• WTI crude oil grinds higher at two-week top as hopes of more energy demand joins supply crunch talks.
• OPEC+ is likely to continue with existing output cut policy in next week.
• Receding fears of banking crisis, softer US Dollar allow Oil buyers to keep the reins.
• China NBS Manufacturing PMI, inflation clues from Eurozone, US will be the key for clear directions.

WTI crude oil price remains firmer at the highest levels in more than two weeks as bulls flirt with the $74.50 level ahead of China’s official PMIs for March during early Friday. In doing so, the black gold cheers the market’s optimism and the broad US Dollar to brace for the biggest weekly gains since early February.

US Dollar Index (DXY) eyes three-week losing streak as hawkish Federal Reserve (Fed) comments fail to gain support from second-tier data and raise expectations of only limited rate hike options available to the policymakers. That said, Apart from Federal Reserve Chairman Jerome Powell, three Fed Officials backed further rate hikes on Thursday to tame the inflation woes.

Apart from the Fed concerns, hopes of sound banking system also favored the WTI bulls as Apart from Federal Reserve Chairman Jerome Powell, three Fed Officials backed further rate hikes on Thursday to tame the inflation woes.

US Treasury Secretary Janet Yellen said on Thursday, “Banking system is sound, even as it has come under pressure.”

Elsewhere, China’s hopes of upbeat march and talks of no change in the production policies of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, known collectively as OPEC+, seem to have favored the commodity bulls. “OPEC+ is likely to stick to its existing deal to cut oil output at a meeting on Monday, five delegates from the producer group told Reuters, after oil prices recovered following a drop to 15-month lows,” said Reuters.

Although the Oil bulls are in the driver’s seat, the price reaches the short-term key resistance and hence upbeat prints of China’s official PMIs for March becomes necessary for the quote to remain firmer. It should be noted that the higher inflation figures can back the latest hawkish rhetoric among the major central bank officials and could challenge the WTI buyers.

Technical analysis

A clear upside break of the previous support line from early December 2022, around $74.50 by the press time, becomes necessary for the WTI crude oil bulls to witness further upside. Otherwise, a pullback towards February’s low near $72.50 can be expected

• USD/CHF dropped after facing the 20-day EMA and a resistance trendline, extending its losses for two straight days
• USD/CHF Price Analysis: Short term, a triple bottom could cap the pair’s fall and open the door to test 0.9300.

After facing a resistance trendline, which intersects with the 20-day Exponential Moving Average (EMA), the USD/CHF dropped and extended its losses for two straight days. At the time of writing, the USD/CHF is trading at 0.9133, up 0.08%, as Friday’s Asian session begins.

USD/CHF Price action

The USD/CHF slid from the 0.9200 mark as the US Dollar (USD) weakened across the FX board. Furthermore, the USD/CHF pair is downward biased, though to further cement its bearish case, the major needs to break below the March 13 swing low at 0.9070. Once cleared, the USD/CHF pair would test the YTD lows at 0.9059, which, once cleared, could open the door towards 0.9000. On the flip side, buyers reclaim the 20-day EMA at 0.9215, and the major could test 0.9300.

Short term, the USD/CHF4-hour chart portrays a triple bottom forming, though it is at the brisk of being invalidated if the spot price tumbles and extends below 0.9118. If buyers keep the price above the latter, the chart pattern will remain in play. If the USD/CHF breaks above the daily pivot at 0.9150, the next resistance would be 0.9180, followed by March 30 high at 0.9200. Once cleared, the next reistace would be the 100-EMA at 0.9218, ahead of the 200-EMA at 0.9244.

In an alternate scenario, if the USD/CHF pair dwindles below 0.9118, that would pave the way to test the YTD low at 0.9059.

USD/CHF 4-Hour chart

USD/CHF Technical levels

• USD/CAD has registered a four-day losing streak amid a declining USD Index.
• S&P500 continued its upside momentum as investors are cheering ebbing fears of the potential banking crisis.
• Canada’s monthly GDP (Jan) is expected to expand by 0.3% vs. a contraction of 0.1%.

The USD/CAD pair has refreshed its five-week low below 1.3516 in the early Asian session amid weakness in the US Dollar Index (DXY) and rising oil prices. The Loonie asset has turned sideways after a four-day losing streak and is looking vulnerable above 1.3510. The USD Index witnessed an intense sell-off on Thursday after surrendering the critical support of 102.40. Less room for further upside in interest rates by the Federal Reserve (Fed) has built bearish bets for the USD Index.

S&P500 futures continued their upside momentum on Thursday as investors are cheering ebbing fears of a potential banking crisis, portraying a significant jump in the risk appetite of market participants.

The demand for US government bonds remained choppy as investors don’t see more casualties to the banking system. However, the 10-year US treasury yields surrendered their entire gains and settled Thursday’s session below 3.55%.

Going forward, the United States' core Personal Consumption Expenditure (PCE) Price Index data will remain in the spotlight. Analysts at CIBC expect “The Fed’s preferred gauge of inflation, core PCE prices, likely decelerated to a 0.4% monthly pace, slightly slower than its CPI counterpart given the lower weight of shelter in the index, but still too hot to reach on-target inflation, and justifying the Fed’s decision to raise rates further in March. We are roughly in line with the consensus, which should limit any market reaction.”

The Canadian Dollar will dance to the tunes of monthly Canada’s Gross Domestic Product (GDP) (Jan) data. As per the consensus, the economic data will expand by 0.3% vs. a contraction of 0.1%.

On the oil front, oil prices rose sharply above $74.00 in hopes that fewer rate hikes from western central banks collaboratively will strengthen the overall oil demand ahead. It is worth noting that Canada is the leading exporter of oil to the United States and higher oil prices will support the Canadian Dollar.

• GBP/USD stays firmer at the highest levels in two months.
• Successful trading above a fortnight-old ascending support line, 2.5-month-old horizontal area keeps Cable bulls hopeful.
• Multiple tops marked since early December 2022 highlights 1.2445-50 as the key upside resistance.
• Upbeat oscillators add strength to the bullish bias.

GBP/USD bulls keep the reins around a two-month high near 1.2390 as they approach a critical resistance area during early Friday. In doing so, the Cable pair braces for five-week uptrend.

That said, a sustained break of the 10-week-old horizontal resistance area, now support around 1.2285-65, joins the clear respect of a fortnight-long ascending trend line, close to 1.2320, to keep the GBP/USD pair buyers hopeful.

Adding strength to the upside bias are the bullish MACD signals and the firmer RSI (14) line, not overbought.

As a result, the Cable pair appears well-set to challenge an area comprising multiple tops marked since December 13, 2022, around mid-1.2400s.

Given the absence of the overbought RSI, in addition to the aforementioned price-positive catalysts, the GBP/USD is likely to cross the stated 1.2450 crucial resistance.

Following that, the 61.8% Fibonacci Expansion (FE) of its November 2022 to March 2023 moves, near 1.2610 will be in focus.

Meanwhile, the previously stated support line and the broad horizontal area, respectively near 1.2320 and 1.2285-65, restrict short-term GBP/USD downside.

In a case where GBP/USD drops below 1.2265, the mid-month top around the 1.2200 threshold could lure the bears.

It should be noted that the 23.6% Fibonacci retracement of the Cable pair’s November 2022 to January 2023 moves, near 1.2140, precedes the 1.2000 psychological magnet to challenge the bulls afterward.

GBP/USD: Daily chart

Trend: Further upside expected

• EUR/USD has defended the 1.0900 support as investors see more rate hikes from the ECB.
• Solid wage growth and labor shortage led to a jump in monthly German inflation.
• S&P500 futures continued their upside journey on Thursday as investors’ confidence has been restored.

The EUR/USD pair has shown decent buying interest after a gradual correction to near the round-level support of 1.0900 in the late New York session. The major currency pair has resumed its upside journey as investors are anticipating more rate hikes from the European Central Bank (ECB) as German inflation remained higher than expected.

In Germany, prices of goods and services in March have accelerated by 1.1%, higher than the consensus of 0.8% and the former release of 1.0%. Annual German Harmonized Index of Consumer Prices (HICP) landed at 7.8%, significantly lower than the prior release of 9.3% but higher than the estimates of 7.5%. Annual HICP figures have softened firmly led by lower energy prices, however, prices of core products look solid amid the shortage of labor.

The labor market has grabbed the bargaining power due to a shortage of job seekers and wage growth is now at between 5% and 6%, the highest in decades, as reported by Reuters. This has bolstered the case for more rate hikes from ECB President Christine Lagarde.

On Friday, the release of Eurozone HICP and German Retail Sales data will provide more clarity. Annual preliminary Eurozone HICP is expected to decelerate to 7.1% vs. the prior print of 8.5%. Along with them, monthly German Retail Sales are expected to expand by 0.5% against a contraction of 0.3%.

Meanwhile, the upside bias for the shared currency pair is also backed by the declining US Dollar Index (DXY). The USD Index is juggling after a fresh weekly low at 102.07. The USD Index failed to capitalize on the anticipation of one more rate hike this year by Federal Reserve (Fed) chair Jerome Powell in a private meeting with United States lawmakers.

S&P500 futures continued their upside journey on Thursday as investors’ confidence has been restored after easing US banking jitters, portraying a higher risk appetite of the market participants.

• AUD/USD reverses the previous weekly loss, grinds higher of late.
• Firmer sentiment, softer US Dollar allow Aussie bulls to keep the reins.
• Fed policymakers tease further rate hikes but don’t confirm the size of it and allow policy doves to remain hopeful.
• China-linked fears jostle with easing bank turmoil fears to tease buyers ahead of key data.

AUD/USD bulls occupy the driver’s seat while reversing the previous weekly losses around 0.6715 as traders await the key inflation clues from the US on Friday. Adding importance to the day’s Asian session are China’s official Purchasing Managers’ Indexes (PMIs) for March.

Receding fears of the banking crisis join the confusion about the future rate hikes among the key central banks to allow the AUD/USD pair to cheer the risk-on mood. Adding strength to the optimism, as well as the Aussie price are the comments from China suggesting higher growth figures in March that the first two months of the year.

That said, Fed Chair Jerome Powell teased one more rate hike in the current year and the other policymakers followed the suit while highlighting the task of taming inflation. However, the majority of them appeared cautious of not sounding too hawkish and hence raised doubts that the price pressure is easing. Additionally favoring the risk appetite, as well as the AUD/USD price, were comments suggesting the soundness of the banking sector. It should be noted that US Treasury Secretary Janet Yellen said on Thursday, “Banking system is sound, even as it has come under pressure.

Elsewhere, mixed US data, mostly softer, fails to justify the hawkish Fed concerns and allow the Aussie pair to grind higher. On Thursday, final readings of the US fourth quarter (Q4) Gross Domestic Product (GDP), also known as the Real GDP, marked an easy Annualized growth number of 2.6% versus 2.7% previous forecasts. It’s worth noting that the Q4 Personal Consumption Expenditure (PCE) Prices matched 3.7% QoQ forecasts and prior while the Core PCE figure grew to 4.4% QoQ versus 4.3% expected and prior. Moving on, the Weekly Initial Jobless Claims rose to 198K for the week ended on March 25 versus 191K prior and 196K market forecasts. 

Alternatively, China's Taiwan Affairs Office threatened retaliation over Taiwan President Tsai Ing-wen's visit to the US on Wednesday. Additionally, China's Premier Li Qiang recently said that the economic situation in March is even better than in January and February. The policymaker, however, also raised geopolitical tension by opposing trade protectionism and decoupling, which indirectly targets the US.

Amid these plays, Wall Street closed positive but the yields grind higher and weigh on the US Dollar.

Moving on, China NBS PMIs for March will precede the Fed’s favorite inflation gauge to direct AUD/USD moves. Forecasts suggest that China’s headline NBS Manufacturing PMI is expected to ease to 51.5 versus 52.6 prior.

Also read: US February PCE Inflation Preview: Bad news for the Dollar, good news for the Fed?

Technical analysis

AUD/USD extends recovery from a three-week-old ascending support line, around 0.6660, towards 200-DMA hurdle surrounding 0.6755.

• Gold price bulls are in the market and eye the $2,000s.
• The Federal Reserve´s preferred inflation measure could be a catalyst on Friday.

Gold price has been buoyed in part by a weaker US Dollar and expectations for a fall in interest rates. The US Dollar index was down 0.4% at 102.20, raising the appeal of dollar-denominated gold prices. XAU/USD has traveled between a low of $1,955 and $1,984.36 on Thursday. 

Analysts at TD Securities argued that investor participation has remained muted despite little evidence of a boon from safe-haven demand in gold markets. ´´In reality, underwhelming CTA flows have weighed on the white metal's performance, despite substantial buying activity in China,´´ the analysts explained.

´´Today, prices are surging overnight amid several large-scale CTA buying programs, as a drift lower in key trigger levels has finally kicked off significant algorithmic buying activity that should help the metal outperform, ´´ the analysts added further. 

Federal Reserve sentiment, key for Gold price

Meanwhile, with the Federal Reserve in mind, the February reading of personal consumption expenditures (PCE) on Friday, the  Fed's preferred inflation gauge, will be released and could be a catalyst for the Gold price. January figures showed a sharp acceleration in consumer spending so the data will be closely eyed. 

´´Comments from Fed officials have been mixed with Jerome Powell indicating last week that the impact of the recent turmoil in the banking system could be the equivalent of 25bp of tightening,´´ analysts at ANZ Bank said. ´´However other Federal Reserve officials have pointed out that more tightening will be required if inflation risks persist.´´

Meanwhile, US data on Thursday showed that Jobless Claims last week rose more than expected from the week before indicating a cooling labor market, while fourth-quarter Gross Domestic Product growth was slightly lower at 2.6% compared with earlier estimates of 2.7%, both supporting the case for a softer Fed policy.

Gold price technical analysis

Gold price was testing the $1,980s resistance but the W-formation was a bearish pattern and this pulled on the Gold price. The gold price bulls have steppe din at neckline support and the price has rallied back into resistance. A pull back into the Fibonacci scale could be the next development before a move higher should the Gold price bulls stay committed with eyes on a restest in the $2,000s

• The GBP/JPY daily chart tests a three-month-old resistance trendline at around 164.70-90.
• The Relative Strength Index (RSI) and the Rate of Change (RoC) shifted bullish, indicating an upward trend for GBP/JPY.
• GBP/JPY Price Analysis: Downside risks remain below 164.00.

The GBP/JPY pair is gaining 0.53% on Thursday and is trading at 164.29 after hitting a daily low of 162.96. The pair's uptrend is attributed to the market's current risk-on sentiment and expectations that central banks will pause hiking rates after the recent banking turmoil in the US and Switzerland.

GBP/JPY Price action

The GBP/JPY daily chart suggests the pair is testing a three-month-old resistance trendline that passes at around 164.70-90, trading at 4-week highs. The Relative Strength Index (RSI) shifted bullish, suggesting the GBP/JPY outlook is upwards. The Rate of Change (RoC) jumped from a neutral stance after the GBP/JPY snapped three days of consecutive losses, erased on Thursday.

If the GBP/JPY continues its uptrend, the next resistance would be the February 27 high at 166.00. A breach of the latter will expose the December 19 daily high at 167.01, followed by the December 12 high at 169.27.

On the other hand, the GBP/JPY first support would be the psychological level at 164.00. Downside risks lie at the next support area at the 20-day Exponential Moving Average (EMA) at 161.87, ahead of testing the 50-day EMA at 161.18.

GBP/JPY Daily chart

GBP/JPY Technical levels

The DXY is under pressure, particularly against its main European rivals, amid risk appetite and following German inflation data. On Friday, the focus will be on US and Eurozone inflation figures. Japan will also release the Tokyo CPI, alongside Industrial Production and Retail Sales. On Asian hours, China's official PMI for manufacturing and service sectors will be released.

Here is what you need to know on Friday, March 31:

Another positive day for Wall Street and a quiet one in the Treasury market. The Dow Jones rose 140 points or 0.43% to post the highest daily close in two weeks, while the Nasdaq reached seven-month highs. Banking jitters continue to fade, and economic data shows no signs of a “hard” or even “soft” landing. A pessimist uncertain outlook is being replaced by just an uncertain outlook.

The bond market does not look as optimistic as stocks. US yields drifted sideways on Thursday, not reflecting risk appetite. Bonds will probably take a more decisive direction after Friday’s US Core Personal Consumption Expenditure data.

German inflation figures showed a big decline in the annual rate but not as much as expected. On Friday, Eurozone Consumer Price Index (CPI) is due. So far, March preliminary figures show that inflation is slowing down but is still elevated, just like what European Central Bank (ECB) officials say publicly.

Volatility is set to rise on Friday, considering key inflation numbers due and also the fact that it is the last trading day of the week, month and quarter.

EUR/USD rose past 1.0900 to test the recent top. The pair remains bullish, consolidating important weekly gains, that could face some challenges on Friday with the critical economic reports due. GBP/USD posted the highest daily close in two months, near 1.2400, boosted by risk appetite and the weaker Dollar.

USD/JPY is moving sideways around 132.60. The US Dollar and the Japanese Yen are suffering from the rally in Wall Street. USD/CHF posted the lowest close in weeks and is approaching the key long-term support at 0.9050.

AUD/USD and NZD/USD rose above 0.6700 and 0.6250, respectively. USD/CAD fell for the fourth consecutive day, and it keeps trending lower, last seen trading around 1.3525.

It was a positive day for Emerging market currencies. The biggest gainer was the Rand (ZAR), after the South African central bank surprised with a bigger-thank-expected rate hike. The Bank of Mexico, as expected, raised rates by 25 basis points.

Gold broke above $1,970 and climbed above $1,980, while Silver surged 2.40% to $23.80, the highest level in two months. 
 

• GBP/USD bulls are in the market with eyes on the 1.24 area.
• Traders will be turning to Friday's key US inflation data.

GBP/USD was last up 0.65% at 1.2391 having traveled between a low of 1.2293 and 1.2392 putting the pair on track for its biggest monthly gain since November, as concerns among investors over the banking sector dwi9ndled and dented the safe haven US Dollar. 

The Great British Pound has climbed around 3% vs. the US Dollar in March and is penetrating its way through resistance to eight-week highs. Domestically, at more than 10%, headline inflation in Britain is showing no signs of slowing down. In this respect, money markets show traders now think rates will top out at 4.5% by September meaning the Bank of England likely has one more quarter-point rise planned. 

´´The BoE is hoping for a quick decline in inflation in the course of the year,´´ analysts at Commerzbank explained. ´´So far, however, the economic data rather harbor upside risks for inflation. If inflation does turn out to be more persistent than the BoE expects, its rather dovish stance is likely to weigh further on the pound.´´

Meanwhile, traders will look to the February reading of personal consumption expenditures (PCE) on Friday. The data is the Fed's preferred inflation gauge. January figures showed a sharp acceleration in consumer spending so the data will be closely eyed. 

Today, US data showed that jobless claims last week rose more than expected from the week before indicating a cooling labor market, while fourth-quarter Gross Domestic Product growth was slightly lower at 2.6% compared with earlier estimates of 2.7%, both supporting the case for a softer Fed policy.

• NZD/USD is higher on the day and testing familiar resistance.
• Traders will turn to the Fed´s preferred inflation reading on Friday for a potential catalyst.

The New Zealand dollar fluctuated at around 0.6250 vs. the US Dollar and struggled for direction while investors awaited the Reserve Bank of New Zealand's monetary policy decision next week and US inflation data on Friday. At the time of writing, NZD/USD is trading between a low of 0.6203 and a high of 0.6264, capped at late February and March´s resistance.

It's been a light data week for New Zealand, but the latest came from New Zealand's business confidence which was almost unchanged at -43.4 in March, remaining at very subdued levels compared to historical averages as manufacturing and services firms remained pessimistic, amid rising cost pressures. In this regard, New Zealand’s annual inflation is currently running near three-decade highs of 7.2%, well above the central bank’s medium-term target of 1%-3%. However, inflation indicators continue to inch lower and going in the right direction, albeit painfully slowly. The RBNZ has lifted its policy rate by a total of 450 basis points, bringing the cash rate to a 41-year record of 4.75%.

´´We expect RBNZ’s tone next week to be hawkish, mindful of resource constraints facing an economy in post-cyclone rebuild mode, and local banks strong and not at risk of some of the issues that plagued bust US banks,´´ analysts at ANZ bank said. ´´That leans toward the RBNZ pressing ahead with hikes amid recovering global risk appetite.´´

Traders now await the major US economic reports in Friday´s inflation data in the February reading of personal consumption expenditures (PCE). This is the Fed's preferred inflation gauge. January figures showed a sharp acceleration in consumer spending so the data will be closely eyed. 

Meanwhile, US data on Thursday showed that jobless claims last week rose more than expected from the week before indicating a cooling labor market, while fourth-quarter Gross Domestic Product growth was slightly lower at 2.6% compared with earlier estimates of 2.7%, both supporting the case for a softer Fed policy.

• Banxico raises key rate by 25 bps to 11.25% in unanimous decision.
• Statement mentions that the current monetary policy stance adjusts to what is necessary for inflation to converge to the target.
• Mexican Peso retreats after decision, USD/MXN climbs to 18.10. 

The Bank of Mexico raised it key interest rate by 25 basis points as expected, to 11.25%. That represents the smallest rate hike since November 2021. Since then, it raised by 50 bps at six meetings, and by 75 bps in four. The decision was unanimous. In the statement, Banxico said that "the monetary policy stance adjusts to the trajectory required for inflation to converge to its 3% target within the forecast horizon", suggesting it's done raising rates.

Key quotes from the statement: 

Market reaction

Prior to the decision, the USD/MXN was trading at 18.05, at the lowest level in three weeks. Following the decision, it jumped toward 18.10, erasing daily losses. 
 

• AUD/USD climbs as market participants expect a US Federal Reserve pivot on its monetary policy stance.
• Boston Fed’s Susan Collins argues that the Fed will maintain steady rates after a future hike.
• Richmond Fed’s Thomas Barkin commented that turmoil at Credit Suisse removed 50 bps rate hikes off the table.

The Australian Dollar (AUD) edges higher against the US Dollar (USD), which continues to weaken across the board, as shown by a basket of six currencies, namely the US Dollar Index. In addition, US Treasury bond yields are falling, and US equities are climbing, painting a challenging outlook for the US currency. At the time of writing, the AUD/USD is trading at 0.6701.

US Dollar weakened on falling UST Bond yields after soft jobs data

Risk appetite continues to be the main driver after the banking crisis woes eased. The financial markets narrative shifted back to central banks, though not inflation but regulation. However, Federal Reserve officials like Boston Fed President Susan Collins and Richmond’s Thomas Barkin crossed news wires and spoke about monetary policy.

Boston Fed Susan Collins said that getting inflation low justifies no rate cuts. She added that the US Federal Reserve (Fed) would hold rates steady after another hike. Richmond Fed President Thomas Barkin commented that the inflation fight would take some time and that Credit Suisse’s turmoil took off the table of a 50 bps rate hike.

Even though both Fed officials looked mildly hawkish, investors had begun pricing in a no change to the Federal Funds Rate (FFR) at the upcoming meeting in May. Therefore, the AUD/USD has been underpinned by a probable shift in the US central bank monetary policy stance, though inflation data is waiting to be released on Friday.

Aside from this, jobs data from the United States (US) showed that the labor market is cooling off, with Initial Jobless Claims for the last week exceeding estimates. At the same time, the US Gross Domestic Product (GDP) for Q4 2022 was 2.6%, below forecasts of 2.7%.

On the Australian front, the latest inflation report surprised the market, as inflation was lower than expected. There are growing rumors amongst financial analysts that the Reserve Bank of Australia (RBA) could pause rate hikes in the next week.

AUD/USD Technical analysis

The AUD/USD is bracing for the 20-day Exponential Moving Average (EMA), at 0.6696, consolidating within a narrow 70 pip range during the last three trading days. Although oscillators remain in bearish territory, like the Relative Strength Index (RSI), the Rate of Change (RoC) is bullish. Hence, mixed signals warrant caution.

If the AUD/USD breaks upwards, it will face resistance at the 50-day EMA at 0.6753, followed by the 100 and the 200-day EMAs at 0.6771 and 0.6821, respectively. On the other hand, the AUD/USD first demand level would be the March 24 low at 0.6625, followed by the 0.6600 figure.

• EUR/USD pops higher and extends the bull cycle in the 1.09´s.
• All eyes will turn top the US PCE data on Friday. 

EUR/USD rallied on easing fears about banking sector troubles and Us stocks on Wall Street have moved higher on encouraging economic signs from the chip industry. In a risk-on setting, EUR/USD has traveled from a low of 1.0823 to a high of 1.0926 so far as investors grew more confident that recent stress in the banking sector would be contained.

The banking turmoil in the collapse of two regional US lenders had sparked concerns about contagion in the banking sector which led to a dramatic shift in monetary policy expectations from the Federal Reserve. Meanwhile,  according to CME Group's Fedwatch tool, bets are now almost equally split between a pause and a 25-basis-point rate hike by the Fed in May,

For further insight, investors are awaiting the February reading of personal consumption expenditures (PCE) on Friday and this is the Fed's preferred inflation gauge. January figures showed a sharp acceleration in consumer spending so the data will be closely eyed. 

Meanwhile, US data on Thursday showed that jobless claims last week rose more than expected from the week before indicating a cooling labor market, while fourth-quarter Gross Domestic Product growth was slightly lower at 2.6% compared with earlier estimates of 2.7%, both supporting the case for a softer Fed policy.

• XAG/USD is upward biased from a daily chart perspective, and it might test the YTD high at $24.63.
• XAG/USD is in a solid uptrend, supported by oscillators at bullish territory.
• XAG/USD may experience a downside if it falls below $23.50, as it could drop toward the S1 pivot point.

Silver price broke a two-month resistance trendline, reaching a new 8-week high of $23.92 due to overall US Dollar (USD) weakness and falling US Treasury bond yields. Therefore, the XAG/USD is trading at $23.74, up more than 2%, after hitting a low of $23.24.

XAG/USD Price action

From a daily chart perspective, the XAG/USD is upward biased and might soon test the YTD high at $24.63 once it reclaimed the $23.50 figure. But firstly, Silver buyers need to reclaim the $24.00 figure, ahead of challenging YTD highs. The Relative Strength Index (RSI) at overbought conditions continues to aim higher, while the Rate of Change (RoC) portrays buyers in charge. If XAG/USD fails to break $24.00, that could pave the way for a pullback.

In the short term, the XAG/USD 4-hour chart portrays the white metal in a solid uptrend, testing the R3 daily pivot point at $23.83 after hitting a daily high of $23.92. If the XAG/USD conquers $24.00, that will expose the YTD high. The Relative Strength Index (RSI) justifies an upward continuation at bullish territory, while the  Rate of Change (RoC) does it too.

On the flip side, if the XAG/USD stumbles beneath the R2’s daily pivot at $23.62, it would pave the way for further downside. Hence, the XAG/USD first support would be the R1 pivot point at $23.47, followed by the intersection of the 20-EMA and the daily pivot point at $23.30, before diving towards the S1 pivot point at $23.11.

XAG/USD 4-hour chart

XAG/USD Technical levels

Minneapolis Federal Reserve President Neel Kashkari said the United States has very high inflation, but it's not being driven by wages.

Key comments

US Dollar update

The DXY, an index that measures the US Dollar vs. a basket of currencies, dropped on Thursday on easing fears about banking sector troubles, encouraging economic signs from the chip industry and rising oil prices. On the weekly DXY chart, the US Dollar is closing in on support and the M-formation, a reversion pattern, could hold up the price from moving much lower at this juncture. 

Richmond Federal Reserve President Thomas Barkin said on Thursday that he is content with the current trajectory set by the FOMC of evaluating whether a 25 bps interest rate hike is required at each meeting. According to Barkin, there is a lot of money available for spending among households. 

Key quotes: 

Federal Reserve Bank of Boston leader Susan Collins has crossed the wires saying that the risks to the outlook have increased with the banking stress and said her economic views are close to the Federal Open Market Committee´s forecasts. 

Key comments

US Dollar update

The US Dollar declined on Thursday on easing fears about banking sector troubles, encouraging economic signs from the chip industry and rising oil prices. On the weekly DXY chart, the US Dollar is closing in on support and the M-formation, a reversion pattern, could hold up the price from moving much lower at this juncture. 

• USD/MXN remains depressed, falling 3.54% weekly due to the Mexican Peso’s strength.
• The rise in US unemployment claims cement the case for a Federal Reserve’s pause as the labor market cools.
• The Bank of Mexico is expected to raise rates by 25 bps, and then a pause is foreseen.

In the North American session, the USD/MXN is almost flat on Thursday after the Mexican Peso (MXN) failed to push through the 18.00 figure. However, the Mexican currency prints gains vs. the US Dollar (USD) of 3.54% amidst ongoing optimism amongst investors that the US Federal Reserve will end its tightening cycle. The USD/MXN is trading at 18.0860.

USD/MXN is almost flat, with traders awaiting Banxico’s move

Sentiment remains upbeat as Wall Street trades in the green. The greenback continues to weaken to fresh weekly lows, as shown by the US Dollar Index (DXY), but MXN bulls stay on the sidelines, awaiting Banxico’s decision.

Data from the United States (US), amongst other reasons, keep the US Dollar pressured. Initial Jobless Claims for the week ending March 25 jumped by 198,000, higher than the predicted 196,000, the Department of Labor (DoL) reported. Meanwhile, the US Commerce Department disclosed the final reading of the Gross Domestic Product (GDP) for Q4 2022, which fell slightly below the estimated 2.7% at 2.6%.

The rise in US unemployment claims is more than welcomed by the Federal Reserve as it scrambles to curb elevated inflation. If the labor market continues that trend, that will help to drop inflation. However, it’s premature to call victory, as the Fed’s preferred gauge for inflation will be revealed on Friday. The Core Personal Consumption Expenditure (PCE) is estimated at 4.7% YoY.

On the Mexican front, most analysts expect Banxico’s last interest rate hike of its tightening cycle of 25 bps, leaving the TIIE at 11.25%. TD Securities Senior Latam Strategist Joel Virgen Rojano wrote in a note, “We expect Banxico to hike in 25bps on March 30 and hit terminal at 11.25%. We think the bar is high for the central bank to contradict its own forward guidance once again.”

Regarding the future of the Mexican Peso after Banxico’s decision, Virgen Rojano added, “We do not expect a meaningful MXN reaction to Banxico’s decision as we think it has been mostly priced in. However, we expect a gradual weakening of MXN against the USD in the coming months

USD/MXN Technical levels

• USD/CAD approaches the 100-day EMA at 1.3520, yet shy of testing it.
• US Bureau of Labor Statistics (BLS) reveals unemployment claims rise above estimates.
• US GDP for Q4 2022 slides a tick below expectations at 2.6%.

USD/CAD stumbles below the 50-day Exponential Moving Average (EMA) spurred by a risk-on impulse, as shown by Wall Street opening in the green. Market participants estimated that the US Federal Reserve (Fed) would not hike rates at the May meeting while the buck weakens. At the time of typing, the USD/CAD is trading at 1.3528, below its opening price by 0.22%.

USD/CAD falls on US unemployment claims rising, easing the Fed’s job

The Canadian Dollar (CAD) strengthened for the fourth straight day, with the USD/CAD tumbling below 1.3600 for the first time since March 7. The greenback’s fall continued after the US Bureau of Labor Statistics (BLS) revealed unemployment claims. Initial Jobless Claims for the week ending on March 25 rose 198K, above estimates of 196K.

At the same time, the US Commerce Department revealed the Gross Domestic Product (GDP) for Q4 2022 on its final reading, it came a tick below 2.7% estimates, at 2.6%

The US labor market data is a relief for the Federal Reserve, as the central bank is trying to curb stickier inflation levels above 6%. If the labor market continues to cool down, that will ease inflationary pressures. Nevertheless, the Fed’s preferred gauge for inflation will be revealed on Friday. The Core Personal Consumption Expenditure (PCE) is estimated at 4.7% YoY. Readings above the consensus could open the door for additional rate increases, meaning that the US Dollar (USD) could appreciate in the near term; hence further upside in the USD/CAD can be expected.

Nevertheless, the USD/CAD has held below 1.3600 on rising oil prices. WTI, the US crude oil benchmark, is increasing 1.88%, at $74.16 PB, a headwind for the USD/CAD. A good part of Canada’s economic growth is linked to oil and natural gas exports.

On the Canadian side, January’s Gross Domestic Product (GDP) is expected at 0.3% MoM. Analysts at TD Securities noted, “We look for industry-level GDP to rise by 0.4% m/m in January, in line with the market consensus and slightly above flash estimates for a 0.3% gain. Details should reveal broad-based strength across goods and services, and if realized, our forecast would leave Q1 GDP tracking further above BoC projections of 0.5%.”

USD/CAD Technical analysis

Despite the recent four-day pullback, the USD/CAD is still neutrally biased. Sellers need to drag prices below the 50-day EMA at 1.3520, which would open the door to testing 1.3500. Further downside below the figure will expose the 200-day EMA at 1.3369. But if USD/CAD buyers step in around 1.3500, the USD/CAD could test the 20-day EMA at 1.3648 in the short term.

• Spain and German inflation declined YoY, but core prices still stubbornly high.
• US Dollar under pressure on risk appetite, Treasuries drift sideways.
• Further weakness in the Dollar could send USD/CHF to test the 0.9050 area.

The USD/CHF is losing over 50 pips on Thursday following Spain and Germany's preliminary Consumer Price Index (CPI) numbers and US Jobless Claims. The pair bottomed at 0.9124, the lowest level in a week.

After the beginning of the American session, USD/CHF staged a recovery to 0.9145 but it is back at 0.9130, showing that the bearish pressure persists.

Economic data on Thursday showed mixed numbers regarding inflation in the Eurozone. Spain's CPI figures came in below expectation, while the German annual CPI declined to 7.4% YoY, above the 7.5% of market consensus.

European markets are rising, with main indexes up by more than 2%. Wall Street is also rising, but off recent highs. The improvement in market sentiment weighs on the US Dollar. The DXY is falling 0.48%, approaching 102.00.

Crucial level back in the radar

The pair is headed toward the lowest daily close in two weeks and again looks at the long-term critical support area of 0.9050.

If Dollar's weakness persists, USD/CHF could drop to test the critical area. A break below, would expose 0.9000, and could open the door to significant losses ahead. At the same time, levels near 0.9050 have triggered sharp rebounds in 2023, and also during the fourth quarter of 2021.

Technical levels

Gold price has given back some of its gains of the past two weeks. However, economists at Commerzbank consider the further correction potential to be limited, which is why they have raised their forecast for XAU/USD.

XAU/USD unlikely to fall back toward $1,800 in the foreseeable future

“Markets seem to have calmed somewhat. As a result, the Gold price has given back some of its gains. However, we do not believe that it will fall back to its starting levels of around $1,800 in the foreseeable future.”

“We estimate that the corridor for the Fed Funds rate could be raised further by a total of 50 bps to 5.25-5.50% in the next months. However, the decisive factor is that the market is likely to realize that, contrary to its current expectations, the Fed will not lower its interest rates this year. Due to the need for a correction of market expectations, we expect the Gold price to fall to around $1,900 (previously $1,800) in the coming months.”

“However, rate cut speculations are likely to return and drive the Gold price upwards on a sustained basis as soon as US inflation has fallen more sharply and the significantly higher interest rates are felt more strongly in the real economy. This should be the case in the second half of the year, which is why we continue to expect XAU/USD to rise then. We have even raised our year-end forecast from $1,950 to $2,000.”

The Fed’s preferred inflation gauge, the Core Personal Consumption Expenditure (Core PCE), will be released by the US Bureau of Economic Analysis on Friday, March 31 at 12:30 GMT and as we get closer to the release time, here are the forecasts of economists and researchers of seven major banks.

Core PCE is expected to stay at 4.7% year-on-year while rising 0.4% in February (MoM). The headline is seen increasing by 0.2% in February, and a slowdown in the annual rate from 5.4% to 5.3%. 

Deutsche Bank

“We see a +0.36% advance for the core PCE in February and MoM declines for both income (-0.1% vs +0.6% in January) and consumption (-0.6% vs +1.8%).”

CIBC

“The Fed’s preferred gauge of inflation, core PCE prices, likely decelerated to a 0.4% monthly pace, slightly slower than its CPI counterpart given the lower weight of shelter in the index, but still too hot to reach on-target inflation, and justifying the Fed’s decision to raise rates further in March. We are roughly in line with the consensus, which should limit any market reaction.”

Citi

“Core PCE inflation should rise 0.31% MoM in February based on details of CPI and PPI, a softer increase than in January but with core PCE YoY moderating only slightly to 4.6% and with risks of a print that remains at 4.7%. Some strong details of CPI will still be supportive of PCE inflation, including persistently strong shelter prices. Meanwhile, we continue to pencil in modestly stronger core PCE prints than CPI for much of this year due to the strength in key non-shelter services prices.”  

TDS

“We expect core PCE price inflation to slow down from a robust 0.6% MoM in Jan to a still-strong 0.4% in Feb (also below core CPI's 0.5% MoM gain). The YoY rate likely rose a tenth to 4.8%, suggesting the path to normalization in price gains will be bumpy. Conversely, personal spending likely fell, but that would follow an eye-popping 1.8% surge in the prior month.”

NBF

“The annual core PCE deflator may have stayed unchanged at 4.7%.”

Wells Fargo

“We forecast the PCE deflator (+0.4%) to outpace nominal spending (+0.3%).”

Credit Suisse

“We expect the monthly reading to just round down to 0.3%, leaving YoY core inflation unchanged at 4.7%. Monthly headline inflation should be similar to core, but the YoY measure should drop to 5.1% owing to an easy base effect.”

Nasdaq 100 strength has extended. However, economists at Credit Suisse expect the index to move back lower from the 12856/81 resistance zone.

Weekly close above 12856/81 would suggest a more meaningful move higher can emerge

“We continue to look for the key resistance from the 38.2% retracement of the 2021/22 fall and YTD high at 12856/81 to cap to define the top of a broad range.” 

“Near-term support moves to 12407, below which can add weight to our view for a fall back to the key 63 and 200-DMA cluster at 11963/05. Below 11695 is needed to warn of a falll back to the ‘neckline’ to the small base from the beginning of the year at 11093.”

“A weekly close above 12856/81 would instead suggest a more meaningful move higher can emerge for resistance next at the 50% retracement and summer 2022 high at 13603/721.”

Economists at ING think the Mexican Peso’s bullish momentum may have further to run.

25 bps hike by Banxico, and maybe a break below 18.00

“Today, Banxico will announce monetary policy and we expect a 25 bps rate hike to 11.25%. “Market pricing suggests investors have already scaled back expectations for additional Banxico tightening beyond today’s hike. If anything, leaving the door open for more tightening if needed as the Bank reiterates its resolution to fight inflation might see some positive impact on the MXN.”

“We think MXN remains attractive in an environment where markets favour currencies with high carry and positive exposure to rebounding crude prices.”

“A break below 18.00 in USD/MXN may be on the cards soon, potentially today on a hawkish surprise by Banxico.”

Year-to-date, the US Dollar has been whipsawing from positive to negative on the back of multi-sigma moves in the rates markets. Economists at ANZ Bank expect the US Dollar Index (DXY) to plummet toward 98 by the end of the year.

US growth to slow

“We expect a slowdown in US growth on the back of recent events which reinforce our view of a weaker Dollar this year.”

“A steeper yield curve tends to correlate with a weaker Dollar, especially as interest rate cuts are now being priced in.”

“Our year-end forecast for the US Dollar Index is 98.”

US Treasury Secretary Janet Yellen will tell at National Business Economics Association on Thursday that recent development in the banking industry remains them the “urgent need” to complete unfinished post-crisis reforms. “The US banking system is sound”:

In prepared remarks, she called Congress to raise or suspend the debt limit and also spoke about stable-coin.

Key quotes from the speech:

• GBP/USD gathers fresh upside traction and approaches 1.2400.
• The greenback accelerates losses and trades closer to 102.00.
• US final Q4 GDP Growth Rate disappointed estimates.

Further losses in the greenback allow GBP/USD to pick up extra pace and reach the 1.2380 region, or multi-week highs, on Thursday.

GBP/USD stronger on USD-selling

GBP/USD sees its upside pressure intensify on the back of the persistent selling pressure in the greenback and the solid improvement in the risk complex on Thursday. The marked knee-jerk in the dollar came in response to higher-than-expected inflation figures in Germany, which could reinforce the case for further tightening by the ECB as soon as at the May gathering.

In the meantime, price action around the British pound appears underpinned by the better tone among its risk-linked peers, while the continuation of the hiking cycle by the BoE should offer some extra support to the quid despite the "Old Lady" could be approaching its peak on rates.

There were no data releases across the Channel on Thursday, while US GDP Growth Rate expanded below consensus 2.6% YoY in Q4 and Initial Jobless Claims rose by 198K in the week to March 25.

GBP/USD levels to consider

As of writing, the pair is gaining 0.40% at 1.2361 and the breakout of 1.2380 (monthly high March 30) would open the door to 1.2447 (2023 high January 23) and then 1.2666 (monthly high May 27 2022). On the other hand, the next support emerges at 1.2160 (55-day SMA) followed by 1.2010 (weekly low March 15 and finally 1.1892 (200-day SMA).

CAD extends gains to a one-month high on the USD. Shaun Osborne, Chief FX Strategist at Scotiabank, expects the USD/CAD pair to plummet toward 1.33/34 on a sustained break under the 1.35 zone.

Backdrop looks CAD positive

“At month-end, there is a risk that CAD gains are related to short-term flows. However, if you combine (relatively extended CAD-bearish) positioning, valuation considerations, CAD-positive seasonals, some (developing) technical momentum and throw in the narrowest WCS/WTI spread in nearly a year and the idea of CAD gains having some sticking power is not so far-fetched. A positive risk backdrop adds to the bullish backdrop for the CAD too.”

“Technical damage has already been done to the USD by spot’s weakness under the 40-Day Moving Average (1.3584) I believe but a clear push under the 1.35 area would solidify prospects for additional CAD gains in the coming weeks towards 1.33/1.34. “

Esther Reichelt, FX Analyst at Commerzbank, analyzes the outlook for the Mexican Peso following the nervousness in the US banking sector.

Banxico has significant scope for rate cuts in case of a crisis

“If the uncertainties were to continue, contrary to our expectations, putting undue pressure on the US economy this is also likely to critically affect the Mexican economy due to the close ties between the two, which would be reflected in a weaker inflation outlook sooner or later.”

“As Banxico has significant scope for rate cuts in case of a crisis thanks to its aggressive rate hike cycle the peso was amongst the biggest losers as a result of the turbulence in the US banking sector. However, if these fade as our economists expect, MXN should quickly retrace its losses thanks to Banxico’s continued hawkish approach.”

• Initial Jobless Claims in the US increased by 7,000 in the week ending March 25.
• US Dollar Index continues to push lower toward 102.00.

There were 198,000 initial jobless claims in the week ending March 25, the weekly data published by the US Department of Labor (DOL) showed on Thursday. This print followed the previous week's print of 191,000 and came in worse than the market expectation of 196,000.

Further details of the publication revealed that the advance seasonally adjusted insured unemployment rate was 1.2% and the 4-week moving average was 198,250, an increase of 2,000 from the previous week's unrevised average.

"The advance number for seasonally adjusted insured unemployment during the week ending March 18 was 1,689,000, an increase of 4,000 from the previous week's revised level," the DOL noted.

Market reaction

The US Dollar struggles to find demand after this report and the US Dollar Index was last seen losing 0.4% on the day at 102.20.

• The US BEA revised Q4 GDP lower to 2.6% from 2.7%.
• US Dollar Index stays deep in negative territory below 102.50.

The real Gross Domestic Product (GDP) of the US expanded at an annualized rate of 2.6% in the fourth quarter, the US Bureau of Economic Analysis' (BEA) final estimate showed on Thursday. This reading came in below the previous estimate and the market expectation of 2.7%. 

"The revision primarily reflected downward revisions to exports and consumer spending," the BEA explained in its press release. "Imports, which are a subtraction in the calculation of GDP, were revised down."

Market reaction

The US Dollar stays on the back foot after this data and the US Dollar Index was last seen losing 0.38% on the day at 102.25.

• Euro hits fresh highs following Eurozone inflation data. 
• German preliminary March annual inflation at 7.4%, above 7.3% expected.
• EUR/USD approaches 1.0900, looking bullish while above 1.0820. 

The EUR/USD rose further following the release of German inflation figures and climbed to 1.0891, reaching the highest level in a week. The pair remains near the highs, supported by a stronger Euro.

Data released on Thursday showed that inflation in Germany, the Consumer Price Index (CPI), declined to 7.4% YoY in March from 8.7% in February, above the 7.5% of market consensus. The CPI rose 0.8% in March according to the preliminary report, above the 0.7% estimated, matching February’s print. 

The data shows a sharp slowdown in the annual rate in Germany, to the lowest since August 2022, but higher than expected. Earlier, Spain surprised with a softer-than-expected CPI. The German 10-year bund yield jumped after the data to 2.35%, the highest level in a week. 

In a few minutes, the US will report Jobless Claims and the third estimate of Q4 GDP growth. 

Looking at 1.0900

The EUR/USD is approaching the 1.0900 mark. If it holds firm above 1.0905, a test of last week’s high at 1.0929 seems likely. On the contrary, 1.0860 has become a support level, followed by 1.0825. 

Technical levels

USD remains soft. Shaun Osborne, Chief FX Strategist at Scotiabank, expects the US Dollar Index (DXY) to challenge last week’s low at 101.92.

There is little or no sign that the soft USD tone overall is relenting

“The pro risk mood may be weighing on the USD somewhat and the backdrop of reduced Fed rate hike expectations (to the point of no additional hikes being reflected in OIS swaps from here now) remains.” 

“There is a chance that month and quarter-end influences are adding to USD headwinds (but my take is that passive rebalancing at least might cancel themselves out).”

“Broadly, there is little or no sign that the soft USD tone overall is relenting. That implies little upside potential for the DXY from there (resistance for the index is about a point higher than spot at 103.50) while the market remains prone to a push back to – and through – last week’s low at 101.92.”

• Inflation in Germany declined at a softer pace than expected in March.
• EUR/USD continues to push higher toward 1.0900 after the data.

Inflation in Germany, as measured by the Consumer Price Index (CPI), declined to 7.4% on a yearly basis in March from 8.7% in February. This reading came in higher than the market expectation of 7.3%. On a monthly basis, the CPI was up 0.8%, matching February's print.

The annual Harmonised Index of Consumer Prices (HICP), the European Central Bank's (ECB) preferred gauge of inflation, fell to 7.8% from 9.3% in the same period, compared to analysts' estimate of 7.5%.

Market reaction

EUR/USD continues to edge higher following these data. As of writing, the pair was up 0.4% on the day at 1.0886.

EUR/USD probes upper 1.08s. Economists at Scotiabank expect the pair to test last week’s high of 1.0930.

Intraday support looks pretty solid at 1.0830

“A firm, short-term bull trend is supporting a positive EUR technical tone on the short-term charts.”

“Intraday support looks pretty solid at 1.0830; bullish trend momentum signals across a range of time frames implies limited downside scope for the EUR and ongoing pressure for gains to extend.”

“The EUR is within reach of last week’s 1.0930 high; above here targets 1.10+.”

• EUR/GBP rallies over 50 pips from the 100-day SMA support and jumps to a multi-day peak.
• The ECB’s hawkish outlook boosts the shared currency and remains supportive of the move.
• Bets for further rate hikes by the BoE underpin the British Pound and might cap the upside.

The EUR/GBP cross rebounds swiftly from the 100-day Simple Moving Average (SMA) support, around the 0.8780 area and turns positive for the second successive day on Thursday. Spot prices rally to a four-day peak, around the 0.8820 region during the first half of the European session and seem poised to appreciate further.

The shared currency strengthens across the board after the European Central Bank (ECB), in its Economic Bulletin, noted that inflation is projected to remain too high for too long. This comes on the back of the recent hawkish commentary by several ECB officials and reaffirms bets for additional interest rate hikes in coming months, which, in turn, prompts aggressive short-covering around the EUR/GBP cross.

It is worth recalling that the ECB chief economist Philip Lane reiterated that rates would need to rise several times to make sure inflation comes down to 2%. Adding to this, Slovak central bank chief Peter Kazimir noted the ECB should not change its stance on rates, though advocated the case for slower rises following three straight 50 bps hikes. This reinforces prospects for further policy tightening by the ECB.

The EUR/GBP bulls, meanwhile, seem rather unaffected by softer Eurozone inflation data, which showed that the Spanish Harmonized Index of Consumer Prices (HICP) fell to 1.1% in March from 0.9% recorded in the previous month. Next on tap is the flash German consumer inflation figures, which will play a key role in influencing the Euro and provide some meaningful trading impetus to the EUR/GBP cross.

In the meantime, rising bets for further rate hikes by the Bank of England (BoE) might continue to underpin the British Pound and cap gains for the cross. In fact, the UK central bank Governor Andrew Bailey said earlier this week that interest rates may have to move higher if there were signs of persistent inflationary pressure. This might hold back traders from placing aggressive bullish bets around the EUR/GBP cross.

Technical levels to watch

• EUR/USD keeps the weekly bullish tone unchanged on Thursday.
• If the recovery picks up pace it could revisit the 1.0930 zone.

EUR/USD climbs to weekly highs in the 1.0880/85 band on Thursday, extending the bounce for the fourth session in a row.

The likelihood of extra advances appears favoured for the time being. Against that, the pair could now set sail to the March peak at 1.0929 (March 23) prior to a potential test of the 2023 high at 1.1032 (February 2).

Looking at the longer run, the constructive view remains unchanged while above the 200-day SMA, today at 1.0338.

EUR/USD daily chart

GBP/USD strengthens to mid 1.23s. Cable should retain a firm undertone, in the view of economists at Scotiabank.

Bulls are in control

“The broader outlook remains positive – solid trend momentum and a steady run of higher highs and higher lows on the short-term chart that shows the bulls are in control.”

“Key resistance remains the recent peaks for the pound at 1.2445/50 but that looks reachable in the near-term.”

“Minor resistance stands at 1.2400. Support is 1.2295/00.”

See – GBP/USD: On course to retest and eventually break above the 1.2447/49 highs – Credit Suisse

• DXY keeps the erratic mood and resumes the decline on Thursday.
• Next on the downside emerges the March low near 101.90.

DXY rapidly fades Wednesday’s uptick and refocuses on the downside amidst the continuation of the choppiness activity so far this week.

In the meantime, it seems the index could face some consolidative range amidst the prevailing bearish stance for the time being. That said, a drop below the monthly low at 101.91 (March 23) should open the door to a potential visit to the 2023 low around 100.80 (February 2).

Looking at the broader picture, while below the 200-day SMA, today at 106.56, the outlook for the index is expected to remain negative.

DXY daily chart

USD/JPY bottom out as systemic banking fears ease. Economists at MUFG Bank expect the pair to stabilize around the 130.00 level.

JPY gives back some of recent gains as banking fears ease

“The reversal of recent Yen gains reflects that investors have become less concerned for now over the risk of a bigger negative systemic shock coming from the banking system although the loss of confidence is expected to result in tighter credit conditions and less lending into the economy than would otherwise have been the case that will put a dampener on the global growth outlook.”

“US rate market participants remain reluctant to price back in further rate hikes for the Fed. It sets a much higher bar for US rates to regain higher levels that were in place prior to the collapse of Silicon Valley Bank earlier this month.” 

“We now believe it is more likely that USD/JPY will settle in the low 130.00’s for now rather than quickly retracing its steps back to the high from 7th March at 137.91.”

“JPY should derive more support in the month ahead as well from building speculation over a further shift in YCC policy settings in the run up to new Governor Ueda’s first policy meeting on 28th April. We still expect the BoJ to abandon YCC in Q2 but have recently delayed the timing from the April to June in response to recent banking disruption. However, we are becoming more confident that the BoJ will exit negative rates later this year.” 

• EUR/JPY picks up extra pace and trespasses the 144.00 hurdle.
• Extra advance could put the YTD high near 145.60 to the test.

EUR/JPY adds to the weekly optimism and extends the strong rebound north of 144.00 the figure on Thursday, or 2-week peaks.

Following the breakout of the key 200-day SMA (141.80), the cross could now accelerate gains to the 2023 top at 145.56 (March 2). The surpass of this level could motivate the cross to embark on a potential visit to the December 2022 high around 146.70 (December 15).

In the meantime, extra gains remain on the table while the cross trades above the 200-day SMA.

EUR/JPY daily chart

Economists at Société Générale analyze Rand's outlook ahead of the South African Central Bank meeting.

Positive carry and dovish repricing of the Fed are a boon for the Rand

“We have pencilled in another 25 bps increase to 7.50% today after core inflation unexpectedly accelerated to a 5-year high of 5.2% in February.”

“Our house view is that today may not be the final hike. We have pencilled in a peak of 7.75% in 2Q.”

“The positive carry and dovish repricing of the Fed are a boon for the Rand.”

“A retracement in USD/ZAR towards 18.00 is not ruled out if the SARB comes across as hawkish.”

• USD/CAD drifts lower for the fourth straight day and is pressured by a combination of factors.
• The risk-on mood weighs on the USD and acts as a headwind amid a fresh leg up in Oil prices.
• Spot prices find some support ahead of the 100-day SMA as traders look to the US macro data.

The USD/CAD pair remains under some selling pressure for the fourth successive day on Thursday and drops to over a one-month low during the first half of the European session. The pair, however, manages to rebound a few pips in the last hour and is currently placed around mid-1.3500s, down less than 0.10% for the day.

The prevalent risk-on environment - as depicted by an extension of the recent rally in the equity markets - exerts fresh downward pressure on the safe-haven US Dollar (USD) and turns out to be a key factor acting as a headwind for the USD/CAD pair. The takeover of Silicon Valley Bank by First Citizens Bank & Trust Company helped calmed market nerves about the contagion risk. Furthermore, no further cracks have emerged in the banking sector over the past two weeks, which suggests that a full-blown banking crisis might have been averted and drives flows away from traditional safe-haven assets, including the Greenback.

Apart from a modest USD weakness, a fresh leg up in Crude Oil prices underpins the commodity-linked Loonie and contributes to the offered tone surrounding the USD/CAD pair. A surprise drop in US Crude stockpiles to a two-year low and concerns about tightening global supplies assist the black liquid to regain positive traction following the overnight pullback from over a two-week high. In fact, the Energy Information Administration reported an unexpected fall in US inventories to a two-year low
during the week of March 24. Moreover, exports from Iraq's northern region remain halted and lend support to Oil prices.

The USD/CAD pair, however, manages to find some support ahead of a technically significant 100-day Simple Moving Average (SMA) as traders keenly await the US inflation data due on Friday. The US Core PCE Price Index - the Fed's preferred inflation gauge - will play a key role in influencing market expectations about future rate hikes. This, in turn, will drive the USD demand and provide a fresh directional impetus to the major. In the meantime, traders on Thursday will take cues from Thursday's US economic docket, featuring the release of the final Q4 GDP print and the usual Weekly Initial Jobless Claims data.

Technical levels to watch

EUR/USD is expected to see an eventual break above its downtrend from May 2021 and 50% retracement at 1.0931/44, analysts at Credit Suisse report.

Break under 1.0750/14 would warn of a fall back toward 1.0590

“Whilst we see scope for further consolidation beneath key resistance from the 50% retracement of the 2021/2022 fall and downtrend from May 2021 at 1.0931/44, we continue to look for an eventual break for a retest of the 1.1035 YTD high. Whilst this should continue to be respected, we see no reason not to look for an eventual break for a test of 1.1185/1.1275 – the 61.8% retracement and March 2022 high.”

“Support at 1.0750/14 now ideally holds. A break would warn of a fall back to the uptrend from last September, currently at 1.0590.”

Gold looks set to benefit from its safe-haven appeal in more uncertain markets, according to economists at UBS.

It will take time for investor confidence to be fully restored

“Gold has already been gaining due to the recent market volatility. The spot price broke above $2,000 an ounce to hit a 12-month high. Meanwhile, Gold exchange traded funds look set to post net inflows in March for the first time in almost a year.”

“Given recent events, we think there’s a chance that Gold prices will reach our end-March 2024 target of $2,100 earlier than expected. While a repeat of the global financial crisis appears to have been averted, we think it will take time for investor confidence to be fully restored.”

• USD/JPY attracts some dip-buying on Thursday and reverses a major part of its intraday losses.
• The prevalent risk-on environment undermines the safe-haven JPY and lends support to the pair.
• A modest USD weakness is holding back bullish traders from placing fresh bets around the major.

The USD/JPY pair rebounds over 50 pips from the daily low and steadily climbs back closer to the top end of its daily trading range during the first half of the European session. The pair is currently placed around the 132.75 region, nearly unchanged for the day and just below the one-week high touched on Wednesday.

An extension of the risk-on rally across the global equity markets undermines the safe-haven Japanese Yen (JPY) and assists the USD/JPY pair to attract some dip-buying near the 132.20 area. The global risk sentiment remains well supported by receding fears of a full-blown banking crisis, especially after the takeover of Silicon Valley Bank by First Citizens Bank & Trust Company. Furthermore, no further cracks have emerged in the banking sector over the past two weeks, which further boosts investors' appetite for riskier assets and continues to drive flows away from traditional safe-haven currencies, including the JPY.

The upside for the USD/JPY pair, meanwhile, remains capped amid the emergence of some selling around the US Dollar (USD). That said, easing concerns over the banking sector led to fresh speculations that the Federal Reserve (Fed) will move back to its inflation-fighting interest rate hikes. This was seen as a key factor behind the recent strong rally in the US Treasury bond yields, which is seen acting as a tailwind for the Greenback and supports prospects for a further near-term appreciating move for the major. Bulls, however, seem reluctant to place aggressive bets ahead of the crucial US PCE report.

The US Core PCE Price Index - the Fed's preferred inflation gauge – is due for release on Friday and will expectations about future rate hikes. This, in turn, will drive the USD demand and provide a fresh directional impetus to the USD/JPY pair. In the meantime, traders on Thursday will take cues from the release of the final US Q4 GDP print and the usual Weekly Initial Jobless Claims data for some impetus later during the early North American session. Apart from this, the broader risk sentiment might produce short-term opportunities.

Technical levels to watch

• US Dollar stays on the back foot as risk flows dominate the financial markets.
• EUR/USD bullish bias stays intact in the near term.
• PCE inflation data from the US could trigger the next big action in the US Dollar.

The US Dollar (USD) started the new week under bearish pressure as easing fears over a global financial crisis allowed investors to move toward risk-sensitive assets. After having closed the previous two weeks in negative territory, the US Dollar Index continued to push lower and broke below 103.00. Renewed expectations about the US Federal Reserve (Fed) pausing its tightening cycle at the upcoming meeting also put additional weight on the USD shoulders. On Friday, the US Bureau of Economic Analysis will publish the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred gauge of inflation. PCE inflation figures could significantly impact the USD performance against its major rivals.

Daily digest market movers: No love for US Dollar

• FDIC issued a statement over the weekend announcing that First Citizens BancShares Inc bought all the loans and deposits of SVB. 
• While speaking on Monday, Federal Reserve Governor Philip Jefferson refrained from sharing his view about whether the Fed should continue raising interest rates.
• The Conference Board’s monthly data showed on Tuesday that the Consumer Confidence Index rose modestly in March while the one-year inflation expectation component edged slightly higher to 6.3%. 
• Previewing the upcoming PCE inflation data, “if the Core PCE remained elevated in February, it would be bad news for the Fed. FOMC members would be in a complex spot battling inflation (with higher interest rates) while facing a crisis in the banking,” said FXStreet Analyst Matias Salord. 
• The benchmark 10-year US Treasury bond yield rose above 3.5% at the beginning of the week but struggled to extend its rebound.
• China's Taiwan Affairs Office threatened retaliation over Taiwan President Tsai Ing-wen's visit to the US on Wednesday.
• FOMC Chairman Jerome Powell reportedly told the Republican Study Committee on Wednesday that they intend to raise the policy rate one more time before the end of the year.
• Wall Street’s main indexes rose sharply on Wednesday led by strong gains witnessed in technology shares. 
• The market mood remains upbeat early Thursday with major European equity indexes opening decisively higher.
• US Bureau of Economic Analysis will release its final revision to fourth-quarter Gross Domestic Product (GDP) growth on Thursday. The US Department of Labor will publish the weekly Initial Jobless Claims report.

Technical analysis: US Dollar could have a hard time outperforming Euro

EUR/USD bullish bias stays intact in the near term with the Relative Strength Index (RSI) indicator on the daily chart holding near 60. This technical reading also suggests that the pair has more room on the upside before turning overbought. Additionally, the pair continues to trade above the 20-day and the 50-day Simple Moving Averages after having tested them toward the end of the previous week. 

EUR/USD faces first resistance at 1.0900 (psychological level, static level). If the pair manages to rise above that level and starts using it as support, it could target 1.1000 (end-point of the latest uptrend) and 1.1035 (multi-month high set in early February).

On the downside, 1.0800 (psychological level) aligns as interim support ahead of 1.0730 (50-day SMA, 20-day SMA) and 1.0650/60, where the 100-day SMA and the Fibonacci 23.6% retracement of the latest uptrend is located. A daily close below the latter could be seen as a significant bearish development and open the door for an extended slide toward 1.0500 (psychological level) and 1.0460 (Fibonacci 38.2% retracement).

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.

GBP/USD continues to push strongly higher. Economists at Credit Suisse expect the pair to break above the 1.2447/49 December and January highs.

GBP/USD could fall back to 1.2009 on a break below 1.2190/57

“We stay bullish for a fresh look at the 1.2447/49 December and January highs. Whilst this should continue to be respected, we are biased to an eventual break of resistance next at 1.2668/1.2768 – the May 2022 high, 61.8% retracement of the 2021/2022 fall and long-term downtrend from May 2021.”

“Support at 1.2190/57 now ideally holds to keep the immediate risk higher. A break can see a fall back to 1.2009.”

Everything under control. Or not? Antje Praefcke, FX Analyst at Commerzbank, analyzes the USD outlook.

The wait continues – to the Dollar’s disadvantage

“I sometimes get a lingering suspicion that the wait for new momentum or a new (trade) idea continues and that every day that passes works to the Dollar’s disadvantage.”

“As long as the market cannot be certain that everything really ‘will be fine’ and ‘under control’ in the US it is likely to act asymmetrically and tend to position itself against the US Dollar. I can, therefore, imagine that the USD will find it difficult to gain much ground against more stable seeming currency areas such as the Eurozone.”

EUR/CZK moved below 23.60 for the first time since the sell-off in global markets two weeks ago after CNB's hawkish tone. 

Koruna welcomes hawkish Czech National Bank

“The CNB board decided to keep the key interest rate at 7.00%. The governor commented on market expectations of a peak in interest rates at current levels and a significant rate cut this year (roughly 125 bps in cuts priced in before the meeting). However, according to the governor, a rate hike cannot be ruled out and rate cut expectations are premature at this point.”

“The central bank has confirmed that it is ready to intervene if needed, but current levels are far from where the CNB was last active. On the other hand, the central bank's statement is clearly supportive for the Koruna and implies that the currency is safe in the event of a global sell-off. Moreover, with the prospect of higher rates for a longer period of time, a solid FX carry is also certain.” 

“The Koruna offers decent risk/reward and we expect it to strengthen further.”

Enrico Tanuwidjaja, Economist at UOB Group, reviews the latest Bank of Thailand (BoT) monetary policy meeting.

Key Takeaways

“Bank of Thailand (BOT) voted unanimously to raise the policy rate by 25bps from 1.50% to 1.75%, bringing its policy rate back to where it was before the pandemic. The next monetary policy board meeting is scheduled on 31 May 2023, a distant later after the scheduled FOMC meeting on 2 May 2023.”

“Confident of sustained growth momentum ahead, underpinned by broad-based tourism recovery (boon for employment and labor income), BOT forecasted the Thai economy to grow at 3.6% in 2023 and further accelerate to 3.8% in 2024.”

“We maintain our view that BOT has reached its terminal rate of 1.75% today and will keep it at the current level for the rest of this year. We pencil in a 25bps rate cut to 1.50% in the early part of next year as growth is expected to slow, along with inflation coming back steadily to BOT’s target range of 1-3%.”

• GBP/USD gains strong positive traction on Thursday and touches a fresh multi-week high.
• The risk-on mood undermines the safe-haven USD and provides a goodish lift to the pair.
• A move beyond the mid-1.2300s favours bulls amid a supportive fundamental backdrop.

The GBP/USD pair reverses an intraday dip to sub-1.2300 levels and climbs to its highest level since early February during the first half of the European session on Thursday. The pair currently trades just above the mid-1.2300s and seems poised to prolong its recent upward trajectory from the 1.1800 round-figure mark, or the YTD low touched earlier this March.

The global risk sentiment remains well supported by receding concerns over the banking sector, which is seen undermining the safe-haven US Dollar (USD) and turning out to be a key factor pushing the GBP/USD pair higher. The takeover of Silicon Valley Bank by First Citizens Bank & Trust Company calmed market nerves about the contagion risk. Moreover, the fact that no further cracks have emerged in the banking sector over the past two weeks suggests that a widespread banking crisis might have been averted. The developments continue to boost investors' confidence and drive flows away from traditional safe-haven currencies, including the Greenback.

The British Pound, on the other hand, draws additional support from a more hawkish commentary by the Bank of England (BoE) Governor Andrew Bailey, saying that interest rates may have to move higher if there were signs of persistent inflationary pressure. Furthermore, Bailey told the House of Commons Treasury Select Committee on Tuesday that the UK banking system is in a strong position and is not experiencing stress linked to the global turmoil in the banking sector. This, in turn, lifted bets for additional rate hikes by the BoE, which continues to act as a tailwind for the Sterling and remains supportive of the GBP/USD pair's strong move up.

With the latest leg up, spot prices now seem to have cleared a hurdle near the 1.2345-50 region, which favours bullish traders and supports prospects for a further near-term appreciating move. That said, the lack of strong follow-through buying warrants some caution ahead of the release of the US Core PCE Price Index - the Fed's preferred inflation gauge - on Friday. In the meantime, traders on Thursday will take cues from the US economic docket, featuring the final Q4 GDP print and the usual Weekly Initial Jobless Claims. This, along with the broader risk sentiment, might influence the USD price dynamics and provide some impetus to the GBP/USD pair.

Technical levels to watch

Economists at Crédit Agricole explain why they see downside risks for EUR/USD in the near-term.

Fed rate hike expectations are in for a rebound

“We continue to see some downside risks for EUR/USD in the near-term. In particular, we think that Fed rate hike expectations are in for a rebound after they have been pared back far too aggressively. We think that abating banking sector risks and evidence on Thursday and Friday that US inflation remains very ‘sticky’ could be the trigger of a renewed move higher in US rates and yields.” 

“Potential downside surprises from the Eurozone HICP data on Friday could force investors to reassess their stance on the ECB’s policy from here. To the extent that this leads to lower EUR/USD nominal and real rate spreads, it should add to the downside risks for the EUR.”

See – EU HICP Preview: Forecasts from seven major banks, headline inflation falls sharply, but core remains high

Can the Swiss Franc still be a safe haven when there's considerable stress in the financial system there? Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, discusses CHF outlook.

SNB intervention policy disrupts Franc's "safe haven" behavior

“I argue that the Franc's safe-haven-property does not depend on the Swiss banking system, but on the SNB's interest rate policy.”

“SNB's interest rate policy policy still makes the Franc a safe haven in the FX space. However, this status is reduced by the SNB's intervention policy.”

• AUD/USD regains positive traction on Thursday and climbs to a one-week high.
• The risk-on mood undermines the USD and benefits the risk-sensitive Aussie.
• The divergent Fed-RBA policy expectations could act as a headwind for the pair.

The AUD/USD pair attracts fresh buying near the 0.6660 area on Thursday and builds on its steady intraday ascent through the early part of the European session. The momentum lifts spot prices to a one-week high, around the 0.6820 region in the last hour, though any meaningful upside still seems elusive.

The upbeat market mood - as depicted by the ongoing rally in the global equity markets - prompts some selling around the safe-haven US Dollar (USD) and turns out to be a key factor lending support to the AUD/USD pair. Against the backdrop of easing fears of a widespread banking crisis, hopes for a strong economic recovery in China boost investors' appetite for riskier assets and benefit the China-proxy Australian Dollar. In fact, China's Premier Li Qiang, speaking at the Boao Forum, promised more stimulus to boost domestic spending and reforms that can help stimulate growth.

That said, worsening US-China relations, along with the prospect of an imminent pause in the Reserve Bank of Australia’s (RBA) rate hikes, might hold back bulls from placing aggressive bets around the AUD/USD pair. The markets have been scaling back their bets for any further policy tightening by the RBA amid signs that inflation had peaked and that economic growth was cooling. The expectations were reinforced by the latest Australian consumer inflation figures released on Wednesday, which showed that the headline CPI decelerated to an eight-month low in February.

Furthermore, the RBA recently warned that the path to a soft landing for the Australian economy remained a narrow one.  Apart from this, speculations that the Federal Reserve (Fed) will move back to its inflation-fighting interest rate hikes could revive the USD demand and further contribute to capping the upside for the AUD/USD pair. Even from a technical perspective, last week's repeated failures near the very important 200-day Simple Moving Average (SMA) warrants some caution for aggressive bullish traders and before positioning for any further near-term appreciating move.

Market participants now look to the US economic docket, featuring the release of the final Q4 GDP print and the usual Weekly Initial Jobless Claims later during the early North American session. This, along with the broader risk sentiment, will influence the USD price dynamics and provide some impetus to the AUD/USD pair. The focus, however, will remain glued to the Fed's preferred inflation gauge - the Core PCE Price Index - due on Friday.

Technical levels to watch

In an Economic Bulletin article published on Thursday; the European Central Bank (ECB) offered updates on the economic, financial and monetary developments in the Euro area.

Key highlights

“Inflation is projected to remain too high for too long.”

“The new ECB staff macroeconomic projections were finalized in early March before the recent emergence of financial market tensions.”

“ECB staff now see inflation averaging 5.3% in 2023, 2.9% in 2024 and 2.1% in 2025.”

“Wage pressures have strengthened on the back of robust labor markets and employees aiming to recoup some of the purchasing power lost owing to high inflation. 

“Risks to the outlook for economic growth are tilted to the downside. Persistently elevated financial market tensions could tighten broader credit conditions more strongly than expected and dampen confidence.”

“Baseline projections for growth in 2023 have been revised up to an average of 1.0% as a result of both the decline in energy prices and the economy’s greater resilience to the challenging international environment.”

“According to ECB staff March 2023 projections, the euro area fiscal outlook is set to improve over the projection horizon. “

Market reaction

EUR/USD is holding the higher ground near 1.0870 following the release of the ECB’s Economic Bulletin. The pair is adding 0.23% on the day to trade at 1.0866, as of writing.

Further consolidation seems likely in USD/CNH around 6.8100 and 6.9200 for the time being, comment UOB Group’s Economist Lee Sue Ann and Market Strategist Quek Ser Leang.

Key Quotes

24-hour view: “We expected USD to trade in a range of 6.8700/6.8950 yesterday. USD subsequently traded between 6.8750 and 6.8975 before closing slightly higher at 6.8950 (+0.22%). The underlying tone has improved somewhat and USD is likely to edge higher today. In view of the mild upward pressure, any advance is unlikely to break 6.9110. On the downside, a break of 6.8850 would indicate that the current upward pressure has faded.”

Next 1-3 weeks: “Our latest narrative was from Monday (27 Mar, spot at 6.8700) wherein we highlighted that the recent USD weakness has stabilized and that USD is likely to trade between 6.8100 and 6.9200 for now. While we continue to hold the same view, short-term momentum has improved a tad, but at this stage, the odds for a clear break above 6.9200 are not high.”

• EUR/USD adds to the recent uptick beyond 1.0800.
• The dollar appears offered ahead of key US data releases.
• EMU Consumer Confidence, Germany Flash CPI next on tap.

The single currency extends the weekly upside and motivates EUR/USD to keep the trade above the 1.0800 mark on Thursday.

EUR/USD looks at data, dollar

EUR/USD advances uninterruptedly since Monday and continues to consolidate the breakout of the 1.0800 barrier in a context dominated by dollar weakness and further improvement in the risk complex.

In addition, further ECB speak reinforced the case for higher interest rates after Board member Elderson said inflation remains too high and deemed as “robust” the bank’s decision to hike rates at the March event. Elderson also suggested that the ECB will reduce its bond holdings in a balanced manner.

Still around the ECB, the Economic Bulletin sees inflation averaging 5.3% this year, 2.9% in 2024 and 2.1% in 2025. In addition, GDP projections have been revised up in response to lower energy prices and the resilience of the domestic economy.

Data wise in the region, the final Consumer Confidence in the euro area is due later seconded by the Economic Sentiment. In addition, advanced inflation figures in Germany will be in the limelight.

In the US, usual weekly Claims are due along with the final Q4 GDP Growth results.

What to look for around EUR

The weekly recovery in EUR/USD remains unabated and continues to target the 1.0900 neighbourhood so far on Thursday.

In the meantime, price action around the European currency should continue to closely follow dollar dynamics, as well as the potential next moves from the ECB in a context still dominated by elevated inflation, although amidst dwindling recession risks for the time being.

Key events in the euro area this week: Germany  Flash Inflation Rate, EMU Consumer Confidence, Economic Sentiment (Thursday) – Germany Retail Sales/Labor Market Report, EMU Flash Inflation Rate/Unemployment Rate, France Flash Inflation Rate, Italy Flash Inflation Rate (Friday).

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 0.14% at 1.0859 and a break above 1.0929 (monthly high March 23) would target 1.1032 (2023 high February 2) en route to 1.1100 (round level). On the flip side, the next support comes at 1.0712 (low March 24) followed by 1.0644 (100-day SMA) and finally 1.0516 (monthly low March 15).

Economists at Morgan Stanley Research discuss GBP outlook. Monetary policy divergence could weigh on the British Pound.

BoE is done hiking

“We remain tactically neutral on GBP but see risks skewed to the downside.”

“We expect the BoE to be done with its hiking cycle now, but incoming data over the next few weeks will remain extremely important for the May rate decision.”

“This stands in contrast with the Fed and the ECB where we see more 25 bps hikes in the coming months. This policy divergence should continue to weigh on GBP and keep EUR/GBP trending higher.” 

Further upside in USD/JPY could surpass the 134.00 barrier in the newxt weeks, note UOB Group’s Economist Lee Sue Ann and Market Strategist Quek Ser Leang.

Key Quotes

24-hour view: “We highlighted yesterday that USD ‘downward momentum has waned with the rebound and USD is unlikely to weaken further’ and we expected USD to trade in a range between 130.70 and 131.75. Instead of trading in a range, USD soared to a high of 132.88 before closing on a strong note at 132.84 (+1.51%). The sharp and swift rise has room to extend but deeply overbought conditions suggest a sustained rise above 133.50 is unlikely. The next resistance level of note is at 134.20. On the downside, 132.00 is a solid support (there is a minor support at 132.30).”

Next 1-3 weeks: “We have held a negative USD view since early last week. In our update from yesterday (29 Mar, spot at 131.10), we highlighted that ‘downward momentum is waning rapidly and the risk of USD bottoming is increasing’. However, we did not quite expect the manner in which USD jumped to a high of 132.88 before closing higher by a whopping 1.51% (NY close of 132.84). Note the increase of 1.51% is the largest 1-day advance in almost 2 months. Despite the sharp rise, it is premature to expect a major reversal. That said, the current rebound could extend to 134.20. At this stage, a sustained rise above this level is unlikely. Overall, the current upside pressure will remain intact as long as USD stays above 131.20, the current ‘strong support’ level.”

Open interest in natural gas futures markets increased for the third straight session on Wednesday, no by more than 19K contracts according to preliminary readings from CME Group. On the other hand, volume shrank by around 27.5K contracts after two consecutive daily builds.

Natural Gas keeps targeting the sub-$2.00 region

Prices of the natural gas attempted a mild bounce on Wednesday. The tepid uptick was accompanied by increasing open interest and declining volume, which should point to the emergence of some consolidation in the very near term. In the meantime, the 2023 low in the sub-$2.00 region per MMBtu.

• Silver gains strong positive traction on Thursday and touched its highest level since early February.
• The technical setup favours bullish traders and supports prospects for a further appreciating move.
• A convincing break below the $22.00 mark is needed to negate the near-term constructive outlook.

Silver catches fresh bids on Thursday, following the previous day's two-way/directionless price moves, and rallies to a nearly two-month high during the early European session. The white metal is currently placed around the $23.60-$23.65 region, up over 1% for the day, and seems poised to prolong its recent appreciating move from levels just below the $20.00 psychological mark, or the YTD low touched earlier this March.

Against the backdrop of the recent breakout through the 61.8% Fibonacci retracement level of the pullback from over a nine-month peak, the ongoing positive move adds credence to the bullish outlook for the XAG/USD. Hence, some follow-through strength, back towards the $24.00 mark, looks like a distinct possibility. The momentum could get extended further towards the $24.65 region (multi-month peak touched in February) en route to the $25.00 psychological mark.

That said, Relative Strength Index (RSI) on the 1-hour chart is already flashing overbought conditions and remains close to 70 on 4-hour/daily charts. This makes it prudent to wait for some near-term consolidation or a modest pullback before placing fresh bullish bets. Any meaningful corrective slide, however, might now be seen as a buying opportunity near the $23.00 round-figure mark and remain limited near the 61.8% Fibo. level resistance breakpoint, around the $22.80 area.

The latter should now act as a strong base and a pivotal point, which if broken decisively might prompt some technical selling. A subsequent slide below the $22.50 region could then drag the XAG/USD towards the $22.20 intermediate support en route to the $22.00 round figure. This is closely followed by the $21.75-$21.70 zone. A convincing break below said support levels is needed to negate the positive outlook and shift the near-term bias in favour of bearish traders.

Silver daily chart

Key levels to watch

• Gold price continues lazily flatlining as markets debate the future of interest rates.
• Jerome Powell said privately the Federal Reserve expects one more rate hike this year but markets disagree.
• US Dollar suffers negative outlook versus major peers as Fed handcuffed by banking crisis – XAU/USD positive.

Gold price continues its comatose flatline in the $1,950s-60s in the early European session on Thursday. This comes in spite of the news that Federal Reserve Chairman Jerome Powell admitted privately that the Fed still sees one more rate hike this year. A market-based gauge of future rate hikes, however, is barely unchanged from the day before, and still shows odds favoring the Fed doing nothing in May. 

Powell privately believes in one more hike but markets pass-on-by

Republican Representative Kevin Hern reported to Bloomberg that Jerome Powell admitted he still sees one more rate hike, when he was in a private meeting with US lawmakers on how much further the central bank will raise interest rates this year.

Despite the revelation, the Fed Funds Futures Curve, a market-based gauge of what the Fed will do at future meetings, has only increased the chances of rate hike in May to 45% from 43% previously. The same gauge sees odds favoring the Fed not hiking rates at all, with a 55% probability of such an outcome at the May FOMC meeting. 

Higher rates are negative for XAU/USD as they increase the opportunity cost of holding Gold vis-a-vis staying in cash or cash alternatives. 

Fundamentals undermine US Dollar outlook, support Gold price

The US Dollar is suffering from a negative outlook compared to its main counterparts, especially the Euro. This could result in losses for the US Dollar Index (DXY) which tracks the value of the currency against a weighted basket of counterparts. Such a deadline would provide a bullish catalyst for XAU/USD.

In the case of the Euro, the US Dollar may decline due to a possible closing of the interest rate differential between the currencies, which hitherto has favored the Greenback. Currencies with higher rates gain an advantage via the effect of the carry trade in which investors profit by borrowing currencies in a low interest rate jurisdiction and using the money to buy a currency yielding a higher rate of return. 

The gap is likely to close because the Federal Reserve (Fed) is widely seen as reaching the end of its hiking cycle, whilst the European Central Bank (ECB) is still viewed as being at the start of its cycle. 

The Fed is also seen as more limited in how much higher it can raise rates compared to the ECB due to the different effects higher rates have on the two region’s banking systems. 

According to Andrew Stimpson, KBW Head of European Banks Research, Europeans are much less likely to withdraw their bank deposits and invest them in higher yielding money market funds – the root cause of the US banking crisis.  

“In Europe we haven’t got the same ease to switch into a money market fund, that is not a normal product that the general population will think of,” said Stimpson in an interview with Bloomberg News.

“The absolute level of rates in Europe is also lower than in the US, so if you are going to sit down on a Sunday afternoon and sort out your finances, whether you are going to switch from an overnight rate of zero to a timed deposit of 1.6-1.7% it is probably not going to make much  difference to you,” Stimpson added.

Gold price bullish trend despite lack of direction in short term 

XAU/USD may be snailing along little-changed in the short term, but it is still in an uptrend when looked at from a distance, adopting a medium-term perspective. The price of the precious metal continues to make higher highs and lows on the daily chart that show an uptrend is in play. Thus, according to the market maxim, “The trend is your friend until the bend at the end,” the technical outlook favors bulls.

Gold price: Daily Chart

A break above the key $2,009 March top would provide confirmation of further upside. The next target for Gold price would then lie at the $2,070 March 2022 highs. 

The key $1,934 March 22 swing low must hold for Gold bulls to retain the advantage. Yet, a break and close on a daily basis below that level would introduce doubt into the overall bullish assessment of the trend. Such a move would probably see a sharp decline to support at $1,990 supplied by the 50-day Simple Moving Average (SMA). 

There is a suggestion Gold price may be forming a triangle pattern as it oscillates to-and-fro between a limited range, and a closer inspection of the pattern on lower timeframes may offer traders opportunities to enter breakout trades at more daring levels than the broader range parameters highlighted above. 

With the Yen bearing the brunt of the risk rally, the Dollar saw some delayed benefits. Economists at ING believe that the USD/JPY pair could bounce to the 135 region.

Oil-sensitive currencies may continue to enjoy decent momentum

“Improving sentiment asymmetrically hits the Yen given it is accompanied by an unwinding of dovish Fed bets: the USD/JPY might rebound to the 135.00 area, even though we favour another decline in the pair beyond the short term.”

“Oil-sensitive currencies may continue to enjoy decent momentum as we see more upside risks to oil prices. The Canadian Dollar is also benefiting from the general improvement in American (North and Latam) sentiment but lacks a domestic tightening story, so its rally may start to run out of steam sooner than other peers (like MXN and NOK).” 

“We think the small USD recovery seen yesterday could be one of many along a gradual decline path, but would favour some consolidation around current levels today.”

In the opinion of UOB Group’s Economist Lee Sue Ann and Market Strategist Quek Ser Leang, NZD/USD is still seen navigating within the 0.6160-0.6280 range in the near term.

Key Quotes

24-hour view: “Yesterday, we held the view that NZD ‘could break above 0.6280 but it is unlikely to maintain a foothold above this level’. However, NZD did not break 0.6280 as it dropped from 0.6271 to a low of 0.6215. Downward momentum has improved a tad and today, NZD is likely to edge lower but a break of 0.6190 is unlikely. On the upside, a breach of 0.6250 (minor resistance is at 0.6235) would indicate that the current mild downward pressure has eased.”

Next 1-3 weeks: “We highlighted yesterday (29 Mar, spot at 0.6250) that ‘if NZD breaks and stays above 0.6280, it would increase the risk of a break of 0.6310’. NZD rose to 0.6271 before dropping quickly from the high. The build-up of momentum fizzled out quickly. In other words, instead of breaking upwards, NZD is more likely to trade in a range for the time being, expected to be between 0.6160 and 0.6280.”

Here is what you need to know on Thursday, March 30:

Choppy action continues in financial markets in the second half of the week but investors prepare for volatility to pick up later in the day. Business and consumer sentiment data from the Eurozone, March inflation data from Germany and fourth-quarter Gross Domestic Product (GDP) reading from the US will be featured in the economic docket. Participants will also pay close attention to comments from Federal Reserve officials, including Richmond Fed President Thomas Barking and Minneapolis Fed President Neel Kashkari.

Risk flows dominated the markets in the second half of the day on Wednesday and the US Dollar's rebound following a two-day slide remained limited. Early Thursday, the US Dollar Index fluctuates in a tight channel at around 102.50 and the benchmark 10-year US Treasury bond yield stays in weekly range above 3.5%. Meanwhile, US stock index futures trade modestly higher in the early European session. In the final revision, Q4 GDP in the US is expected to match the previous estimate of 3.9%. The US Department of Labor will release its weekly Initial Jobless Claims data as well.

Earlier in the day, the data from Spain showed that the annual Harmonized Index of Consumer Prices (HICP) declined sharply to 3.1% in March from 6% in February. This reading came in much below the market expectation of 4%. In Germany, annual HICP is forecast to drop to 7.5% from 9.3%. Despite the soft inflation data from Spain, EUR/USD continues to trade in its daily channel at around 1.0850 in the European morning.

Following Wednesday's pullback, GBP/USD has regained its traction and climbed to the 1.2350 area in the European session. The UK's FTSE 100 Index opened marginally higher.

USD/JPY took advantage of the risk-positive market environment on Wednesday and registered impressive gains. The pair seems to have gone into a consolidation phase early Thursday and was last seen trading in negative territory below 132.50.

Gold price edged lower on Wednesday but didn't have a difficult time holding above $1,960. With the US yields staying indecisive on Thursday, XAU/USD continues to move up and down in its daily range slightly below $1,970.

Supported by the improving market mood, Bitcoin gained nearly 4% on Wednesday and reclaimed $28,000. BTC/USD holds its ground on Thursday and continues to edge higher toward $29,000. Ethereum registered small gains on Wednesday and was last seen moving sideways near $1,800.

The South African central bank (SARB) is likely to hike its key rate by a further 25 bps today to 7.5%. A lot already seems to have been priced in, so that the reaction of the Rand exchange rates should be moderate, economists at Commerzbank report.

SARB likely to hike further today

“With a view to rising inflation risks it cannot be excluded that a larger rate step of 50 bps will at least be discussed. However, due to the weak economy we assume that the majority on the board will vote in favour of a moderate 25 bps hike.”

“Possible ZAR gains in case of a hawkish seeming SARB are likely to be limited.”

“We do not foresee a sustainable recovery in ZAR in the current market environment and in view of the domestic challenges. ZAR investors are likely to remain cautious going forward due to possible fiscal risks too.”

• NZD/USD rebounds from the 0.6200 mark and reverses a part of the overnight losses.
• A positive risk tone undermines the safe-haven USD and benefits the risk-sensitive Kiwi.
• The upside seems limited as traders keenly await the US Core PCE Price Index on Friday.

The NZD/USD pair attracts fresh buying near the 0.6200 mark on Thursday and builds on its steady intraday ascent through the early European session. The pair is currently placed just below mid-0.6200s, up over 0.25% for the day, and for now, seems to have stalled the overnight rejection slide from a technically significant 200-day Simple Moving Average (SMA).

As investors look past softer data from New Zealand, a generally positive tone around the equity markets undermines the safe-haven US Dollar (USD) and turns out to be a key factor benefitting the risk-sensitive Kiwi. Against the backdrop of easing fears of a widespread banking crisis, hopes for a strong economic recovery in China boost investors' confidence and remain supportive of the prevalent risk-on environment. The optimism is fueled by comments from China's Premier Li Qiang, promising more stimulus to boost domestic spending and delivering reforms that can help stimulate growth.

The upside for the NZD/USD pair, however, seems limited, at least for the time being, amid reviving bets for further policy tightening by the Federal Reserve (Fed). The takeover of Silicon Valley Bank by First Citizens Bank & Trust Company calmed market nerves about the contagion risk. Furthermore, the fact that no further cracks have emerged in the banking sector over the past two weeks raises hopes that a full-blown banking crisis has been averted. This could allow the US central bank to move back to its inflation-fighting interest rate hikes, which could lend support to the Greenback.

Hence, it will be prudent to wait for strong follow-through and sustained strength above the 200-day SMA before positioning for any further appreciating move for the NZD/USD pair. Investors also seem reluctant and might prefer to wait for the release of the US Core PCE Price Index - the Fed's preferred inflation gauge on Friday - before placing aggressive directional bets. In the meantime, Thursday's US economic docket, featuring the final Q4 GDP print and Initial Weekly Jobless Claims, might influence the USD and provide some impetus to the major later during the early North American session.

Technical levels to watch

• The annual HICP in Spain declined to 3.1% in March.
• EUR/USD is holding higher ground near 1.0850 on the dismal Spanish data.

According to the latest data published by the Instituto Nacional de Estadístic (INE) on Thursday, inflation in Spain decelerated to 3.1% year-on-year (YoY) in March, compared with the previous month's unexpected jump to 6.0% and missing the market's expected forecast of 4.3%.

On a monthly basis, the Spanish Harmonized Index of Consumer Prices (HICP) measure fell to 1.1% in March from 0.9% recorded in February. The expectations were for a 1.6% reading.

Meanwhile, the annualized Consumer Price Index (CPI) in the fourth largest euro area economy fell sharply to 3.3% vs. 3.8% expected and 6.0% previous.

The Spanish monthly CPI declined to 0.4% in March vs. 0.65% expected and the February print of 0.9%

Spain has been routinely seen as a 'bellwether' for broader Eurozone inflation with a lead of about four months.

Market reaction

EUR/USD showed little to no reaction to the Spanish inflation data. The pair is trading at 1.0842, modestly flat on the day.

• EUR/CHF extends the previous day’s pullback from a one-week high to pare Tuesday’s heavy gains.
• U-turn from monthly resistance line, looming bear cross on MACD lures sellers.
• Convergence of 100, 200-EMA and a fortnight-old ascending trend line appears a tough nut to crack for bears.

EUR/CHF holds onto the previous day’s bearish bias while refreshing intraday low near 0.9945 during early Thursday morning in Europe.

On Tuesday, the cross-currency pair marked the heaviest daily gains in 11 weeks but failed to surpass a downward-sloping resistance line from March 02.

Not only the failure to cross the key resistance line but the overbought RSI (14) and the impending bear cross on the MACD also lures the EUR/CHF pair sellers during the second consecutive loss-making day.

It’s worth noting, however, that the 100-bar and 200-bar Exponential Moving Average (EMA) joins a two-week-long ascending trend line to highlight the 0.9915-10 area as the key challenge for the EUR/CHF bears to tackle to keep the reins.

Following that, the 0.9900 round and multiple levels around 0.9850 can offer intermediate halts during the pair’s fall targeting the monthly low of around 0.9705.

On the flip side, a clear break of the aforementioned resistance line, close to 0.9985 at the latest, isn’t an open invitation to the EUR/CHF bulls as a downward-sloping trend line from January 12, near 1.0020, acts as an extra filter towards the north.

Should the EUR/CHF price manage to cross the 1.0020 hurdle, the odds of witnessing a rally towards the yearly top of around 1.0100 can’t be ruled out.

EUR/CHF: Four-hour chart

Trend: Limited downside expected

Preliminary March inflation readings in Spain and Germany will be closely watched today. Regarding EUR/USD, economists at ING expect the pair to hover around 1.0840.

First CPI readings in focus

“The German figures will obviously draw greater interest, and consensus expectations are for a deceleration from 8.7% to 7.3% in the headline rate. Spanish numbers did trigger some market shake-up recently. Expectations are for a flat core rate at 7.6%, but a sharp deceleration in headline inflation from 6.0% to 3.7%.”

“With the European Central Bank explicitly data-dependent despite an implicit hawkish bias, this week’s inflation figures are set to be an important driver of the market’s rate expectations.”

“The EUR/USD rally took a break around 1.0840 and we could see it hover around those levels today, but we still favour a break above 1.0900 and ultimately a test of 1.1000 in the near term.”

See – EU HICP Preview: Forecasts from seven major banks, headline inflation falls sharply, but core remains high

Czech Koruna rallied late yesterday with EUR/CZK moving below 23.60 after the Czech National Bank (CNB) hinted at a rate hike. Economists at Commerzbank expect CZK to remain supported for now.

Hawkish CNB message

“CNB Governor Alles Michl made hawkish remarks following the rate meeting, saying that the market’s assessment – that CNB’s rate hikes are over – could prove wrong.”

“Whether Michl would really pull the trigger easily or not remains to be seen, but for now his verbal intervention will support the Czech Koruna.”

Frank Elderson, member of the Executive Board of the European Central Bank (ECB) and Vice-Chair of the Supervisory Board of the central bank, said in a media interview on Thursday, “we must reduce the very high rate of inflation.”

Additional quotes

“The rate increase decision made in March was robust."

“We are not pre-empting future decisions.”

“The ECB will reduce its bond holdings in a balanced manner.”

His comments come just ahead of the release of the flash estimate of the Spanish inflation data.

Also read: Euro area HICP Preview: Peak inflation or base effects? No trade-off for ECB (for now)

Market reaction

EUR/USD is holding steady just below 1.0850 on the above comments, awaiting the critical inflation readings from the euro area economies.

• EUR/JPY retreats from three-week-old resistance line, depressed near the intraday low of late.
• Multiple hurdles stand tall to challenge bears; bulls need validation from 144.20.
• RSI’s retreat from overbought territory suggests a mild pullback in prices, bullish MACD signals favor buyers.

EUR/JPY licks its wounds around the intraday low of 143.50 as it consolidates the previous day’s heavy gains during early Thursday in Europe.

The cross-currency pair rallied the most since early January 2023 before reversing from a downward-sloping trend line from March 07. The pullback moves also take clues from the RSI’s (14) retreat from the overbought territory. As a result, the quote’s short-term downside can’t be ruled out.

However, an upward-sloping support line from the last Friday, close to 143.00 at the latest, restricts the immediate downside of the EUR/JPY.

Following that, the 100-SMA and a two-week-long previous resistance line, respectively near 142.45 and 142.10 in that order, could challenge the EUR/JPY bears. It’s worth noting that the 142.00 round figure acts as the last defense of the pair buyers.

On the contrary, recovery moves need a clear upside break of the aforementioned three-week-old resistance line, around 144.20 at the latest.

In that case, the monthly high of around 145.50 may act as an intermediate halt before fueling the price towards the multi-year top marked in February, around 148.40.

Overall, EUR/JPY remains on the bull’s radar despite the latest pullback.

EUR/JPY: Four-hour chart

Limited downside expected

FX option expiries for Mar 30 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0680 1.3b
• 1.0700 2.8b
• 1.0840 784m
• 1.0950 1.5b
• 1.1000 1.9b

- USD/JPY: USD amounts                     

• 130.00 1.1b
• 130.50 658m
• 131.00 1.6b
• 131.50 1.2b
• 132.00 1.4b
• 132.90 1.1b
• 134.20 647m

- AUD/USD: AUD amounts  

• 0.6600 834m
• 0.6650 850m
• 0.6745 530m

- USD/CAD: USD amounts       

• 1.3312 1.0b

Eurostat will release the preliminary estimate of Eurozone Harmonised Index of Consumer Prices (HICP) data for March on Friday, March 31 at 09:00 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of seven major banks regarding the upcoming EU inflation print.

The flash estimate for Eurozone is likely to decelerate to 7.2% YoY in March vs. 8.5% in February while the annualized Core HICP is seen a tad higher at 5.7% vs. 5.6% in February. 

Commerzbank 

“In the euro area, the inflation rate is likely to have fallen from 8.5% in February to 6.8% in March. This is because the massive rise in energy prices in March 2022 is now excluded from the year-on-year comparison. However, from the ECB's perspective, it is likely to be more important that the core inflation rate probably remains at 5.6%. This would show that underlying inflation remains high.”

Danske Bank

“Despite a further decline in headline inflation to 7.9%, we expect Euro area HICP figures for March to show still a picture of strong underlying inflation pressures, with core inflation remaining unchanged at 5.6%.”

Deutsche Bank

“We see March headline at 7.1% (+1.1% MoM) and core at 5.8% (+1.4% MoM). As a reminder, the latest 5.6% core inflation reading is the highest on record. We don't expect it to peak until the 6.0% they expect in July.”

Citi

“We see headline HICP falling to 6.8% on energy base effects but core CPI still accelerating to 5.7%.”

TDS

“Headline inflation is set to plunge across the EZ to 7.3 YoY as the spike in energy prices following Russia's invasion of Ukraine drops out of the YoY calculation. Some reversal of Feb's weather-related jump in fresh food prices also adds some downside pressure. Focus will be on the core measure, though, and another strong print  (our forecast is 5.8%) will maintain pressure on the ECB to hike rates further.”

SocGen

“Negative energy base effects should lead to a massive deceleration in headline inflation from 8.4% to 6.7% in March. However, given the recent upside surprise, especially in food inflation, we believe there is upside risk to this forecast. Furthermore, the strength in core inflation should continue. We anticipate an increase from 5.6% to 5.7%, again, with the risks tilted to the upside.”

Credit Suisse

“We expect headline inflation to fall from 8.7% to 8.5% YoY and core inflation to rise from 5.6% to a new all-time high of 5.8% YoY in March.”

Considering advanced prints from CME Group for crude oil futures markets, open interest reversed two daily drops in a row and went up by around 21.8K contracts on Wednesday. Volume, instead, extended the downtrend for the third consecutive day, this time by nearly 8K contracts.

WTI: Gains appear capped by $74.00… for now

Prices of the WTI printed new weekly highs, although it ended Wednesday’s session in the negative territory. The downtick was in tandem with increasing open interest and suggests that extra losses may be in store for the commodity in the very near term. In the meantime, the recent peak past the $74.00 mark per barrel (March 29) emerges as the next hurdle of note.

Analysts at Goldman Sachs are out with their revisions to the EUR/USD forecasts for the coming months.

Key quotes

"We are revising up our 3- and 6-month EUR/USD forecasts to 1.05 (from 1.02 previously) to account for the recent deterioration in the US growth outlook and less favorable tightening mix for the Dollar.”

"And, we are maintaining our 12-month forecast at 1.10; we expect that still-limited economic slack and rising recession risks cut against more meaningful Dollar downside.”

• Gold price picks up bids to pare intraday losses as markets brace for top-tier inflation data.
• Mixed concerns over rate hikes, banking weigh on yields even as China tries to lure XAU/USD bulls.
• Central bank speeches, inflation clues will guide the Gold price amid quarter-end positioning.

Gold price (XAU/USD) consolidates intraday loss, the second one in a row around $1,965 as US Dollar, as well as the Treasury bond yields, struggle to defend the previous day’s gains amid mixed sentiment during Thursday’s European session. With this, the bright metal pares the second weekly loss amid a cautious mood ahead of the top-tier inflation data from Europe and the US.

While portraying the sentiment, the US Dollar Index (DXY) retreats from its intraday high to print mild losses near 102.60 while S&P 500 Futures struggle around a one-week high marked the previous day. Further, the US 10-year and two-year Treasury bond yields fade upside momentum around 3.57% and 4.09% respectively.

China Premier Li Qiang’s hopes that the economic situation in March is even better than in January and February joins Fed Chair Jerome Powell’s signals of policy pivot after one more rate hike seems to have underpinned the latest run-up of the Gold price.

It should be noted, however, that the majority of the central bankers defend their previous bias about inflation and hence challenge the Gold buyers. Additionally, International Monetary Fund’s (IMF) Managing Director Kristalina Georgieva said on Thursday, “Urgently need faster, more efficient mechanisms for providing debt support to vulnerable countries.” Her comments renew banking fears which eased previously.

Above all, the market’s preparations for top-tier inflation numbers from Europe and the US seem to allow the Gold price to trim weekly losses. That said, the US fourth quarter (Q4) Core Personal Consumption Expenditure (PCE) and final prints of the Q4 Gross Domestic Product (GDP) can entertain intraday traders of the XAU/USD.

Also read: US February PCE Inflation Preview: Bad news for the Dollar, good news for the Fed?

Gold price technical analysis

Gold price bounces off the weekly support line while staying within an eight-day-old symmetrical triangle. In doing so, the XAU/USD pays little heed to the sluggish MACD to pare the second consecutive weekly loss.

That said, the Gold price currently rises towards a convergence of the 100 and 200 Hour Moving Average (HMA), around $1,970, a break of which could propel XAU/USD towards the $1,985 hurdle.

However, the top line of the stated triangle, close to $1,996, quickly followed by the $2,000 psychological magnet, could challenge the Gold buyers afterward.

Meanwhile, the immediate support line precedes the aforementioned triangle’s bottom line to restrict short-term XAU/USD downside near $1,958 and $1,950 in that order.

Following that, a quick drop to the 61.8% Fibonacci retracement level of the metal’s March 15-20 upside, near $1,933, can’t be ruled out.

Overall, Gold price remains sidelined despite the latest recovery.

Gold price: Hourly chart

Trend: Limited recovery expected

The likeliness for extra gains in GBP/USD remains in place with the next target of note at the 1.2400 region, suggest UOB Group’s Economist Lee Sue Ann and Market Strategist Quek Ser Leang.

Key Quotes

24-hour view: “We highlighted yesterday that ‘Despite the advance, there is no significant improvement in upward momentum’. We added, ‘However, there is room for GBP to rise to 1.2370 before the risk of a pullback increases’. GBP rose to a high of 1.2362 in London trade before pulling back to end the day at 1.2314 (-0.22%). The underlying tone has softened somewhat but while GBP is likely to edge lower, any decline is viewed as part of a 1.2270/1.2340 range. In other words, a clear break below 1.2270 is unlikely.”

Next 1-3 weeks: “Our update from yesterday (29 Mar, spot at 1.2330) is still valid. As highlighted, upward momentum appears to be building, albeit tentatively. In order for GBP to advance in a sustained manner, it has to break and stay above 1.2400. The likelihood of a clear break of 1.2400 is not high for now but it will remain intact as long as GBP stays above 1.2240 in the next 1-2 days. Looking ahead, the next resistance level above 1.2400 is a solid level at 1.2450.”

• EUR/USD is marching towards 1.0850 as the upside momentum in the USD Index has faded.
• Federal Reserve Powell has anticipated one more interest rate hike this year.
• European Central Bank may continue to raise rates further but at a slower pace.
• EUR/USD is consolidating in a narrow range of 1.0818-1.0871 ahead of the German Inflation data.

EUR/USD is looking to stretch its recovery towards the immediate resistance of 1.0850 in the early European session. The major currency pair rebounded from 1.0830 as US Dollar Index (DXY) retreated amid positive market sentiment. A volatile action is highly expected from the shared currency pair ahead of the German Harmonized Index of Consumer Prices (HICP) data.  

S&P500 futures have recovered their entire losses posted in the Asian session and have turned positive as investors are cheering receding fears of United States banking jitters. Acquisition of collapsed Silicon Valley Bank’s (SVB) deposits and advances and now discussion over increasing insurance limits for deposits have infused immense confidence in investors that US authorities are taking care of the overall financial system.

The demand for US government bonds is easing further amid anticipation of one more interest rate hike by Fed chair Jerome Powell and ebbing banking turmoil fears, which have raised 10-year US Treasury yields further to 3.59%.

USD Index loses momentum despite easing dovish Federal Reserve bets

The USD Index has shown a decent correction after failing to extend its upside journey to the critical resistance of 103.00. It looks like the USD Index has failed to capitalize on easing dovish Federal Reserve (Fed) bets after Federal Reserve chair Jerome Powell anticipated one more rate hike in 2023. As per the CME Fedwatch tool, chances of an unchanged monetary policy in May have trimmed quickly to 50%.

In March’s monetary policy meeting, Federal Reserve Powell also stated that one more rate hike is still needed after pushing rates to 4.75-5.00%. The discussion looks encouraging about the month when Federal Reserve Powell will put the last nail in the coffin.

For further clarity, US core Personal Consumption Expenditure (PCE) Price Index data will be keenly watched, which will release on Friday. As per the consensus, monthly core PCE would accelerate by 0.4%, lower than the former expansion of 0.6%. The annual figure is expected to remain steady at 4.7%.

Fears of US banking crisis receded further

US authorities have put their blood and sweat into restoring the confidence of investors in the troubled banking system after the collapse of three mid-size banks. The administration is not considering an expansion of blanket insurance for all deposits but has come forward with more measures.

Bloomberg reported that the private meeting between Federal Reserve Powell and US lawmakers has also discussed the agenda of raising insurance limits for deposits after the collapse of Silicon Valley Bank (SVB) and Signature Bank. Currently, the Federal Deposit Insurance Corporation (FDIC) currently insures up to $250,000 per depositor.

On Wednesday, Federal Reserve (Fed) Vice Chair for Supervision Michael Barr told Senate Banking Committee that the United States banking system is ‘sound and resilient’. He assured investors that the failure of a couple of lenders is unable to lead to a widespread contagion.

German Inflation remains the key

Financial instability inspired by global banking jitters in Eurozone has raised concerns about a further escalation in interest rates by the European Central Bank (ECB). ECB policymaker Peter Kazimir cited on Wednesday “I think inflation is too high for too long.” He further added that the European Central Bank will consider the financial situation before arriving at the interest rate decision. ECB Kazimir believes “There is a genuine danger that banks will cut back on lending.”

About interest rate guidance, ECB Kazimir is of the view, “We should continue in raising rates, possibly at a slower pace.”

It seems that German HICP data will deliver more clarity about the monetary policy outlook. The street is anticipating monthly German HICP to expand by 0.8% vs. the former release of 1.0%. On an annual basis, German HICP would soften dramatically to 7.5% from the prior release of 9.3%.

EUR/USD technical outlook

EUR/USD is showing immense contraction in volatility ahead of the German inflation data. The shared currency pair is consolidating in a narrow range of 1.0818-1.0871 on an hourly scale. The downside of the major is supported near March 24 low at 1.0714 while the upside is restricted near March 23 high at 1.0930.

The 20-period Exponential Moving Average (EMA) at 1.0840 has overlapped the asset, which indicates a rangebound structure.

Also, the Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, which indicates that investors are awaiting a fresh trigger for a decisive move.

Gold price is looking to extend the previous weakness while defending the $1,950 level so far this Thursday. FXStreet’s Dhwani Mehta analyzes XAU/USD’s technical outlook.

XAU/USD at a critical juncture

“Gold price is challenging the critical rising trendline support at $1,953, which if broken on a daily closing basis will confirm a down break from the pennant. The next strong support for Gold bulls awaits at the $1,940 round level, below which the previous week’s low at $1,935 will be a tough nut to crack for bears. Further south, Gold sellers will aim for a test of the bullish 21-Daily Moving Average (DMA) at $1,916.”

“If Gold price bounces off the a$1,953 trendline support, then a fresh run-up toward the static resistance at $1,975 cannot be ruled out. Buyers will then look out for the weekly high at $1,981 on their way to the $2,000 psychological level.”

See – Gold Price Forecast: XAU/USD to retest record highs of 2020 and 2022 on a break past $2,000/10 – Credit Suisse

• The bull run in the index loses impulse near 102.80.
• US yields attempts a mild bounce early on Thursday.
• Final Q4 GDP, weekly Claims next on tap in the docket.

The greenback, in terms of the USD Index (DXY), trades within a tight range around the 102.60 region on Thursday.

USD Index focuses on data

The index appears side-lined below the 103.00 region ahead of the opening bell in Euroland on Thursday amidst a mild rebound in US yields and the generalized absence of direction in the global markets.

In the meantime, expectations keep running high among markets participants regarding the likeliness that the Fed might leave rates unchanged at the May event, which seem to have removed some strength from the dollar as of late.

In the US calendar, final Q4 GDP figures are due seconded by usual Initial Jobless Claims and the speech by Richmond Fed T. Barkin (2024 voter, centrist).

What to look for around USD

The weekly rebound in the index appears to have run out of steam and struggles to revisit the key 103.00 region.

So far, speculation of a potential Fed’s pivot in the short-term horizon should keep weighing on the dollar, although the still elevated inflation, the resilience of the US economy and the hawkish narrative from Fed speakers are all seen playing against that view for the time being.

Key events in the US this week: Final Q4 GDP Growth Rate, Initial Jobless Claims (Thursday) – PCE, Personal Income/Spending, Final Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is advancing 0.01% at 102.65 and faces the next resistance level at 103.37 (55-day SMA) followed by 104.10 (100-day SMA) and then 105.88 (2023 high March 8). On the other hand, the breach of 101.93 (monthly low March 23) would open the door to 100.82 (2023 low February 2) and finally 100.00 (psychological level).

• Natural Gas fades the previous day’s corrective bounce off five-week low.
• Hopes of more energy demand from China contrasts with challenges to sentiment to weigh on XNG/USD price.
• Inflation headlines, EIA Natural Gas Storage Change eyed for fresh impulse as the commodity drops toward the key support.

Natural Gas (XNG/USD) price seesaws around the intraday low of $2.23, fading the previous day’s corrective bounce off a five-week low heading into Thursday’s European session. In doing so, the energy instrument fails to cheer hopes of more demand from China amid fears of higher inflation and hawkish central bank actions, not to forget the firmer US Dollar.

News that China is up for importing 65,000 tonnes of Li liquefied natural gas (LNG) from the United Arab Emirates (UAE) joins optimistic comments from China Premier Li Qiang to put a floor under the XNG/USD. “The economic situation in March is even better than in January and February,” said China’s Premier Qiang. The policymaker, however, also raised geopolitical tension by opposing trade protectionism and decoupling, which indirectly targets the US, which in turn prods the Natural Gas bulls.

On the other hand, talks that German gas pipelines are dependable again for energy transportation, after previous challenges from Russia, weigh on the XNG/USD price. Further, the majority of the central bankers defend their previous bias about inflation and hence exert downside pressure on the commodity. Additionally, International Monetary Fund’s (IMF) Managing Director Kristalina Georgieva said on Thursday, “Urgently need faster, more efficient mechanisms for providing debt support to vulnerable countries.” Her comments renew banking fears which eased previously.

While portraying the sentiment, the US Dollar Index (DXY) clings to mild gains while S&P 500 Futures struggled around a one-week high marked the previous day. Further, the US 10-year and two-year Treasury bond yields grind higher after teasing the bond buyers the previous day.

Moving on, Weekly Natural Gas Storage Change data from the US Energy Information Administration (EIA), prior -72B, could direct XNG/USD moves. Though, major attention should be given to the headlines surrounding inflation and the banking system, not to forget China, for clear directions.

Technical analysis

Natural Gas bears stay hopeful of refreshing the yearly low, currently around $2.13, unless crossing a two-week-old horizontal resistance near $2.50.

CME Group’s flash data for gold futures markets noted traders reduced their open interest positions for the third session in a row on Wednesday, this time by more than 4K contracts. Volume followed suit and dropped for the third straight day, now by around 69.6K contracts.

Gold remains supported near $1935

Gold prices resumed the decline on Wednesday amidst shrinking open interest and volume, which hints at the likelihood that a deeper decline is not favoured in the very near term. In the meantime, weekly lows around $1935 (March 21,22) emerge as decent contention for the time being.

• USD/CAD fails to defend the first daily gains in four, retreats towards monthly low.
• Oil price remains sidelined after reversing from two-week top; market sentiment dribbles.
• BoC’s Gravelle appears more hawkish than Fed talks.
• Canada GDP, US inflation clues eyed for clear directions.

USD/CAD reverses from intraday while paring the first daily gains in four around 1.3565 heading into Thursday’s European session. In doing so, the Loonie pair justifies hawkish comments from Bank of Canada (BoC) officials while paying a little heed to the lackluster prices of WTI crude Oil, Canada’s key export earner.

BoC Deputy Governor Toni Gravelle said on Wednesday that the BOC is ready to act in the case of severe market-wide stress and provide liquidity support to the financial system. The policymaker also added that the Quantitative Tightening (QT) program will likely end sometime around the end of 2024 or the first half of 2025; QT is working but will take some time to run its course.

On the other hand, Fed Chair Jerome Powell’s teasing of one more rate hike joined Fed Vice Chair for Supervision Michael Barr’s emphasis on data dependency to test the market’s previous optimism. On the same line could be Fed Chair Powell’s push for alteration in deposit insurance. As a result, the Fed hawks do flex their muscles but wait for more clues and amplify the market’s anxiety ahead of Friday’s key inflation gauge from the US, namely the Core Personal Consumption Expenditure (PCE) Price Index.

That said, WTI Crude oil treads water around $73.00 after snapping a two-day uptrend while reversing from a fortnight high the previous day. It should be noted that the market’s cautious mood ahead of the top-tier data/events joins the US Dollar rebound to weigh on the Oil price even as supply crunch fears and inventory draw keep the energy buyers hopeful.

Also likely to challenge the market sentiment is China Premier Li Qiang’s dislike for trade protectionism and decoupling, which indirectly targets the US, as well as the North Korean and Russian tactics over nuclear power usage.

Furthermore, the majority of the central bankers defend their previous bias about inflation and hence propel yields amid economic fears. Additionally, International Monetary Fund’s (IMF) Managing Director Kristalina Georgieva said on Thursday, “Urgently need faster, more efficient mechanisms for providing debt support to vulnerable countries.” Her comments renew banking fears which eased previously.

Against this backdrop, the US Dollar Index (DXY) clings to mild gains while S&P 500 Futures struggled around a one-week high marked the previous day. Further, the US 10-year and two-year Treasury bond yields grind higher after teasing the bond buyers the previous day.

Looking forward, the US fourth quarter (Q4) Core Personal Consumption Expenditure (PCE) and final prints of the Q4 Gross Domestic Product (GDP) can entertain Loonie pair traders. However, major attention should be given to Friday’s Fed’s preferred inflation gauge, namely the US Core PCE Price Index, as well as Canada’s monthly GDP data.

Technical analysis

USD/CAD bears stay in the driver’s seat unless the quote marks a daily closing beyond the 50-day Exponential Moving Average (EMA) surrounding 1.3600.

According to UOB Group’s Economist Lee Sue Ann and Market Strategist Quek Ser Leang, sustained gains are likely once EUR/USD clears the 1.0900 hurdle.

Key Quotes

24-hour view: “We stated yesterday that EUR could rise above 1.0870 but the chances of it staying above this level today are not high. Our expectation did not quite materialize as it edged to a high of 1.0871 before easing off to end the day unchanged at 1.0843. The consolidative price action suggests EUR is likely to trade sideways. Expected range for today, 1.0810/1.0870.”

Next 1-3 weeks: “Our most recent narrative from Monday (27 Mar, spot at 1.0775) is still valid. As highlighted, EUR appears to have entered a consolidation phase and it is likely to trade between 1.0660 and 1.0870 for the time being. Note that EUR edged to a high of 1.0871 yesterday before easing. While short-term upward momentum has improved a tad, EUR has to break and stay above 1.0900 before a sustained advance is likely. The prospect of EUR breaking clearly above 1.0900 is low for now, but it would remain intact as long as EUR stays above the ‘strong support’ level of 1.0770 in the next few days.”

• GBP/USD has sensed buying interest near 1.2300 as USD Index has faced exhaustion in the upside momentum.
• The USD Index has failed to capitalize on rising hopes for one more rate hike by the Fed.
• As per the consensus, UK’s growth has remained stagnant in the fourth quarter of CY2022.

The GBP/USD pair has gauged support near the round-level support of 1.2300 in the early European session. The Cable is aiming to extend recovery further amid a loss in the upside momentum in the US Dollar Index (DXY). The USD Index has failed to stretch its upside further above the previous day’s high at 102.78. It seems that the improved risk appetite of investors has weighed on the USD Index.

Meanwhile, S&P500 futures have recovered their entire losses reported in the Asian session. The 500-US stocks basket futures are aiming to carry forward the super-bullish bias observed on Wednesday. US equities were heavily bought on Wednesday as the street anticipated no more casualties in the US baking system ahead. Also receding fears of a US banking crisis have weighed down demand for US government bonds. The yields offered on 10-year US Treasury bonds have escalated to near 3.58%.

The USD Index has failed to capitalize on rising hopes for one more rate hike by the Federal Reserve (Fed). Bloomberg reported that Fed chair Jerome Powell is anticipating one more rate hike this year when asked in a private meeting with US lawmakers about how much further the central bank will raise interest rates this year.

For further guidance, investors will keep an eye on US core Personal Consumption Expenditure (PCE) Price Index data. A steady figure is expected in households’ spending, which might ease hopes of a rate hike in the May policy meeting.

On the United Kingdom front, the Pound Sterling will remain in action as investors are awaiting the release of the Gross Domestic Product (GDP), which will be announced on Friday. As per the consensus, UK’s growth has remained stagnant in the fourth quarter of CY2022. Annual GDP is expected to remain steady at 0.4%.

• USD/JPY pares the biggest daily gains in two months even as US Dollar, yields grind higher.
• Japan PM pushes for global wages at home, gives rises to hawkish hopes for BoJ.
• German, Tokyo inflation can entertain traders ahead of Fed’s preferred inflation gauge.
• Fears of higher inflation, geopolitics join mixed data to propel yields amid quarter-end consolidation.

USD/JPY prints mild losses around 132.60 heading into Thursday’s European session. In doing so, the Yen pair struggles to respect the upbeat US Dollar and Treasury bond yields amid mixed concerns about the Bank of Japan’s (BoJ) next move. Also weighing on the major currency pair are the talks of Japanese credit rating and the Federal Reserve (Fed) officials’ cautious optimism. It should be noted, however, that the geopolitical fears surrounding Russia, North Korea and China weigh on the market’s sentiment and allow the Yen to cheer its traditional haven status after rising heavily the previous day.

BoJ policymakers, including the outgoing Governor Haruhiko Kuroda, advocate for an easy money policy but the latest wage accord and Prime Minister Fumio Kishida’s readiness for higher wages can challenge the ultra-loose policies. Recently, global rating agency Fitch Ratings affirmed Japan’s sovereign credit rating at ‘A’ while maintaining a ‘stable’ outlook. “Base case remains that BoJ will maintain its loose monetary policy over the medium term,” said Fitch.

Elsewhere, Fed Chair Jerome Powell’s teasing of one more rate hike joined Fed Vice Chair for Supervision Michael Barr’s emphasis on data dependency to test the market’s previous optimism. On the same line could be Fed Chair Powell’s push for alteration in deposit insurance. As a result, the Fed hawks do flex their muscles but wait for more clues and amplify the market’s anxiety ahead of Friday’s key inflation gauge from the US, namely the Core Personal Consumption Expenditure (PCE) Price Index.

It should be observed that China Premier Li Qiang’s dislike for trade protectionism and decoupling, which indirectly targets the US, joined the North Korean and Russian tactics over nuclear power to sour the sentiment.

On a different page, the majority of the central bankers defend their previous bias about inflation and hence propel yields amid economic fears. Furthermore, International Monetary Fund’s (IMF) Managing Director Kristalina Georgieva said on Thursday, “Urgently need faster, more efficient mechanisms for providing debt support to vulnerable countries.” Her comments renew banking fears which eased previously.

Amid these plays, the S&P 500 Futures struggled around a one-week high marked the previous day, while ignoring Wall Street’s upbeat performance, whereas the US 10-year and two-year Treasury bond yields grind higher after teasing the bond buyers the previous day.

Moving forward, the US fourth quarter (Q4) Core Personal Consumption Expenditure (PCE) and final prints of the Q4 Gross Domestic Product (GDP) can entertain Yen pair traders. However, major attention should be given to Friday’s Tokyo inflation data and the Fed’s preferred inflation gauge, namely the US Core PCE Price Index.

Technical analysis

Failure to provide a daily close beyond 50-DMA, around 132.90 by the press time, directs USD/JPY bears towards a 10-week-old ascending support line, close to 130.80 at the latest.

• USD/MXN has defended its crucial support of 18.00 amid a recovery in the USD Index.
• US consumer spending is to be impacted this year amid fears of a recession and tremors in the banking industry.
• A 25bp rate hike is expected from Banxico to 11.25%.

The USD/MXN has witnessed a marginal decline to near 18.10 in the Asian session after a recovery move. The asset has defended the psychological support of 18.00 amid a recovery move by the US Dollar Index (DXY). The USD Index is juggling near the previous day's high around 102.77. The mighty USD is gathering strength to deliver a break above the same in hopes that the Federal Reserve (Fed) will hike rates one more time this year.

S&P500 futures have trimmed losses shown in the Asian session, portraying further improvement in the risk appetite of the market participants. Receding fears of further casualty in the US banking system have weighed on demand for US government bonds. Eventually, the 10-year US Treasury yields jumped to 3.58%.

Going forward, the release of the United States core Personal Consumption Expenditure (PCE) Price Index data will remain in the spotlight, which is scheduled for Friday.  As per the consensus, households’ spending increased by 0.4% in February lower than the prior escalation of 0.6%. The annual core PCE price index is expected to remain steady at 4.7%.

The National Retail Federation (NRF) said on Wednesday that fears of a recession and tremors in the banking industry cast a shadow over a recovery in consumer spending, as reported by Reuters. The NRF is expecting a growth in retail demand in the 4-6% range, lower than expansion by 7% recorded in 2022. Therefore, chances of a better-than-anticipated core PCE are less likely.

On the Mexican Peso front, investors are awaiting the interest rate decision by the Bank of Mexico (Banxico). As per the consensus, Banxico will hike interest rates further by 25 basis points (bps) to 11.25%.

• Asia-Pacific stocks drift lower as markets reassess inflation, banking concerns.
• Major central bankers defend rate hikes despite highlighting data dependency.
• China’s Premier appears hopeful of higher growth but gives air to Sino-American tension.
• IMF cites need for urgent debt support system; Japan braces for higher wages.

Asian equities remain depressed even as Australia, New Zealand and South Korea print gains during early Thursday. That said, the stock markets in China and Japan print losses and hence highlight overall mildly negative sentiment for the traders.

While portraying the mood, the MSCI’s Index of Asia-Pacific shares outside Japan drops 0.30% whereas Japan’s Nikkei 225 prints 0.80% intraday loss near 27,650 even as Japanese Prime Minister Fumio Kishida braces for higher wages. The reason for pessimism in Tokyo could be linked to the likely negative impact of higher salaries on inflation and the Bank of Japan’s (BoJ) easy money policy.

Elsewhere, stocks in China grind lower as Premier Li Qiang recently said that the economic situation in March is even better than in January and February. The policymaker, however, also raised geopolitical tension by opposing trade protectionism and decoupling, which indirectly targets the US.

It should be noted, however, that dovish concerns about the Reserve Bank of Australia (RBA) and mixed statistics in New Zealand allow equity bulls in Canberra and Auckland to remain hopeful despite seeing losses elsewhere. On the same line is South Korea’s KOSPI as BOK Manufacturing BSI improved in March.

Alternatively, Indian markets are off due to Ram Navmi while Indonesia’s IDX Composite takes clues from Chinese stocks to print mild losses.

On a broader front, Fed Chair Jerome Powell’s teasing of one more rate hike joined Fed Vice Chair for Supervision Michael Barr’s emphasis on data dependency to allow the US Dollar to remain firmer. On the same line could be Fed Chair Powell’s push for alteration in deposit insurance. As a result, the Fed hawks do flex their muscles but wait for more clues and amplify the market’s anxiety ahead of Friday’s key inflation gauge from the US, namely the Core Personal Consumption Expenditure (PCE) Price Index.

Furthermore, International Monetary Fund’s (IMF) Managing Director Kristalina Georgieva said on Thursday, “Urgently need faster, more efficient mechanisms for providing debt support to vulnerable countries.” Her comments renew banking fears which eased previously.

As a result, the S&P 500 Futures struggled around a one-week high marked the previous day, while ignoring Wall Street’s upbeat performance, whereas the US 10-year and two-year Treasury bond yields grind higher after teasing the bond buyers the previous day.

Looking ahead, preliminary readings of the Harmonized Index of Consumer Prices (HICP) gauge for Germany will precede the US fourth quarter (Q4) Core Personal Consumption Expenditure (PCE) and final prints of the US Q4 Gross Domestic Product (GDP) to entertain traders.

Also read: S&P 500 Futures retreat despite Wall Street’s gains, yields seesaw as pre-Inflation anxiety escalates

• USD/INR is consolidating in a narrow range above 82.20, upside seems favored amid a recovery in US Dollar.
• The odds of hawkish Fed bets have improved as Fed Powell has anticipated one more rate hike this year.
• Fed Barr assured investors that the failure of a couple of lenders is unable to lead to a widespread contagion.

The USD/INR pair is displaying a sideways performance in a narrow range above 82.20 in the Asian session. The asset registered a positive opening as investors discounted overnight recovery in the US Dollar Index (DXY). The USD Index rebounded firmly after sensing decent buying interest near 102.40. The US Dollar Index is looking to extend its recovery above 102.78 as odds for one more rate hike by the Federal Reserve (Fed) have strengthened.

The market sentiment looks cautiously optimistic as S&P500 futures have eased nominal gains in the Asian session after a stellar buying on Wednesday. The demand for US government bonds is easing further amid anticipation of one more interest rate hike by Fed chair Jerome Powell and ebbing banking turmoil fears.

The USD Index is regaining traction as bets for steady monetary policy by the Fed have trimmed. As per the CME Fedwatch tool, chances for an unchanged policy stance by the Fed have been trimmed to 54%.

Investors are now anticipating that the US banking crisis won’t have more collateral damage, however, the credit conditions will remain extremely tight. The commentary from Federal Reserve (Fed) Vice Chair for Supervision Michael Barr to Senate Banking Committee that the United States banking system is ‘sound and resilient’ brought a sense of relief for the market participants. He assured investors that the failure of a couple of lenders is unable to lead to a widespread contagion.

On the Indian rupee front, the Reserve Bank of India (RBI) has allowed 18 countries to pay off international payments through Indian Rupee. The global economic slowdown has delivered an opportunity to trim dependence on US Dollar.

• Gold price is facing resistance around $1,960.00 as Fed Powell is anticipating one more rate hike.
• Fed Powell and US lawmakers have discussed raising insurance limits after the collapse of SVB and Signature Bank.
• Gold price is demonstrating a sheer contraction in volatility amid the absence of potential triggers.

Gold price (XAU/USD) has sensed barricades near $1,960.00 in the Asian session. The precious metal has shifted its auction below $1,960.00 led by easing United States banking jitters and growing chances of one more interest rate hike by the Federal Reserve (Fed).

S&P500 futures have witnessed minimal losses in the Tokyo session after a stalwart buying on Wednesday, indicating that the overall market mood is cheerful but caution has emerged after commentary from Fed chair Jerome Powell.

Republican Representative Kevin Hern reported through Bloomberg that Fed Powell still sees one more rate hike when asked in a private meeting with US lawmakers about how much further the central bank will raise interest rates this year.

The US Dollar Index (DXY) has shown a recovery and is hovering near Wednesday’s high around 102.77. The USD Index is looking to extend its upside move further on hopes of rising hawkish Fed bets.

Meanwhile, the display of meaningful efforts by US authorities to infuse confidence among investors that the banking system is ‘sound and resilient’ has also trimmed appeal for the Gold as a safe-haven. US lawmakers and Fed Powell have discussed the need of raising insurance limits after the collapse of Silicon Valley Bank (SVB) and Signature Bank. Currently, the Federal Deposit Insurance Corporation (FDIC) currently insures up to $250,000 per depositor.

Gold technical analysis

Gold price is demonstrating a sheer contraction in volatility amid an absence of potential triggers. Broadly, the asset is auctioning in a Symmetrical Triangle chart pattern on an hourly scale. The upward-sloping trendline of the chart pattern is plotted from March 22 low at $1,934.34 while the downward-sloping trendline is placed from March 20 high at $2,009.88.

Inside the broader triangle, a small xSymmetrical Triangle is also emerging, which is indicating a build-up of strength for a decisive move.

The Gold price has dropped below the 20-period Exponential Moving Average (EMA), which is at $1,963.66, indicating a short-term bearish trend.

Meanwhile, the Relative Strength Index (RSI) (14) has slipped into the bearish range of 20.00-40.00. The absence of divergence and oversold signals cement more downside.

Gold hourly chart

International Monetary Fund’s (IMF) Managing Director Kristalina Georgieva said on Thursday, “Urgently need faster, more efficient mechanisms for providing debt support to vulnerable countries.

Additional takeaways

• AUD/USD holds lower grounds amid cautious markets, receding hawkish bias for RBA.
• China’s Premier sounds hopeful of upbeat growth but Sino-American woes cross the optimism.
• NAB cuts RBA rate forecasts after downbeat inflation, Retail Sales.
• Fed hawks also wait for more clues to confirm further hawkish moves and put a floor under the Aussie price.

AUD/USD fades bounce off intraday low even as Chinese Premier tries to lure the bulls during early Thursday. The reason could be linked to the fresh Sino-American tension over Taiwan and the recently dovish concerns about the Reserve Bank of Australia’s (RBA) next moves. That said, the Aussie pair drops to 0.6670 during the two-day downtrend by the press time.

China's Premier Li Qiang recently said that the economic situation in March is even better than in January and February. The policymaker, however, also raised geopolitical tension by opposing trade protectionism and decoupling, which indirectly targets the US.

Elsewhere, the National Australia Bank (NAB) cut its forecast for the RBA peak rate to 3.85% from 4.15% after witnessing the recent fall in inflation and Retail Sales figures.  The NAB also expects a 0.25% rate hike in April. It should be noted that Westpac, Commonwealth Bank of Australia (CBA) and Australia and New Zealand Banking Group (ANZ) all of them expect a pause in the RBA’s rate hike trajectory after April’s 25 basis points (bps) of a lift in the benchmark rates.

It should be noted that Fed Chair Jerome Powell’s teasing of one more rate hike joined Fed Vice Chair for Supervision Michael Barr’s emphasis on data dependency to allow the US Dollar to remain firmer. On the same line could be Fed Chair Powell’s push for alteration in deposit insurance. As a result, the Fed hawks do flex their muscles but wait for more clues and amplify the market’s anxiety ahead of Friday’s key inflation gauge from the US, namely the Core Personal Consumption Expenditure (PCE) Price Index.

Amid these plays, the S&P 500 Futures struggle around a one-week high marked the previous day, while ignoring Wall Street’s upbeat performance, whereas the US 10-year and two-year Treasury bond yields grind higher after teasing the bond buyers the previous day.

It’s worth mentioning that Australia’s Job Vacancies improved in February, to -1.5% QoQ versus -4.9% prior while the US Pending Home Sales grew 0.8% MoM during the said month versus -3.0% expected and 8.1% prior.

Looking ahead, preliminary readings of the US fourth quarter (Q4) Core Personal Consumption Expenditure (PCE) and the final numbers for the US Q4 Gross Domestic Product (GDP) will be important to watch for the AUD/USD pair traders for intraday directions.

Also read: US February PCE Inflation Preview: Bad news for the Dollar, good news for the Fed?

Technical analysis

AUD/USD grinds lower between 200-DMA and a three-week-old ascending support line, respectively near 0.6755 and 0.6650.

• EUR/USD justifies the previous day’s bearish candlestick to refresh intraday low, prints the biggest intraday loss in four day.
• A less hawkish ECB talks join consolidation ahead of the key inflation numbers to tease Euro bears.
• Fed officials also appear unclear about their next moves even as banking fears recede.
• ECB’s Economic Bulletin, preliminary readings of Germany’s HICP for March eyed for fresh impulse.

EUR/USD bears are in the driver’s seat after a four-day off as the major currency pair drops to 1.0830 while extending the previous day’s U-turn from the weekly high amid early Thursday. In doing so, the Euro pair portrays the market’s consolidation ahead of the key German inflation data and the European Central Bank’s (ECB) monthly Economic Bulletin. Additionally, the market’s cautious mood and the US Dollar’s sustained recovery also weigh on the quote of late.

That said, the pair refreshed the weekly top on Wednesday after ECB policymaker Peter Kazimir and Chief Economist Philip Lane advocated for further rate hikes. However, ECB Policymaker Isabel Schnabel said that underlying inflation in the Eurozone is proving sticky and hence raised doubts about the regional central bank’s future hawkish bias.

On the other hand, Fed Chair Jerome Powell’s teasing of one more rate hike joined Fed Vice Chair for Supervision Michael Barr’s emphasis on data dependency to allow the US Dollar to remain firmer. On the same line could be Fed Chair Powell’s push for alteration in deposit insurance.

It should be noted that Germany’s GfK Consumer Confidence figures for March improved to -29.5 from -30.6 revised prior, not to forget mentioning -29.2 market forecasts. The US Pending Home Sales for February, however, grew 0.8% MoM versus -3.0% expected and 8.1% prior.

On a broader scale, the optimism surrounding the technology and banking sector puts a floor under the EUR/USD prices even as nuclear threats from Russia and North Korea join the US-China tussles to weigh on the risk profile and the pair prices of late.

While portraying the mood, the S&P 500 Futures struggle around a one-week high marked the previous day, while ignoring Wall Street’s upbeat performance, whereas the US 10-year and two-year Treasury bond yields grind higher after teasing the bond buyers the previous day.

Looking ahead, the ECB’s Economic Bulletin and Germany’s preliminary readings of the Harmonized Index of Consumer Prices (HICP) gauge for March will be crucial for the EUR/USD pair traders to watch considering the latest reduction in the inflation woes and the USD rebound.

Technical analysis

Wednesday’s Doji candlestick on the EUR/USD pair’s daily chart gains more attention from the sellers as it stands at the weekly top.

Speaking at Boao Forum on Thursday, China's Premier Li Qiang said that he opposes trade protectionism and decoupling.

Additional quotes

Market reaction

The above comments have little to no impact on the Australian Dollar, as the AUD/USD pair keeps the red near 0.6675, at the time of writing.

• NZD/USD stretches the previous day’s losses as US Dollar grinds higher.
• New Zealand Building Permits slump in February, ANZ figures improve for March.
• US Dollar portrays quarter-end consolidation amid mixed Fed concerns, cautious optimism.
• Second-tier data, inflation and baking headlines will be the key for fresh impulse.

NZD/USD drops to 0.6200 during early Thursday while extending the previous day’s pullback from the weekly high. In doing so, the Kiwi pair justifies the broadly firmer US Dollar, as well as mixed data from New Zealand (NZ).

NZ Building Permits dropped by 9.0% in February versus an expected recovery of 0.5%, compared to -5.2% prior. However, the Australia and New Zealand Banking Group’s (ANZ) sentiment indices came in firmer for March but flashed negative prints and failed to lure the NZD/USD buyers. That said, the ANZ Activity Outlook for March improved to -8.5% versus -12.5% expected and -9.2% prior while ANZ Business Confidence also came in firmer than -47.5 market forecasts to -43.4 for the said month, versus -43.3 prior.

On the other hand, US Pending Home Sales grew 0.8% MoM in February versus -3.0% expected and 8.1% prior.

It should be noted that Fed Chair Jerome Powell’s teasing of one more rate hike joined Fed Vice Chair for Supervision Michael Barr’s emphasis on data dependency to allow the US Dollar to remain firmer. On the same line could be Fed Chair Powell’s push for alteration in deposit insurance.

Elsewhere, optimism surrounding the technology and banking sector puts a floor under the NZD/USD prices even as nuclear threats from Russia and North Korea join the US-China tussles to weigh on the risk profile amid a light calendar in Asia.

Against this backdrop, the S&P 500 Futures print mild losses around 4,050, retreating from a one-week high marked the previous day, while ignoring Wall Street’s upbeat performance. On the other hand, the US 10-year and two-year Treasury bond yields grind higher after teasing the bond buyers the previous day.

Moving on, preliminary readings of the US fourth quarter (Q4) Core Personal Consumption Expenditure (PCE) and the final numbers for the US Q4 Gross Domestic Product will be important to watch for market players. However, major attention should be given to the banking and inflation clues.

Technical analysis

NZD/USD grinds between the 50-DMA and the 21-DMA, respectively around 0.6280 and 0.6200, amid recently increasing bearish bias.

• USD/CHF picks up bids to reverse the previous day’s pullback from weekly high.
• Convergence of one-week-old resistance line, descending trend line from early March prods Swiss Franc pair buyers.
• Bears need validation from 13-day-old ascending support line to retake control.

USD/CHF bulls are back to the table, following the previous day’s retreat, as the quote grinds higher around 0.9200 during early Thursday. In doing so, the Swiss currency pair bounces off the 100-Hour Moving Average (HMA) while also justifying the upward-sloping RSI (14) line, not overbought.

As a result, the USD/CHF buyers are likely to witness more gains. However, a convergence of an ascending trend line from the last Friday and a three-week-old descending resistance line, around 0.9230, appears a tough nut to crack for the pair buyers before retaking control.

In a case where the USD/CHF buyers manage to keep the reins past 0.9230, a run-up towards 0.9300 and the mid-month high surrounding 0.9340 can’t be ruled out. Though, a clear upside break of 0.9340 won’t hesitate to challenge the monthly peak of near 0.9440.

On the flip side, the 100-HMA level surrounding 0.9180 restricts the immediate downside of the USD/CHF price, a break of which could drag prices toward an ascending support line from March 13, close to 0.9150 at the latest.

It’s worth noting that the USD/CHF pair’s weakness past 0.9150 can make it vulnerable to testing the monthly low of around 0.9070.

Overall, USD/CHF is likely to rise further but the upside move needs validation from 0.9230.

USD/CHF: Hourly chart

Trend: Further upside expected

• USD/JPY bears are in the market and guarding the 133 area. 
• Bears will seek a move to test the prior highs and the neckline of the W-formation. 

USD/JPY has moved into a phase of consolidation near 132.90 and below 133.00 the figure that has served as a key area in the prior days of March. If the bears commit, then a correction could be on the cards and given the W-formation, this is a high probability. The following illustrates such a prospect  on the daily charts:

USD/JPY daily charts

USD/JPY might be expected to return to the midpoint of the W-formation in the coming days where the neckline meets a 50% mean reversion and a 61.8% Fibonacci retracement level near 131.50. 

USD/JPY H1 chart

The bears need to get over the 132.50s styructure and onto the backside of the hourly micro bullish trend as illustrated baove. 

• Risk profile appears unclear as traders await key inflation clues from Europe, US.
• Key central bank officials show readiness to act while sounding less hawkish.
• Fears emanating from China, Russia and North Korea weigh on sentiment amid a light calendar in Asia.
• Second-tier US data, German HICP eyed for intraday directions.

Having witnessed a mixed end to Wednesday, market sentiment remains sluggish during early Thursday, titling towards the bears of late.

While portraying the mood, the S&P 500 Futures print mild losses around 4,050, retreating from a one-week high marked the previous day, while ignoring Wall Street’s upbeat performance. On the other hand, the US 10-year and two-year Treasury bond yields grind higher after teasing the bond buyers the previous day. That said, US 10-year and two-year Treasury yields marked their first daily loss in three on Wednesday by ending the North American trading session around 3.57% and 4.10% respectively, making rounds to the same level by the press time.

Behind the stage could be the latest comments from the officials from the Federal Reserve (Fed), European Central Bank (ECB), Bank of England (BoE) and Bank of Canada (BoC) gain major attention as most of them raise doubts on further rate hikes despite sounding hawkish. Also testing the market’s previous risk-on mood are the talks of easing inflation pain and geopolitical woes, not to forget anxiety ahead of this week’s key data.

Starting with Fed Chair Jerome Powell who showed forecasts for one more rate hike in 2023, which in turn pushed back talks of policy pivot and favor the US Dollar bulls. Though, Vice Chair for Supervision Michael Barr said, “We will be looking at incoming data and financial conditions to make a meeting-by-meeting judgment on rates.”

Further, Bank of England (BoE) Governor Andrew Bailey showed readiness for more rate hikes but BOE policymaker Catherine Mann flagged challenges for the UK’s central bank to do its job in the second half of the year, suggesting more hurdles for the hawks moving forward.

On the same line, BoC Deputy Governor Toni Gravelle said on Wednesday that the BOC is ready to act in the case of severe market-wide stress and provide liquidity support to the financial system.

Additionally, ECB Policymaker Isabel Schnabel said on Wednesday that underlying inflation in the Eurozone is proving sticky and hence defends the peers’ hawkish bias.

It should be observed that optimism surrounding the technology and banking sector allows the market players to remain hopeful ahead of the top-tier Europe and US inflation numbers.

Meanwhile, the nuclear threats from Russia and North Korea join the US-China tussles to also weigh on the risk profile amid a light calendar in Asia.

Looking forward, preliminary readings of the Harmonized Index of Consumer Prices (HICP) gauge for Germany and the US fourth quarter (Q4) Core Personal Consumption Expenditure (PCE) details will be important to watch for market players. However, major attention should be given to the banking and inflation clues.

Also read: Forex Today: DXY recovers despite risk appetite; focus turns to inflation data

• EUR/GBP has extended its recovery move above 0.8880 as the focus shifts to Eurozone inflation.
• The ECB would hike rates further if banking jitters have no or weak impact on the financial situation.
• The UK economy is expected to witness a deep recession as inflation is extremely sticky and growth is getting squeezed.

The EUR/GBP pair has stretched its recovery above 0.8800 in the Asian session. The cross has shown a gradual decline in hopes that the European Central Bank (ECB) will continue to hike rates further to tame the sticky inflation. The asset is expected to show a power-pack action ahead of the release of the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) and the Gross Domestic Product (GDP) (Q4) figures on Friday.

Preliminary Eurozone HICP is expected to decelerate significantly to 7.3% from the former release of 8.5%. While core HICP is expected to escalate to 5.7% vs. the prior release of 5.6%. Weak oil prices are expected to weigh heavily on Eurozone inflation. The European Central Bank (ECB) is expected to continue tightening the monetary policy further as ECB President Christine Lagarde reiterated that Inflation will stay higher for a longer period.

Meanwhile, banking tensions are settling down as no news about further collateral damage is itself good news for the market. Chief Economist Philip Lane said on Wednesday, “ECB rates must rise if banking tension has no or ‘fairly limited’ impact.”

On the United Kingdom front, investors are keenly awaiting Gross Domestic Product (GDP) data. As per the consensus, UK’s growth has remained stagnant in the fourth quarter of CY2022. Annual GDP is expected to remain steady at 0.4%. The UK economy is expected to witness a deep recession as inflation is extremely sticky and growth is getting squeezed.

Bank of England (BoE) policymakers look confident about softening of inflation ahead and the surprise rise in February’s inflation was a one-time blip, however, an absence of evidence is still raising doubts. BoE Governor Andrew Bailey cited that more rates would be announced if inflation remains persistent further. On the contrary, analysts at Bank of America (BoA) are of the view that the BoE won’t hike rates further and will keep rates steady until 2024.

• USD/CAD bulls eye a move towards neckline resistance. 
• Bears seek a continuation and break of support to open 1.3450.

The Canadian Dollar strengthened to its highest level in nearly four weeks against the Greenback on Wednesday as a recovery in risk appetite supported the currency. However, there are prospects of a correction at this juncture as the following technical analysis illustrates. 

USD/CAD weekly chart

As seen, USD/CAD is meeting a support area and leaving behind an M-formation which is a reversion pattern and would be expected to see the price return to the neckline for a retest in due course. The ultimate objective is a retest of the trendline support that meets horizontal support near 1.3250 in the long term. 

USD/CAD daily chart

This would see the daily chart´s price action correct up and into the Fibonacci scale. The 38.2% Fibonacci aligns with the nose of the neckline near 1.3650. However, should the beares move in again, then the focus will be on 1.3450 in the medium term. 

• GBP/USD extends the previous day’s pullback from two-month high, stays pressured near intraday low of late.
• Easing supply-chain hurdles in the UK, comments from BoE’s Mann challenge hawkish bias of Governor Andrew Bailey.
• US Dollar grinds higher even as Fed policymakers highlight data dependency, slower rate hikes.
• Inflation woes, banking news will be crucial for fresh impulse amid a light calendar.

GBP/USD renews intraday low near 1.2295 as it stretches the previous day’s U-turn from the highest levels since early February. The Cable pair’s latest pullback could be linked to the chatters suggesting hardships for the Bank of England (BoE) hawks, as well as the US Dollar’s sustained rebound, amid a sluggish Asian session on Thursday.

Reuters quotes the UK’s 13.1% jump in car production during February to mark the easing in the supply-chain woes, which in turn challenges the Bank of England (BoE) Governor Andrew Bailey’s previously hawkish statements. Additionally, BOE policymaker Catherine Mann flagged challenges for the UK’s central bank to do its job in the second half of the year, suggesting more hurdles for the hawks moving forward.

It should be noted that UK Finance Minister Jeremy Hunt’s comments saying, “Core inflation will be harder to bring down,” joined the BoE Governor Bailey’s readiness for more rate hikes, if needed, to put a floor under the Cable price.

On the other hand, the US Dollar Index (DXY) marked the first daily gain in three the previous day, up 0.09% intraday near 102.75 by the press time. A retreat in the US Treasury bond yields joined the quarter-end positioning and cautious optimism in the market to underpin the US Dollar’s latest rebound. Adding strength to the greenback’s rebound could be the geopolitical fears emanating from China, Russia and North Korea. However, an absence of hawkish comments from the Federal Reserve (Fed) officials joins the absence of talks about banking woes to weigh on the US Dollar.

That said, Bloomberg came out with the news suggesting Fed Chair Jerome Powell showed forecasts for one more rate hike in 2023, which in turn pushed back talks of policy pivot and favor the US Dollar bulls. Though, Vice Chair for Supervision Michael Barr said, “We will be looking at incoming data and financial conditions to make a meeting-by-meeting judgment on rates.”

Elsewhere, optimism surrounding the technology and banking sector allows the GBP/USD to fight back the bears.

Against this backdrop, US 10-year and two-year Treasury yields marked their first daily loss in three on Wednesday by ending the North American trading session around 3.57% and 4.10% respectively, making rounds to the same level by the press time. It should be observed that the S&P 500 Futures struggle to extend Wall Street’s gains at the latest.

Moving on, a light calendar in the UK suggests the GBP/USD pair traders watch for risk catalysts and the US factors for clear directions. As a result, the final readings of the US fourth quarter (Q4) Gross Domestic Product (GDP) will join the Q4 Core Personal Consumption Expenditure (PCE) details and the weekly jobless claims will be important to track.

Also read: US February PCE Inflation Preview: Bad news for the Dollar, good news for the Fed?

Technical analysis

A two-week-old rising wedge bearish chart formation lures GBP/USD sellers between 1.2430 and 1.2290 at the latest.

In recent trade today, the People’s Bank of China (PBOC) set the yuan at  6.8886 vs. the previous fix of 6.8771 and the prior close at 6.8866.

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/JPY has corrected marginally from above 144.00, however, the upside bias seems solid.
• ECB Kazimir believes “There is a genuine danger that banks will cut back on lending.”
• Declining international oil prices have weighed heavily on Tokyo's inflation.

The EUR/JPY pair has sensed selling pressure after failing to sustain above the critical resistance of 144.00 in the Asian session. The cross is expected to turn sideways ahead of the release of the inflation figures by Germany and Tokyo. The asset is aiming higher for the past four trading sessions amid receding expectations of an exit from the ultra-loose monetary policy by the Bank of Japan (BoJ).

Investors are shifting their focus toward the release of the preliminary German Harmonized Index of Consumer Prices (HICP) data. As per the consensus, monthly German HICP is expected to expand by 0.8% vs. the former release of 1.0%. On an annual basis, German HICP would soften dramatically to 7.5% from the prior release of 9.3%.

It seems that the continuation of the policy-tightening spell by the European Central Bank (ECB) is showing its impact on inflationary pressures. ECB policymaker Peter Kazimir cited on Wednesday “I think inflation is too high for too long.” He further added that the ECB will consider the financial situation before arriving at the interest rate decision. ECB Kazimir believes “There is a genuine danger that banks will cut back on lending.”

About interest rate guidance, ECB Kazimir is of the view, “We should continue in raising rates, possibly at a slower pace.”

On the Japanese Yen front, declining international oil prices have weighed heavily on Japan’s inflation. The street is anticipating further softening of the headline Tokyo CPI to 2.7% from the former release of 3.4%. While the core CPI that excludes oil and food prices is seen expanding to 3.3% from the former release of 3.2%.

• Silver price retreats after positing bearish candlestick the previous day.
• Overbought RSI conditions, repeated failures to cross three-month-old resistance line also tease XAG/USD bears.
• 10-DMA restricts immediate downside; $24.00 acts as an extra filter towards the north.

Silver price (XAG/USD) slides to $23.30 while printing mild losses during Thursday’s sluggish Asian session.

In doing so, the bright metal justifies the previous day’s Doji candlestick, as well as overbought conditions of the RSI (14) line, to push back the bullish bias below a downward-sloping resistance line from early January 2023. Additionally, keeping the XAG/USD sellers hopeful is the receding strength of the MACD’s bullish bias.

However, the 10-DMA support of $23.00 restricts the immediate downside of the Silver price, a break of which could quickly drag the quote towards the 61.8% Fibonacci retracement level of its February-march fall, near $22.80.

In a case where the XAG/USD remains bearish past $22.80, the 50% and 38.2% Fibonacci retracement levels, around $22.25 and $21.70 in that order, could test the Silver sellers before directing them to the early March high of $21.30.

On the contrary, a daily closing beyond the three-month-old descending resistance line, around $23.50 by the press time, becomes necessary for the Silver buyers to defy the downbeat signals flashed through the previous day’s Doji and retake control.

Even so, the multiple resistances near $24.00 can test the XAG/USD buyers ahead of highlighting the yearly top surrounding $24.65.

Overall, Silver price is likely to witness a pullback but the downside room appears limited.

Silver price: Daily chart

Trend: Pullback expected

• AUD/USD is juggling in a restricted territory around 0.6680 after Australian Inflation-inspired volatility.
• A consecutive deceleration in Australian CPI has strengthened hopes for a pause in the rate-hiking spell by the RBA.
• The Aussie asset has dropped below the 50-period EMA, which indicates that the short-term trend has turned bearish.

The AUD/USD pair is showing topsy-turvy action in a narrow range around 0.6680 in the Asian session. The Aussie asset remained in action on Wednesday after the monthly Australian Consumer Price Index (CPI) softens further to 6.8% from the former release of 7.4% and its peak of 8.4% recorded in December.

A consecutive deceleration in Australian inflation has strengthened hopes for a pause in the rate-hiking spell by the Reserve Bank of Australia (RBA). However, economists at ANZ Bank are of the view that “While the RBA has signaled its intention to pause at some point in coming months, we continue to think that the data is not yet consistent with a pause.”

Meanwhile, S&P500 futures are showing nominal losses after a super bullish Wednesday, portraying mild pessimism in the overall positive market mood. The US Dollar Index (DXY) is looking to resume its upside move after sensing a cushion around 102.60.

On an hourly scale, AUD/USD is forming a Head and Shoulder chart pattern, which indicates a prolonged consolidation. A breakdown of the aforementioned chart pattern results in a bearish reversal. The neckline of the chart pattern is plotted from March 29 low at 0.6661.

The asset has dropped below the 50-period Exponential Moving Average (EMA) at 0.6682, which indicates that the short-term trend has turned bearish.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range. A break into the bearish range of 20.00-40.00 will trigger the downside momentum.

A slippage below March 29 low at 0.6661 will drag the asset toward March 24 low at 0.6625 and the March 15 low at 0.6564.

Should the asset breaks above March 13 high at 0.6717, Aussie bulls would drive the asset further toward March 07 high at 0.67478 followed by the horizontal resistance plotted from February 23 low at 0.6781.

AUD/USD hourly chart

• GBP/JPY pares the biggest daily gains in six weeks, reverses from a fortnight high.
• Talks of tough pension regulations, easing supply chain hurdles prod BoE’s hawkish bias.
• BoJ officials’ defense of easy-money policies contrasts with likely run-up in inflation.
• Japanese wage accords, stable economic outlook advocate BoJ’s exit from ultra-loose policies.

GBP/JPY drops back towards 163.00, down 0.30% intraday near 163.10 during early Thursday, as it reverses from a two-week high amid mixed sentiment and a sluggish session. In doing so, the cross-currency pair traces downbeat Treasury bond yields while also justifying the receding inflation fears in the UK, as well as the challenges for the Bank of Japan (BoJ) officials’ defense of the easy money policy.

US 10-year and two-year Treasury yields marked their first daily loss in three on Wednesday by ending the North American trading session around 3.57% and 4.10% respectively, making rounds to the same level by the press time.

Elsewhere, Reuters quotes the UK’s 13.1% jump in car production during February to mark the easing in the supply-chain woes, which in turn challenges the Bank of England (BoE) Governor Andrew Bailey’s previously hawkish statements. Additionally, BOE policymaker Catherine Mann flagged challenges for the UK’s central bank to do its job in the second half of the year, which in turn hints at likely hurdles for the hawks.

On a different page, the BoJ policymakers, including the outgoing Governor Haruhiko Kuroda, advocates for an easy money policy but the latest wage accord and Prime Minister Fumio Kishida’s readiness for higher wages can challenge the ultra-loose policies. Recently, global rating agency Fitch Ratings affirmed Japan’s sovereign credit rating at ‘A’ while maintaining a ‘stable’ outlook. “Base case remains that BoJ will maintain its loose monetary policy over the medium term,” said Fitch.

It’s worth mentioning that the nuclear threats from Russia and North Korea join the US-China tussles to also weigh on the GBP/JPY prices. Even so, optimism on technology and banking fronts keeps the S&P 500 Futures firmer.

Moving on, a light calendar can allow the cross-currency pair to extend the latest pullback.

Technical analysis

A clear upside break of one-month-old descending trend line, now immediate support around 162.30, directs GBP/JPY buyers towards the monthly high of 164.25.

• EUR/USD bears eye a break of trendline support that guards a run to a daily 78.6% Fibonacci retracement.
• Bulls need to commit above 1.0780 and then 1.0700.

As per the prior analysis, EUR/USD Price Analysis: Bulls run into key resistance but ride dynamic support, the price has been unable to take off and is submerging itself below the aforementioned resistance:

EUR/USD prior analysis

EUR/USD updates

The lower time-frame charts show that the price is taking on 1.0820 support that guards 1.0780.

A break of the trendline support would be a significant development in what could open risk all the way to the 78.6% Fibonacci retracement of the prior daily bullish trend and the wedge counter-trendline support. 

• Gold price funnels down towards the breaking point of a volatility-signaling chart pattern.
• Softer United States Treasury bond yields contrast with the US Dollar rebound to weigh on the XAU/USD.
• Neutral comments from Federal Reserve officials put a floor under the Gold price.
• Easy inflation can keep the XAU/USD buyers hopeful as banking fears fade.

Gold price (XAU/USD) prints mild losses around $1,963 as bulls and bears jostle within a short-term symmetrical triangle ahead of the key inflation release. It’s worth noting that the US Dollar’s rebound allowed the XAU/USD to lure bears the previous day but mixed comments from the Federal Reserve (Fed) officials and the absence of important United States data, not to forget the risk-on mood, challenge the Gold sellers amid Thursday’s sluggish Asian session.

Gold price drop on US Dollar’s rebound

Gold price bears the burden of the US Dollar’s rebound as traders await the key data/events. That said, the US Dollar Index (DXY) marked the first daily gain in three the previous day, down 0.05% intraday near 102.65 by the press time.

A retreat in the US Treasury bond yields joined the quarter-end positioning and cautious optimism in the market to underpin the US Dollar’s latest rebound. Adding strength to the greenback’s rebound could be the geopolitical fears emanating from China, Russia and North Korea. However, an absence of hawkish comments from the Federal Reserve (Fed) officials joins the absence of talks about banking woes to weigh on the US Dollar.

That said, the US 10-year and two-year Treasury yields marked their first daily loss on Wednesday by ending the North American trading session around 3.57% and 4.10% respectively.

It should be noted that the US Dollar gains, as well as the Gold price weakness, could also be linked to the increase in the US inflation expectations, per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED).

Alternatively, the Federal Reserve (Fed) officials’ hesitance in suggesting further rate hikes seems to challenge the greenback buyers, which in turn keeps the Gold buyers hopeful. Bloomberg came out with the news suggesting Fed Chair Jerome Powell showed forecasts for one more rate hike in 2023, which in turn pushed back talks of policy pivot and favor the US Dollar bulls. Though, Vice Chair for Supervision Michael Barr said, “We will be looking at incoming data, financial conditions to make a meeting-by-meeting judgment on rates.”

China-linked fears also weigh on XAU/USD

The recent chatters surrounding the US-China strain due to the US-Taiwan ties also challenge the Gold buyers, due to the dragon nation’s status as one of the world’s biggest XAU/USD consumers. That said, the US blacklisting of Chinese companies and Beijing’s dislike of a meeting between the White House Speak and the Taiwan President can be considered the key news on that matter. On the same line, Bloomberg said that Taiwanese officials are pushing hard for an agreement to eliminate the burden of double taxation, like the US has with dozens of countries. The same could fury China and allow the Gold sellers to keep the reins.

On the other hand, nuclear threats from Russia and North Korea are also challenging the sentiment and the XAU/USD price.

Meanwhile, optimism surrounding the technology and banking sector allows the Gold price to fight back the bears.

Inflation, banking news are crucial for Gold traders to track

Although the recent shift in the Federal Reserve (Fed) tone and the market’s cautious optimism keeps the Gold buyers hopeful, a jump in the US inflation expectations and an absence of dovish comments from major central banks prod the XAU/USD bulls. As a result, today’s preliminary readings of the Harmonized Index of Consumer Prices (HICP) gauge for Germany and the US fourth quarter (Q4) Core Personal Consumption Expenditure (PCE) details will be important to watch for the Gold traders. It’s worth noting that an increase in price pressure pushes the central banks towards higher rates and the same can weigh on the precious metal.

Also read: US February PCE Inflation Preview: Bad news for the Dollar, good news for the Fed?

Gold price technical analysis

Gold price seesaws within a one-week-old symmetrical triangle, suggesting more volatility on the breakout. That said, the impending bull cross on the Moving Average Convergence and Divergence (MACD) indicator joins the hidden bullish divergence between the Relative Strength Index (RSI) line, placed at 14, and the price to lure the XAU/USD bulls.

It’s worth noting that a hidden bullish RSI divergence can be found when the Gold price makes a higher low but the RSI (14) grinds lower.

With this, the XAU/USD is likely to grind higher with the stated triangle’s top line, close to $1,985 at the latest, which acts as an immediate hurdle towards the north. Following that, the $2,000 round figure and the latest peak surrounding $2,010 can test the Gold buyers before directing them to the previous yearly high of $2,070.

Alternatively, a downside break of the aforementioned triangle’s lower line, near $1,950, can trigger a short-term fall in the Gold price. Though, the 100-bar Simple Moving Average (SMA) level of near $1,923 may check the XAU/USD sellers before giving them control.

Gold price: Four-hour chart

Trend: Further upside expected

• USD/CHF has dropped to near 0.9180 amid rising expectations for more rates by the SNB.
• SNB Quarterly Bulletin cemented more rate hikes to ensure price stability in the Swiss region.
• The expectation of weak growth in US Retail Sales in 2023 is barricading the upside of the USD Index.

The USD/CHF pair has shown a corrective move to near 0.9180 in the early Tokyo session. The Swiss Franc asset has witnessed selling pressure led by a gradual decline in the US Dollar Index (DXY) and rising expectations for more rates by the Swiss National Bank (SNB).

In recent sessions, the collapse of Credit Suisse kept the Swiss Franc on the back foot as the currency lost its charm of safe-haven. It seems that hawkish SNB bets are aiming to retrieve its glory.

The release of the SNB Quarterly Bulletin on Wednesday confirmed that SNB Chairman Thomas J. Jordan will hike rates further to ensure price stability in the Swiss region. The SNB Quarterly Bulletin also showed that inflation escalated to 3.4% in February and the majority of the contribution to rising Swiss inflation is coming from domestic goods.

Going forward, Friday’s Real Retail Sales (Feb) data will be keenly watched. The annual retail sales data is expected to expand by 1.9% against a contraction of 2.2%, which would cement further scalability in the inflationary pressures.

Meanwhile, the USD Index has turned sideways below 102.70. The asset had a roller-coaster ride on Wednesday amid deepening expectations of a decline in the retail demand in the United States ahead. The National Retail Federation (NRF) said on Wednesday that fears of a recession and tremors in the banking industry cast a shadow over a recovery in consumer spending, as reported by Reuters. The NRF is expecting a growth in retail demand in the 4-6% range, lower than expansion by 7% recorded in 2022.

• NZD/USD´s 4-hour chart shows that the price needs to break below 0.6215.
• Below 0.6215, bears will seek a continuation below 0.6150.

NZD/USD is flat on the day so far after what was a relatively quiet session on Wednesday. The pair has stuck to familiar ranges around 0.6220 amid growing expectations that the Reserve Bank of New Zealand will lift the official cash rate by 25bps to 5.0% at its meeting next week and a move to hike rates again to 5.25% in May.

However, until then, there is room for the US Dollar to claw back some ground and the following illustrates a downside bias for NZD/USD:

NZD/USD daily charts

The price is on the back side of the prior bullish trend but a break of another micro trendline support will open the risk of a break below 0.6190 and then 0.6150.

NZD/USD H4 chart

NZD/USD´s 4-hour chart shows that the price needs to first break below 0.6215.

• WTI crude oil remains sidelined inside a short-term bullish channel after reversing from the highest levels in a fortnight.
• Five-week-old horizontal hurdle guards immediate upside, convergence of 200-SMA, channel’s top line is the key hurdle.
• 100-SMA lures intraday sellers of Oil but further downside needs validation from $69.45.

WTI crude oil seesaws around $73.00 during Thursday’s sluggish Asian session, following its pullback from a 12-day high. In doing so, the black gold remains with the fortnight-old ascending trend channel while retreating from the channel’s top line and a five-week-long horizontal hurdle of late.

It should be noted that the energy benchmark’s latest pullback takes clues from the impending bear cross on the MACD and a retreat in the RSI (14) line after it touched the overbought territory.

With this, the commodity price is likely to decline further towards the immediate support of 100-SMA, around $71.70 by the press time.

In a case where the quote remains bearish past $71.70, the $70.00 and bottom line of the stated channel, close to $69.45, become crucial to watch as they hold the gate for the Oil bear’s entry.

Meanwhile, the aforementioned five-week-old horizontal resistance near $73.90-74.00 restricts the immediate upside of the WTI crude oil.

Following that, a convergence of the stated channel’s top line and the 200-SMA together highlights $74.60 as a tough nut to crack for Oil buyers.

Should the commodity price rally beyond $74.60, the odds of witnessing a run-up toward $77.50 and then to the $78.00 hurdles can’t be ruled out. Though, multiple hurdles marked since February 13 highlight the $80.80-81.00 as crucial resistance to watch afterward.

WTI: Four-hour chart

Trend: Pullback expected

• The EUR/JPY struggled at 144.00 and dived toward the 143.70s area.
• An EUR/JPY fall below 143.50, and the 20/50-day EMAs, could be tested before Friday’s session.
• EUR/JPY buyers reclaiming 144.00, and a new YTD high could be possible, above 145.56.

The EUR/JPY reached a weekly high at 144.09, but as the Asian session began, it retreated under 144.00. Although the EUR/JPY double bottom is still in play, it is at the brisk of being invalidated once the pair drops below the March 22 daily high at 143.62. At the time of writing, the EUR/JPY is trading at 143.75, registering minuscule losses of 0.01%.

EUR/JPY Price Action

From the daily chart perspective, the EUR/JPY rallied sharply on Wednesday, piercing the 20 and the 50-day Exponential Moving Averages (EMAs), each at 142.65 and 142.58, respectively. However, failure to hold to its gains above 144.00 could exacerbate a pullback toward the 142.00 area.

Oscillators like the Relative Strength Index (RSI) and the Rate of Change (RoC), portray the pair might be headed for a bullish continuation. But the RSI’s slope shifted flat, suggesting buyers are getting a respite.

If the EUR/JPY buyers reclaim 144.00, that could open the door to test the March 15 high at 144.96, ahead of piercing 145.00. A breach of the latter, and the EUR/JPY could be trading at new YTD highs, nearby the December 15 high at 146.72. But firstly, the EUR/JPY needs to face solid resistance at 145.50 and 146.00.

On the other hand, if the EUR/JPY extended its losses below 143, the 20-day EMA, at 142.64, could be tested. Break below, and the 50-day EMA is next at 142.58.

EUR/JPY Daily Chart

EUR/JPY Technical Levels

• USD/JPY is aiming to recapture 133.00 as ebbing fears of US banking shakedown have trimmed the Japanese Yen’s appeal.
• The street believes that the US banking sector has already reported its collateral damage.
• Tokyo CPI is expected to soften consecutively led by declining oil prices.

The USD/JPY pair is facing barricades in reclaiming the immediate resistance of 133.00 in the Asian session. The major is expected to resume its upside journey as global banking fears have eased, the US Dollar Index (DXY) has shown a decent recovery, and fears of softening of Japan’s inflation have renewed.

Easing US banking jitters after the announcement of the acquisition of collapsed Silicon Valley Bank’s (SVB) deposits and loans to efforts made by US authorities to infuse confidence among investors have trimmed appeal for the Japanese Yen as a safe-haven.

Investors were gung ho for the Japanese Yen when the US administration alarmed shakedown in the banking sector. However, the market participants believe that the US banking sector has already reported its collateral damage, which has forced them to withdraw funds from the Japanese Yen. This also helped the USD Index in building a cushion around 102.40. A recovery move by the USD Index has already pushed it to above 102.60.

The US Dollar is expected to remain in action ahead of the release of the Federal Reserve’s (Fed) preferred inflation tool, core Personal Consumption Expenditure (PCE) Price Index (Feb) data. According to the estimates, monthly core PCE inflation would accelerate by 0.4%, lower than the former expansion of 0.6%. The annual figure is expected to remain steady at 4.7%.

On the Tokyo front, investors are focusing on Tokyo Consumer Price Index (CPI) data, which will release on Friday. The street is anticipating further softening of the headline Tokyo CPI to 2.7% from the former release of 3.4% led by declining oil prices in the international market. However, the core CPI that strips off oil and food prices is seen expanding to 3.3% from the former release of 3.2%. More stimulus measures are expected from the Bank of Japan (BoJ) in keeping inflation steadily above desired levels.

• US Dollar Index fades bounce off one-week low, sidelined of late.
• Fed Chair Powell signal one more rate hike in 2023, Vice Chair Barr highlights data dependency.
• US inflation expectations remain firmer ahead of Fed’s favorite inflation gauge.
• Dicey markets, quarter-end positioning also restrict DXY moves ahead of Thursday’s second-tier data.

US Dollar Index (DXY) struggles to keep the previous day’s bounce off weekly low around 102.65 amid mixed signals from the Federal Reserve (Fed) officials despite inflation woes, as well as due to the recently receding banking fears.

Corrective bounce in the US Treasury bond yields joined the quarter-end positioning and cautious optimism in the market to underpin the US Dollar’s latest rebound. Adding strength to the greenback’s rebound could be the geopolitical fears emanating from China, Russia and North Korea. However, an absence of hawkish comments from the Federal Reserve (Fed) officials joins the absence of talks about banking woes to weigh on the US Dollar.

The US blacklisting of Chinese companies and Beijing’s dislike of a meeting between the White House Speak and the Taiwan President can be considered the key catalysts to challenge the previously firmer sentiment and allowed the US Dollar to snap a two-day downtrend.  Though, optimism on the technology and banking front challenged the risk-off mood, as well as the DXY’s rebound.

It’s worth noting that the US inflation expectations, per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED), jumped to a two-week high the previous day and allowed the US Dollar to remain firmer.

However, Bloomberg came out with the news suggesting Fed Chair Jerome Powell showed forecasts for one more rate hike in 2023, which in turn pushed back talks of policy pivot and favor the US Dollar bulls. Though, Vice Chair for Supervision Michael Barr said, “We will be looking at incoming data, financial conditions to make a meeting-by-meeting judgment on rates.

Against this backdrop, Wall Street closed with notable gains led by tech and bank stocks while the US Treasury bond yields eased.

Looking ahead, the final readings of the US fourth quarter (Q4) Gross Domestic Product (GDP) will join the Q4 Core Personal Consumption Expenditure (PCE) details and the weekly jobless claims to direct intraday moves. However, Friday’s US Core PCE Price Index, the Fed’s favorite inflation gauge becomes crucial for the market to watch for clear directions.

Technical analysis

US Dollar Index bulls need to provide a daily closing beyond a three-week-old descending resistance line, around 102.90 by the press time, to retake control.

• GBP/USD seesaws in a tight range after reversing from a two-month high.
• One-month-old ascending resistance line challenges bulls despite firmer oscillators.
• Bears need validation from two-week-long support line before taking control.

GBP/USD stays defensive above 1.2300 amid early Thursday’s Asian session, making rounds to a 15-pip trading range in the last, as bears struggle to keep the reins after the Cable pair reversed from a two-month high the previous day.

That said, the Cable pair took a U-turn from a multi-day top the previous day after an upward-sloping resistance line from late February challenged the bulls. However, the bullish MACD signals and an absence of the overbought RSI (14) seem to have tamed the bearish bias.

Adding strength to the upside bias is the pair’s ability to trade beyond the two-week-old upward-sloping support line and the key moving averages.

With this, the GBP/USD buyers are likely to again challenge the aforementioned resistance line, around 1.2370 by the press time.

In that case, a horizontal area comprising multiple tops marked since mid-December 2022, around 1.2445-50, gains major attention.

However, likely overbought conditions of the RSI around then could challenge the Cable bulls afterward, if not then the GBP/USD price won’t hesitate to challenge the May 2022 high of around 1.2670.

On the flip side, a two-week-long ascending support line, close to 1.2290 by the press time, restricts the immediate downside of the pair, a break of which highlights the 10-DMA support of 1.2270.

It should be noted, however, that a clear downside break of the 10-DMA can direct GBP/USD towards the 50-DMA, close to 1.2150 by the press time.

GBP/USD: Daily chart

Trend: Further upside expected

• The AUD/JPY daily chart portrays the pair might consolidate as it faces solid resistance.
• In the short term, the AUD/JPY must reclaim 89.00 to pursue higher prices.
• Otherwise, the AUD/JPY could fall toward the 87.00 area.

The AUD/JPY retreats as the Asian session begins, some 0.06%, following Wednesday’s gains of 1.09%. at the time of writing, the AUD/JPY is trading at 88.68, below the week’s high at 88.82, and also 20 pips under the 20-day Exponential Moving Average (EMA).

AUD/JPY Price Action

From a daily chart perspective, the AUD/JPY failed to hurdle solid resistance at the 20-day EMA and at March’s 22 high of 89.00. Oscillators turned flat at bearish territory, suggesting that sellers are lurking around current exchange rates. Additionally, the Rate of Change (RoC), albeit bullish, is at the mercy of Thursday’s price action. Therefore, sudden shifts in market sentiment and the AUD/JPY could reverse its course.

Short term, the AUD/JPY is hovering around the 100-EMA at 88.68, slightly above the central pivot point. After the AUD/JPY crossed above the 20-EMA, the pair registered gains of 1.41%. However, the Relative Strength Index (RSI) is shifting downward, albeit at bullish territory, while the Rate of Change (RoC) portrays that buying pressure is waning. The AUD/JPY could print a leg-down before testing 89.00 and beyond.

Hence, the AUD/JPY first support would be the pivot point at 88.42, followed by the confluence of the 50/20-EMAs, and the S1 pivot point at around 87.95/88.02. Once cleared, the pair could dive to the S1 daily pivot at 87.28

On the upside, the AUD/JPY could test the 200-EMA once it clears 89.00 and the R1 daily pivot at 89.16. The next resistance would be the 200-EMA at 89.58.

AUD/JPY 4-Hour Chart

AUD/JPY Technical levels