are diminishing the prospects of further Federal Reserve interest rate hikes. Markets are pricing for the Fed to cut rates by year-end on an expected recession and a softer US Dollar, as a consequence, makes oil cheaper for non-Dollar denominated investments, helping to support higher oil.  Also, tightness in global oil supplies is supporting crude prices with the continued halt of 400,000 bpd of Iraqi crude oil exports.

Looking to core fundamentals, a Wall Street Journal survey is forecasting that tomorrow's weekly Energy Information Administration report will show a 600,000-barrel decline in crude-oil stockpiles and a 1.7M-barrel fall in gasoline inventories. This would mark an eighth consecutive decline in gasoline inventories and will put crude inventories at their lowest since early February.

Meanwhile, The Energy Information Administration on Tuesday raised its price forecast for Brent crude oil by 2.5% in the agency's influential monthly Short-Term Energy Outlook following OPEC's decision earlier this month to reduce production by around 1.1 million barrels per day to support prices and lower global oil inventories. The agency raised its forecast for Brent crude, the global benchmark, to US$85.00 per barrel from its prior US$83.00 target on lower supply.

On the flip side, a bearish factor for crude was the International Monetary Fund, IMF, said that five years from now, global growth is expected to be around 3% — the lowest medium-term forecast in a World Economic Outlook for over 30 years.

• GBP/USD bulls are stepping in at a key structure area on the charts. 
• All eyes will be on the US inflation data on Wednesday in the main. 

GBP/USD has traveled within a range of 1.2379 and 1.2456 on the day and is up around 0.3% currently at 1.2420. 

The British pound has found solid ground in a key support area amidst improved risk sentiment, helping to keep sterling towards the 10-month high it reached last week as traders bet that interest rates would soon peak and come down later this year.

Domestically, the Bank of England Governor Andrew Bailey is scheduled to speak on Wednesday and could give clues on the future path for monetary policy, but attention is on the US Consumer Price Index also. Analysts at TD Securities argued that core prices likely cooled off modestly in March, which could result in an even softer US dollar leading to higher Cable. 

Meanwhile, the following illustrates the technical landscape leading into tomorrow´s events:

GBP/USD technical analysis

GBP/USD is trading within the right-hand shoulder of a massive inverse head and shoulders pattern, testing the neckline.

GBP/USD bullish/bearish scenario

The price had dropped for four consecutive days and retraced over 70% of the prior bullish impùlse. Bulls are moving in following a close above the 61.8% Fibonacci retracement measure which is bullish. A higher high could be on the cards for this bull cycle. However, the price is on the backside of the bull trendline which means the bull cycle has been decelerating. If bears commit heavily to the next bullish thrust, a period of distribution could unfold. 1.2270s will be key in this regard ahead of 1.2190. However, the above thesis is meanwhile bullish:

GBP/USD H1 chart

On the lower time frames, such as this hourly chart, we can see the price is testing 1.2400 structure but so long as this holds, given the break of the trendline to the upside, a break of 1.2450 will likely leave the bulls in control for a run to test the 1.2520s.

If on the other hand, considering the break of the prior bullish trendline, if bears commit below 1.2450, then a bearish thesis will be in play to break below 1.2400:

GBP/USD bullish scenario

However, the bullish thesis will be in play while above support and 1.2350 as per the above daily chart. All will depend on the US consumer Price Index outcome for the US session and beyond ahead. 

Federal Reserve Bank of Chicago President Austan Goolsbee, said on Tuesday that they need to be cautious about raising interest rates after recent development in the banking sector. He mentioned that the central bank needs to assess the potential impact of the financial stress on the real economy. 

Speaking at the Economic Club of Chicago, Goolsbee said that they should gather further information and be careful about raising rates “too aggressively” until they see how much work the headwinds are doing for the central bank in getting inflation down. According to him, markets and financial issues should not drive actions from the Fed. 

Market reaction 

The US Dollar Index is falling on Tuesday, ending a four-day positive streak. It is hovering around 102.20, down 0.32% for the day. US bond yields are higher, with the 2-year yield at 4.06%, the highest in a week. 
 

• US Dollar drops across the board despite higher yields. 
• A better mood in equity markets weighs on the Greenback. 
• EUR/USD holds firm above 1.0900, further away from Monday's weekly lows. 

The EUR/USD rose to 1.0928, reaching the highest level since last Thursday, and then pulled back. The Euro holds a bullish tone but remains unable to break above 1.0930. 

The short-term technical bias favors the Euro, particularly while above 1.0900. Below, the next support stands at 1.0880. Above daily highs, more gains seem likely, but the common currency faces many horizontal levels until 1.0955. 

DXY down, yields up 

The US Dollar Index is falling on Tuesday, erasing most of Monday's gains. The DXY is approaching 102.00 and is ending a 4-day positive streak. 

Federal Reserve (Fed) Bank of New York President John Williams said on Tuesday that they need to stay in "data-dependent mode," and added that if inflation comes down, they will have to lower interest rates. 

US yields are modestly higher on Tuesday, with the 10-year Treasury yield at 3.43% and the 2-year at weekly highs at 4.04%. European yields are also higher, as market participants fully price in a 25 basis point rate hike from the European Central Bank at their next meeting in May. 

Data from the Eurozone showed a decline of 0.8% in Retail Sales in March, in line with expectations. With no relevant reports from the US om Tuesday, the focus is on the Consumer Price Index due on Wednesday. 

Technical levels 

The US Bureau of Labor Statistics (BLS) will release the most important inflation measure, the US Consumer Price Index (CPI) figures, on Wednesday, April 12 at 12:30 GMT. As we get closer to the release time, here are the forecasts by the economists and researchers of 10 major banks regarding the upcoming United States inflation print for the month of March.

The annual inflation is expected to have risen by 5.2% year-on-year after increasing by 6% in February. The core reading, however, is foreseen at 5.6%, up from 5.5% previously. On a monthly basis, the CPI is forecast at 0.3%, while the Core CPI is expected at 0.4%.

Danske Bank

“While lower energy prices will ease March headline inflation to around +0.2% MoM, we expect core inflation to remain elevated at +0.4%.”

ANZ

“We expect both core and headline CPI inflation to have risen by 0.5% MoM in March.”

Commerzbank

“Statisticians are likely to report a drop in the inflation rate from 6.0% in February to 5.3% in March. However, the March decline is entirely due to the fact that prices are now being compared with those in March 2022, when energy prices in particular had already risen significantly due to the Ukraine war. Indications of the underlying trend are more likely to be provided by the core rate, which excludes the volatile prices for energy and food. Here we expect an increase from 5.5% to 5.7%. The MoM rates also show that inflation is hardly calming down. Compared with February, prices across all goods and services probably rose by 0.3%, excluding energy and food by as much as 0.5%.”

ING

“Markets are increasingly doubtful that the Fed will be able to hike rates much further, but that could yet change after the upcoming CPI report. Another 0.4% MoM figure on core CPI, more than double the rate required over time to take the US back to the 2% YoY inflation rate target, could nudge expectations for the upcoming FOMC meeting higher. We still think the Fed would prefer to raise rates at least once more should financial conditions allow, but we see a strong probability that it reverses course and cuts rates by 100 bps later in the year as ever-tighter lending conditions, high borrowing costs, weak business sentiment and a deteriorating housing market all weigh on growth and rapidly dampen price pressures.”

Deutsche Bank

“We expect core inflation to come off a bit to +0.39%, although that would still leave the year-on-year change up a tenth at +5.6%. For headline inflation, we see a lower rate of +0.24%, taking the YoY rate down to +5.2%. Remember this month that there’ll be unusually large base effects at play, since the March 2022 surge in energy prices after Russia’s invasion of Ukraine will be dropping out of the annual comparisons.”

TDS

“Core prices likely cooled off modestly in March, with the index still rising a strong 0.4% MoM, as we look for recent relief from goods deflation to turn into inflation this month. Shelter prices likely remained the key wildcard, while slowing gas prices and softer food-price gains will likely dent non-core inflation. Our MoM forecasts imply 5.1%/5.6% YoY for total/core prices.”

NBF

“The energy component may have had a negative impact on the headline index as prices likely fell in both the gasoline and natural gas segment. Expected gains for shelter and used vehicles could still result in a 0.2% monthly increase in headline prices. The core index, for its part, could have increased 0.4% MoM, which would translate into a one-tenth increase in the annual rate to 5.6%.”

CIBC

“Core CPI likely decelerated to 0.4% MoM, in line with flagging consumer demand as excess savings have dwindled and the labor market has slowed, but that’s still too hot of a pace to achieve on-target inflation. Although private measures of used car prices have increased recently, the weight of that component in the CPI index has fallen sharply, and other measures of goods prices, including the PPI for finished core consumer goods, suggest that pressure in core goods prices could have been limited. Adding food and energy prices back into the mix likely showed more modest price pressures of 0.2% MoM for the total CPI, as prices at the pump fell in seasonally-adjusted terms. We’re nearly in line with the consensus expectation, which should limit market reaction.”

Wells Fargo

“After rising 0.4% in February, we look for the CPI to moderate to a 0.2% gain in March. With the initial surge in oil/gasoline prices stemming from Russia’s invasion of Ukraine a full year behind us, CPI when measured on a year-over-year basis should fall to 5.1% in March from 6.0% in February. However, another elevated reading in the core CPI is likely to indicate that the recent trend in inflation is little improved. Excluding food and energy, we look for the CPI to rise 0.4% and remain close to 5% on a three-month annualized basis. A further slowdown in core inflation is likely coming as the year progresses, but we doubt it will be evident in this CPI release.”

Citi

“We expect an increase in core CPI in March that is on the border between 0.4% and 0.5% MoM, but at 0.456% the forecast would again round to 0.5% MoM with risks tilted towards the upside for most components though with modest downside risks for the largest subcomponent of shelter prices. Most forecasts over the next few months will likely be factoring in a gradual slowing in shelter prices that has long been expected (a large one-month drop is possible, but unlikely).”

Gold breached the psychological $2,000 barrier last week for the first time since the war in Ukraine broke out last year. Economists at UBS forecast the yellow metal at $2,100 by the end of the year.

Downside risks to the USD have risen alongside money market pricing of Fed rate cuts

“Gold tends to rise in periods when the US Dollar is weakening, and downside risks to the greenback have risen alongside money market pricing of Federal Reserve rate cuts.”

“While volatility can be expected in the near term, we now expect the precious metal to hit $2,100 by year-end, and $2,200 by March 2024.” 

Economists at ING expect steady outperformance of the Yen through the year and forecast USD/JPY at 128 by the end of June.

The Bank of Japan can add to the Yen’s appeal

“A lower USD/JPY is becoming the market’s conviction call. It covers both the potential for a sharp Fed easing cycle and frailty in the US financial system. Also, there is the wild card risk event of a change in BoJ policy. 

“At the 16 June meeting, we think the BoJ could shorten its yield curve target to 5-year from 10-year JGB yields. 10-year JGB yields would rise sharply, and the Yen would rally. That’s why we target 128 for USD/JPY in end-June.”

“One risk we see to the bearish USD/JPY call is energy prices. Our team is calling Brent to $110/bbl by year-end – a Yen negative.”  

The US Dollar slid for the fourth consecutive week last week, losing approximately 10% from its peak last year. In the weeks ahead, economists at TD Securities anticipate data to remain a critical determinant of the USD.

Short-term rallies should be met with skepticism

“The USD's downtrend could stall a bit in the short-term, aided by the expectations of another Fed hike next month. However, much will hinge on the near-term data releases, especially the March CPI print.”

“We continue to expect a deeper USD correction in the months ahead, so would use any rallies as opportunities to resell it.”

USD/BRL is pressing 5.00 and the Real has been one of the better EM FX performers over the last month. However, economists at ING expect the pair to stay above the 5.00 level.

New fiscal framework delivers a brief lift

“Helping the Real has been the positive reception of the new fiscal framework announced at the end of March. Having done its part, the government will now be leaning on the central bank to cut rates. So far, the central bank is still sounding hawkish given that inflation expectations are heading in the wrong direction.”

“BRL is enjoying a short honeymoon, but renewed pressure on the central bank or poor fiscal developments can easily end the rally.”

“We favour USD/BRL returning to the middle of a 5.00-5.50 range.”

• AUD/USD attracts some buying on Tuesday and snaps a five-day losing streak to a multi-week low.
• A generally positive risk tone undermines the safe-haven USD and benefits the risk-sensitive Aussie.
• Rising US bond yields limit the USD losses and keep a lid on any meaningful upside for the major.

The AUD/USD pair sticks to its intraday gains through the early part of the North American session and is currently placed around the 0.6660-0.6655 region, up nearly 0.25% for the day.

The US Dollar (USD) meets with some supply and stalls a four-day-old recovery trend from over a two-month low touched last week, which, in turn, is seen pushing the AUD/USD pair higher. A generally positive tone around the equity markets is seen as a key factor undermining the Greenback's relative safe-haven status and lending some support to the risk-sensitive Aussie.

The upside for the AUD/USD pair, however, remains capped amid signs that the post-COVID economic recovery in China was losing steam. The concerns were fueled by softer Chinese data, which showed that consumer inflation hit an 18-month low and producer price inflation contracted at a steady pace. This, in turn, acts as a headwind for the China-proxy Australian Dollar.

Apart from this, speculations that the Federal Reserve (Fed) may continue raising interest rates, for now, seem to have put a floor under the US Treasury bond yields. In fact, the current market pricing indicates a greater chance of another 25 bps lift-off at the next FOMC meeting in May. This lends some support to the USD and contributes to capping the AUD/USD pair, at least for now.

Traders also seem reluctant to place aggressive bets ahead of the release of the latest US consumer inflation figures and the FOMC meeting minutes on Wednesday. Investors this week will also confront the release of monthly jobs data from Australia on Thursday, followed by the US monthly Retail Sales on Friday, which should provide a fresh impetus to the AUD/USD pair.

Technical levels to watch

Economists at ING have been surprised by Sterling's strength in March. What now? GBP/USD may bounce around in a 1.20-1.25 range.

GBP/USD will struggle to sustain a move above 1.25 in the second quarter

“Based on our EUR/USD view for the second quarter, we suspect GBP/USD may bounce around in a 1.20-1.25 range. Events in the US, however, give us greater conviction that it trades at 1.28/1.30 later in the year as the Fed pushes through with easing.”

“An early pause from the BoE in May could also support the view that GBP/USD will struggle to sustain a move above 1.25 in the second quarter.”

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting review the latest portfolio results in Malaysia.

Key Takeaways

“Foreigners bought more MYR-denominated debt securities in Mar at MYR6.6bn (Feb: +MYR4.3bn), which helped to offset another month of net selling in equities (Mar: -MYR1.4bn, Feb: -MYR0.2bn). In 1Q23, foreigners piled up MYR11.4bn worth of Malaysian debt securities, the largest quarterly net purchases in two years with flows concentrating in Malaysian Government Securities (MGS, MYR9.7bn) and Government Investment Issues (GII, MYR4.6bn).”

“Bank Negara Malaysia (BNM)’s foreign reserves rose by USD1.2bn m/m to USD115.5bn as at end-Mar. This marks the highest FX reserves level since Mar 2022. It is sufficient to finance 5.1 months of imports of goods and services and is 1.1 time of total short-term external debt. BNM’s net short position in FX swaps narrowed for the first time in 15 months by USD0.3bn m/m to USD26.3bn (or 23.0% of FX reserves) as of Feb 2023.”

“Despite global banking sector turmoil easing and financial conditions stabilizing, we expect risk sentiment to remain cautious in the near term as markets continue to keep tabs on US data and market developments. Persistent repricing of Fed rate trajectory according to upcoming data points and news flows as well as China’s recovery momentum will continue to affect portfolio reallocation decision across regions including Malaysia.”

Federal Reserve (Fed) Bank of New York President John Williams said on Tuesday that they need to stay in "data-dependent mode," as reported by Reuters.

Key takeaways

"We see some slowing in demand for labor, but still high."

"Job growth is still quite strong."

"Inflation still way above our 2% goal, seeing it coming down mostly in goods and commodities."

"Some core services inflation ex-housing hasn't budged yet so we have our work cut out for us."

"Too soon to see changes in credit conditions and availability, not seeing strong signs of those effects happening yet."

"We've gotten policy to a restrictive stance, now we need to watch the data on retail sales, CPI and others."

"We will see what we need to do on hikes by assessing the data."

"We are somewhat restrictive on policy right now."

"I expect economy to grow at a modest rate this year."

"Bank failures have added to uncertainty in the outlook."

"One more rate hike is a reasonable starting place but we will be driven by the data."

"We really need to see underlying inflation come down."

"If inflation comes down, we will have to lower rates."

"Banking system has really stabilized after recent stresses."

Market reaction

The US Dollar stays on the back foot following these comments and the US Dollar Index was last seen losing 0.42% on the day at 102.10.

A further Dollar decline looks likely this year, although economists at ING suspect this is more a story for the second half when the Fed can declare that the inflation battle is won.

A case of when, not if the Dollar declines

“The collapse of two regional banks in the US has seen the Fed take action to address financial stability, while at the same time tightening rates to address monetary stability. We expect these two positions to collide in the second half of this year, where tighter credit conditions and greater evidence of a hard landing could see the Fed cut rates 100 bp in 4Q23. It is a question of when not if the Dollar declines.”

“We favour a 1.05-1.10 range over coming months. But the European financial sector looks better positioned than the US. Higher for longer European Central Bank rates target EUR/USD at 1.15 by year-end.”

• EUR/USD reverses part of the recent decline and retakes 1.0900.
• Further rebound could see the April high near 1.0973 revisited.

EUR/USD leaves behind two consecutive sessions with losses and advances past 1.0900 the figure on Tuesday.

The likelihood of extra advances appears favoured for the time being. Against that, the pair needs to clear the April high at 1.0973 (April 4) to put the key 1.1000 mark back on the radar and then challenge the YTD peak at 1.1032 (February 2).

Looking at the longer run, the constructive view remains unchanged while above the 200-day SMA, today at 1.0356.

EUR/USD daily chart

The International Monetary Fund said in its latest World Economic Outlook report that it revised the global real Gross Domestic Product growth for 2023 to 2.8% from 2.9% in January's report, per Reuters.

Additional takeaways

"IMF forecasts 2024 global growth at 3.0% vs 3.1% in January forecast."

"Plausible alternative scenario of more moderate lending pullback would cut growth by 0.3 percentage point from baseline."

"Banking system turmoil appears contained but further tightening of financial conditions would reduce growth."

"Severe tightening of financial conditions sparked by deeper banking system turmoil would slash 2023 global growth by 1.8 percentage points from baseline."

"IMF forecasts 2023 US growth at 1.6% vs 1.4% in January; 2024 growth seen at 1.1%."

"IMF forecasts Germany GDP to contract 0.1%, UK to contract 0.3% in 2023."

"IMF forecasts 2023 Eurozone growth at 0.8% vs 0.7% in January; 2024 output seen at 1.4%."

"IMF forecasts China 2023 growth at 5.2%, 2024 growth at 4.5%, both unchanged from January forecasts."

"IMF says forecasts 2023 Japan growth at 1.3% vs 1.8% in January due to slow Q4 2022 performance."

"Forecasts assume average oil price of $73/barrel in 2023; unclear if latest price of $85/barrel will be sustained."

"Inflation still too elevated compared to central bank targets, monetary policy should focus on bringing it down."

Market reaction

The US Dollar Index showed no immediate reaction to this report and was last seen losing 0.4% on the day at 102.15.

• USD/CAD reverses an intraday dip and climbs back above the 1.3500 mark.
• Softer Oil prices undermine the Loonie and act as a tailwind for the major.
• A positive risk tone weighs on the safe-haven USD and might cap the upside.

The USD/CAD pair attracts some buyers near the 1.3480 region on Tuesday and for now, seems to have stalled the overnight retracement slide from over a one-week high. Spot prices climb back above the 1.3500 psychological mark during the early North American session, albeit the intraday uptick lacks bullish conviction.

Crude Oil prices languish near a one-week low, which, in turn, is seen undermining the commodity-linked Loonie and lending some support to the USD/CAD pair. Data released earlier today showed China's consumer inflation hit an 18-month low and producer price inflation contracted at a steady pace. This suggested that a post-COVID recovery in the world's second-largest economy was losing steam and raised concerns about a recovery in fuel demand.

The upside for the USD/CAD pair, however, remains capped amid the emergence of fresh selling around the US Dollar (USD). A generally positive tone around the equity markets dents the Greenback's relative safe-haven status, though speculations that the Federal Reserve (Fed) may continue raising interest rates should help limit the downside. In fact, the markets are now pricing in a greater chance of another 25 bps lift-off at the next FOMC meeting in May.

The bets were lifted by the mostly upbeat US monthly employment details (NFP) released on Friday, which, for the time being, puts a floor under the US Treasury bond yields and could act as a tailwind for the USD. This, in turn, supports prospects for the resumption of the USD/CAD pair's recent recovery move from the 1.3400 mark, or its lowest level since February 16 touched last week. Traders, however, seem reluctant ahead of this week's key event/data risks.

The Bank of Canada (BoC) is scheduled to announce its monetary policy decision on Wednesday, which will be accompanied by the release of the latest consumer inflation figures from the US. The market focus, meanwhile, will remain glued to the FOMC meeting minutes, also due on Wednesday. This, along with the US monthly Retail Sales data on Friday, will play a key role in influencing the USD and provide a fresh directional impetus to the USD/CAD pair.

Technical levels to watch

Sterling carried over positive momentum from Q1 to April, resulting in GBP/USD crossing 1.25 for the first time since last June. Economists at Société Générale expect the pair to extend its race higher.

Further uptrend likely

“Hedge funds trimmed short GBP positions to 6.5% of OI last week, the lowest since the end of December. Short covering and seasonal factors could keep Cable in the ascendancy this week provided US CPI does not surprise to the upside.”

“Next potential hurdles are at projections of 1.2610 and 1.2750.”

“Defending last week's low at 1.2270 is crucial for persistence in up move.”

Head of Research at UOB Group Suan Teck Kin, CFA, assesses the latest interest rate decision by the RBI.

Key Takeaways

“The Reserve Bank of India (RBI) at its latest Monetary Policy Committee (MPC) meeting unexpectedly decided to pause its year-long rate hike campaign, keeping its benchmark repo rate at 6.50% while the market and we had expected potentially a final 25 bps hike.”

“The latest decision came amidst a backdrop of slower growth and persistent inflation pressures, with banking stresses in the US and Europe adding to the mix of uncertainty and volatility. While noting the need to assess the progress of its tightening so far, the RBI remarked that the pause is only for this meeting, and it is still focused on withdrawal of its accommodative policy.”

“Outlook – While the possibility of further rate increases remains on the table, we see a high likelihood of the RBI maintaining its rate pause, for now, at 6.50%. Incoming data, particularly consumer prices, as well as developments in the external environment will be the main factors of consideration for the upcoming decisions. The next MPC meeting is scheduled for 6-8 Jun 2023.”

India will release March Consumer Price Index (CPI) data on Wednesday, April 12 at 12:00 GMT and as we get closer to the release time, here are forecasts from economists and researchers of five major banks regarding the upcoming inflation data.

Inflation is expected at 5.8% year-on-year vs. 6.44% in February. If so, inflation would be the lowest since December and back within the 2-6% target range.

ANZ

“We expect both headline and core inflation at 5.9% YoY, or below 6% – the upper end of the official target range. This follows two months of inflation breaching the target range. Base effects turned favourable in February and became larger in March. We expect food inflation to have eased below 6% last month, although food prices likely rose in sequential terms. Overall, helped by base effects, it is likely that inflation will now average below 6% in Q2.”

Standard Chartered

“CPI inflation likely eased to 5.6% from 6.4% in February, on favourable base effects and a correction in food prices. However, core inflation likely stayed sticky at 6% on price pressures in Gold (and the broader personal care sub-segment) and communication (mobile tariff hikes), among others. Going forward, we expect inflation to remain in a broad range of 5-5.6% in FY24; inflation is likely to remain at sub-5% in April-June, albeit driven by favourable base effects. We believe the repo rate has peaked, following the surprise on-hold decision by the Monetary Policy Committee (MPC) in April. The MPC is unlikely to see the need to hike further unless inflation once again moves above or closer to the upper threshold of the mandated band of 2-6% (with 4% the medium-term target).”

SocGen

“India’s March 2023 CPI likely decelerated by 0.70%, as we are entering a period of high statistical base effect that will last for the next eight months. While average prices are still moving up, headline CPI inflation likely dropped to 5.7% YoY from 6.4% in February. Food prices appear to have come down due to sharply moderating vegetable prices. Spice and cereal prices remain high, though both appear to have peaked too. Despite the sharp disinflation, core inflation likely saw only a modest decline. Although goods price inflation has peaked, prices continue to rise despite aggregate domestic demand being weak. We continue to maintain that rising GST rates and a high level of corporate concentration will ensure that goods prices do not drop off sharply despite weak demand. Compared to goods inflation, service inflation appears modest. The other driver of core inflation is residential building and land prices.” 

• DXY fades part of the recent multi-day recovery and revisits 102.00.
• Further south now comes the monthly low near 101.40.

DXY gives away some of its recent marked gains and retreats to the boundaries of the 102.00 region, where initial contention appears to have emerged so far.

If the correction gathers extra steam, the index could then put the April low at 101.43 (April 5) to the test in the near term, while the breach of this level should open the door to a probable slide towards the 2023 low around 100.80 (February 2).

Looking at the broader picture, while below the 200-day SMA, today at 106.45, the outlook for the index is expected to remain negative.

DXY daily chart

Further downside in USD/IDR should meet firm contention around 14,830, according to Market Strategist Quek Ser Leang at UOB Group.

Key Quotes

“We highlighted last Monday (03 Apr, spot at 14,995) that ‘while conditions remain oversold, the weakness in USD/IDR has not stabilized’. We added, ‘barring a break above 15,230, USD/IDR could drop to 14,925 before stabilization is likely’. The anticipated USD/IDR weakness exceeded our expectations as it plummeted to 14,875 before closing on a soft note at 14,910 (-0.53%).”

“The weakness has yet to stabilize and USD/IDR could weaken further. However, February’s low of 14,830 is likely out of reach this week. Resistance is at 14,965; a break of 15,005 would indicate that the weakness has stabilized.”

• GBP/USD gains strong positive traction on Tuesday and snaps a four-day losing streak.
• A positive risk tone prompts some selling around the safe-haven USD and lends support.
• Bets for more Fed rate hikes should help limit the USD losses and cap any further gains.

The GBP/USD pair catches fresh bids on Tuesday and snaps a four-day losing streak to over a one-week low, around the 1.2345 region touched the previous day. The pair sticks to its strong intraday gains heading into the North American session and trades around the 1.2435-1.2440 area, just a few pips below the daily high.

The US Dollar (USD) meets with some supply and stalls a four-day-old recovery trend from over a two-month low touched last week, which, in turn, is seen pushing the GBP/USD pair higher. A generally positive tone around the equity markets is seen as a key factor undermining the Greenback's relative safe-haven status, though speculations that the Federal Reserve (Fed) may continue raising interest rates should help limit losses.

. In fact, the current market pricing indicates a greater chance of a 25 bps lift-off at the next FOMC monetary policy meeting in May and the bets were lifted by the mostly upbeat US employment details (NFP) released on Friday. This, for the time being, puts a floor under the US Treasury bond yields, which should further act as a tailwind for the buck and keep a lid on any further gains for the GBP/USD pair, at least for time being.

Furthermore, the recent mixed signals from the Bank of England (BoE) members over the next policy move might also hold back traders from placing aggressive bullish bets around the British Pound. Investors might prefer to move to the sidelines ahead of this week's release of the latest US consumer inflation figures and the FOMC meeting minutes, both scheduled on Wednesday, followed by the US Retail Sales data on Friday.

In the absence of any relevant market-moving economic releases on Tuesday, either from the UK or the US, the broader risk sentiment could play a key role in influencing the USD price dynamics. Apart from this, the broader risk sentiment, which tends to drive the demand for safe-haven assets, including the buck, might allow traders to grab short-term opportunities around the GBP/USD pair.

Technical levels to watch

GBP/USD rebounds firmly from early week low. The pair is set to enjoy further gains, economists at Scotiabank report.

Bull trend persists

“Solid, short-term gains for Cable give the intraday charts a positive look.”

“GBP/USD gains through the low 1.24 zone break the short-term trend decline in the Pound off of last week’s high and suggest the broader uptrend in spot is set to resume.”

“Support is 1.2400/10. Resistance is 1.2515.”

See: GBP/USD may struggle to sustain a break above 1.25 this quarter – ING

USD/CAD holds little changed around 1.35. But the pair’s price action looks positive for the Loonie, economists at Scotiabank report.

Firm resistance seen at 1.3520/25

“Trading volumes might be light but yesterday’s USD gains peaked and stalled fight around the 55-DMA via a ‘doji’ candle on the daily chart, implying a stall and (possibly) reversal in recent USD gains.” 

“Intraday price action adds to the soft look, with the USD easing below the base of the rising channel (bear flag) that has supported USD gains off the Mar 4 low just above 1.34. A low close today should see as softer USD tone follow.”

“USD/CAD resistance is firm at 1.3520/25.” 

• EUR/JPY adds to the ongoing rally beyond 145.00.
• Next on the upside comes the 2023 high near 145.70.

EUR/JPY advances for the fourth session in a row and breaks above the key barrier at 145.00 on Tuesday.

The continuation of the recovery should encourage the cross to challenge the 2023 top at 145.67 (March 31). The surpass of this level could put a potential test of the December 2022 high near 146.70 (December 15) back on the radar in the not-so-distant future.

So far, further upside looks favoured while the cross trades above the 200-day SMA, today at 141.89.

EUR/JPY daily chart

• US Dollar weakens against its major rivals following the Easter holiday.
• EUR/USD holds above key support despite the latest pullback.
• March CPI data from US could significantly impact US Dollar’s valuation.

The US Dollar (USD) stays on the back foot on Tuesday and weakens against its major rivals as investors gear up for the highly anticipated March Consumer Price Index (CPI) data from the US. The US Dollar Index, which closed the previous four trading days in positive territory, retreats toward 102.00, reflecting the lack of demand for the currency.  

Ahead of the weekend, the USD gathered strength as investors started to price in a 25 basis points (bps) US Federal Reserve (Fed) rate hike in May on the back of the upbeat March jobs report. With trading conditions normalizing after a long weekend, however, US Treasury bond yields started to push lower, making it difficult for the USD to continue to outperform its peers. Moreover, the improving risk mood seems to be putting additional weight on the USD’s shoulders.

Daily digest market movers: US Dollar struggles to remain attractive

• Nonfarm Payrolls in the US rose by 236,000 in March, slightly below the market expectation of 240,000. February’s print of 311,000 got revised higher to 326,000 from 311,000.
• Wage inflation in the US, as measured by Average Hourly Earnings, declined to 4.2% on a yearly basis from 4.6% in February. The Unemployment Rate ticked down to 3.5% with the Labor Force Participation Rate improving to 62.6% from 62.5%.
• The CME Group FedWatch Tool shows that markets are pricing in a 67% probability of a 25 bps Fed rate increase in May, compared to 73% on Monday.
• Federal Reserve Bank of Atlanta’s GDPNow model’s estimate for the first-quarter real Gross Domestic Product Growth (GDP) in the US rose to 2.2% from 1.5% on April 10.
• NY Fed President John Williams argued on Monday that the pace of Fed rate increases was not behind the issues surrounding the two collapsed banks back in March.
• NY Fed’s latest consumer survey revealed that the one-year inflation expectation climbed to 4.7% in March from 4.2% in February.
• Minneapolis Fed President Neel Kashkari, Philadelphia Fed President Patrick Harker and Chicago Fed President Austan Goolsbee will be delivering speeches on Monday.
• Inflation in the US, as measured by the Consumer Price Index (CPI) is forecast to decline to 5.2% in March from 6% in February. The Core CPI, which excludes volatile food and energy prices, is expected to rise by 0.4% on a monthly basis, compared to the 0.5% increase recorded in February. 

Technical analysis: US Dollar turns bearish against Euro 

EUR/USD closed in negative territory in the previous two trading days and touched its lowest level in a week at 1.0830 late Monday. The pair, however, managed to regain its traction on Tuesday and rose above the 1.0900 area. The pair’s near-term technical outlook remains bullish with the Relative Strength Index (RSI) indicator on the daily chart holding above 50. Moreover, EUR/USD has reversed its direction after coming in within a touching distance of the 20-day Simple Moving Average, which currently aligns as immediate support at 1.0830.

In case EUR/USD stabilizes above 1.0900, it is likely to face resistance at 1.0950 (static level) before targeting 1.1000 (end-point of the latest uptrend, psychological level) and 1.1035 (multi-month high set in early February).

On the downside, 1.0830 (20-day SMA) aligns as first support before 1.0800 (psychological level), 1.0740 (50-day SMA) and 1.0700 (100-day SMA).

How does Fed’s policy impact US Dollar?

The US Federal Reserve (Fed) has two mandates: maximum employment and price stability. The Fed uses interest rates as the primary tool to reach its goals but has to find the right balance. If the Fed is concerned about inflation, it tightens its policy by raising the interest rate to increase the cost of borrowing and encourage saving. In that scenario, the US Dollar (USD) is likely to gain value due to decreasing money supply. On the other hand, the Fed could decide to loosen its policy via rate cuts if it’s concerned about a rising unemployment rate due to a slowdown in economic activity. Lower interest rates are likely to lead to a growth in investment and allow companies to hire more people. In that case, the USD is expected to lose value.

The Fed also uses quantitative tightening (QT) or quantitative easing (QE) to adjust the size of its balance sheet and steer the economy in the desired direction. QE refers to the Fed buying assets, such as government bonds, in the open market to spur growth and QT is exactly the opposite. QE is widely seen as a USD-negative central bank policy action and vice versa.

USD trades broadly lower. The US Dollar Index (DXY) could accelerate its decline on a break under the 102 mark, economists at Scotiabank report.

Resistance aligns at 103.00/10

“While the USD is better offered, investors may not want to lean too hard on the currency ahead of the US CPI report tomorrow. The report could bring mixed news – clear progress in taming headline inflation but signs of stickier core inflation which may provide the USD some anchoring in the short run.”

“Technically, the sell-off in the DXY looks to have paused after a week or so of modest gains. The downtrend persists from a broader point of view, however, and may not take much encouragement to resume (below 102 on the index).” 

“Resistance for the DXY is 103.00/10.”

EUR/USD rises steadily from Monday’s low to regain the 1.09 area. Economists at Scotiabank still expect the world’s most popular currency pair to push above the 1.10 handle.

EUR/USD to retest mid-1.09 on sustained gains through 1.09 today

“Short-term trends look flat for EUR/USD but solid gains off the early week low for spot confers a slightly more positive spin on prospects and the longer run technical patterns remain bullish-leaning.”

“Sustained gains through 1.09 today should see the mid-1.09 are retested. A push to 1.10+ remains the objective for this move.”

Paring back of speculation over more immediate BoJ policy shift weighs on the Japanese Yen. However, the USDJPY is set to struggle at between 135 and 137, key resistance levels, economists at MUFG Bank report.

BoJ will abandon yield curve control this year

“The paring back of expectations for a more immediate shift to BoJ policy settings under new Governor Ueda will take some of the wind out the Yen’s sails, and make it harder for the JPY to extend its advance ahead of the BoJ’s policy meeting later this month. We are still of the view though that the BoJ will abandon yield curve control this year so any Yen weakness on the back of maintaining current policy settings is unlikely to prove sustainable.” 

“Furthermore, with US yields having peaked out, it should help dampen upside potential for USD/JPY in the near-term with important resistance levels coming in between 135.00 and 137.00.”

With the RBI on hold and the Fed likely to deliver another 25 bps hike in May, economists at Wells Fargo expect the Rupee to continue moving sideways in the short-term. Over the longerterm, an aggressive Fed easing cycle and broad-based USD depreciation should lead to INR strength.

Stable Rupee through Q2-2023

“With the RBI on hold and the Fed likely to deliver one last 25 bps hike in May, diverging paths for Fed-RBI monetary policy combined with lingering uncertainties should result in a stable Rupee through Q2-2023. We forecast the USD/INR exchange rate to hover near 82.25 through the end of the second quarter.”

“We believe the Federal Reserve is likely to lower interest rates at an aggressive pace starting in Q4 of this year, which should result in broad-based US Dollar weakness. This greenback depreciation should facilitate Indian Rupee strength over the medium-to-longer term, and we target a USD/INR exchange rate of 81.00 by the end of 2023 and 79.50 by the middle of 2024.”

• Gold price regains positive traction on Tuesday amid the emergence of fresh US Dollar selling.
• Bets for more rate hikes by the Federal Reserve could cap any meaningful gains for the metal.
• Traders also seem reluctant ahead of the US CPI report and the FOMC minutes on Wednesday.

Gold price attracts fresh buying on Tuesday and snaps a two-day losing streak to the $1,982-$1,981 region, or a three-day low touched the previous day. The XAU/USD sticks to its intraday gains through the first half of the European session and is currently placed just above the $2,000 psychological mark, near the top end of the daily trading range.

Weaker US Dollar helps Gold price to regain positive traction

The US Dollar (USD) meets with some supply and stalls a four-day-old recovery trend from over a two-month low touched last week amid some repositioning trade ahead of the latest consumer inflation figures from the United States (US) on Wednesday. This, in turn, is seen as a key factor that benefits the US Dollar-denominated Gold price and remains supportive of the intraday positive move. That said, any meaningful upside seems elusive amid speculations that the Federal Reserve (Fed) may continue raising interest rates.

Rising bets for additional rate hikes by Federal Reserve could cap gains

In fact, the current market pricing indicates a greater chance of another 25 basis points (bps) lift-off at the next  Federal Open Market Committee (FOMC) monetary policy meeting in May. The bets were lifted by the mostly upbeat US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report, released last Friday. This, for now, seems to have put a floor under the US Treasury bond yields, which should act as a tailwind for the Greenback and cap any further gains for the non-yielding Gold price.

Investors await CPI report from United States and FOMC minutes

Hence, the market focus will remain glued to the FOMC meeting minutes, due on Wednesday, which will be preceded by the release of the crucial US Consumer Price Index (CPI) report on Wednesday. This might influence market expectations about the Fed's next policy move, which, in turn, will drive the USD demand and provide some meaningful impetus to Gold price. Traders this week will further take cues from the release of the US monthly Retail Sales data on Friday to determine the near-term trajectory for the XAU/USD.

Gold price technical outlook

From a technical perspective, any subsequent move up is likely to face stiff resistance near the $2,020 horizontal zone. This is followed by over a one-year high, around the $2,032 area touched last week, which if cleared will be seen as a fresh trigger for bullish traders. Gold price could then accelerate the momentum towards the $2,048-$2,050 intermediate hurdle en route to the all-time high, around the $2,070-$2,075 region.

On the flip side, the $1,990-$1,980 zone now seems to have emerged as an immediate strong support. A convincing break below should pave the way for a slide towards the $1,955-$1,950 region before the Gold price eventually drops to the next relevant support near the $1,935-$1,934 area. The corrective decline could get extended further towards the $1,918-$1,917 horizontal zone en route to the $1,900 round-figure mark.

Key levels to watch

The Bank of Korea (BoK) kept its policy rate on hold at 3.50%. Economists at TD Securities believe that the Won weakness will be short-lived as the USD/KRW pair faces stubborn resistance at its 200-Day Moving Average.

BoK maintains hawkish bias despite pause

“The BoK maintained its policy rate at 3.50% in an unanimous decision. In the accompanying statement, BoK didn't give any sense it would consider easing soon, seeing a ‘restrictive stance as warranted for considerable time’ and keeping open the option to hike further.” 

“We think the BoK will see the 300 bps of hikes in its current cycle as sufficient to slow inflation going forward as the economy weakens, without needing to hike further. We maintain our bigger than consensus expectation of 75 bps easing in Q4 this year, with markets only pricing in a small probability of cuts.”

“Today's outcome will do little to help KRW, though we continue to believe its weakness will be short-lived as US yields fall back.”

“Strong resistance for USD/KRW is likely around its 200-DMA at 1,323.73.”

Market Strategist Quek Ser Leang at UOB Group suggests USD/MYR is likely to face extra consolidation between 4.3930 and 4.4350 in the near term.

Key Quotes

“Last week, we expected USD/MYR to trade in a range between 4.38 00 and 4.4350.”

“Our view for USD/MYR to trade in a range was not wrong even though USD/MYR traded in a narrower range than expected (4.3920-4.4310). Further range trading appears likely, expected to be between 4.3930 and 4.4350.”

Kit Juckes, Chief Global FX Strategist at Société Générale, analyzes CFTC data,  highlighting the Canadian Dollar as an attractive currency.

Long EUR/USD may be a frustrating ride

“There isn’t much wrong with being a Dollar bear – relative monetary policy prospects and the high historic Dollar valuation are both going to help – but long EUR/USD (in spot) may be a frustrating ride as positioning causes frequent pullbacks.”

“The speculative market’s still short GBP and CHF, so maybe those are better bets, though the extent of divergence from the EUR/USD trend will be limited. For those who want to buy a currency which is properly unloved, the CFTC data point towards the CAD.”

EUR/USD logjammed at 1.09. Economists at Société Générale expect the pair to see tedious price action.

Rate cuts in the US later this year would help EUR/USD to move beyond 1.10

“EUR/USD continues to struggle above 1.09 but to the downside we think risks are limited which could be a recipe for sideways shuffle and subdued volatility until the May ECB and FOMC meetings.”

“The 2y US yield must ideally either retrace to 3.64%/3.55% or advance through 4.15%/4.25% to break the tedium in EUR/USD.”

“Rate cuts in the US later this year (not our base case) would help EUR/USD to move beyond 1.10. Conviction of a decisive break remains low, however, and buyers are unlikely to test the upper end of the range until there is greater visibility on where US and Eurozone interest rates peak and whether a recession in the US is forthcoming or not.” 

• NZD/USD struggles to capitalize on its modest intraday gains, though the downside seems limited.
• The softer Chinese inflation figures fuel concerns about slowing growth and weighs on the major.
• A positive risk tone undermines the safe-haven USD and lends support to the risk-sensitive Kiwi.

The NZD/USD pair attracts fresh sellers following an intraday uptick to the 0.6235 area on Tuesday and drops to the lower end of its daily trading range during the first half of the European session. The pair is currently placed around the 0.6215-0.6210 region and remains well within the striking distance of a nearly two-week low touched on Monday.

Data released earlier today showed China's consumer inflation hit an 18-month low and producer price inflation contracted at a steady pace amid growing signs that a post-COVID economic recovery was losing steam. This, in turn, is seen weighing on antipodean currencies, including the New Zealand Dollar, though broad-based US Dollar (USD) weakness helps limit the downside for the NZD/USD pair, at least for the time being.

A generally positive tone around the equity markets is seen as a key factor undermining the Greenback's relative safe-haven status and lending some support to the risk-sensitive Kiwi. The USD downfall, however, is likely to remain cushioned amid speculations that the Federal Reserve (Fed) may continue raising interest rates. In fact, the current market pricing indicates a greater chance of a 25 bps lift-off at the next FOMC monetary policy meeting in May and the bets were lifted by the mostly upbeat US employment details (NFP) released on Friday.

The prospects for further policy tightening by the Fed, meanwhile, puts a floor under the US Treasury bond yields, which should further act as a tailwind for the buck and cap the upside for the NZD/USD pair. The mixed fundamental backdrop warrants some caution before placing aggressive directional bets ahead of this week's important releases from the US - the latest consumer inflation figures and the FOMC meeting minutes on Wednesday. This, along with the US Retail Sales data on Friday, will drive the USD demand and provide a fresh directional impetus to the major.

Technical levels to watch

Eastern European currencies (CEE) have limited upside potential, in the opinion of economists at ING.  

CEE rally is slowing down

“Positive conditions still prevail in the CEE FX market, however, we expect the current rally to start running out of steam.”

“EUR/USD is struggling to reach 1.10 and we don't see much room for further risk premium reduction in the EM space. Moreover, inflation numbers this week may return dovish expectations to the region, which should put the brakes on the current FX rally.”

“The Czech Koruna and the Hungarian Forint remain our favourites, but the room for appreciation is getting thinner. For now, we see a gravity point at 23.30 EUR/CZK and 375 EUR/HUF.”

In the view of Market Strategist Quek Ser Leang at UOB Group, a sustained advance north of 34.55 in USD/THB appears out of favour for the time being.

Key Quotes

“We highlighted last Monday (03 Apr, spot at 34.35) that “USD/THB is likely to edge higher but a sustained rise above 34.55 is unlikely”. Our expectation did not materialize and USD/THB traded between 33.78 and 35.46 before ending the week slightly higher at 34.20 (+0.16%).”

“The underlying tone still appears to be firm and we continue to h old the view that USD/THB could edge higher this week. However, a sustained rise above 34.55 still appears unlikely (next resistance is at 34.75). On the downside, a breach of 34.05 would indicate that USD/THB is not strengthening further.”

The AUD languished in Q1 and indifferent price action marked the start of Q2. Economists at Société Générale expect AUD/USD to remain below the 0.70 mark.

RBA kept policy rate on hold

“The RBA kept rates unchanged as expected but wild swings in US bond yields and the mixed start to April for Chinese assets (HSCEI) and industrial metals do not inspire confidence for a sustained return of AUD/USD over 0.70 in the short-term.”

“The next signposts for the AUD besides US bond yields and Chinese data is the Statement on Monetary Policy and updated macro forecasts on 5 May. This follows the next rate meeting on 2 May. In February, the RBA revised up wage growth for this year to 4.2% and core inflation to 4.3%. The growth forecast for this year was revised up to 1.6%.”

“The minutes of the last meeting will be released on 18 April. The level of unanimity or discord around the April pause will give us a better indication of the likelihood that rates have peaked.” 

• EUR/GBP seesaws between tepid gains/minor losses through the early part of the European session.
• Bets for more ECB rate hikes, the upbeat Eurozone data underpin the Euro and lend some support.
• Acceptance below the 100-day SMA warrants some caution before placing aggressive bullish bets.

The EUR/GBP cross struggles for a firm intraday direction on Tuesday and oscillates in a narrow trading band, just above the mid-0.8700s through the first half of the European session.

The Sterling Pound's relative outperformance comes amid the upbeat report by the British Retail Consortium (BRC), which showed that like-for-like retail sales rose by 4.9% in March and the total retail spending increased by 5.1% YoY. This, in turn, is seen as a key factor acting as a headwind for the EUR/GBP cross. That said, the recent mixed signals from the Bank of England (BoE) members over the next policy move hold back traders from placing aggressive bets.

Apart from this, a strong pickup in demand for the shared currency, bolstered by rising bets for additional rate hikes by the European Central Bank (ECB) and the better-than-expected data, is seen lending support to the EUR/GBP cross. In fact, the Eurozone Sentix Investor Confidence index improves from -11.1 in March to -8.7  in April against the -9.9 expected. Furthermore, the Current Situation Index rose for the sixth straight month, to -4.3 in April from the -9.3 previous.

The aforementioned fundamental backdrop supports prospects for some meaningful upside for the EUR/GBP cross. That said, the recent breakdown and acceptance below the 100-day Simple Moving Average (SMA), along with the range-bound price action witnessed over the past week or so, warrants some caution for bullish traders. The focus now shifts to the BoE Governor Andrew Bailey's scheduled speeches on Wednesday and Thursday, which might provide a fresh impetus.

Technical levels to watch

• Eurozone Retail Sales came in at -0.8% MoM in March vs. -0.8% expected.
• Retail Sales in the bloc arrived at -3.0% YoY in March vs. -3.5% expected.

Eurozone’s Retail Sales declined by 0.8% MoM in March versus -0.8% expected and 0.8% previous, the latest official figures released by Eurostat showed on Tuesday.

On an annualized basis, the bloc’s Retail Sales came in at -3.0% in March versus -1.8% recorded in February and -3.5% expected.

FX implications

The Euro finds some demand on the upbeat Eurozone data. At the time of writing, the major is trading at 1.0909, up 0.48% on the day

About Eurozone Retail Sales

The Retail Sales released by Eurostat are a measure of changes in sales of the Eurozone retail sector. It shows the performance of the retail sector in the short term. Percent changes reflect the rate of changes of such sales. The changes are widely followed as an indicator of consumer spending. Usually, positive economic growth anticipates "Bullishness" for the EUR, while a low reading is seen as negative, or bearish, for the EUR.

The GBP/USD pair has regained the 1.24 handle. However, economists at ING expect Cable to remain below the 1.25 level this quarter.

EUR/GBP set to move back to the 0.90 zone

“The EUR/GBP pair has just about been keeping its head above the 0.8750 support level. We favour a return to the 0.89 area.”

“And our base case is that GBP/USD may struggle to sustain a break above 1.25 this quarter – whilst the Fed is still in the last stages of tightening.”

• EUR/USD leaves behind Monday’s retracement and retakes 1.0900.
• The dollar struggles to extend the rebound amidst lower yields.
• EMU Investor Confidence surprised to the upside in April.

The single currency regains upside traction and lifts EUR/USD back above the 1.0900 yardstick on turnaround Tuesday.

EUR/USD looks at data, USD

EUR/USD so far reverses two consecutive daily pullbacks and manages to advance to the area beyond 1.0900 the figure on the back of some corrective weakness in the greenback and the marked rebound in the risk complex.

Also collaborating with the bounce in the pair emerges another positive performance of the German 10-year Bund yields, which approach the 2.30% region and add to Thursday’s gains.

In the meantime, investors continue to gauge a most likely 25 bps rate hike by both the ECB and the Federal Reserve. The likeliness of a move on rates on the latter has gathered pace following the solid US jobs report published on Friday.

Closer to home, the Investor Confidence tracked by the Sentix Index in the broader Euroland improved to -8.7 in April, while Retail Sales in the region are due later.

What to look for around EUR

EUR/USD clings to the 1.0900 region following the marked retracement seen in the last couple of sessions.

In the meantime, price action around the single currency should continue to closely follow dollar dynamics, as well as the incipient Fed-ECB divergence when it comes to the banks’ intentions regarding the potential next moves in interest rates.

Moving forward, hawkish ECB-speak continue to favour further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region.

Key events in the euro area this week: EMU Sentix Index, Retail Sales (Tuesday) – Germany Final Inflation Rate, EMU Industrial Production (Thursday).

Eminent issues on the back boiler: Continuation, or not, of the ECB hiking cycle. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is gaining 0.44% at 1.0901 and a break above 1.0973 (monthly high April 4) would target 1.1032 (2023 high February 2) en route to 1.1100 (round level). On the flip side, the next support comes at 1.0788 (monthly low April 3) followed by 1.0746 (55-day SMA) and finally 1.0712 (low March 24).

The USD/KRW pair is in vicinity to intermittent resistance zone at 1325/1330. A break above here would open up further gains toward 1357, then 1394/97, analysts at Société Générale report.

Defence of 1288 would be crucial for averting a deeper pullback

“Recent pivot low of 1288 is a short-term support.”

“In case the pair establishes itself above 1325/1330, the phase of rebound could extend towards 1357, the 61.8% retracement from last October and 1394/1397.”

“Defence of 1288 would be crucial for averting a deeper pullback.”

Antje Praefcke, FX Analyst at Commerzbank, believes that the Swedish Krona is undervalued and expects the Riksbank to intervene in case of further SEK weakness. 

Riksbank proved that it is decisive in its fight against inflation

“In my view SEK is still trading at levels that remain too low, as the Riksbank took a hawkish decision in February. Everything all told it proved that it is decisive in its fight against inflation.”

“I would like to warn all those who are bashing SEK a little too much, as the Riksbank has already mentioned the weak Krona as an additional risk for inflation and considers it to be under-valued.”

“I do not want to exclude that in case of further SEK weakness the Riksbank might adopt a tougher tone regarding the exchange rate or even intervene on the FX market. I for my case would not be surprised in case of interventions. Many others might be.”

The Eurozone Sentix Investor Confidence index improves to -8.7  in April from -11.1 in February vs. -9.9 expected.

The Current Situation Index rose for the sixth month in a row in April, to -4.3 from -9.3. An Expectations Index, on the other hand, held steady at -13.0.

Key takeaways

"There is no doubt that the Eurozone economy has weathered the winter months better than many feared in the fall.”

“The mild winter and efforts to conserve energy helped prevent a dangerous energy shortage.”

EUR/USD reaction 

The shared currency is unaffected by the upbeat Eurozone Sentix data. EUR/USD is trading at 1.0900, up 0.38% on the day.

• USD/JPY retreats from over a three-week high touched on Monday amid a modest USD weakness.
• A generally positive risk tone could undermine the safe-haven JPY and lend support to the major.
• The divergent Fed-BoJ policy outlook also warrants caution before placing aggressive bearish bets.

The USD/JPY pair comes under some selling pressure on Tuesday and erodes a part of the previous day's strong gains to the 133.85 region, or its highest level since mid-March. Spot prices drop to a fresh daily low, around the 133.00 round-figure mark during the early part of the European session and for now, seem to have snapped a three-day winning streak.

The US Dollar (USD) meets with some supply and stalls a four-day-old recovery trend from over a two-month low touched last week, which, in turn, is seen dragging the USD/JPY pair lower. The USD downtick, however, seems limited amid speculations that the Federal Reserve (Fed) may continue raising interest rates. In fact, the current market pricing indicates a greater chance of a 25 bps lift-off at the next FOMC monetary policy meeting in May and the bets were lifted by the mostly upbeat US employment details (NFP) released on Friday.

The prospects for further policy tightening by the Fed, meanwhile, puts a floor under the US Treasury bond yields, which should further act as a tailwind for the Greenback. Apart from this, the Bank of Japan's (BoJ) dovish near-term outlook, along with a generally positive tone around the equity markets, could undermine the safe-haven Japanese Yen (JPY) and help limit losses for the USD/JPY pair. It is worth recalling that the new BoJ Governor Kazuo Ueda said on Monday it was appropriate to maintain the ultra-loose stance as inflation has yet to hit 2% as a trend.

Traders might also refrain from placing aggressive directional bets and prefer to move to the sidelines ahead of this week's key data/event risks from the US - the release of consumer inflation figures and the FOMC meeting minutes on Wednesday. This, along with the US Retail Sales report on Friday, will play a key role in influencing the USD price dynamics and provide a fresh directional impetus to the USD/JPY pair. This makes it prudent to wait for strong follow-through selling before positioning for any meaningful slide in the absence of any relevant data on Tuesday.

Technical levels to watch

There is still room for USD/CNH to extend further the current 6.8500-6.9200 range, comment UOB Group’s Economist Lee Sue Ann and Market Strategist Quek Ser Leang.

Key Quotes

24-hour view: “We expected USD to trade sideways in a range of 6.8680/6.8950 yesterday. USD subsequently traded in a range of 6.8750/6.8963. The firm underlying tone suggests USD could test 6.9050 before the risk of a more sustained pullback increases. The major resistance at 6.9200 is unlikely to come under threat. On the downside, a breach of 6.8790 would indicate that the current upward pressure has eased.”

Next 1-3 weeks: “USD traded sideways and in a quiet manner for the past few days. The consolidative price actions suggest further sideways trading, likely between 6.8500 and 6.9200.”

EUR/USD is trading not much weaker than prior to the US labor market report on Friday. Economists at ING believes that the pair can advance toward the 1.0930/50 zone today.

1.10 is holding EUR/USD for now

“Recent public holidays may well have played a factor in keeping EUR/USD below 1.10 and the pair only saw a muted reaction to what was a good US March NFP release last Friday. Potentially, EUR/USD could have come a lot lower on this after it firmed up expectations for a 25 bps Fed hike on 3 May. Instead, EUR/USD is trading in a narrow range and waiting for its next major input, probably from the western side of the Atlantic.”

“EUR/USD can edge back up to the 1.0930/50 area today assuming that equities stay mildly bid and the US NFIB data emerges on the soft side.”

Here is what you need to know on Tuesday, April 11:

With trading conditions normalizing following the Easter holiday, the US Dollar (USD) is having a difficult time gathering strength against its rivals on Tuesday. Retail Sales data for March will be featured in the European economic docket. In the second half of the day, several FOMC policymakers, including Philadelphia Fed President Patrick Harker and Minneapolis Fed President Neel Kashkari, will be delivering speeches.

On Monday, rising US Treasury bond yields and the risk-averse market environment helped the USD outperform its rivals. The US Dollar Index (DXY) registered gains for the fourth straight day and the 10-year US Treasury bond yield rose above 3.4%. Early Tuesday, the DXY stays in negative territory slightly above 102.00 and the 10-year yield holds steady at around 3.4%. Meanwhile, US stock index futures trade marginally higher on the day and the Euro Stoxx 50 is up 0.6%, pointing to an upbeat market mood.

In the Asian trading hours, the data from China revealed that the annual Consumer Price Index (CPI) declined to 0.7% in March from 1% in February. This data, however, failed to trigger a noticeable market reaction.

EUR/USD touched its lowest level in a week at 1.0830 on Monday but managed to closed the day above 1.0850. The pair preserves its recovery momentum and early Tuesday and trades in positive territory at around 1.0900.

After having declined below 1.2400 on Monday, GBP/USD gained traction and climbed toward 1.2450 in the early European morning on Tuesday.

Gold price fell sharply on Monday pressured by rising US Treasury bond yields. XAU/USD reversed its direction during the Asian trading hours on Tuesday and advanced above $2,000.

USD/JPY rose sharply and gained more than 100 pips on Monday. The pair has lost its bullish momentum and retreated to the 133.00 area early Tuesday. Bank of Japan's new Governor Kazuo Ueda said on Monday that they want to avoid a sudden normalization in monetary policy as it would cause a big impact on markets.

Bitcoin gathered bullish momentum and gained nearly 5% on Monday. BTC/USD extended its rally early Tuesday and advanced beyond $30,000 for the first time since June. Ethereum rose early 3% and continued to push higher on Tuesday. ETH/USD was last seen rising nearly 1% on the day at around $1,930.

We were able to experience the new governor of the Bank of Japan (BoJ), Kazuo Ueda, in his new role for the first time yesterday. Everything remains unchanged. That was JPY-negative initially. Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, analyzes the management of JPY risks.

Ueda leaves everything unchanged

“What he had to say was in no way positive for JPY, as he underlined that he would continue his predecessor’s ultra-expansionary monetary policy. The indicator of this is the yield curve control (YCC) which would probably be the first element to change in a possible exit scenario. However, Ueda rejected this kind of change. In other words: everything remains unchanged.”

“Tthe Yen is only likely to appreciate long-term if there is this early move away from current monetary policy. Otherwise, it will mean: If the BoJ waits for too long, the Yen might easily suffer despite increased (real) yields. Or inflation eases back below the BoJ’s target level (2%). At that point we would be back to square one, which means a move away from the ultra-expansionary monetary policy would be unlikely. Short, medium and long-term.”

“Anyone who has already read the IMF’s latest "World Economic Outlook" and who follows its view might come to the conclusion that after the current inflation shock has worn off real yields in the rest of the world will be back at low levels. Followers of that view might not be excessively JPY-pessimistic, as the real yield disadvantage of the Yen would be reasonably moderate in that case.”

• AUD/USD regains positive traction and snaps a five-day losing streak to over a three-month low.
• The upbeat domestic data, along with a modest USD weakness, lend some support to the major.
• Bets for more rate hikes by the Fed should limit the USD losses and cap the upside for the pair.

The AUD/USD pair attracts some buyers on Tuesday and snaps a five-day losing streak to over a three-week low, around the 0.6620 region touched the previous day. The pair maintains its bid tone through the early part of the European session and is currently placed near the top end of the daily trading range, around the 0.6665-0.6670 area, up nearly 0.50% for the day.

The Australian Dollar gets a goodish lift after domestic data indicated an improvement in consumer sentiment in the wake of the Reserve Bank of Australia's (RBA) rate-hike pause earlier this month. In fact, the Westpac-Melbourne Institute Consumer Sentiment index bounced from near-record lows and jumped 9.4% to 85.8 in early April, recording its fastest rise since late-2020. Adding to this, the National Australia Bank Business Confidence Index improved to -1 from -4 previously, suggesting that the economy is still holding up.

Apart from this, a generally positive tone around the equity markets undermines the safe-haven US Dollar (USD) and further benefits the risk-sensitive Aussie. The USD downtick, however, is likely to remain cushioned amid speculations that the Federal Reserve (Fed) may continue raising interest rates. In fact, the current market pricing indicates a greater chance of a 25 bps lift-off at the next FOMC monetary policy meeting in May and the bets were lifted by the mostly upbeat US employment details (NFP) released on Friday.

The prospects for further policy tightening by the Fed, meanwhile, puts a floor under the US Treasury bond yields, which should further act as a tailwind for the Greenback and contribute to capping gains for the AUD/USD pair. Traders might also refrain from placing aggressive bets and prefer to wait for this week's important releases from the US - the latest consumer inflation figures and the FOMC meeting minutes on Wednesday. This, along with the US Retail Sales data on Friday, will influence the near-term USD price dynamics.

In the meantime, the US bond yields will drive the USD demand and provide some impetus to the AUD/USD pair. Traders will further take cues from the broader risk sentiment to grab short-term opportunities. Nevertheless, the fundamental backdrop makes it prudent to wait for strong follow-through buying before confirming that the recent rejection slide from the 100-day Simple Moving Average (SMA) has run its course.

Technical levels to watch

Considering advanced prints from CME Group for natural gas futures markets, open interest went down for the second straight session on Monday, this time by nearly 8K contracts. Volume, on the other hand, rose by around 170.9K contracts, adding to the previous daily build.

Natural Gas: Further consolidation in store near term

Prices of the natural gas started the new trading week in a positive foot. However, the marked uptick was on the back of shrinking open interest and increasing volume, allowing for the continuation of the current range bound theme for the time being. On the downside, the next target remains at the 2023 low near $1.97 per MMBtu (February 22).

Today's session will focus on US small business optimism ahead of important US releases later in the week. Economists at ING expect the US Dollar to stay mildly offered.

A further drop in pricing intentions could soften the Dollar slightly

“For today, the focus will be on the NFIB small optimism index. Any sharp fall in optimism and especially a further drop in pricing intentions could soften the US Dollar slightly.”

“US Dollar Index (DXY) can probably drift back to the 102.00 area.”

• Silver remains confined in a narrow trading band for the fourth straight day on Tuesday.
• The technical setup favours bullish traders and supports prospects for additional gains.
• Any meaningful slide is likely to find decent support near the $24.40-30 horizontal zone.

Silver extends its sideways consolidative price move for the fourth straight day on Tuesday and holds steady around the $25.00 psychological mark through the early European session.

The Relative Strength Index (RIS) on the daily chart is still flashing overbought conditions and holding back bullish traders from placing fresh bets around the XAG/USD. That said, last week's sustained breakout through the $24.30-$24.40 strong horizontal barrier supports prospects for an extension of the upward trajectory witnessed over the past month or so.

Hence, the range-bound price action might still be categorized as a bullish consolidation phase in the wake of the recent rally to a nearly one-year high touched last week. The constructive near-term technical setup suggests that the path of least resistance for the XAG/USD is to the upside and any meaningful corrective pullback is more likely to attract fresh buyers at lower levels.

Some follow-through buying beyond the YTD peak, around the $25.10-$25.15 area, will reaffirm the positive outlook and lift the XAG/USD further towards the $25.35-$25.40 region. The momentum could get extended towards the $26.00 mark en route to the next relevant hurdle near the $26.20 area, the $26.40-$26.50 zone and the 2022 high, just ahead of the $27.00 mark.

On the flip side, any corrective slide is likely to remain limited near the $24.40-$24.30 resistance-turned-support, which should now act as a pivotal point. A convincing break below could make the XAG/USD vulnerable to weaken below the $24.00 mark and test the $23.60-$23.55 support area before eventually dropping to the $23.15 zone en route to the $23.00 round figure.

Silver 4-hour chart

Key levels to watch

Open interest in gold futures markets shrank for the second session in a row on Monday, this time by around 2.6K contracts according to preliminary readings from CME Group. Volume followed suit and dropped for the sixth consecutive session, now by around 12.6K contracts.

Gold now retargets $2000 and above

Gold started the week in a negative fashion amidst shrinking open interest and volume, which suggests that the continuation of the decline seems not favoured for the time being. Against that, bullion should retarget the key $2000 mark per ounce troy and beyond in the very near term.

• Natural Gas price grinds higher after rising the most in a month the previous day.
• Clear break of 100-SMA, one-week-old descending trend line joins bullish MACD signals to lure XNG/USD buyers.
• 1.5-month-long horizontal hurdle comprising 200-SMA appears a tough nut to crack for Natural Gas buyers.

Natural Gas (XNG/USD) remains mildly bid around the higher levels in two weeks as it grinds higher past short-term key resistance confluence, now support around $2.30, during early Tuesday in Europe. In doing so, the energy instrument bounces off seven-week-old horizontal support.

The first sustained break of the 100-SMA in nearly a month joins the XNG/USD run-up beyond a one-week-old descending trend line to lure Natural Gas buyers. Adding strength to the upside bias are the bullish MACD signals.

With this, the Natural Gas price is all set to challenge the six-week-old horizontal resistance area including the 200-SMA, around $2.47-48 by the press time.

Following that, the quote’s run-up towards the mid-March swing high of around $2.75 and then to the previous monthly peak of $3.08 can’t be ruled out. That said, March 08 peak surrounding $2.78 can act as an intermediate halt during the run-up between $2.75 and $3.08.

On the flip side, the resistance-turned-support confluence restricts the short-term downside of the Natural Gas price to around $2.28.

Should the quote drops back below $2.28, the aforementioned horizontal support comprising multiple levels marked since late February, around $2.13-12, will be important to watch as it holds the key to the commodity’s fall towards the $2.00 round figure.

Natural Gas Price: Four-hour chart

Trend: Further upside expected

• Gold price has scaled to near $2,000.00 amid further correction in the USD Index.
• S&P500 futures have added some gains in Asia, portraying improved risk appetite.
• Gold price has managed to surpass the 20-EMA, which indicates that the short-term trend has turned bullish.

Gold price (XAU/USD) has taken its recovery to near the psychological resistance of $2,000.00 in the Asian session. The precious metal has regained traction as investors have ignored hawkish Federal Reserve (Fed) bets fueled after the release of United States Employment data last week.

The street seems convinced about one more 25 basis points (bps) rate hike from the Fed as the US inflation is expected to remain stubborn amid upbeat demand for labor. More than 70% of investors are anticipating a rate hike of 25 bps, which will push rates to 5.00-5.25%, according to the CME Fedwatch tool.

Meanwhile, S&P500 futures have added some gains in Asia, portraying improved risk appetite of the market participants. US equities recovered dramatically on Monday after a gap-down opening due to higher volatility inspired by the extended weekend.

The US Dollar Index (DXY) is working on defending its immediate support of 102.30 after a sheer contraction. Also, 10-year US Treasury yields have dropped below 3.41%.

For further guidance, US Inflation data will be keenly watched. As per the consensus, the headline inflation will soften to 5.2% from the former release of 6.0%. Also, monthly headline CPI would decelerate to 0.3% from 0.4% reported earlier. While annual core inflation that excludes oil and food prices could surprisingly jump to 5.6% from the former release of 5.5%. Headline inflation is expected to soften due to weaker oil prices recorded in March.

Gold technical analysis

Gold price has shown a decent recovery after testing the breakout region of the Symmetrical Triangle chart pattern formed on an hourly scale. The precious metal is marching towards the horizontal resistance plotted from April 05 high at $2,032.00.

Gold price has managed to surpass the 20-period Exponential Moving Average (EMA) at $1,995.00, which indicates that the short-term trend has turned bullish.

Also, the Relative Strength Index (RSI) (14) has rebounded after dropping below 40.00, which indicates the presence of responsive buyers.

Gold hourly chart

UOB Group’s Economist Lee Sue Ann and Market Strategist Quek Ser Leang note further downside in EUR/USD should meet firm contention around 1.0790.

Key Quotes

24-hour view: “We did not expect the rapid drop in EUR to 1.0830 (we were expecting it to trade sideways). While the sharp drop appears to be running ahead of itself, there is scope for EUR to retest the 1.0830 level before a more sustained rebound is likely. The next major support at 1.0785 is unlikely to come into view. On the upside, a breach of 1.0895 would suggest that 1.0830 is not coming back into view for now.”

Next 1-3 weeks: “Yesterday (10 Apr, spot at 1.0905), we held the view that EUR is likely to consolidate between 1.0870 and 1.0970 before heading higher at a later stage. We did not anticipate the rapid drop below 1.0840 (low has been 1.0830). Downward momentum has improved somewhat and EUR is likely to edge lower for the time being. In view of the mild downward pressure, any decline is likely limited to a test of 1.0785. EUR is likely to edge lower as long as it stays below the ‘strong resistance’ level, currently at 1.0940 in the next few days.”

• Asia-Pacific markets remain firmer outside China as trade, macro headlines favor risk-on mood.
• Aussie trade deal, data joins optimism surrounding Japan to underpin bullish bias.
• Fed bets remain firmer even as NY Fed’s Williams doubts rate hike concerns.
• Softer China inflation data, hopes of firmer growth in Asia favor optimists.

Market sentiment in the Asia-Pacific zone appears mostly firmer on Tuesday as traders cheer upbeat macros and hopes of cordial foreign trade relations in the region. While portraying the mood, the MSCI’s index of Asia-Pacific shares outside Japan prints mild gains to extend the previous day’s rebound from the lowest levels in a fortnight.

That said, the receding odds of a sudden shift in the Bank of Japan (BoJ) monetary policy and talks that the legendary investor Warren Buffet may invest in Tokyo seem to have propelled Nikkei 225, up 1.35% intraday near 28,010 by the press time.

On the other hand, Australia’s ASX 200 also prints more than 1.0% gain as Aussie Westpac Consumer Confidence for April rallied to the highest levels since June 2022, printing 9.4% figure versus 0.8% expected and 0.0% prior. Further, the National Australia Bank’s (NAB) Business Conditions matched the forecast figure of 16.0, versus 17.0 prior, whereas NAB Business Confidence eased to -1.0 versus 0.0% expected and -4.0% previous readings.

It should be noted that the end of the trade dispute between Australia and China over barley exports also seemed to have favored the equity traders in the Asia-Pacific bloc.

Elsewhere, stocks in China print mild losses as headline inflation numbers for March, namely the Consumer Price Index (CPI) and Producer Price Index (PPI), came in 0.7% YoY and -2.5% YoY versus 1.0% and -1.4% respective priors. However, upbeat headlines from the International Monetary Fund’s (IMF) Managing Director Kristalina Georgieva seem to restrict the losses in China and allow Indian equities to remain firmer. “The global economy is estimated to grow less than 3% in 2023, with India and China expected to account for half of the global growth this year,” said IMF’s Georgieva on Monday.

On a broader front, fresh doubts on the US Federal Reserve’s (Fed) capacity to stay hawkish, backed by downbeat comments from New York Fed John Williams and fears of recession spread by BlackRock, appear to favor the cautious optimism in the market. As a result, the S&P 500 Futures print mild gains around 4,143 at the latest while the US 10-year and two-year Treasury bond yields retreat to 3.40% and 3.97% by the press time.

Alternatively, looming US-China tension and hawkish Fed bets challenge the stock buyers ahead of the top-tier data from the US. That said, a return of the full markets can entertain traders amid a light calendar on Tuesday, except for Eurozone Retail Sales. However, Wednesday’s key US inflation and Fed Minutes will be crucial for investors to watch, not to forget the updates from the Q1 earnings season.

Also read: Forex Today: US Dollar strengthens ahead of US Inflation

• AUD/USD bounces off three-week low amid upbeat catalysts surrounding Australia, grinds higher around intraday top of late.
• Australia Westpac Consumer Confidence, NAB sentiment figures join deal with China over barley exports to propel Aussie prices.
• Cautious optimism, reassessment of latest hawkish Fed bets challenge US Dollar bulls amid full markets.
• Risk catalysts eyed for fresh impulse ahead of top-tier US, Australia catalysts.

AUD/USD bulls are back in motion, after a week-long absence, as upbeat Aussie catalysts surrounding foreign trade and sentiment underpin the quote’s latest recovery from a three-week low to 0.6670 heading into Tuesday’s European session. Not only the price-positive factors surrounding Australia but the overall improvement in the risk appetite also favors the quote’s latest rebound.

That said, Australia’s Westpac Consumer Confidence for April rallied to the highest levels since June 2022, printing 9.4% figure versus 0.8% expected and 0.0% prior. Further, the National Australia Bank’s (NAB) Business Conditions matched the forecast figure of 16.0, versus 17.0 prior, whereas NAB Business Confidence eased to -1.0 versus 0.0% expected and -4.0% previous readings.

On the contrary, China’s headline inflation numbers for March, namely the Consumer Price Index (CPI) and Producer Price Index (PPI), came in 0.7% YoY and -2.5% YoY versus 1.0% and -1.4% respective priors.

Apart from mostly upbeat Aussie data, headlines from Reuters suggesting an end of the trade dispute between Australia and China over barley exports also seemed to have favored the AUD/USD prices.

Elsewhere, fresh doubts on the US Federal Reserve’s (Fed) capacity to stay hawkish, backed by downbeat comments from New York Fed John Williams and fears of recession spread by BlackRock, seem to weigh on the US Dollar and allow the AUD/USD to remain firmer.

Amid these plays, the S&P 500 Futures print mild gains around 4,143 at the latest while the US 10-year and two-year Treasury bond yields retreat to 3.40% and 3.97% by the press time.

Moving on, risk catalysts and the return of full markets may entertain AUD/USD pair traders ahead of Wednesday’s key US inflation and Fed Minutes, as well as Thursday’s Aussie jobs report.

Technical analysis

AUD/USD bounces off a two-week-old support line, around 0.6620 at the latest, to aim for the convergence of the 10-DMA and the support-turned-resistance line stretched from March 10, around the 0.6700 round figure.

• USD/INR has scaled above the critical resistance of 82.00 amid a recovery in the USD Index.
• The upside in the US Dollar is being supported by expectations of hot United States core inflation data.
• Bullish bets for oil prices are fading as investors are not convinced of the global recovery.

The USD/INR pair has climbed above the critical resistance of 82.00 in the Asian session after a recovery move. The upside in the US Dollar is being supported by expectations of hot United States core inflation data. The street is expecting a rebound in the US core inflation as the Unemployment Rate has not shown signs of escalating in the Employment data released last week.

US jobless rate was trimmed further to 3.5% from the consensus and the former release of 3.6%. Also, job additions in March matched expectations, which shows the huge demand for labor. Apart from that, monthly Average Hourly Earnings at 0.3% matched consensus and rebounded from the former release of 0.2%.

This shows that firms are keen on acquisitions of talent at higher offerings, which is keeping expectations for a rebound in the US core Consumer Price Index (CPI) at elevated levels. Economists at BBH expect “Headline inflation at 0.2% m/m and 5.1% y/y vs. 0.4% m/m and 6.0% y/y in February.  A core is expected at 0.4% m/m and 5.6% y/y vs. 0.5% m/m and 5.5% y/y in February.” 

On the oil front, oil prices have rebounded after a corrective move and have reclaimed the $80.00 hurdle. Meanwhile, bullish bets for oil prices despite the announcement of production cuts by OPEC+ are fading as investors are not convinced of the global recovery amid higher interest rates and a potential banking crisis. It is worth noting that India is one of the leading importers of oil in the world and a recovery in the oil price will impact the India Rupee.

• EUR/USD is looking to extend its upside journey towards 1.0900 amid a cheerful market mood.
• Investors have digested the expectations of one more 25 basis points (bps) rate hike from the Fed.
• Higher rates by the Fed and tight credit conditions by US banks have forced investors to downgrade growth for S&P500.

The EUR/USD pair is approaching swiftly towards the round-level resistance of 1.0900 in the Asian session. The major currency pair has extended its rally above 1.0880 as investors have digested the expectations of one more 25 basis points (bps) rate hike from the Federal Reserve (Fed). The upbeat market mood has forced the US Dollar Index (DXY) for an extended correction.

The USD Index has slipped further to near 102.33 amid positive market sentiment. Meanwhile, S&P500 futures have generated some gains ahead of the quarterly result season. As per Refinitiv estimates, S&P500 is expected to report a shrinkage in profits by 5.2% vs. a growth forecast of 1.4% anticipated at the start of the year.

Higher rates by the Fed and tight credit conditions by US commercial banks have forced investors to downgrade growth for S&P500.

The declining USD Index has supported demand for US government bonds. This has led to a decline in the 10-year US Treasury Yields to 3.40%.

The US Dollar is expected to remain highly volatile as investors are awaiting the release of Wednesday’s Consumer Price Index (CPI) data. Analysts at TD Securities expect the headline inflation to rise by 0.1% in March, and the core CPI by 0.4%. They see the CPI slowing to 3.6% by the fourth quarter.

On the Eurozone front, the Euro will be impacted by Retail Sales (Mar) data. Monthly Retail Sales data could contract by 0.8%. And, annual Retail Sales could contract further to 3.5%. The street is very much confident about economic recovery in the shared continent amid a shortage of labor, which indicates optimal utilization of capacities by firms.

• USD/JPY snaps three-day uptrend while retreating from the highest levels in three weeks.
• RSI’s pullback from overbought territory adds strength to the downside bias.
• Convergence of one-week-old ascending trend line, 50-SMA restricts Yen pair’s short-term fall.
• Bears need validation from 12-day-long upward-sloping trend line to retake control.

USD/JPY drops to 133.40 as bulls take a breather after a three-day uptrend during early Tuesday. In doing so, the Yen pair takes a U-turn from a three-week-old horizontal resistance area, as well as the 200-SMA.

Adding strength to the pullback moves could be the RSI (14) retreat from the overbought territory.

As a result, the Yen pair is well-set for further downside towards the 132.40-35 support confluence including the 50-SMA and one-week-old ascending trend line.

It should be noted, however, that there prevails limited room towards the south for the USD/JPY pair even if it breaks the 132.35 key support. The reason could be linked to an upward-sloping support line from March 24, close to 131.10 by the press time.

In a case where the USD/JPY bears keep the reins past 131.10, and also conquer the 131.00 round figure, the odds of witnessing a fresh 2023 low, currently around 127.20, can’t be ruled out.

On the contrary, the 200-SMA level of 133.60 precedes the aforementioned three-week-old horizontal resistance area surrounding 133.75-85 to limit the short-term upside of the USD/JPY pair.

Following that, the mid-March high of 135.05 acts as an intermediate halt during the likely run-up towards the YTD peak marked in the previous month at around 137.95.

USD/JPY: Four-hour chart

Trend: Limited downside expected

• USD/CAD takes offers to refresh intraday low, extend the previous day’s pullback from monthly high.
• Receding fears of recession, banking fallouts underpin mildly positive sentiment.
• Fed talks, concerns about easy rate hikes prod US Dollar bulls, as well as propel WTI crude oil.
• Risk catalysts eyed ahead of the all-important Wednesday.

USD/CAD drops to 1.3490 as it renews its intraday low during early Tuesday, extending the previous day’s pullback from a seven-day high.

In doing so, the Loonie pair justifies the US Dollar’s pullback amid mildly positive sentiment. Adding strength to the USD/CAD fall could be the recent recovery in WTI crude oil prices, as well as the Canadian Dollar’s (CAD) preparations for Wednesday’s Bank of Canada (BoC) Monetary Policy announcements.

That said, the US Dollar Index (DXY) eases to 102.40 while printing the first daily loss in five. On the other hand, the US 10-year and two-year Treasury bond yields retreat to 3.40% and 3.99% at the latest while the S&P 500 Futures print mild gains around 4,143 at the latest.

Underpinning the firmer risk appetite are mixed talks of the US Federal Reserve’s (Fed) next move joining headlines suggesting China’s end to the military strikes near Taiwan. It should be noted that the Federal Reserve (Fed) Bank of New York President, as well as the Fed’s Vice Chairman of the rate-setting committee, John Williams anticipated slower inflation while ruling out the interest rates as culprits for the previous month’s bank fallouts. On the same line, Rick Rieder, Chief Investment Officer of global fixed income at BlackRock, the world's largest asset manager, said late Monday, “The Federal Reserve may not need to raise interest rates further to fight inflation, as the fallout from last month's turmoil in the banking sector and a series of recent labor data point to a slowing US economy,” per Reuters.

On the other hand, Reuters cites the end of China’s military drills while saying, “China ended three days of military drills around Taiwan on Monday saying they had tested integrated military capabilities under actual combat conditions, having practiced precision strikes and blockading the island that Beijing views as its own.”

That said, WTI crude oil rises half a percent to $80.30 while making rounds to a 10-week-old trading range of around $79.65 and $81.70. While seeking clues for the latest WTI rebound, chatters about the optimistic Japan and China concerns gain major attention. Recently, legendary investor Warren Buffet signals to invest in Japanese stocks while the International Monetary Fund (IMF) suggests higher growth in Asia to lead the global economy. International Monetary Fund’s (IMF) Managing Director Kristalina Georgieva said that “the global economy is estimated to grow less than 3% in 2023, with India and China expected to account for half of the global growth this year.

Looking forward, USD/CAD is likely to remain depressed as full markets brace for the dovish BoC outcome. However, softer US inflation and a likely hesitance to favor further rate hikes in the Fed Minutes may allow the Loonie pair bears to keep the reins.

Technical analysis

Repeated failures to cross the 50-DMA hurdle of 1.3560 keeps USD/CAD bears hopeful of witnessing further downside.

Australia's Foreign Minister Penny Wong said on Tuesday, "We reached an agreement with China to settle the dispute over Australian barley.”

“China agreed to review the duties levied on Australian barley,” Wong added.

Market reaction

With Australia announcing suspension of its World Trade Organization (WTO) dispute against China on barley, AUD/USD is picking up fresh bids toward 0.6700. The pair is trading at 0.6667, up 0.44% on the day.

• USD/MXN takes offers to reverse the previous day’s corrective bounce off one-week low.
• Bearish MACD signals, steady RSI joins sustained trading below 200-SMA to keep Mexican Peso buyers hopeful.
• One-week-old ascending trend line, monthly support challenge bears; Buyers should remain cautious below 200-SMA.

USD/MXN renews intraday low near 18.14 as it fails to extend the week-start recovery from the 50-SMA amid early Tuesday.

In doing so, the Mexican Peso (MXN) pair stays below a two-week-old resistance line and the 200-SMA, keeping its 12-day-old bearish fashion intact. Adding strength to the downside bias are the bearish MACD signals and a steady RSI (14).

With this, the USD/MXN price is well-set to break the 50-SMA immediate support of around 18.13, which in turn can direct the sellers toward a one-week-long ascending trend line support, near 18.10.

Following that, an upward-sloping support line from early March, around the 18.00 round figure by the press time, can act as the last defense of the USD/MXN buyers, a break of which could drag prices towards refreshing the yearly low, currently near 17.89.

Alternatively, a fortnight-old descending resistance line, close to 18.25 at the latest, guards the immediate upside of the USD/MXN pair ahead of the 200-SMA hurdle of 18.35.

In a case where the Mexican Peso pair stays firmer past 18.35, the late March swing high of around 18.80 and the 19.00 psychological magnet may check the bulls before giving them control.

Overall, USD/MXN is likely to remain sidelined but the bears seem to have an upper hand of late.

USD/MXN: Four-hour chart

Trend: Further weakness expected

Japan’s media outlook, the Nikkei Asian Review, is citing that Warren Buffett is considering additional investment in Japanese stocks, per Reuters.

Additional takeaways

“Buffett says holding 7.4% stake in five Japanese trading houses including Itochu.”

“Buffet to visit Japanese trading houses, Tungaloy Corp offices during his stay in Japan this time.”

Market reaction

The Japanese benchmark index, the Nikkei 225, is holding above the 28,000 mark on the encouraging headlines, up 1.36% on the day. Meanwhile, USD/JPY is feeling the pull of gravity, as it drops below 133.50, down 0.16% on the day.

• USD/CHF is struggling to rebound from 0.9080 amid further correction in the USD Index.
• The Swiss Franc asset has corrected to near the breakout zone of the consolidation.
• US Dollar bulls are getting support from the 20-period EMA at 0.9084.

The USD/CHF pair is not getting the bids required to deliver a rebound move of around 0.9080 in the Asian session. Pessimism in the Swiss Franc asset is the outcome of extended correction in the US Dollar Index (DXY). The USD Index has dropped further to near 102.40 as investors have digested anticipation of one more rate hike from the Federal Reserve (Fed), which is expected next month.

S&P500 futures are holding marginal gains in Asia after a light positive Monday, portraying mildly positive market sentiment. The US yields have dropped marginally amid extended corrections in the USD Index. The 10-year US Treasury yields have dropped below 3.41%.

For further guidance, United States Consumer Price Index (CPI) data will be keenly watched. Further softening in headline inflation is expected as oil prices have remained weaker in March.

USD/CHF has witnessed a correction after printing a weekly high of 0.91140. The Swiss Franc asset has corrected to near the breakout zone of the consolidation that happened on Monday. The 20-period Exponential Moving Average (EMA) at 0.9084 is providing support to the US Dollar bulls.

Meanwhile, the Relative Strength Index (RSI) (14) has slipped into the 40.00-60.00 range after observing exhaustion in the upside momentum.

For an upside move, the major needs to break above the round-level resistance of 0.9100  decisively, which will drive the major toward April 04 high at 0.9143 followed by March 31 high at 0.9178.

On the flip side, a downside move below April 04 low at 0.9040 will expose the Swiss Franc asset to psychological support at 0.9000 and a fresh 21-month low at 0.8930, which is 25 May 2021.

USD/CHF hourly chart

• USD/CNH renews intraday high as China inflation data deteriorates in March.
• China’s headline CPI eases to 0.7% YoY while PPI drops further to -2.5% YoY.
• Friday’s upbeat US data allow Fed hawks to expect 0.25% rate hike in May.
• US-China tension over Taiwan, full markets eyed for intraday directions.

USD/CNH justifies downbeat China inflation data as it refreshed intraday high to near 6.8975 following the data release on early Tuesday. In doing so, the offshore Chinese Yuan (CNH) pair also respects the hawkish concerns about the Federal Reserve (Fed) as full markets return after an extended weekend.

China’s headline inflation numbers for March, namely the Consumer Price Index (CPI) and Producer Price Index (PPI), came in 0.7% YoY and -2.5% YoY versus 1.0% and -1.4% respective priors.

Also read: China’s CPI softens to 0.7% YoY in March vs. 1.0% expected

It’s worth noting that optimism surrounding China’s growth conditions seems to challenge the USD/CNH buyers of late. International Monetary Fund’s (IMF) Managing Director Kristalina Georgieva said that “the global economy is estimated to grow less than 3% in 2023, with India and China expected to account for half of the global growth this year.

Even so, Friday’s upbeat US employment data joins the market’s rejection of recession woes to underpin the hawkish Fed bets and propel the USD/CNH prices amid cautious optimism in the markets.

While portraying the same, CME’s FedWatch Tool suggests a 72% chance of the Fed’s 0.25% rate hike in May, versus 57% odds favoring the same in the last week.

Earlier in Asia, USD/CNH marked losses amid mixed talks of the US Federal Reserve’s (Fed) next move joining headlines suggesting China’s end to the military strikes near Taiwan.

Federal Reserve (Fed) Bank of New York President, as well as the Fed’s Vice Chairman of the rate-setting committee, John Williams anticipated slower inflation while ruling out the interest rates as culprits for the previous month’s bank fallouts. On the same line, Rick Rieder, Chief Investment Officer of global fixed income at BlackRock, the world's largest asset manager, said late Monday, “The Federal Reserve may not need to raise interest rates further to fight inflation, as the fallout from last month's turmoil in the banking sector and a series of recent labor data point to a slowing US economy,” per Reuters.

Reuters cites the end of China’s military drills while saying, “China ended three days of military drills around Taiwan on Monday saying they had tested integrated military capabilities under actual combat conditions, having practiced precision strikes and blockading the island that Beijing views as its own.”

Moving on, the risk catalysts and the trading moves amid full markets can direct USD/CNH traders ahead of Wednesday’s US CPI and Fed Minutes.

Technical analysis

A three-week-old ascending triangle, currently between 6.9140 and 6.8820, restricts short-term USD/CNH moves.

Following are the key highlights from the Bank of  Korea’s (BoK) monetary policy statement, as reported by Reuters. The South Korean central bank left its key interest rate unchanged at 3.50% for the second straight meeting in April.

Key takeaways

Market reaction

USD/KRW is trading volatile within the range at around $1,320 on the announcement of the BoK rate decision. The spot is modestly flat on the day.

• AUD/USD drops sharply below 0.6650 amid a recovery in USD Index and China’s deflationary data.
• Annual China inflation data has softened to 0.7% from the consensus and the former release of 1.0%.
• The USD Index has shown recovery as fears of a further rate hike from the Fed have renewed.

The AUD/USD pair has slipped below 0.6650 as China’s Consumer Price Index (CPI) has softened further despite various measures from the Chinese administration to stem economic recovery. Annual China inflation data has softened to 0.7% from the consensus and the former release of 1.0%. On a monthly basis, the Chinese economy has shown deflation by 0.3% while the street was expecting an acceleration in prices of goods and services by 0.1%.

This indicates poor demand from households, which is raising questions about the economic prospects of the Chinese economy despite reopening with various stimulus. It is worth noting that Australia is the leading trading partner of China and weaker Chinese economic prospects will also dampen the Australian Dollar.

This week, the Australian Dollar will remain in action amid the release of March’s Employment data, which will release on Thursday. The street is anticipating an addition of fresh 20K jobs in the Australian economy lower than the former release of 64.6K. While the Unemployment Rate is expected to increase to 3.6% vs. 3.5% released in February.

A slowdown in the labor demand should be the outcome of higher rates from the Reserve Bank of Australia (RBA). RBA Governor Philip Lowe has already commented that the Australian economy will slow further due to higher interest rates and inflation will soften too. Easing labor market conditions would be supportive of the RBA in maintaining its monetary policy unchanged.

Meanwhile, S&P500 futures are showing choppy moves with some positive bias from the previous trading session, indicating minor strength in bulls in a quiet market. The US Dollar Index (DXY) has shown a recovery move after an extended correction to near 102.40.

Going forward, the release of the United States inflation data will guide the further direction in market. As per the consensus, the headline inflation will soften to 5.2% from the former release of 6.0%. Also, monthly headline CPI would decelerate to 0.3% from 0.4% reported earlier. While annual core inflation that excludes oil and food prices could surprisingly jump to 5.6% from the former release of 5.5%.

• NZD/USD extends pullback from intraday high on softer China inflation figures for March.
• China CPI drops to 0.7% YoY, PPI also eases to -2.5% YoY.
• Markets remain cautiously optimistic as yields retreat, China ends military drills near Taiwan.
• Hawkish Fed bets, recession woes keep Kiwi bears hopeful ahead of key US data, Fed Minutes.

NZD/USD takes offers to refresh intraday low near 0.6210 on downbeat China inflation data, published early Tuesday. Adding strength to the Kiwi pair’s pullback moves could be the hawkish Fed bets and the return of full markets.

That said, China’s headline inflation numbers for March, namely the Consumer Price Index (CPI) and Producer Price Index (PPI), came in 0.7% YoY and -2.5% YoY versus 1.0% and -1.4% respective priors.

Also read: China’s CPI softens to 0.7% YoY in March vs. 1.0% expected

On the other hand, Friday’s upbeat US employment data joins the market’s rejection of recession woes to underpin the hawkish Fed bets. While portraying the same, CME’s FedWatch Tool suggests a 72% chance of the Fed’s 0.25% rate hike in May, versus 57% odds favoring the same in the last week.

It should be noted that the Kiwi pair portrayed a corrective bounce earlier in Asia as mixed concerns surrounding the US Federal Reserve’s (Fed) next move join headlines suggesting China’s end to the military strikes near Taiwan.

That said, Federal Reserve (Fed) Bank of New York President, as well as the Fed’s Vice Chairman of the rate-setting committee, John Williams anticipated slower inflation while ruling out the interest rates as culprits for the previous month’s bank fallouts. On the same line, Rick Rieder, Chief Investment Officer of global fixed income at BlackRock, the world's largest asset manager, said late Monday, “The Federal Reserve may not need to raise interest rates further to fight inflation, as the fallout from last month's turmoil in the banking sector and a series of recent labor data point to a slowing US economy,” per Reuters.

On the other hand, Reuters said that China ended three days of military drills around Taiwan on Monday saying they had tested integrated military capabilities under actual combat conditions, having practiced precision strikes and blockading the island that Beijing views as its own.

Amid these plays, the S&P 500 Futures print mild gains while the US 10-year and two-year Treasury bond yields retreat to 3.40% and 3.99% at the latest.

Having witnessed the initial market reaction to China’s headline inflation data, NZD/USD pair traders should pay attention to the risk catalysts and the trading moves amid full markets. However, major attention should be given to Wednesday’s US CPI and Fed Minutes amid hawkish concerns about the US central bank’s next moves.

Technical analysis

Unless rising back beyond a one-month-old previous support line, now immediate resistance near 0.6265, the NZD/USD bears remain on their way to refreshing the year 2023 bottom of 0.6084.

China’s Consumer Price Index (CPI) came in at 0.7% than a year earlier in March, rising slower than the 1.0% annual gain seen in February, the latest data from the National Bureau of Statistics (NBS) showed on Tuesday. The market consensus was for a 1.0% increase.

On a monthly basis, the country’s CPI data dropped by 0.3% in March versus 0.1% expected and -0.5% booked in February.

China’s Producer Price Index (PPI) decelerated by 2.5% YoY in March, compared with the -2.5% expectations and -1.4% previous reading.

Market reaction

At the time of writing, AUD/USD is little changed on the data release, keeping the green near 0.6650, up 0.15% on the day.

People’s Bank of China (PBOC) set the USD/CNY central rate at 6.8882 on Tuesday, versus Monday's fix of 6.8764 and market expectations of 6.8884. It's worth noting that the USD/CNY closed near 6.8835 the previous day.

In addition to the daily USD/CNY fix, the PBOC conveys details of the Open Market Operations (OMO), suggesting a net 3 billion Yuan injection at the laest.

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's closing level and quotations taken from the inter-bank dealer.

• EUR/USD picks up bids to renew intraday high as it snaps two-day downtrend.
• Two-week-old ascending support line, 100-SMA restricts short-term downside.
• Euro buyers need validation from weekly descending trend line, horizontal resistance area established from late March.
• Bearish MACD signals, multiple hurdles towards the north challenge EUR/USD bulls.

EUR/USD renews intraday high near 1.0880 as bulls struggle to retake control after a two-day downtrend during early Tuesday. In doing so, the Euro pair rebounds from a convergence of the 100-SMA and a two-week-long ascending support line.

The major currency pair’s recovery moves, however, remain elusive unless the quote remains below the 13-day-old horizontal resistance area surrounding 1.0930.

That said, a one-week-old descending trend line, around 1.0900 by the press time, guards the EUR/USD pair’s immediate upside.

In a case where the EUR/USD remains firmer past 1.0930, the monthly high of around 1.0975 may act as the last defense of the pair sellers ahead of directing the price towards February’s peak of 1.1033.

Alternatively, a downside break of 1.0840-45 support confluence won’t hesitate to drag the quote toward the monthly low of 1.0788.

However, the 50% and 61.8% Fibonacci retracement levels of the pair’s March-April upside, respectively near 1.0745 and 1.0690, can challenge the EUR/USD bears afterward.

To sum up, EUR/USD bulls need to cross 1.0930 to regain the market’s confidence. Otherwise, the quote remains on the bear’s radar even if 1.0845-40 restricts the short-term downside.

EUR/USD: Four-hour chart

Trend: Limited recovery expected

• AUD/JPY is approaching 89.00 as BoJ Ueda has supported the continuation of expansionary policy.
• Acceleration in China’s inflation figures would boost hopes of an economic recovery in China.
• Higher rates from the RBA are expected to soften Australian Employment.

The AUD/JPY pair is aiming to capture the critical resistance of 89.00 in the Asian session. The risk barometer is meaningfully rising since Monday after the novel Bank of Japan (BoJ) favored the continuation of a decade-long ultra-loose monetary policy to safeguard the Japanese economy from the cascading effects of a global slowdown.

Considering optimism in AUD/USD, the AUD/JPY pair is following the footprints. The Australian Dollar is likely to remain volatile ahead of the release of China’s Consumer Price Index (CPI) data. As per the estimates, the annual inflation figure would remain stable at 1%. The monthly CPI figure is expected to accelerate by 0.1% vs. a deflation of 0.5% recorded in February.

This gives hope for an economic recovery in China as investors are losing faith in the economic prospects of China despite the dismantling of pandemic controls. A recovery in retail demand would also infuse confidence among firms for deploying more capacity for production. Investors should be aware of the fact that Australia is the leading trading partner of China and a recovery in China will also strengthen the Australian Dollar.

Later this week, Australia’s Employment data will be keenly watched. According to the estimates, the Australian economy added fresh 20K jobs in March lower than the former release of 64.6K. Also, the Unemployment Rate will increase to 3.6% from the prior release of 3.5%. It looks like higher rates from the Reserve Bank of Australia (RBA) are softening the demand for labor. RBA Governor Philip Lowe has already commented that the Australian economy will slow further due to higher interest rates and inflation will soften further.

Meanwhile, “Australia’s Treasurer Jim Chalmers warned of ‘complex and confronting’ global economic conditions as he prepares to head to Washington for G20 meeting, as reported by Bloomberg.

• Gold price picks up bids to pare recent losses, snaps two-day downtrend.
• United States Treasury bond yields, US Dollar pare recent losses but upbeat Federal Reserve bets prod XAU/USD bulls.
• China-inflicted risk aversion also exerts downside pressure on the Gold price.
• China inflation eyed for intraday directions, US Consumer Price Index, Fed Minutes become the key for Gold traders to track.

Gold price (XAU/USD) snaps a three-day losing streak as it prints mild gains around $1,995 while bouncing off a one-week low during Tuesday’s Asian session. In doing so, the metal price consolidates recent losses as the United States Treasury bond yields and the US Dollar retreat. However, the hawkish bets on the Federal Reserve’s (Fed) next moves seem to weigh on the Gold price.

Gold price rebounds as United States Treasury bond yields, US Dollar ease

US Dollar Index (DXY) and the benchmark Treasury bond yields fade recent upside momentum as full markets return. Also challenging the greenback and the bond yields could be the latest comments from the Federal Reserve (Fed) officials and the market’s concerns about the US recession.

That said, Rick Rieder, Chief Investment Officer of global fixed income at BlackRock, the world's largest asset manager, said late Monday, “The Federal Reserve may not need to raise interest rates further to fight inflation, as the fallout from last month's turmoil in the banking sector and a series of recent labor data point to a slowing US economy,” per Reuters.

On the other hand, Federal Reserve (Fed) Bank of New York President, as well as the Fed’s Vice Chairman of the rate-setting committee, John Williams anticipated slower inflation while ruling out the interest rates as culprits for the previous month’s bank fallouts.

With this, the US Dollar Index (DXY) eases to 102.40 while printing the first daily loss in five. On the other hand, the US 10-year and two-year Treasury bond yields retreat to 3.40% and 3.99% at the latest.

Even so, the CME’s FedWatch Tool suggests a 72% chance of the Fed’s 0.25% rate hike in May, versus 57% odds favoring the same in the last week, which in turn keeps the Gold sellers hopeful.

Sino-US tension also weighs on XAU/USD price

Apart from the recent hawkish bets on the Federal Reserve’s (Fed) 0.25% rate hike in May, the looming geopolitical tension between the United States and China also exerts downside pressure on the Gold price, due to the dragon nation’s status as one of the biggest Gold consumers. That said, Beijing marked solid military drills around Taiwan after Taiwan President Tsai Ing-wen’s US visit. However, the end of testing military power seems to have favored the Gold buyers of late. “China ended three days of military drills around Taiwan on Monday saying they had tested integrated military capabilities under actual combat conditions, having practiced precision strikes and blockading the island that Beijing views as its own,” said Reuters.

On the contrary, hopers of more growth in Asia, the key Gold consuming region, seem to help the XAU/USD bulls of late. International Monetary Fund’s (IMF) Managing Director Kristalina Georgieva said that “the global economy is estimated to grow less than 3 percent in 2023, with India and China expected to account for half of the global growth this year.

China inflation eyed for intraday Gold price direction

Looking forward, China’s headline inflation numbers for March, namely the Consumer Price Index (CPI) and Producer Price Index (PPI), will be important for the immediate direction of the Gold price. Given the downbeat forecasts for the inflation numbers, the XAU/USD may witness a pullback. However, major attention will be given to Wednesday’s US Consumer Price Index (CPI) and Fed Minutes.

Gold price technical analysis

Gold price consolidates the previous week’s pullback from an 11-week-old ascending resistance line, backed by Friday’s Doji candlestick.

It should be noted that the bearish divergence between the Relative Strength Index (RSI), placed at 14, and the Gold price challenge the quote’s latest corrective bounce. While portraying the bearish RSI divergence, the Gold price marked higher highs but the RSI (14) printed lower highs, suggesting that the XAU/USD buyers run out of steam.

Further, the looming bear cross on the Moving Average Convergence and Divergence (MACD) indicator also keeps Gold sellers hopeful of witnessing the quote’s further downside.

As a result, the bullion appears well-set to drop towards the $1,960 support confluence, comprising February’s top and a three-week-long ascending trend line.

In a case where the Gold price drops past $1,960, multiple levels marked since mid-January around $1,930-27 can challenge the XAU/USD bears before giving them control.

On the contrary, recovery moves need to stay beyond the $2,000 psychological magnet to lure the Gold buyers. Even so, the aforementioned resistance line from late January, close to $2,040 at the latest, can challenge the upside momentum.

In a case where the quote remains firmer beyond $2,040, the year 2022 high of around $2,070 and the record high marked in 2020 of around $2,075 will be in focus.

Gold price: Daily chart

Trend: Further downside expected

“Australia’s Treasurer Jim Chalmers warned of ‘complex and confronting’ global economic conditions as he prepares to head to Washington for a Group of 20 meeting and about a month out from handing down his nation’s annual budget,” reported Bloomberg while quoting Australia’s Sydney Morning Herald (SMH) news on early Tuesday.

Key statements

AUD/USD pare recent losses

AUD/USD picks up bids to refresh intraday high near 0.6650 while extending the late Monday’s corrective bounce off the two-week low.

Also read: AUD/USD Price Analysis: Bounces off fortnight-long support but 0.6700 is the key to upside

• USD/JPY has slipped below 133.50 amid a steep correction in the USD Index.
• The proportion of correction in the USD/JPY pair is much less than the corrective move in the USD Index.
• BoJ Ueda is reluctant to approach a sudden normalization of monetary policy as it would cause a big impact on the Japanese economy.

The USD/JPY pair has corrected below the critical support of 133.50 in the Asian session after a stellar upside move to near 133.87. The corrective move in the asset is a trace of correction in the US Dollar Index (DXY), which took place after an improvement in the risk appetite of the market participants.

It is worth noting that the proportion of correction in the USD/JPY pair is much less than the corrective move in the USD Index, which indicates weakness in the Japanese Yen. Japan’s domestic currency went through significant offers on Monday after a dovish commentary from novel Bank of Japan (BoJ) Governor Kazuo Ueda.

BoJ Ueda said on Monday that the central bank is reluctant to approach a sudden normalization of monetary policy as it would cause a big impact on the Japanese economy, as reported by Reuters. The commentary has supported the continuation of ultra-loose monetary policy for an extended period as the global economy is going through a rough phase due to the banking crisis. He also added, "Fully aware that global economy is slowing and a further slowdown is expected." Also, the strengthening of wage growth is supporting inflation to reach its target sustainably.

Meanwhile, S&P500 futures have added further gains after minor additions on Monday, portraying further improvement in the risk-taking ability of the market participants. The US Dollar Index (DXY) has extended its correction sharply below 102.50 as investors have digested the expectations of further policy-tightening by the Federal Reserve (Fed).

• AUD/USD recovers from the lowest levels in 12 days to snap five-day downtrend.
• Convergence of 10-DMA, previous support line from early March restricts immediate upside.
• Aussie bulls need validation from 0.6800 to keep the reins.

AUD/USD picks up bids to pare recent losses around 0.6650 during early Tuesday morning in Asia. In doing so, the Aussie pair rebounds from the lowest levels in two weeks while taking a U-turn from the 12-day-old horizontal support around 0.6620.

However, the looming bearish MACD signals and the steady RSI suggests further downside for the AUD/USD pair.

Also challenging the quote’s latest recovery moves could be the convergence of the 10-DMA and the support-turned-resistance line stretched from March 10, around the 0.6700 round figure.

Even if the AUD/USD bulls manage to cross the 0.6700 hurdle the 50% Fibonacci retracement level of the pair’s February-March fall, around 0.6805 will act as the last defense of the bears.

Alternatively, a downside break of 0.6620 could trigger the fresh fall targeting the Year-To-Date (YTD) low marked in February around 0.6565.

It’s worth noting that the AUD/USD pair’s weakness past 0.6565 has multiple hurdles towards the south, namely the highs marked in October 2022 around 0.6545 and 0.6520.

Following that, a south-run towards November 2022 bottom surrounding 0.6275 can’t be ruled out.

Overall, AUD/USD remains on the bear’s radar despite the latest corrective bounce.

AUD/USD: Daily chart

Trend: Further downside expected

"It is Inappropriate to guide fiscal policy by depending on BoJ debt buying," said Japan’s Finance Minister (FinMin) Shunichi Suzuki said on early Tuesday.

• GBP/USD picks up bids to snap four-day downtrend, bounces off one-week low.
• 10-DMA, looming bear cross on MACD challenges Cable pair buyers.
• 12-day-old ascending support line holds the key to further downside.

GBP/USD prints the first daily gains in five around 1.2390 as full markets return on Tuesday. In doing so, the Cable pair bounces off the lowest levels in a week.

That said, a two-week-old ascending trend line, around 1.2355 by the press time, triggered the GBP/USD pair’s rebound the previous day.

However, the quote’s sustained trading below the 10-DMA hurdle and an impending bear cross on the MACD keeps GBP/USD sellers hopeful. Adding strength to the downside bias is the RSI (14) line’s retreat from the overbought territory.

Hence, the quote’s latest rebound remains elusive unless it stays below the 10-DMA hurdle of 1.2405.

Even if the GBP/USD buyers manage to cross the 1.2405 resistance, a four-month-old horizontal line and previous support trend line stretched from mid-March, respectively near 1.2445 and 1.2510, could challenge the pair’s further upside.

It’s worth noting that the latest multi-month high of 1.2525, marked the last week, also acts as an extra upside filter to watch for Cable buyers.

On the flip side, the aforementioned support line stretched from March 24, close to 1.2355, restricts the immediate downside of the GBP/USD pair, a break of which could quickly drag the quote towards 1.2300 and then to February’s high of near 1.2270.

GBP/USD: Daily chart

Trend: Further downside expected

• NZD/USD is looking to recapture the immediate resistance of 0.6230 amid the risk-on mood.
• The street is anticipating that weaker oil prices in March would result in further softening of US headline inflation.
• China’s CPI monthly figure would accelerate by 0.1% vs. a contraction of 0.5% reported earlier.

The NZD/USD pair is looking to extend its recovery toward the immediate resistance of 0.6230 in the early Asian session. The Kiwi asset rebounded firmly after finding a stellar buying interest near the round-level support of 0.6200. The recovery move in the Kiwi asset was backed by a correction in the US Dollar Index (DXY) as investors started ignoring the risk associated with more rate hikes from the Federal Reserve (Fed) and shifted funds to risk-sensitive assets.

S&P500 futures have added some gains in the Asian session after a mild positive Monday. Gap down opening in US equities on Monday was fully offset by recovery. Also, investors ignored volatility ahead of the quarterly earnings season. Meanwhile, US yields scaled higher as investors are convinced about one more rate hike from the Federal Reserve (Fed) next month. The return offered o 10-year US Treasury yields rebounded firmly above 3.41%.

Going forward, the release of the United States inflation data will provide more clarity on Fed’s interest rate guidance. The street is anticipating that weaker oil prices in March would result in further softening of headline inflation. However, core inflation could be sticky further due to solid labor demand.

Economists at BBH expect “Headline inflation at 0.2% m/m and 5.1% y/y vs. 0.4% m/m and 6.0% y/y in February.  A core is expected at 0.4% m/m and 5.6% y/y vs. 0.5% m/m and 5.5% y/y in February.” 

On the New Zealand front, investors are awaiting the release of China’s inflation data. Annual inflation is expected to remain steady at 1% while the monthly figure would accelerate by 0.1% vs. a contraction of 0.5% reported earlier. This indicates that the retail demand is in a recovery mode, which will improve the overall economic outlook.

It is worth noting that New Zealand is one of the leading trading partners of China and the solidification of China’s economic prospects will also support the New Zealand Dollar.

• US Dollar Index retreats from one-week high, challenges four-day uptrend.
• Traders reassess hawkish Fed bets as full markets return after multiple holidays.
• Doubts over Fed’s ability to offer rate hike in May also challenge DXY bulls.
• Risk catalysts, yields will be more important for intraday directions.

US Dollar Index (DXY) pares recent gains around 102.50 as it retreats from a one-week high, as well as snapping a four-day uptrend, during early Tuesday in Asia. In doing so, the greenback’s gauge versus six major currencies portrays the market’s cautious mood as full markets return after two consecutive days off in the major markets.

Late on Monday, Rick Rieder, Chief Investment Officer of global fixed income at BlackRock, the world's largest asset manager, said, “The Federal Reserve may not need to raise interest rates further to fight inflation, as the fallout from last month's turmoil in the banking sector and a series of recent labor data point to a slowing US economy,” per Reuters.

On the other hand, Federal Reserve (Fed) Bank of New York President, as well as the Fed’s Vice Chairman of the rate-setting committee, John Williams anticipated slower inflation while ruling out the interest rates as culprits for the previous month’s bank fallouts.

That said, the US Dollar Index previously traced firmer US Treasury bond yields while cheering mostly upbeat US employment numbers and hawkish Fed bets. Adding strength to the US Dollar is the currency’s haven demand amid the geopolitical fears emanating from China, mainly concerning Taiwan.

Against this backdrop, Wall Street benchmarks closed mixed while the US 10-year and two-year Treasury bond yields rose to 3.41% and 4.0% at the latest. It should be noted that the CME’s FedWatch Tool suggests a 72% chance of the Fed’s 0.25% rate hike in May, versus 57% odds favoring the same in the last week.

Moving on, multiple Fed policymakers are up for speeches and can entertain the US Dollar Index (DXY) traders. However, major attention will be given to the yields and Fed bets for clear directions ahead of Wednesday’s US Consumer Price Index (CPI) and Fed Minutes.

Technical analysis

A daily closing beyond one-month-old descending resistance line, now immediate support around 102.15, directs US Dollar Index bulls towards the 50-DMA hurdle of around 103.50.

Ed Morse, global head of commodities research at Citigroup, flags Oil price weakness despite the previous week’s surprise supply cuts from the Organization of the Petroleum Exporting Countries and its allies (OPEC+) during an interview with Bloomberg.

Key comments

WTI remains pressured

WTI crude oil extends the week-start pullback to $79.80 during the early hours of Tuesday’s Asian session.

Also read: WTI Price Analysis: Testing the $80 level on broad US Dollar

• USD/CAD is juggling in a narrow range above 1.3500 after a sell-off move ahead of US Inflation.
• BoC Macklem to keep rates steady as Canada’s inflation is softening consistently.
• Investors’ risk appetite is improving as investors are digesting one more rate hike from the Fed.

The USD/CAD pair has turned sideways after a perpendicular decline move above the psychological resistance of 1.3500 in the early Tokyo session. The Loonie asset is expected to remain on the tenterhooks ahead of the interest rate decision by the Bank of Canada (BoC) and the United States inflation data, which are scheduled for Wednesday.

BoC Governor Tiff Macklem might stick to its plan of keeping rates steady as Canada’s inflation has been declining consistently.

Investors’ risk appetite is improving as investors are digesting one more rate hike from the Federal Reserve (Fed) in its next month's policy meeting due to the tight labor market. S&P500 futures have added some gains in early Asia after a recovery move on Monday. The US Dollar Index (DXY) showed a gradual correction after failing to surpass to reclaim the critical resistance of 103.00.

USD/CAD has dropped near the lower portion of the Rising Channel chart pattern formed on an hourly scale. The lower portion of the aforementioned chart pattern is plotted from April 04 low at 1.3406 while the upper portion is placed from April 04 high at 1.3467.

The 20-period Exponential Moving Average (EMA) at 1.3512 is barricading the US Dollar from a recovery.

Meanwhile, the Relative Strength Index (RSI) (14) has slipped back into the 40.00-60.00 range after an attempt of climbing above 60.00, indicating the presence of aggressive sellers at elevated levels.

Should the asset break below April 10 low at 1.3485, Canadian Dollar bulls would further drag the Loonie asset toward April 06 low at 1.3452 followed by April 04 low at 1.3406.

On the contrary, a decisive break above April 10 high at 1.3554 will drive the asset toward the round-level resistance at 1.3600. A breach of the 1.3600 resistance will expose the asset to March 23 low at 1.3630.

USD/CAD hourly chart

• USD/CHF fades upside momentum after rising in the last two consecutive days.
• US Dollar bulls seek more clues to extend four-day uptrend near one-week high.
• Friday’s upbeat NFP favored hawkish Fed bets and favored US Dollar of late, risk aversion also strengthened the greenback.
• Return of full markets, cautious mood ahead of top-tier data/events test Swiss pair traders.

USD/CHF retreats to 0.9090 during early Tuesday, snapping a two-day uptrend, as bulls turn cautious on full markets’ return after Good Friday and Easter Monday holidays. Also acting as an upside barrier for the Swiss Franc pair are the fresh doubts on the Federal Reserve’s (Fed) May month rate hikes.

That said, Rick Rieder, Chief Investment Officer of global fixed income at BlackRock, the world's largest asset manager, said late Monday, “The Federal Reserve may not need to raise interest rates further to fight inflation, as the fallout from last month's turmoil in the banking sector and a series of recent labor data point to a slowing US economy,” per Reuters.

On the other hand, Federal Reserve (Fed) Bank of New York President, as well as the Fed’s Vice Chairman of the rate-setting committee, John Williams anticipated slower inflation while ruling out the interest rates as culprits for the previous month’s bank fallouts.

That said, the US Dollar Index (DXY) eases to 102.55, around a one-week high, after rising in the last four consecutive days. The greenback’s gauge versus the six major currencies recently traced firmer US Treasury bond yields while cheering mostly upbeat US employment numbers. Adding strength to the US Dollar is the currency’s haven demand amid the geopolitical fears emanating from China, mainly concerning Taiwan.

Against this backdrop, Wall Street benchmarks closed mixed while the US 10-year and two-year Treasury bond yields rose to 3.41% and 4.0% at the latest.

Moving on, China’s headline inflation numbers for March, namely the Consumer Price Index (CPI) and Producer Price Index (PPI), can entertain USD/CHF pair traders but risk catalysts likely Fed bets and geopolitical concerns may gain major attention. Above all, Wednesday’s US CPI and Fed Minutes will be crucial for the pair traders to watch for clear directions.

Technical analysis

A one-month-old descending resistance line, around 0.9155 by the press time, guards immediate upside of the USD/CHF pair.