• AUD/JPY pair sees two straight days of losses as sellers remain in charge.
• A breach of 20-day EMA support at 88.81 opens the path for further decline.

AUD/JPY Price Action

With the AUD/JPY pair extending its losses to two-straight days and breaching the 20-day Exponential Moving Average (EMA) support at 88.81 has opened the path for sellers. After testing previous resistance at around 90.00, where a prior support trendline turned resistance, sellers gathered momentum, and since then, the AUD/JPY has dropped 2.86%.

Oscillators remain in bearish territory, with the Relative Strength Index (RSI) aiming lower, while the Rate of Change (RoC) portrays sellers remaining in charge.

In the short term, the AUD/JPY 1-hour chart portrays the pair correcting upwards, testing the 38.2% Fibonacci retracement around 88.24. Upside risks lie at the central pivot point at 88.33, which, once cleared, would expose the R1 daily pivot at 89.03. Nevertheless, the confluence of April’s 5 low and the 61.80% Fibonacci retracement at around 88.62 would cap any rallies. If AUD/JPY retreats at the latter, look for a slide toward the S2 daily pivot point at 86.77.

AUD/JPY 1-Hour Chart

AUD/JPY Technical Levels

US House of Representatives Speaker Kevin McCarthy crossed wires, via Reuters, late Wednesday while praising talks with Taiwanese President Tsai Ing-Wen. The Diplomat, however, ruled out chatters of his visit to the Asian nation by saying, “I don't have any current plans to visit Taiwan but that doesn't mean I will not go.”

Additional comments

Soon after the comments from US House Speaker McCarthy, China’s Foreign Ministry Spokesperson crossed wires and alleged the US of breaking its commitment on the Taiwan issue. The following are additional statements from Chinese Foreign Ministry Spokesperson:

Market reaction

The news could weigh on the AUD/USD price which is picking up bids to pare recent losses around 0.6720 by the press time.

Also read: AUD/USD regains 0.6700 in a corrective bounce ahead of Australia trade numbers, China PMI

• Gold price has turned sideways above $2,020.00 ahead of the US NFP data.
• US Services PMI defending dropping below 50.0 but recession fears get deepened.
• The Labor Cost Index data is expected to soften ahead, which might decelerate inflationary pressures further.

Gold price (XAU/USD) is showing a lackluster performance above $2,020.00 in the early Tokyo session. The precious metal witnessed a wild gyration after the release of weak United States Employment data on Wednesday. The Gold price has turned sideways as investors have shifted their focus toward the release of the US Nonfarm Payrolls (NFP) data.

S&P500 continued its downside move on Wednesday as weaker Services PMI stroked signs of recession in the US economy, indicating negative market sentiment. The US Dollar Index (DXY) rebounded firmly from its fresh monthly low of 101.40 but observed a restricted upside near 102.00. The USD Index attracted significant bids despite the release of downbeat US Services PMI and labor market data.

March’s US ISM Services PMI dropped to 51.2 vs. the consensus of 54.5 and the former release of 55.1. A slowdown in the Service sector shows deepening concerns due to higher rates by the Federal Reserve (Fed). Also, households are struggling in bearing the burden of high inflation. The New Orders Index that conveys forward-demand dropped dramatically to 52.2 from the estimates of 57.6 and the prior release of 62.6. It is quite satisfactory that the US Services PMI gamut didn’t fall below 50.0 as it would have been considered a contraction.

After the release of downbeat US Automatic Data Processing (ADP) Employment data, investors are keenly awaiting the release of US NFP, which will provide more clarity on labor market conditions. The Unemployment Rate is expected to remain steady at 3.6%. And Average Hourly Earnings would soften to 4.3% vs. the former release of 4.6%.

Gold technical analysis

Gold price is oscillating in a narrow range of $2,011-2,033 on an hourly sale. The precious metal found cushion after a wild move from March 20 high at $2,009.88. The Gold price is struggling to sustain above the 20-period Exponential Moving Average (EMA) at $2,021.20. While the 50-period EMA at $2,010.00 is still advancing.

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

Gold hourly chart

• AUD/USD picks up bids to pare recent losses, snaps two-day downtrend.
• RBA’s Lowe fails to convince markets of the Aussie central bank’s hawkish capacity after pausing rates.
• US Dollar rebound, sour sentiment also weighs on the risk-barometer pair.
• Australia’s trade numbers, China Caixin Services PMI will be important to watch for clear directions.

AUD/USD picks up bids to pare recent losses around 0.6720 as it braces for the Aussie foreign trade numbers for February and China’s Caixin Services PMI for March on early Thursday. The Aussie pair dropped in the last two consecutive days despite softer US data as the Reserve Bank of Australia’s (RBA) pause to the rate hike trajectory pushed back the bulls even if Governor Philip Lowe tried to recall them.

On Wednesday, Reserve Bank of Australia (RBA) Governor Philip Lowe tried to appease hawks, following the RBA’s pause in rate hikes. The Policymaker ruled out rate cuts while also saying, “Balance of risks lean toward further rate rises.”

On the other hand, the US Dollar rebound amid recession woes and ignored the downbeat data. That said, the ADP Employment Change for March dropped to 145K from 200K expected and an upwardly revised prior of 261K. On the same line, the final readings of S&P Global Composite and Services PMIs for March also came in downbeat as the former one declined to 52.3 from 53.3 preliminary estimations while the Services PMI dropped to 52.6 from 53.8 anticipated earlier. More importantly, the US ISM Services PMI for the said month amplified pessimism as it dropped to 51.2 versus 54.5 expected and 55.1 prior.

Against this backdrop, the recession woes in the US grew stronger and weighed on the sentiment. The same marked downbeat Wall Street close and drowned the US Treasury bond yields. However, the sour sentiment allowed the US Dollar Index (DXY) to recover from a two-month low and snap a two-day downtrend.

Looking ahead, Australia’s monthly Trade Balance, Exports and Imports for February will precede  China’s Caixin Services PMI for March to direct immediate AUD/USD moves. Given the dovish RBA, the Aussie pair is likely to remain pressured unless the data provides positive surprise.

Technical analysis

A daily closing below one-month-old support line near 0.6680 becomes necessary for the AUD/USD bears to retake control.

• GBP/USD remains sidelined after refreshing 10-month high.
• Brexit optimism, softer US Dollar initially pleased Cable buyers before a corrective move amid recession chatters.
• UK employment numbers flash downbeat signals and weigh on yields, US Dollar.
• Monthly US jobs report will be crucial to watch, risk catalysts are also important for fresh impulse.

GBP/USD seesaws around 1.2460 during early Thursday in Asia, after a volatile day that initially refreshed the multi-month high before reversing the gains.

The Cable pair rose to the highest levels since June 2022 earlier on Wednesday amid broad US Dollar weakness and Brexit optimism. However, the following rebound in the greenback, due to the recession woes, triggered the much-awaited pullback in prices. It’s worth noting, though, that the USD’s latest rebound ignores downbeat employment clues. Additionally, mixed data at home might have also allowed the GBP/USD pair buyers to take a breather.

On Wednesday, the UK’s final readings of S&P Global/CIPS Composite and Services PMIs for March came in mixed as the former confirmed the initial estimations of 52.2 but the key Services gauge improved to 52.9 from 52.8 initial forecasts.

Talking about Brexit, “A new model will be announced later on Wednesday to ‘reduce the need for checks for many types of goods,’” said Sky News while citing an anonymous UK Cabinet Office source speaking on the post-Brexit checks on goods coming to the UK from the European Union (EU).

After a disappointing 19-month low of the US JOLTS Job Openings for February, the ADP Employment Change for March dropped to 145K from 200K expected and an upwardly revised prior of 261K.

On the same line, the final readings of S&P Global Composite and Services PMIs for March also came in downbeat as the former one declined to 52.3 from 53.3 preliminary estimations while the Services PMI dropped to 52.6 from 53.8 anticipated earlier. More importantly, the US ISM Services PMI for the said month amplified pessimism as it dropped to 51.2 versus 54.5 expected and 55.1 prior.

Amid these plays, the recession woes in the US grew stronger and weighed on the US Dollar despite the latest rebound. On the same line are the latest challenges to its reserve currency status. With this, Wall Street marked downbeat close and drowned the US Treasury bond yields. However, the sour sentiment allowed the US Dollar Index (DXY) to recover from a two-month low and snap a two-day downtrend.

Moving on, a light calendar with only second-tier US data may entertain GBP/USD traders but risk catalysts are more important for clear directions.

Technical analysis

Unless declining back below 1.2445-50 resistance-turned-support, GBP/USD remains on the bull’s radar even if the overbought RSI suggests a pullback in prices.

• EUR/USD has shown recovery from 1.0900 amid signs of softening the US labor market.
• US firms have slowed down their hiring process amid rising interest rates by the Fed and a bleak economic outlook.
• The ECB would continue its policy-tightening process ahead.

The EUR/USD pair has sensed support after dropping to near the round-level support of 1.0900 in the early Asian session. The major currency pair has attempted a recovery after falling to near 1.0900 as the tight United States labor market has cooled down further after US Employment data released by Automatic Data Processing (ADP) missed estimates.

As per the released data, the US economy added 145K jobs in March, significantly lower than the estimates of 200K and the former release of 242K. Firms have slowed down their hiring process amid rising interest rates by the Federal Reserve (Fed) and a bleak economic outlook. A slowdown in the recruitment process after the release of weak Job Openings data indicates that the US labor market has started cooling off and chances are solid of an escalation in the Unemployment Rate ahead.

Meanwhile, S&P500 settled Wednesday’s session with some losses as the risk of recession has been fuelled further after the release of the downbeat US ISM Services PMI data, portraying a risk appetite theme. The US Dollar Index (DXY) rebounded to near 102.00 after defending the fresh monthly low above 102.40. The demand for US government bonds soared as weak Services PMI and a slowdown in payroll numbers have confirmed that the Fed will favor an unchanged interest rate decision ahead. The 10-year US Treasury yields have sipped sharply below 3.31%.

In Eurozone, the survey of consumer expectations for inflation, conducted by the European Central Bank (ECB) on a monthly basis showed that median inflation expectations for the next 12 months have fallen to 4.6% in February vs. 4.9% recorded in January. Constantly rising rates by European Central Bank President Christine Lagarde to tame sticky Eurozone inflation has trimmed consumer inflation expectations.

• The US EIA reports a 3.7 million barrel drop in inventories, with gasoline and distillates falling even more than estimated.
• Global Manufacturing and Services PMIs suggest a potential economic slump, adding pressure to WTI prices.

Western Texas Intermediate (WTI), the US crude oil benchmark, retreats from weekly highs at $81.75 and drops on greater-than-expected reductions in US crude and fuel stockpiles. Investors’ speculations that a Fed pivot is likely to happen as recession fears grow turned flows towards the US Dollar. At the time of typing, WTI is trading at around $80.30.

US oil inventories decline, though failed to underpin WTI price

Data from the US Energy Information Administration (EIA) office showed that inventories fell by 3.7 million barrels. In comparison, gasoline and distillates dropped more than estimates by 4.1 million barrels and 3.6 million barrels, respectively.

US crude oil prices jumped over the weekend, highlighting the Organization of Petroleum Exporting Countries (OPEC) decision to cut output by 1 million barrels.

Also weighing on WTI price are the recent readings of Global Manufacturing and Services PMIs, indicating that the economy might slump worldwide.

The latest data in the United States (US) showed that business activity is slowing down while the labor market is catching up with the Fed’s cumulative tightening. Therefore, traders estimate a pause in the US central bank tightening campaign, with over a 50% chance of keeping rates unchanged.

Job openings in the US fell to their lowest in almost two years, according to the JOLTs report. The market participants focus on Thursday’s Initial Jobless Claims data, followed by Friday’s Nonfarm Payrolls.

WTI Technical Analysis

WTI remains braced to the $80.00 per barrel figure on sideways trading. Price action during the last week remains almost flat. The Relative Strength Index (RSI) persists in bullish territory and shifts flat. At the same time, the Rate of Change (RoC) portrays that buying pressure is waning. If WTI resumes upwards, the first resistance would be $81.00. A breach of the latter will expose the November 7 pivot high at $93.73. On the flip side, WTI’s would dip, towards $75.00, if sellers reclaim the $80.00 PB psychological level.

• USD/CAD bulls come up for air ahead of US NFP.
• The US Dollar is paring back shorts into the holidays. 

USD/CAD is flat on Wednesday and had traveled between a low of 1.3423 and 1.3484 as the CAD consolidates this week´s gains as investors turned their attention to the release of US and Canadian employment data. 

After touching its weakest intraday level since Feb. 16 at 1.3406, the pair rallied as investors pared back some of the short positions on profit-taking ahead of Friday´s showdown event. However, the US Dollar initially fell to mark a fresh bear cycle low on Wednesday but has since recovered the best part of the losses made on Tuesday´s sell-off and is now reaching back towards 102.00 DXY.

Meanwhile, a report today that showed US private sector employers added 145,000 jobs in March, well under expectations for a rise of 210,000 is casting a dark cloud over the Greenback. /The ADP National Employment report showed US private employers hired fewer workers than expected in March, suggesting a cooling labor market. Private employment increased by 145,000 jobs last month, while economists polled by Reuters had forecast private employment increasing by 200,000. In other data, the United States services industry was also shown to have slowed more than expected in March as the measure of prices paid by services businesses fell to the lowest in nearly three years. The ISM's Non-Manufacturing index dropped to 51.2 in March from 55.1 in February. The services sector's employment indicator sliding as well to 45.8 from 47.6 in February.

For Canada, data on Wednesday showed that Canada posted a smaller-than-expected trade surplus of C$422 million ($313 million) in February, as both exports and imports recorded widespread declines. Meanwhile, the price of oil , one of Canada's major exports, was under pressure with WTI down some 0.8% into the close but off the lowest point of the day down at $79.77bbls. Oil has been weighed by worsening economic prospects against expectations of US crude inventory declines and plans by OPEC+ producers to reduce output.

Looking ahead, Canada's employment report for March is due on Thursday. This is expected to show the economy added 12,000 jobs. This data falls ahead of Friday´s US Nonfarm Payrolls report whereby traders who are in on Good Friday will be looking for any confirmation that the labor market is cooling, a major requisite in the Federal Reserve's fight to curb inflation. Particular attention will be paid to the Unemployment Rate in this regard. 

Analysts at Brown Brothers Harriman said the following with regard to the forthcoming jobs data:

´´The consensus for Nonfarm Payrolls this Friday stands at 240k vs. 311k in February, while the unemployment rate is seen steady at 3.6%.  Average hourly earnings are expected to slow to 4.3% y/y vs. 4.6% in February.  It's worth noting that the data will come on Good Friday.  With markets likely to be very thin, we could get some outsize movements from the numbers, whether good or bad. ´´

After the ADP and ISM Service PMI, attention turns to Nonfarm Payrolls. Data releases on Thursday include Australian trade, Reserve Bank of Australia Financial Stability Review, Chinese Caixin Service PMI, Canadian employment and US weekly Jobless Claims. Markets can be affected by Easter holidays. 

Here is what you need to know on Thursday, April 6:

After two days of heavy losses, the US Dollar rose despite dismal US data. On Wednesday, stocks finished mixed on Wall Street and bonds rallied. The bond market continues to signal recession ahead, but economic figures and equities to a slowdown. 

The US Dollar Index climbed from two-month lows toward 102.00. DXY's trends is still bearish. US and European bond yields fell on Wednesday, with the bond market suggesting a recession. The US 10-year ended at 3.30%, the lowest close since September. 

Data from the US came in below expectations. The ADP Employment report showed an increase in private payrolls of 145K in March, against expectations of 200K. The ISM Service PMI dropped from 55.1 in February to 51.2 in March. On Friday, the US Jobs report is due. 

Lower yields continue to boost the Japanese Yen that outperformed again. USD/JPY fell for the third day in a row, but managed to retake 131.00, amid Dollar's strength during the American session. 

EUR/USD dropped from two-month highs to settle around 1.0900. The rally took a breather amid lower European yields and on the back of a deterioration in market sentiment. 

GBP/USD lost ground after trading above 1.2500 for the first time since June 2022; it found support at 1.2430 and trimmed losses. EUR/GBP fell modestly, posting the lowest close since mid-March. The pound outperformed following comments from Bank of England (BoE) Chief Economist Pill about inflation persistence. 

AUD/USD regained levels above 0.6700, after falling to 0.6676, slightly above the 20-day Simple Moving Average. The Aussie received some support from Reserve Bank Governor Philip Lowe. He said that despite the decision to pause the hike cycle, it does not mean tightening is over.  

The New Zealand Dollar was among the best performers on Wednesday, boosted by the surprise of the Reserve Bank of New Zealand (RBNZ). The central bank raised rates by 50 basis points to 5.25%. NZD/USD jumped initially to 0.6379 and then dropped to as low as 0.6282 to rise later to the 0.6330 area. AUD/NZD spiked down to 1.0588, the lowest since December, and then rebounded to 1.0640. 

USD/CAD corrected higher for the second consecutive day, rising above 1.3450. However, the bearish trend is intact. Canada will release job market numbers on Thursday. Analysts expected more modest gains in jobs, predicting on average a 12K increase in payroll in March and a small increase in the Unemployment Rate to 5.1%. 

The Mexican Peso was the worst performer on Wednesday, with USD/MXN rising above 18.30. Mexico reported a slowdown in annual inflation from 7.62% to 6.85% in March. The Central Bank of India will announce its decision on Thursday. 

Gold price lost some momentum and fell to $2,009/oz only to rise back to $2,020 showing that bulls are still in control. Silver continues to consolidate around $25.00. 

Bitcoin ended flat, hovering around $28,250, while Ethereum rose 1.60% to $1,910. 

• AUD/USD stuck in the US dollar´s ebb and flow.
• all eyes turn to the US NFP.

AUD/USD is trading at 0.6720 and has been stuck in a range of between 0.6676 and 0.6779 so far. The US Dollar has been firmer on Wednesday, recovering from two-month lows as investors lightened their short positions ahead of Friday´s US Nonfarm Payrolls and the Easter holidays.

The Greenback was initially offered at 101.415, DXY, after a second-straight report showed slowing employment growth in the United States. The combination of this week´s data and a report today that showed US private sector employers added 145,000 jobs in March, well under expectations for a rise of 210,000 is casting a dark cloud over the US Dollar. 

The ADP National Employment report showed US private employers hired fewer workers than expected in March, suggesting a cooling labor market. Private employment increased by 145,000 jobs last month, while economists polled by Reuters had forecast private employment increasing by 200,000.

The services industry was also shown to have slowed more than expected in March as the measure of prices paid by services businesses fell to the lowest in nearly three years. The ISM's Non-Manufacturing index dropped to 51.2 in March from 55.1 in February. The services sector's employment indicator sliding as well to 45.8 from 47.6 in February.

This data falls ahead of Friday´s US Nonfarm Payrolls report whereby traders who are in on Good Friday will be looking for any confirmation that the labor market is cooling, a major requisite in the Federal Reserve's fight to curb inflation. Particular attention will be paid to the Unemployment Rate in this regard. 

Analysts at Brown Brothers Harriman said the following with regard to the forthcoming jobs data:

´´The consensus for Nonfarm Payrolls this Friday stands at 240k vs. 311k in February, while the unemployment rate is seen steady at 3.6%.  Average hourly earnings are expected to slow to 4.3% y/y vs. 4.6% in February.  It's worth noting that the data will come on Good Friday.  With markets likely to be very thin, we could get some outsize movements from the numbers, whether good or bad. ´´

Meanwhile, the analysts at BBH noted that Cleveland Fed President Loretta Mester, a known hawk, said monetary policy needs to move “somewhat further into restrictive territory this year, with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time.”  She added that she was “very comfortable” with the Fed’s decision to hike rates 25 bp last month and that “So far that seems to have stabilized at the moment.” 

´´Yet Fed tightening expectations continue to fall,´´ the analysts said. ´´WIRP suggests around 55% odds of 25 bp hike at the May 2-3 meeting.  After that, it’s all about the cuts; 2-3 cuts by year-end are priced in.  In that regard, Powell said that Fed officials “just don’t see” any rate cuts this year. ´´

The analysts also pointed put that last week’s PCE data were mixed.  ´´While headline and core both came in a tick lower than expected, super core accelerated for a second straight month to 4.63% y/y and is the highest since October.  This is not the direction that the Fed desires and so we look for the hawkish tilt in Fed comments to continue,´´ the analysts argued. 

AUD could have last laugh

For the Aussie, MUFG currency analyst Lee Hardman said in a note that while the expectations are that the RBA is close to or has ended its rate-rise cycle, negative for AUD, ´´it's partially offset by bets other G10 central banks are at similar points.´´He argues that ´´the AUD also remains driven more by the outlook for global growth, particularly for China's economy. Stronger growth in China as its economy continues to fully reopen this year supports our forecast for the Australian dollar to strengthen."

• GBP/USD is forming a bearish-harami candlestick pattern with bearish implications.
• Private hiring and business activity in the US missed estimates as economic growth decelerated.
• Business activity in the UK expands, though inflation remains at double digits.

GBP/USD faces strong resistance at around 1.2500 and retraces due to risk aversion as investors assess a possible recession in the United States (US). The latest US economic data paints a gloomy scenario, which is already foreseen by the US Federal Reserve (Fed) as the last piece of the puzzle, the larbor market, showed signs of slowing down. The GBPUSD trades at 1.2459, down by 0.33%.

US equities continue to tumble across the board. The ISM revealed its non-manufacturing index, which rose by 51.2, below estimates and the prior’s month data. Earlier, private hiring in the US, as reported by ADP in collaboration with Stanford Digital Economy Lab, jumped to 145K, below the 200K consensus.

After the release of the figures, the GBP/USD seesawed in an extensive 70-pip range, from 1.2505-1.2432, before stabilizing around 1.2450. As business activity slows down, recessionary fears are growing amongst investors.

Aside from this, money market futures continued to price in that the US central bank, the Federal Reserve (Fed) would keep rates unchanged at their May meeting.

Source: CME FedWatch Tool

Aside from this, the UK economic docket featured the S$P Global/CIPS Services PMI, which came at 52.9, below estimates but at expansionary territory. However, fundamentally speaking, inflation in the UK remains at double-digit figures, though per the latest Bank of England (BoE) Monetary Policy Report (MPR), the central bank expected inflation to drop “significantly in Q2 2023.” That said, investors have begun to price in a less hawkish BoE, and for the next monetary policy meeting, odds for a no change sit at 54.5%.

GBP/USD Technical Analysis

From a technical perspective, the GBP/USD appears to have peaked at around 1.2500. A daily close at current exchange rates would confirm the formation of a bearish-harami two-candlesticks pattern, suggesting further downside is expected. If GBP/USD tumbles below Tuesday’s low of 1.2394, the pair’s next support would be the 20-day EMA at 1.2276, followed by the psychological 1.2200 mark. Downside risks lie at the 50-day EMA.

• GBP/JPY is bearish while on the front side of the bear trend.
• Bulls will need to get on the backside of the bear trend and break 163.50 horizontal resistance thereafter. 

GBP/JPY holds in bullish territories on the longterm outlook but is currently offered toward trendline support as the following will illustrate. 

GBP/JPY daily charts

The price is in a bull trend and the M-formation might serve as a basis for bulls to get long on the front side of the trendline again. It is a reversion pattern that could see the price pulled into the neckline. However, that is not to say that there will not be more downsides to come in the coming days first of all. 

GBP/JPY H4 chart

The bearish wick on the prior 4-hour candle could well be filled in the next session or so. 

GBP/JPY M15 chart

The price is bearish on the front side of the bear trend and a filling of the 4-hour wick will mitigate a price imbalance on the 15-minute chart for a restest of 163 the figure. Bulls will need to get on the backside of the bear trend and break 163.50 horizontal resistance thereafter. 

• Private hiring in February rose by 145K, lower than anticipated.
• ISM Non-Manufacturing PMI drops to 51.2, below expectations and the previous month’s reading.
• USD/CHF Price Analysis: Bullish continuation requires reclaiming 0.9100 resistance; otherwise, further losses lie below 0.9000.

USD/CHF hits a new YTD low at 0.9005 but rebounds as a risk-off impulse, seeing a flight to safety, as shown by US equities trading in the red. Growing concerns in the United States (USD) arose after the last tranche of US economic data increased the likelihood of a recession. At the time of writing, the USD/CHF is trading at 0.9070.

Wall Street fluctuates between gains and losses. US Treasury bond yields continued to drop as the bond market rallied, on investors seeking safe-haven assets. The USD/CHF fell to a multi-month low, though it recovered some ground after US data revealed elevated recession fears.

The ISM Non-Manufacturing PMI headed to 51.2, less than the expected 54.4, and fell short of the previous month’s reading of 55.1. Business activity deterioration, and a decline in new orders growth, were the reasons for the dip. Earlier, the ADP Employment Change report showed that private hiring in February rose by 145K, below the anticipated 200K, trailing January’s upwardly revised figure of 261K.

Given the backdrop that labor market indicators suggesting a downturn in unemployment claims could pave the way for a weak US Nonfarm Payrolls report. The consensus estimates that the US economy in March created 240K jobs, lower than February’s 311K.

USD/CHF Technical Analysis

The daily chart shows that the USD/CHF remains downward biased. Wednesday’s fall toward a multi-month low at around 0.9005 and a late recovery is forming a hammer, which, preceded by a downtrend, can exacerbate an upward correction. For a bullish continuation, the USD/CHF needs to reclaim 0.9100. Above that resistance, a previous support trendline turned resistance around 0.9170-0.9180, which would be the next supply zone, ahead of testing the 20-day EMA. Otherwise, the USD/CHF could extend its losses below 0.9000.

What to watch?

• Gold price is stalling on the bid and the focus is on a meanwhile correction.
• The US Dollar is firming up ahead of the US Nonfarm Payrolls report this Friday. 

Gold price is tracking the ebbs and flows in the US Dollar on Wednesday but holding its own in the $2,020s in midday trade having traveled between a low of $2010.09 and $2032.11 so far on the day. The US Dollar initially fell to mark a fresh bear cycle low on Wednesday but has since recovered the best part of the losses made on Tuesday´s sell-off and is now reaching back towards 102.00 DXY, making the Gold price a touch less affordable for international buyers.

Nevertheless, the Gold price rose to a fresh 13-month high early on Wednesday as investors move to safe havens after a second-straight report showed slowing employment growth for the United States as interest rates rise. A combination of this week´s data and a report today that showed US private sector employers added 145,000 jobs in March, well under expectations for a rise of 210,000, sent the greenback to a low of 101.415 DXY. The data came in well below the 242,000 positions gained in February. The data follows the weak result for US new job openings released Tuesday and gives rise to sentiment that the Federal Reserve is about to pivot due to the evidence that the US economy is slowing.

US Treasury yields dropping 

Consequently, investors are fearful of recession and are pricing in Federal Reserve rate cuts later in the year and the Gold price is finding support from a fall in US Treasury yields. The US two-year note was paying as little as 3.646% on the day while the yield on the 10-year note was down to a low of 3.268%. Both notes were poised to close at lows last seen in September as safe-haven buying pushed bond prices, which move opposite to their yields, higher.

Reuters reported that ´´futures priced in a 39.1% likelihood that the Fed raises its target rate by 25 basis points on May 3 when policymakers conclude a two-day meeting, down from 59.7% on Monday, CME's FedWatch Tool showed. Chances the Fed cuts rates by year's end also rose, with the outlook for the US central bank's target rate falling below 4.0% in December.´´

US Nonfarm Payrolls could see outsize movements

Looking ahead, the market now is waiting for the US Nonfarm Payrolls report on Friday and Gold price bulls will be keen to see if there will be any confirmation that the labor market is cooling, a major requisite in the Federal Reserve's fight to curb inflation. Particular attention will be paid to the Unemployment Rate in this regard. 

Analysts at Brown Brothers Harriman said the following with regard to the forthcoming jobs data:

´´The consensus for Nonfarm Payrolls this Friday stands at 240k vs. 311k in February, while the unemployment rate is seen steady at 3.6%.  Average hourly earnings are expected to slow to 4.3% y/y vs. 4.6% in February.  It's worth noting that the data will come on Good Friday.  With markets likely to be very thin, we could get some outsize movements from the numbers, whether good or bad. ´´

Gold technical analysis

As per the pre-market open weekly Gold price analysis, Gold, Chart of the Week: XAU/USD bulls remain in control, the Gold price indeed rallied:

Prior Gold price analysis

We had a bullish Gold price  pennant on the daily and 4-hour charts:

Gold price updates

The Gold price bulls were back in the market after an anticipated drive from around the supporting area. The Gold price bulls needed to commit at this juncture to get and stay above $2,010.

The Gold price bullish pennant thesis played out as illustrated in Tuesday´s chart above. 

It was shown that the Gold price Fibonacci scale comes into play.

We have the 38.2% Fibonacci retracement of the Gold price aligned with the $2,000 area that could come back under pressure for a retest, if not lower, prior to the next bullish impulse and an eventual upside continuation:

Gold price update, live chart

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

The March ISM Service PMI showed lower-than-expected numbers in its main indicators. Analysts at Wells Fargo point out it signalled cooler activity in March amid a pullback in new demand as higher rates and recent banking sector stress weigh on the outlook. However, they noted that business activity practically held firm and major components remained consistent with expansion.

Key quotes: 

“The breadth of service sector activity clearly pulled back in March. We expected service activity to cool to some degree last month, but the near-four point drop was larger than anticipated. The ISM services index is now at 51.2, which still signals expansion, but the latest report takes some wind out of the sails of the services sector.”

“Service-providers continued to hire in March, but at a slower pace with the employment component dropping to 51.3. Recent labor market data suggest the jobs market is loosening. The number of job openings in February fell to its lowest level since May 2021 and the ISM manufacturing hiring component fell for the third straight month reaching its lowest reading since 2020.”

“This report is not great news for service resilience, but the sector is still expanding and the major components (business activity, new orders, employment) remain in expansion.”
 

• USD/MXN sees strong gains on cooling inflation data from Mexico.
• Weaker PMI and ADP figures suggest potential challenges for the US labor market and economic growth.
• USD/MXN Price Analysis: A daily close above the 20-day EMA could lead to a rally towards the 100-day EMA at 18.8382.

The Mexican Peso (MXN) depreciated vs. the US Dollar (USD) as market sentiment shifted sour. A raft of economic data from the United States (US) and Mexico spurred a jump in the exchange rate. At the time of writing, the USD/MXN is trading at 18.3469

USD/MXN climbs as Mexico’s inflation cools down

Wall Street is trading mixed, with the S&P 500 and the Nasdaq posting losses while the Dow Jones climb. The USD/MXN is registering solid gains on data from Mexico, showing that inflation is cooling down. Data from INEGI showed that inflation rose by 6.85% YoY, below estimates of 6.90%, as revealed by a Reuters poll. Core inflation, which excludes volatile items, cooled from 8.09% to 8.09% annually.

Last week, Banxico (the Mexican central bank) raised rates by 25 bps moderating the pace of tightening. Analysts expect Banxico to keep rates unchanged at around 11.25%,

On the US front, the ISM Non-Manufacturing PMI dropped to 51.2, which is lower than the anticipated 54.4 and falls short of the previous month’s reading of 55.1. The decline is attributed to a decrease in new orders growth and less robust business activity. Meanwhile, February ADP figures showed private hiring increased by 145K, below the expected 200K, trailing January’s upwardly revised figure of 261K.

Given the latest round of labor market metrics pointing to deterioration, a jump in Initial Jobless Claims for the latest week could open the door for a weaker US Nonfarm Payrolls figure. Analysts predict that the number of payrolls for March will be around 240K, which is lower than February’s figure of 311K.

USD/MXN Technical analysis

The USD/MXN appears to have bottomed at around 18.0000. USD/MXN weekly gains above 2% spurred a rise from 17.9644 toward 18.4000, exposing the 20-day Exponential Moving Average (EMA) at 18.3329. A daily close above the latter could exacerbate a rally towards the 100-day EMA At 18.8382, but firstly, buyers need to clear the 50-day EMA At 18.5235. On the other hand, a dip below the 20-day EMA and the USD/MXN could re-test 18.0000.

• The Reserve Bank of New Zealand’s decision to raise rates by 50 bps lifted the NZD/USD pair to new 2-month highs.
• The US ADP Employment Change report for March was below estimates, as the labor market feels the Fed’s cumulative tightening.
• NZD/USD Price Analysis: Downside risks remain below 0.6400.

The New Zealand Dollar (NZD) reversed its course against the US Dollar (USD), after hitting a fresh two-month high at 0.6379, following an astonishing 50 bps hike by the Reserve Bank of New Zealand (RBNZ). However, sentiment shifting sour spurred flows toward safe-haven assets. Therefore, the NZD/USD is trading at 0.6331, clinging to minimal gains of 0.30%.

NZD/USD clings to decent gains as the US Dollar recovers

Economic data from the United States (US) continued to show deterioration. The ISM Non-Manufacturing PMI, also known as Services, fell to 51.2, below estimates of 54.4, and trailed February’s 55.1 reading. The index fell due to weaker new orders growth and softer business activity. Earlier data revealed that private hiring in February rose 145K below estimates of 200K and trailed January, which was upwards revised to 261K.

Given the latest round of labor market metrics pointing to deterioration, a jump in Initial Jobless Claims for the latest week could open the door for a weaker US Nonfarm Payrolls figure. Analyst estimates payrolls for March at 240K, below February’s 311K.

The greenback is recovering some ground after falling to fresh two-month lows at 101.42, as shown by the US Dollar Index. At the time of typing, the DXY sits at 101.780, up 0.41%.

On the New Zealand (NZ) front, the RBNZ surprised the markets and hiked the Overnight Cash Rate (OCR) by 50 bps to 5.25%. The RBNZ sees upside risks to inflation, according to February’s Monetary Policy Statement (MPS).

NZD/USD Technical analysis

The NZD/USD remains neutral to upward biased after the RBNZ’s decision. As the NZD/USD rallied towards 0.6379 and challenged 0.6389, the February 14 high, buyers did not have the strength to crack the latter and lift the pair towards 0.6400. Therefore, NZD/USD sellers stepped in, and dragged the exchange rate toward the 0.6320 area.

Upside risks lie at 0.6390, which would pave the way to 0.6400 before testing the August 12 high at 0.6468. On the other hand, a breach of 0.6300 and the NZD/USD would dive to the 200-day EMA at 0.6268.

• US Dollar gains momentum during the American session. 
• US data points to a slowdown in activity, hiring and also, inflation. 
• EUR/USD down for the day, moves away from two-month highs. 

The EUR/USD corrected to the 1.0900 zone after the beginning of the American session and despite weaker-than-expected US economic data. The US Dollar gained momentum, pushing the pair to the downside. 

DXY holds to gains after US data 

Automatic Data Processing (ADP) released its employment report showing that in March the private sector added 145K jobs, below expectations of 200K. The US Dollar dropped after the report but later, following the ISM Service, PMI turned decisively higher for the day. 

The ISM Service PMI came in at 51.2 in March, a bigger-than-expected slowdown from the 55.1 of February, and below market expectations of 54.5. The Employment Index fell to 51.3 from 54 and the Price Paid fell from 65.6 to 59.5. The report shows activity expanding at a modest pace with inflation indicators retreating further. 

Despite the fact that the economic figures offer arguments for the monetary policy doves the US Dollar gained momentum, even as US yields printed fresh lows. 

The EUR/USD is hovering around 1.0920. The slide from the 1.0970 area is seen as a correction so far. Below 1.0900, the next support stands at 1.0870. On the upside, if the Euro retakes 1.0950, it could likely rise to test the 1.0970 zone again. 

Technical levels 

Gold has benefitted strongly from the fall in Yields and decline in the USD. Economists at Credit Suisse look for a test of major resistance at the $2,070/75 highs. 

Break under 55-DMA at $1,898 would suggest another reversion lower

“We look for a retest of long-term resistance from the $2,070/75 record highs of 2020 and 2022. Whilst this should clearly be respected, a clear and sustained break higher would mark a major bullish long-term breakout to open the door to a move to $2,300 next.”

“Ideally, the 55-DMA, currently seen at $1,898, floors the market now. If this breaks, this would lessen the risk of a breakout above $2,070/75 and suggest another reversion lower within the broader range, with next support at $1,778.”

Economists at HSBC discuss the Swiss Franc outlook. Its “safe haven” is likely to be less supportive in the coming weeks.

CHF to move largely sideways against the USD in the weeks ahead

“The CHF can still enjoy occasional ‘safe haven’ allure, but we expect this factor will be less supportive in the coming weeks.” 

“CHF weakness against the EUR may be tempered but not reversed by SNB FX interventions.” 

“We expect the CHF to move largely sideways against the USD in the weeks ahead.”

Each day brings more data that suggests the US economy could be weakening more abruptly than assumed only recently. In the view of economists at MUFG Bank, weakening US data is set to weaken the US Dollar further.

Weaker growth concerns increase

“With the ISM Manufacturing Employment Index down at 46.9, there is growing evidence that the positive demand in the US labour market is now beginning to fade. If that is confirmed on Friday by a weaker than expected Nonfarm Payrolls report it will likely result in a more substantial depreciation of the Dollar.”

“The potential tightening of credit conditions fuelled by banking sector turmoil is likely to see another hit to real economic activity. Indeed, it is worth noting that credit conditions were already tightening significantly prior to the March banking sector turmoil that may explain the  weakness in the data we are seeing for February.” 

“The area of the US economy that has held up best continues to be the labour market but we may be on the cusp of that changing.”

• Service sector growth in the US lost momentum in March.
•  US Dollar Index stays in daily range near 101.50.

Economic activity in the US services sector expanded at a softening pace in March with the ISM Services PMI declining to 51.2 from 55.1 in February. This reading came in weaker than the market expectation of 54.5.

The inflation component of the PMI survey, the Price Paid sub-index, edged lower to 69.5 from 65.6 in February, the New Orders sub-index declined sharply to 52.2 from 60.4 and the Employment sub-index fell to 51.3 from 54.

Commenting on the data, “there has been a pullback in the rate of growth for the services sector, attributed mainly to (1) a cooling off in the new orders growth rate, (2) an employment environment that varies by industry and (3) continued improvements in capacity and logistics, a positive impact on supplier performance," said Anthony Nieves, Chair of the ISM Services Business Survey Committee.

Market reaction

The US Dollar Index stays in its daily range at around 101.50 after this report.

The Canadian Dollar is expected to struggle in the near-term. Nonetheless, economists at ANZ Bank believe that the USD/CAD pair will turn back lower later in the year.

BoC’s pause will pay off

“If CPI continues to slip towards the BoC’s expectations of 2.6% YoY by year-end, the pause in the current monetary policy tightening cycle may bring about a rebound in broader economic data later in the year, leading to tailwinds for the CAD as the DXY declines and Oil prices rise as per our forecasts.”

“In the near term, CAD underperformance will continue, but we believe that USD/CAD will gradually fall to 1.29 by December this year.”

• Gold price rose to $2,031/oz, new one-year high.
• US March ADP report came in below expectations, attention turns to ISM Service PMI.
• US yields and DXY turn lower after data.

Gold price printed fresh one-year highs at $2,031 after the release of US employment data. The yellow metal then pulled back modestly, and ahead of more economic reports, it is hovering around $2,020.

US data weighs on yields, boosts Gold

Automatic Data Processing (ADP) released it employment report showing that in March the private sector added 145,000 jobs, below market consensus of 200,000. February’s figures were revised higher from 242,000 to 261,000.

After the report, US yields printed fresh weekly lows and the US Dollar weakened. The numbers still show a healthy labor market, but slowing down. More data from the US is due on Wednesday with March ISM Service PMI.

Indicators remain bullish for Gold. A break above $2,030 would favor a test of the all-time high around $2,075. On the downside, the immediate support stands at $2,015 followed by $2,000.

Technical levels

• Silver pulls back from a nearly one-year peak touched earlier this Wednesday.
• The technical setup still favours bulls and supports prospects for further gains.
• Any further slide is likely to support near the $24.40-30 resistance breakpoint.

Silver retreats from the $25.10-$25.15 area, or a nearly one-year high touched this Wednesday and erodes a part of the previous day's strong gains. The white metal remains depressed through the early North American session and is currently placed near the lower end of its daily range, around the $24.85-$24.80 region.

From a technical perspective, the overnight sustained move and acceptance above the $24.30-$24.40 strong horizontal barrier was seen as a fresh trigger for the XAG/USD bulls. A subsequent strength beyond the previous YTD peak, around the $24.65 zone, might have already set the stage for an extension of the recent strong upward trajectory witnessed over the past month or so.

The positive outlook is reinforced by the fact that the XAG/USD is holding comfortably above technically significant Simple Moving Averages (SMAs) - 50, 100 and 200-day SMAs. That said, Relative Strength Index (RSI) on the daily chart is flashing overbought conditions and makes it prudent to wait for some near-term consolidation or a modest pullback before placing fresh bullish bets.

In the meantime, any meaningful pullback is likely to attract fresh buyers and remain limited near the $24.40-$24.30 resistance breakpoint, now turned support. This should now act as a pivotal point, which if broken decisively might prompt some technical selling and make the XAG/USD vulnerable to weaken below the $24.00 mark, towards testing the weekly low, around the $23.60-$23.55 area.

Silver daily chart

Key levels to watch

• EUR/USD fades part of the initial move to 1.0970 on Wednesday.
• Final Services PMIs in Germany and the EMU remained firm in March.
• The US ADP report came in below expectations at 145K jobs.

EUR/USD alternates gains with losses around the 1.0950 region on Wednesday.

EUR/USD: Initial resistance appears in the 1.0970/80 band

EUR/USD keeps the cautious note and exchanges ups & downs in the 1.0950 region amidst the equally inconclusive price action around the greenback on Wednesday.

Earlier hawkish comments from ECB policy makers (Vasle, Vujcic) lend some support to the single currency along with healthy prints from Services PMIs in the euro area, although the generalized steady prudence ahead of the NFP figures on Friday appears to keep bulls contained for the time being.

In US data space, the ADP Employment Report showed the US private sector created 145K jobs in March vs. 200K expected and down from February’s 261K jobs. Additionally, the US trade deficit widened to $70.5B in February and the final Services PMI improved to 52.6 during last month. Finally, the ISM Non-Manufacturing is expected later in the session.

What to look for around EUR

EUR/USD keeps the weekly rally well and sound despite the ongoing knee-jerk, allowing for a potential test of the key 1.1000 mark sooner rather than later.

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

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

Key events in the euro area this week: Germany, EMU Final Services PMI (Wednesday) – Germany Construction PMI (Thursday).

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

EUR/USD levels to watch

So far, the pair is losing 0.05% at 1.0944 and faces the immediate contention at 1.0788 (monthly low April 3) followed by 1.0745 (55-day SMA) and finally 1.0712 (low March 24). On the flip side, a break above 1.0973 (monthly high April 4) would target 1.1032 (2023 high February 2) en route to 1.1100 (round level).

In March, the Mexican Peso appreciated from 18.343 to 18.047 against the US Dollar. Economists at MUFG Bank keep their view that two major risk factors might contribute to some MXN weakening ahead.

High interest rates might keep some attractiveness of MXN

“The Mexican finance minister stated its confidence on the soundness of Mexican banking system, not being impacted by the recent events abroad. In such scenario, we keep our view of moderate rather than sharp MXN weakening in the coming quarters.”

“Additionally, Banxico keeps committed to make inflation to converge to the target in the next years, which means high policy rates for longer in the current scenario of resilient high core inflation, thus keeping the MXN attractive as a carry currency.” 

“We keep our view that two major risk factors might contribute to some MXN weakening ahead. Firstly, the slowdown/recession in the US might hit USD inflows into Mexico. Secondly, Lopez Obrador’s nationalistic policies especially on the energy sector may deter private investments. However, the MXN might continue to be supported by investment and exports from companies reallocating global supply chains into Mexico.”

GBP saw relative stability in Q1 after a torrid 2022. Economists at Credit Suisse believe that the GBP/USD could reach over the second quarter.

Relative ECB hawkishness should allow for an upward EUR/GBP drift

“Relative ECB hawkishness should allow for an upward EUR/GBP drift, but we suspect the BoE will not be shy to hike rates still more if the data support that, and so GBP/USD can rise towards 1.2650 over the quarter.”

“If we are wrong and the BoE decides to see through high inflation and shift in a materially dovish direction for reasons such as financial risk, EUR/GBP would quickly move above 0.9000.”

• USD/CAD struggles to capitalize on its modest gains amid the emergence of fresh USD selling.
• The weaker ADP report lifts bets for an imminent Fed rate-hike pause and weighs on the buck.
• The downside seems limited ahead of Canadian jobs data on Thursday and Friday’s NFP report.

The USD/CAD pair builds on the previous day's bounce from the 1.3400 mark, or its lowest level since February 16 and edges higher for the second successive day on Wednesday. The intraday positive move, however, runs out of steam ahead of the 100-hour Simple Moving Average (SMA), forcing spot prices to retreat below mid-1.3400s during the early North American session.

Crude Oil prices struggle to capitalize on this week's big bullish gap opening and the subsequent move up to the highest level since January 17 amid worries that looming recession risks will dent fuel demand. This, in turn, undermines the commodity-linked Loonie and lends some support to the USD/CAD pair. The US Dollar, on the other hand, struggles to capitalize on its modest intraday recovery from over a two-month low, which, in turn, caps the upside for the pair. 

Growing acceptance that the Federal Reserve (Fed) is nearly done with its tightening cycle keeps a lid on any meaningful rally in the US bond yields and holds back the USD bulls from placing aggressive bets. In fact, the markets are now pricing in an even chance of a 25 bps lift-off at the May FOMC meeting and the possibility of rate cuts by end-December. The bets were reaffirmed by the incoming softer US macro releases, including the US ADP report on Wednesday.

According to the data published by Automatic Data Processing, the US private-sector employers added 145K jobs in March as compared to the 200K expected and the previous month's upwardly revised reading of 261 K. This comes on the back of the JOLTS report released on Tuesday, which indicated that job openings in February dropped to the lowest in nearly two years. This is seen as a sign that the Fed's efforts to slow the labor market may be having some impact.

Apart from this, looming recession risks reinforce speculations that the Fed might soon pause its inflation-fighting rate hikes, which suggests that the path of least resistance for the USD is to the downside. That said, a softer risk tone could lend some support to the safe-haven buck and help limit the downside for the USD/CAD pair. Traders might also refrain from placing aggressive bets ahead of Thursday's release of Canadian jobs data and the US NFP report on Friday.

Technical levels to watch

• The index lacks conviction to spark a more serious rebound.
• US ADP report came in below expectations in March.
• Next of note will come the ISM Non-Manufacturing.

The greenback returns to the 101.50 region when gauged by the USD Index (DXY) following a failed attempt to advance north of the 101.75/80 band earlier on Wednesday’s session.

USD Index loses traction post-ADP

The index now adds to the weekly leg lower and puts the area of multi-week lows to the test once again following a bout of weakness after the release of the ADP report.

Indeed, speculation of a potential “on hold” stance at the Fed’s meeting in May was reinforced after the ADP report showed the US private sector added fewer jobs than initially expected during last month (145K).

Further data saw the trade deficit widened to $70.5B in February while the final Services PMI and the ISM Non-Manufacturing are due later in the NA session.

Back to the Fed, CME Group’s FedWatch Tool now sees the probability that the Fed could leave rates unchanged at nearly 55% at the May 3 gathering.

What to look for around USD

Price action around the index remains depressed well below the 102.00 mark against the backdrop of rising prudence among market participants ahead of the release of US Nonfarm Payrolls in the second half of the week.

Also weighing on the current bearish outlook for the dollar emerges the almost omnipresent view that the Federal Reserve could pause its ongoing tightening stance in May, which has been propped up by persevering disinflation, nascent weakness in some key fundamentals and fresh concerns surrounding the banking sector

In addition, dwindling hawkishness from Fed rate setters also seems to have removed some strength from the greenback, particularly since the latest FOMC gathering and events around SVB and other medium-size US lenders.

Key events in the US this week: MBA Mortgage Applications, ADP Employment Change, Balance of Trade, Final Services PMI, ISM Non-Manufacturing (Wednesday) – Initial Jobless Claims (Thursday) – Non-Farm Payrolls, Unemployment Rate, Consumer Credit Change (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 retreating 0.07% at 101.49 and the breach of 101.43 (monthly low April 5) would open the door to 100.82 (2023 low February 2) and finally 100.00 (psychological level). On the other hand, the next resistance level aligns at 103.33 (55-day SMA) followed by 103.91 (100-day SMA) and then 105.88 (2023 high March 8).

EUR/USD advanced to its strongest level since early February above 1.0970. Economists at MUFG Bank expect the pair to move back toward the middle of that 1.1000-1.1500 range.

Two-year swap spread will help EUR/USD higher

“We see the US Dollar suffering most against the core G10 currencies. The Swiss Franc, Yen and Euro remain three of the top four best performing G10 currencies (the Pound is the other) and if yields in the US decline further that’s where we would expect to see the bigger moves.”

“EUR/USD continues to lag where yields imply it should be trading – somewhere between 1.1000-1.1500.” 

“The 2-year EZUS swap spread closed yesterday at -86 bps, close to recent highs not seen since October 2021. If that level can be sustained over the short-term, we could very soon see EUR/USD back toward the middle of that 1.1000-1.1500 range.” 

• Canada's international trade surplus narrowed unexpectedly in February.
• USD/CAD trades virtually unchanged on the day at around mid-1.3400s.

Canada's merchandise trade surplus with the world declined to C$0.42 billion in February from to C$1.2 billion in January, Statistics Canada reported on Wednesday. This reading came in worse than the market expectation for a surplus of C$1.8 billion.

"Exports were down 2.4%, while imports decreased 1.3%," Statistics Canada further noted in its publication. "The February surplus is close to the typical bounds for monthly revisions to imports and exports."

Market reaction

USD/CAD has erased its daily gains in the early American session and was last seen trading flat on the day at around 1.3450.

• US Goods and Services Trade Balance came in at -$70.5 billion in February.
• US Dollar Index stays in daily range near 101.50.

The United States international trade deficit in goods and services rose by $1.9 billion to $70.5 billion in February, the data published jointly by the US Census Bureau and the US Bureau of Economic Analysis revealed on Wednesday. This reading came in worse than the market expectation for a deficit of $69 billion.

"February exports were $251.2 billion, $6.9 billion less than January exports," the publication further read. "February imports were $321.7billion, $5.0 billion less than January imports."

Market reaction

Following the technical correction seen earlier in the day, the US Dollar Index is struggling to gather recovery momentum and was last seen unchanged on the day at 101.55.

Economists at Credit Suisse preview the upcoming monetary policy decision in India. Whether the RBI hikes should have a limited impact on their USD/INR forecast of 81.00-83.00 in Q2.

RBI will continue intervening at the 81.00-83.00 levels to limit volatility

“We think more balanced trade flows and a less hawkish Fed outlook will result in less Rupee depreciation pressure. However, we still think RBI intervention is the main driver for the USD/INR exchange rate. 

“The RBI has intervened at 81.00 and 83.00 since October 2022. The decision to hike or hold on 6 April is unlikely to shift these RBI intervention levels. As such, we continue to expect USD/INR to trade in a 81.00-83.00 range in Q2.”

See – RBI Preview: Forecasts from five major banks, hiking 25 bps, will be the final?

• US ADP March Private Employment rises by 145K in March, below 200K expected.
• Japanese Yen rises as US yields tumble, USD/JPY at weekly lows testing 131.00. 
• Data ahead: US March ISM Service PMI, expected at 54.5. 

After moving sideways for hours, the USD/JPY broke to the downside, hitting fresh weekly lows following the release of the US ADP Employment report. The pair is testing the 131.00 area amid a weaker US dollar. 

ADP below expectations 

The report published by Automatic Data Processing (ADP) showed that in March the private sector added 145,000 jobs, below expectations of a 200,000 increase. February’s figures were revised higher from 242,000 to 261,000. On Friday, the Nonfarm Payrolls report is due. Later on Thursday, at 14:00 GMT, the March ISM Service PMI Index will be released. 

US yields accelerated the decline after the ADP report, boosting the Japanese Yen across the board. The US 10-year yield fell to 3.30%, and is about to test March lows. The 2-year Treasury yield was at 3.89% and bottomed at 3.75%. The US Dollar Index erased daily gains and fell from 101.70 to 101.50. On Tuesday, the DXY posted the lowest daily close since early February. 

The USD/JPY bottomed at 130.97, hitting the lowest level since March 29. As of writing, it is testing the 131.00 zone. A consolidation below would suggest more losses ahead, targeting the next strong support seen at 130.50/60. On the upside, the key resistance is 131.80. 

Technical levels 

• AUD/USD drifts lower for the second straight day and is pressured by a combination of factors.
• The RBA’s dovish outlook continues to weigh on the Aussie amid a modest intraday USD uptick.
• The disappointing ADP report reaffirmed bets for Fed rate-hike pause and caps the Greenback.

The AUD/USD pair comes under heavy selling pressure on Wednesday and extends the previous day's retracement slide from the vicinity of the 0.6800 mark, or its highest level since February 24. Spot prices, however, manage to recover a few pips from the daily low and trade around the 0.6700 round figure during the early North American session.

The Australian Dollar continues to be weighed down by the Reserve Bank of Australia's (RBA) dovish outlook, which, along with a modest US Dollar (USD) rebound from over a two-month low, drag the AUD/USD pair lower for the second straight day. It is worth recalling that the Australian central bank on Tuesday paused its rate-hiking cycle following 10 consecutive raises and signalled that inflation had likely peaked. In the accompanying policy statement, the RBA noted that it wanted additional time to assess the full effects of rate increases as the economy slows.

The USD, on the other hand, draws some support from an intraday uptick in the US Treasury bond yields, though lacks bullish conviction amid expectations that the Federal Reserve (Fed) is nearly done with its tightening cycle. In fact, the current market pricing indicates an even chance of a 25 bps lift-off at the May FOMC meeting and the possibility of rate cuts by end-December. The bets were reaffirmed by the disappointing release of the US ADP report, showing that private-sector employers added 145K jobs in March, down sharply from the 261K in the previous month.

This comes on the back of the monthly Job Openings and Labor Turnover Survey, or JOLTS report, which indicated that job openings in February dropped to the lowest in nearly two years. This is seen as a sign that the Fed's efforts to slow the labor market may be having some impact. Apart from this, looming recession risks reinforce speculations that the Fed might soon pause its inflation-fighting rate hikes, which caps the upside for the US bond yields. This, in turn, is holding back the USD bulls from placing aggressive bets and lending some support to the AUD/USD pair.

Moving ahead, traders now look to the release of the US ISM Services PMI for a fresh impetus. The focus, however, will remain on the closely-watched US monthly employment details, popularly known as the NFP report, on Friday. Nevertheless, the aforementioned mixed fundamental backdrop warrants some caution before positioning for any meaningful corrective downfall for the AUD/USD pair.

Technical levels to watch

The data published by Automatic Data Processing (ADP) showed on Wednesday that private sector employment in the US rose by 145,000 in March. This reading came in below than the market expectation of 200,000. On a positive note, February's print of 242,000 got revised higher to 261,000.

Commenting on the data, "our March payroll data is one of several signals that the economy is slowing,” said Nela Richardson, chief economist, ADP. "Employers are pulling back from a year of strong hiring and pay growth, after a three-month plateau, is inching down."

Market reaction

With the initial reaction, the US Dollar lost its recovery momentum and the US Dollar Index was last seen trading flat on the day at 101.55.

• EUR/USD comes under pressure following a move to 1.0970.
• Next on the upside appears the 2023 high at 1.1032.

EUR/USD faces some selling pressure after another test of the multi-week tops near 1.0970 on Wednesday.

The likelihood of extra advances appears favoured for the time being. Against that, the pair needs to clear the April high at 1.0973 (April 4) to challenge the YTD peak at 1.1032 (February 2).

Looking at the longer run, the constructive view remains unchanged while above the 200-day SMA, today at 1.0346.

EUR/USD daily chart

The CAD’s failure to make more impression on the 1.34 area has prompted some drift off this week’s peaks on a generally soft USD. Economists at Scotiabank expect the USD/CAD to enjoy minor gains.

USD trend support holds 

“Minor gains in the USD from the low 1.34 area may have a little further to go.” 

“The USD’s positive reaction to the test of nearly year-long trend support in the low 1.34 area reflects the fact that trend dynamics are leaning USD-bearish but are not as well-established as some other currencies.” 

“Resistance is 1.3490/00, with 1.3525 (100-Day Moving Average) firmer resistance above the figure.” 

Economists at Credit Suisse expect the USD/JPY to extend its decline toward the 125 level.

Yen strength can persist towards USD/JPY 125

“We were wrong in early Jan setting the 125 level as our end-Q1 target, as excessive positioning, a slothful BoJ and upside US / European inflation surprises delayed JPY appreciation. But any real hint that the BoJ could shift away from YCC would likely create another wave of interest in long JPY positioning, given now-greater concerns about global macro fragility. Even without that shift, arguably JPY assets are looking more attractive anyway to Japanese investors.”

“If US debt ceiling fears gather pace into the end of Q2, USD/JPY could extend lower beyond 125.”

The India Rupee strengthened slightly against the US Dollar in March. Economists at MUFG Bank expect the USD/INR pair to fal toward 79.50 by the end of the year. 

RBI likely to continue capping INR volatility through FX intervention

“We are reasonably sanguine on INR’s prospects, and expect USD/INR to start to benefit from a weaker US Dollar by end-2023 and decline to 79.50.”

“From a fundamental perspective, there are certainly some things to like, but with some risks to watch for. First, the current account deficit is narrowing faster than expected. Second, the government has committed to fiscal consolidation in its latest budget. Third, real yields are still positive. Fourth, equity outflows have stabilised. Lastly, exchange rate valuations are not exorbitant, given the meaningful decline in trade weighted exchange rate index since 4Q2022 last year.” 

“Moving forward, a key driver of the Indian Rupee will continue to be the RBI’s FX intervention strategy. The RBI seems to dislike excessive FX volatility, especially if it is driven by portfolio flows (in both directions).”

• DXY reverses two sessions with losses and bounces off 101.45/40.
• Extra decline could still retest the 2023 low near 100.80.

DXY manages to rebound from earlier 2-month lows near 101.40 on Wednesday.

The bearish sentiment around the dollar remains well and sound and this could force the index to breach the so far April low at 101.43 (April 5) and head towards the 2023 low around 100.80 (February 2).

Looking at the broader picture, while below the 200-day SMA, today at 106.51, the outlook for the index is expected to remain negative.

DXY daily chart

EUR/USD holds in narrow range above low 1.09 zone. Economists at Scotiabank expect the pair to resume its race higher on a break above 1.0965/70.

Bull trend remains intact

“The EUR is little changed but the fact that spot is consolidating above the late Feb/early Mar high suggests firm underlying support for the currency.”

“The bull trend remains intact and will need little encouragement to reassert itself.”

“Support is 1.0920/25 and  – stronger  – at 1.0850/75.”

“EUR gains should resume on a break above 1.0965/70 intraday.”

US ADP jobs report overview

Wednesday's US economic docket features the release of the ADP report on private-sector employment for March, due at 12:15 GMT. Estimates point to an addition of 200K private-sector jobs during the reported month, down from 245K in February. The data will provide fresh insight into the US labor market conditions and drive expectations for the official jobs report, popularly known as NFP scheduled for release on Friday.

As Matías Salord, news Reporter at FXStreet, explains: All the economic numbers have the potential to influence market expectations on Fed’s monetary policy, which are steady regarding the very short-term but fluctuate sharply considering what could happen from the third quarter onwards. Recession fears and recent banking developments have led markets to price in rate cuts later in 2023. The economic outlook is uncertain and even the Fed does not know what it will do. The forward guidance is vague. This week’s economic data could help to shed some light but it won’t bring clarity.

How could the data affect EUR/USD?

Ahead of the key release, the US Dollar (USD) stages a modest recovery from its lowest level since early February touched this Wednesday amid an intraday uptick in the US Treasury bond yields. That said, firming expectations that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycle act as a tailwind for the Greenback. The disappointing release of the ADP report will reaffirm market bets and prompt fresh selling around the buck, which, in turn, supports prospects for an extension of the EUR/USD pair's upward trajectory witnessed over the past three weeks or so.

Conversely, a stronger reading is unlikely to impress the USD bulls ahead of the official jobs report. This, along with the prospects for additional rate hikes by the European Central Bank (ECB), suggests that the path of least resistance for the EUR/USD pair is to the upside. Hence, any immediate market reaction is more likely to remain limited.

Eren Sengezer, Editor at FXStreet, offers a brief technical outlook for the major and writes: “EUR/USD trades within the upper half of the ascending regression channel coming from mid-March and the Relative Strength Index (RSI) indicator on the four-hour chart stays below 70, suggesting that the near-term bullish bias stays intact.”

Eren also outlines important technical levels to trade the EUR/USD pair: “On the upside, 1.1000 (psychological level, upper limit of the ascending channel) aligns as key resistance ahead of 1.1035 (multi-month high set in early February).”

“In case EUR/USD falls below 1.0950 (mid-point of the ascending channel), it could extend its correction toward 1.0900 (lower limit of the ascending channel, 20-period Simple Moving Average (SMA) on the four-hour chart) and 1.0850 (50-period SMA),” Eren adds further.

Key Notes

  •  US ADP Jobs/ISM Service PMI Preview: Slowing but still positive

  •  EUR/USD Forecast: Euro could test 1.1000 on weak US data

  •  EUR/USD may break 1.10 at any time but could struggle to rally much further – ING

About the US ADP jobs report

The Employment Change released by the Automatic Data Processing, Inc, Inc is a measure of the change in the number of employed people in the US. Generally speaking, a rise in this indicator has positive implications for consumer spending, stimulating economic growth. So a high reading is traditionally seen as positive, or bullish for the USD, while a low reading is seen as negative, or bearish.

GBP/USD is holding in a flat, sideways consolidation range. Economists at Scotiabank expect the pair to extend its race higher toward the 1.2750/00 area.

Rate prospects are GBP-supportive 

“Rate prospects are GBP-supportive. Markets continue to price in around 80% risk of a 25 bps hike in the BoE policy rate at the May 11th meeting but also anticipate only modest declines in the policy rate over the balance of the year.”

“Support is 1.2465/70. Resistance is 1.2520/25.”

“GBP gains through the mid 1.24 area (major highs from late 2022/early 2023) still confer a bullish outlook on the GBP and should mean solid support on dips to mid/upper 1.24 area from here.” 

“The GBP rally still looks capable of extending toward 1.2750/00.”

The ISM will also release the Services PMI survey for March. A downside surprise could deliver another dent to the USD, economists at TD Securities report.

EUR/USD has shown capacity to breach above the 1.0930 level, further upside ahead

“Should ISM Services surprise to the downside (we are a bit below market), it could deal another significant blow to the USD against the EUR and the JPY.”

“We remain short USD/JPY and spot 130.80/00 as the next major tech pivot point ahead of 130, as it coincides with YTD uptrend support. Note, however, that USD/JPY appears to have re-entered a downtrend channel from the March highs.” 

“EUR/USD has also shown the capacity to breach above the 1.0930 level, which coincides with downtrend resistance from the May 2021 highs and would suggest that further upside ahead.”

• EUR/JPY trades on the defensive around 144.00 midweek.
• Extra gains appear on the cards once the 2023 peak is cleared.

EUR/JPY adds to Tuesday’s decline and revisits the mid-143.00s, where some initial contention appears to have emerged on Wednesday.

In the meantime, a daily close above the 2023 peak at 145.67 (March 31) should encourage the cross to shift its focus to the December 2022 high around 146.70 (December 15) in the near term.

So far, further upside looks favoured while the cross trades above the 200-day SMA, today at 141.83.

EUR/JPY daily chart

Economists at Barclays expect the Swiss Franc to remain resilient. They see the EUR/CHF pair hovering around parity for an extended period.

Recent banking sector stress unlikely to dent Franc strength or undermine its “safe haven” status

“We expect the Swiss Franc to remain resilient, supported by the SNB’s strategy to use currency strength as a lever against inflation. This strategy is implemented via further policy rate hikes and FX intervention, which should keep EUR/CHF around parity for an extended period. In a recovering EUR environment, this implies additional strength versus the Dollar (to below 0.90 in USD/CHF).”

“We do not expect the recent banking sector stress to dent Franc strength or undermine its status as one of the world’s ‘safe haven’ currencies. Such an outcome would require radical shifts in Switzerland’s balance sheet via ‘safe asset’ outflows, which we deem very unlikely.”

• Gold price oscillates in a narrow band just below its highest level since March 2022.
• Bets for an imminent Fed rate-hike pause and a softer risk tone benefit the XAU/USD.
• Rebounding US bond yields helps revive the USD demand and caps any further gains.

Gold price is seen consolidating its recent gains to the highest level since March 2022 and oscillating in a narrow trading band through the first half of the European session. The XAU/USD currently trades just above the $2,020 level and seems poised to build on this week's strong rally from the $1,950 area.

Expectations for an imminent Fed rate-hike pause lend support to Gold price

Growing acceptance that the Federal Reserve (Fed) ) is nearly done with its inflation-fighting interest rate hikes add credence to the positive outlook for the non-yielding Gold price. In fact, the markets are now pricing in an even chance of a 25 bps lift-off at the next Federal Open Market Committee (FOMC) meeting in May and the possibility of rate cuts by end-December. The bets were reaffirmed by Tuesday's weaker macro data from the United States (US), showing that job openings in February dropped to the lowest in nearly two years.

Looming recession risks further benefit the safe-haven XAU/USD

This was seen as the first sign that the Fed's efforts to cool the labor market may be having some impact. Apart from this, the disappointing US Factory Orders data pointed to slowing economic growth and lifted bets for an imminent pause in the rate-hiking cycle. This, in turn, tempers investors' appetite for riskier assets, which is evident from a generally softer tone around the equity markets and further contributes to driving some haven flows towards Gold price. That said, a modest US Dollar (USD) strength acts as a headwind for the XAU/USD.

Rebounding US bond yields and a modest US Dollar strength cap gains

The US Treasury bond yields gain some positive traction following the overnight slump and assist the USD to bounce off its lowest level since early February touched earlier this Wednesday. This, in turn, is holding back bulls from placing aggressive bets around the US Dollar-denominated Gold price. Traders also seem reluctant and prefer to move to the sidelines ahead of the release of the closely-watched US monthly employment details - popularly known as the NFP report - on Friday, warranting some caution before positioning for further gains.

Traders look to macro data from United States for some impetus

Heading into the key data risk, traders on Wednesday will take cues from the US economic docket, featuring the ADP report on private-sector employment and ISM Services PMI, due later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to Gold price. Apart from this, traders will take cues from the broader risk sentiment to grab short-term opportunities. Nevertheless, the fundamental backdrop supports prospects for a further near-term appreciating move for the XAU/USD.

Gold price technical outlook

From a technical perspective, the overnight sustained strength and close above the $2,000 psychological mark could be seen as a fresh trigger for bullish traders. Furthermore, oscillators on the daily chart are holding in the bullish territory and support prospects for additional gains. Some follow-through buying beyond the daily peak, around the $2,028 area, will reaffirm the positive bias and allow Gold price to aim to retest the March 2022 swing high, around the $2,070 region. This is closely followed by the all-time peak, around the $2,074-$2,075 zone, which if cleared will set the stage for a further near-term appreciating move.

On the flip side, any meaningful corrective pullback now seems to find decent support near the $2,000 mark. A further decline is more likely to attract fresh buyers and remain limited around the $1,982-$1,980 horizontal zone. The latter should act as a pivotal point, which if broken decisively might prompt some technical selling and drag the Gold price towards the $1,955 intermediate support en route to the $1,945-$1,944 support.

Key levels to watch

Gold rallied amid concerns over a global economic slowdown. However, economists at ANZ bank expect the yellow metal to give up gains if the bank turmoil eases.

Bullish view on Gold for the long-term

“While the ongoing banking sector issues remain an upside risk, we see Gold prices giving up gains if the crisis eases.”

“We hold our bullish view on Gold for the long-term as the Fed pauses its interest rate hikes and the USD continues to grind lower through the rest of the year.”

The US Dollar seems to have stabilized early Wednesday after having suffered heavy losses on Tuesday. Economists at ING expect the greenback to come under renewed downside pressure if ISM Services prints even in the 52-53 area.

All eyes on ISM

“Markets are clearly attaching more recessionary risks to the Dollar, but – we want to reiterate this point – it appears that the Fed has not provided any solid anchor to rate expectations so more subdued readings in key releases can definitely bring more downward pressure to the Dollar. On the contrary, above-consensus readings could prompt a rapid rebound in the very volatile Fed funds pricing and trigger a Dollar correction.”

“Today, the ISM Services Index will be the big market mover, and the consensus is looking for a decline from 55.1 to 54.4. Back in December, a one-off drop below 50 sparked recessionary panic and crippled the Dollar. Now, the combination with yesterday’s decline in job openings could mean that even prints in the 52-53 area could have a similar effect. With that in mind, we think the balance of risks is skewed to the downside for the Dollar today.”

European Central Bank (ECB) policymaker Boris Vujčić said on Wednesday, “the largest part of the rate-hiking cycle is behind us.”

He added that “to address core inflation, we might need to raise rates further.”

Market reaction

EUR/USD was last seen trading at 1.0950, modestly flat on the day.

Cable consolidates after trading above 1.25 for the first time since June last year. Economists at Société Générale expect the GBP/USD pair to extend its advance toward 1.2610 and perhaps even toward 1.2750.

EUR/GBP’s downside limited

“The pair is expected to inch higher towards 1.2610 and perhaps even towards 1.2750, the 61.8% retracement of 2021/2022 downtrend. 

“The low formed earlier this week at 1.2270/1.2210 should now be a crucial support zone.”

“EUR/GBP is experiencing a gradual decline after facing resistance near 0.8980 earlier this year. A large downside is not envisaged; 200-DMA at 0.8700/0.8650 is crucial support zone.”

The Bank of Japan (BoJ) unswervingly stuck to its ultra-expansionary monetary policy. Antje Praefcke, FX Analyst at Commerzbank, expects to see jumps in the Yen.

Has the BoJ missed the right moment?

“I wonder whether the BoJ might have missed the right moment to credibly initiate an exit from its ultra-expansionary monetary policy. If it did not even fight the massive rise in energy prices like other central banks and did not use the opportunity of an overall inflation rate well in excess of 2% to change its approach, how likely is it that it will change its monetary policy ‘only’ because the core rate remains elevated?”

“How difficult will communication become if the best argument, that is an inflation rate well above target, is already weakened? Of course, that leaves core inflation as an argument, but a sudden focus on this argument would not seem that convincing to me either. That is why in my view the publication of the price data for March on 21st April will be very important.”

“I agree with my boss as far as JPY is concerned: jumps in the Yen are likely. Even former vice ministers recognize that by demanding a move away from the YCC.”

Citing a UK Cabinet Office source, Sky News reported on Wednesday, post-Brexit checks on goods coming to the UK from the European Union (EU) are to be streamlined.

Key takeaways

“A new model will be announced later on Wednesday to "reduce the need for checks for many types of goods.”

"The government is delivering on our ambition to have the world's most effective border.”

"We are working with stakeholders and are taking a pragmatic approach to phase in these controls to give a business the opportunity to prepare."

Market reaction

GBP/USD fails to draw any inspiration from the encouraging Brexit news, keeping its range at around 1.2490, down 0.07% on the day.

GBP/USD climbed above 1.2500 for the first time since June on Tuesday. The pair should remain resilient in the near term, economists at ING report.

EUR/GBP to reach 0.89 by the summer and 0.90 by the second half of the year

“While we don’t see reasons to dislike Cable in the very near term as long as the Dollar momentum remains soft, we continue to favour a higher EUR/GBP in the remainder of the year on the back of our view that Bank of England tightening expectations are overdone.”

“We target 0.89 by the summer, and 0.90 by the second half of the year.”

• USD/JPY drifts lower for the third successive day and drops to a one-week low.
• Rebounding US bond yields lends support to the USD and limit further losses.
• Traders look to the US ADP report and the ISM Services PMI for fresh impetus.

The USD/JPY pair extends this week's rejection slide from the 100-day Simple Moving Average (SMA) and remains under some selling pressure for the third successive day on Wednesday. The downward trajectory drags spot prices to a one-week low, around the 131.25-131.20 region during the first half of the European session.

A mildly softer tone around the equity markets benefits the safe-haven Japanese Yen (JPY) and is seen as a key factor exerting downward pressure on the USD/JPY pair. That said, a modest US Dollar (USD) bounce from over a two-month low, helped by an uptick in the US Treasury bond yields, lends some support and limits the downside for the major, at least for the time being. The fundamental backdrop, however, still seems tilted in favour of bearish traders, suggesting that any attempted recovery move is more likely to get sold into.

Investors now seem convinced that the Federal Reserve (Fed) is nearly done with its tightening cycle and have been pricing in an even chance of a 25 bps lift-off at the May FOMC meeting. Furthermore, market participants see the possibility of rate cuts by end-December and the bets were reaffirmed by the weaker US macro data on Tuesday, showing that job openings in February dropped to the lowest in nearly two years. This seems to act as a headwind for the US bond yields and is holding back the USD bulls from placing aggressive bets.

The aforementioned fundamental backdrop suggests that the path of least resistance for the USD/JPY pair is to the downside and a further slide towards the 131.00 mark, en route to the 130.70 support, looks like a distinct possibility. Traders now look to the US economic docket, featuring the release of the ADP report on private-sector employment and the ISM Services PMI, for some impetus later during the early North American session. The focus, meanwhile, remains on the closely-watched US jobs data - popularly known as the NFP - on Friday.

Technical levels to watch

The end of the rate hike cycle is approaching in Mexico. Economists at Commerzbank analyze how Banxico’s stance is set to impact the Peso.

Scope for lower key rates to emerge in Mexico if Fed rate cuts become more apparent towards year-end

“It is not likely to make a fundamental difference for the MXN whether the key rate peaks at 11.25% or 11.5% for now. What is going to be decisive is that Banxico will not permit any doubt in its determination to fight inflation even at the end of the rate hike cycle.”

“At present, all market participants are likely to bet on Banxico being prepared to implement further tightening should surprise upside risks for inflation emerge. That provides support for the Peso.”

“We assume that Banxico will stick to its principally hawkish approach and as a result, we see further appreciation potential for the Peso over the coming months. Nonetheless, scope for lower key rates is also likely to emerge in Mexico if Fed rate cuts become more apparent towards year-end.”

“The European Central Bank (ECB) is conscious of the dangers of moving too fast in cutting reinvestments from its asset purchase programme, particularly after seeing last year's UK gilt market volatility,“ the central bank policymaker Robert Holzmann told MNI in an interview.

Additional takeaways

"I think we all want to have a smaller balance sheet, but we are all still a bit unsure how much the financial system can support, and at what speed?"

"Even the people who continue to be more on the hawkish side take this seriously because it's difficult to anticipate what's going to happen. The UK experience is something which is in our minds there."

"The discussion of QT will be part of the discussion around our future price-setting system.”

"The other part has to do with PEPP, which is currently used as a kind of buffer towards differences in spreads. It's proved a useful instrument, but you cannot keep this system forever. Or you have to give it a different rationale."

Market reaction

EUR/USD is trading listlessly near 1.0950, awaiting the top-tier US economic data for a fresh direction.

The Reserve Bank of New Zealand (RBNZ) shocked markets with a 50 bps hike. NZD/USD jumped more than 1.0% after the hike but then halved its gains. Economists at ING would be wary about chasing NZD rallies.

RBNZ shocks markets with a 50 bps hike

“The RBNZ surprised markets with a 50 bps rate hike. Despite the quite evident downside risks to the economic outlook, policymakers highlighted how ‘Inflation is still too high and persistent, and employment is beyond its maximum sustainable level’. Interestingly, the impact of recent severe weather events in parts of the country was also seen as primarily inflationary, and the Bank actually pointed to the rebuilding effort supporting demand.”

“While markets almost fully price in another 25 bps rate hike, this is not a given. There is a chance the RBNZ has front-loaded tightening but may struggle to push tightening further if inflation fails to stay high. That said, even in the event of another hike and the 5.50% projected peak rate being reached, we think the chances of rate cuts by the end of the year have now increased materially, and markets are likely underestimating them. This is why we would be wary about chasing NZD rallies, especially in the crosses.”

• EUR/USD adds to the weekly uptrend and approaches 1.1000.
• Final Services PMIs in the euro area and the US are due later.
• Markets’ attention will also be on the US ADP report.

The buying interest around the European currency remains well and sound and motivates EUR/USD to edge a tad higher and flirt with the 1.0980 region on Wednesday.

EUR/USD appears bid ahead of data

EUR/USD extends the upside in place since the beginning of the week and with the next target at the key round level at 1.1000 the figure, always amidst the generalized flattish mood in the global markets and the lack of direction in the dollar.

Indeed, some consolidation as well as rising cautiousness seem to kick in ahead of key data releases – especially Friday’s US Nonfarm Payrolls – and against the backdrop of a shortened trading week due to Easter holidays.

In addition, the ECB-Fed divergence keeps bolstering the pair’s upside, particularly aft the JOLTs report on Tuesday reignited speculation of a likely pause at the Fed’s May event.

In the domestic calendar, final Services PMI in Germany and the broader Euroland advanced to 53.7 and 55.0, respectively, for the month of March. Across the pond, all the attention will be on the publication of the ADP Employment Change seconded by weekly Mortgage Applications, trade balance results, final Services PMI and the key ISM Non-Manufacturing.

What to look for around EUR

EUR/USD keeps the rally well and sound and a potential test of the key 1.1000 mark already emerges on the horizon.

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

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

Key events in the euro area this week: Germany, EMU Final Services PMI (Wednesday) – Germany Construction PMI (Thursday).

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

EUR/USD levels to watch

So far, the pair is gaining 0.01% at 1.0951 and a break above 1.0973 (monthly high April 4) would target 1.1032 (2023 high February 2) en route to 1.1100 (round level). On the flip side, the next support comes at 1.0788 (monthly low April 3) followed by 1.0745 (55-day SMA) and finally 1.0712 (low March 24).

• GBP/USD oscillates in a narrow trading band through the early European session on Wednesday.
• A combination of factors lends some support to the USD and acts as a headwind for the major.
• Bets for an imminent Fed rate-hike pause continue to cap the buck and help limit the downside.

The GBP/USD pair is seen oscillating in a narrow trading band through the early part of the European session on Wednesday and consolidates its recent gains to its highest level since June 2022 touched the previous day. The pair is currently placed around the 1.2500 psychological mark and seems poised to prolong the upward trajectory witnessed over the past month or so.

A modest intraday uptick in the US Treasury bond yields, along with a mildly softer risk tone, assist the safe-haven US Dollar to stall its recent downfall to over a two-month low, which, in turn, acts as a headwind for the GBP/USD pair. The USD, however, struggles to gain any meaningful traction amid firming expectations that the Federal Reserve (Fed) is nearly done with its tightening cycle. In fact, the current market pricing indicates an even chance of a 25 bps lift-off at the May FOMC meeting and the possibility of rate cuts by end-December.

The bets were reaffirmed by the weaker US macro data on Tuesday, which showed that job openings in February dropped to the lowest in nearly two years and Factory Orders declined for the second straight month. The Labor Department's monthly Job Openings and Labor Turnover Survey, or JOLTS report,  was seen as a sign that the Fed's efforts to slow the labor market may be having some impact. This, in turn, should keep a lid on any meaningful upside for the US bond yields and hold back the USD bulls from placing aggressive bets.

The aforementioned factors, to a larger extent, helps offset mixed signals from the Bank of England (BoE) policymakers over the future rate-hike path. In fact, the BoE MPC member Silvana Tenreyro on Tuesday advocated for consideration of cutting rates sooner than thought as the absence of cost-push shocks would bring down inflation well below targets. In contrast, the BoE Chief Economist Huw Pill said that action is still needed in assessing inflation prospects and that the onus remains on ensuring enough policy tightening is delivered to see the job through.

The lack of any meaningful selling, meanwhile, suggests that the path of least resistance for the GBP/USD pair is to the upside. Bullish traders, however, seem reluctant to place fresh bets and prefer to move to the sidelines ahead of the closely-watched US monthly jobs data - popularly known as the NFP report - on Friday. Heading into the key data risk, Wednesday's  US economic docket, featuring the ADP report on private-sector employment and the ISM Services PMI, due might provide some impetus later during the early North American session.

Technical levels to watch

The market remains skeptical towards the Dollar. Disappointing US data is set to weigh on the greenback, economists at Commerzbank report.

EUR/USD might easily rise to 1.11 if NFP disappoints

“If the US economic data such as the ADP index and the ISM index for the service sector, due for publication today, disappoints, the Dollar will ease further, like yesterday after the disappointing JOLTS data.”

“The Dollar should react asymmetrically to weaker US data. That means the upper end remains the weaker one in EUR/USD. If the labor market report on Friday disappoints, EUR/USD might easily rise to 1.11.”

CME Group’s flash data for natural gas futures markets noted traders added nearly 16K contracts to their open interest positions on Tuesday, extending the uptrend in place since March 27. On the other hand, volume went down by almost 53K contracts, reversing at the same time two daily builds in a row.

Natural Gas: Next on the downside comes $1.97

Price action around natural gas remained irresolute on Tuesday amidst rising open interest and shrinking volume. That said, there seems to be no changes to the ongoing consolidative mood for the time being, while the next support remains at the 2023 low at $1.967 per MMBtu (February 22).
 

The Dollar will once again be driving EUR/USD. The pair could surge above 1.1000, but may find it difficult to enjoy further gains, economists at ING report.

A below-consensus ISM services reading could trigger a break above 1.1000

“A below-consensus ISM services reading could trigger a break above 1.1000, although the sustainability of rallies beyond that level in the coming weeks would need to be tested against the markets’ confidence to consistently unwind defensive dollar positions at a time when fresh financial turmoil and tighter liquidity remain non-negligible risks.”

“On the European Central Bank side, we’ll hear from the ECB Governing Council members Boris Vujcic and Bostjan Vasle, as well as Chief Economist Philip Lane. The risks of surprise remarks by ECB officials appear to have moderated lately as most key speakers have recently aligned (in line with their position in the dovish/hawkish spectrum) with a pledge to keep raising rates.”

• NZD/USD jumps to over a two-month high in reaction to the RBNZ’s surprise 50 bps rate hike.
• Rebounding US bond yields lends some support to the USD and acts as a headwind for the pair.
• The fundamental backdrop favours bullish traders and supports prospects for additional gains.

The NZD/USD pair builds on this week's bullish breakout through a technically significant 200-day Simple Moving Averages (SMA) and climbs to its highest level since February 14 on Wednesday. Spot prices, however, trim a part of the strong intraday gains and trade around mid-0.6300s during the early European session, still up over 0.50% for the day.

As investors digest the Reserve Bank of New Zealand's (RBNZ) surprise 50 bps rate hike, a modest US Dollar rebound from over a two-month low turns out to be a key factor acting as a headwind for the NZD/USD pair. The US Treasury bond yields edge higher following the overnight steep decline, which, along with the cautious market mood, lends some support to the safe-haven buck. That said, growing acceptance that the Federal Reserve (Fed) is nearly done with its tightening cycle could keep a lid on any meaningful gains for the Greenback.

In fact, the current market pricing indicates an even chance of a 25 bps lift-off at the May FOMC meeting and the possibility of rate cuts by end-December. The bets were reaffirmed by the weaker US macro data on Tuesday, which showed that job openings in February dropped to the lowest in nearly two years. This was seen as a sign that the Fed's efforts to slow the labor market may be having some impact. This, in turn, should cap the US bond yields and the USD, which, along with the RBNZ's hawkish outlook, should continue to boost the NZD/USD pair.

In the accompanying monetary policy statement, the RBNZ stressed that inflation is still too high and remains persistent, adding that the official cash rate needs to be at a level to reduce prices. This suggests that the path of least resistance for the NZD/USD pair is to the upside and supports prospects for an extension of a three-day-old positive trend. Traders now look to the US economic docket, featuring the release of the ADP on private-sector employment and the ISM Services PMI, for a fresh impetus later during the early North American session.

Technical levels to watch

Following OPEC’s decision to cut production, Brent Crude Oil looks well supported at $80/bbl. Economists at ANZ Bank expect Oil prices to top $100/bbl in Q3 2023.

OPEC production cut to further support Oil market

“A surprise move by OPEC has the potential to push the implied Oil market deficit as deep as 2mb/d in coming months. This is likely to reverse recent Oil price weakness, lifting prices into the northern hemisphere summer.”

“Expectations of tightness had already been rising amid China’s reopening, although that was tempered by the uncertain macro backdrop. At the least, this move essentially protects the market against such risks. Moreover, it sends a strong message to the market that OPEC is willing to defend a price floor above $80/bbl. It does this with the knowledge that there will likely be little response from other producers. Growth in US supply remains muted and other marginal suppliers have limited spare capacity.”

“We now expect Brent Crude to break through $100/bbl in early Q3 2023 and likely hold around that level into year-end.”

• USD/CAD struggles to extend the previous day’s rebound from seven-week low.
• One-week-old descending resistance line challenge Loonie pair buyers.
• Bullish MACD signals, RSI recovery from oversold territory facilitates upside momentum.

USD/CAD picks up bids to refresh intraday high near 1.3455 as bulls poke a downward-sloping resistance line from the previous Tuesday.

Adding strength to the recovery moves are the bullish MACD signals and the RSI (14) recovery from the oversold territory, which in turn suggests continuation of the latest rebound.

With this, the Loonie pair buyers are ready to break the immediate hurdle surrounding 1.3460.

Following that, the 61.8% Fibonacci retracement level of February-March upside, near 1.3490 and the 1.3500 round figure could challenge USD/CAD buyers.

In a case where the Loonie pair remains firmer past 1.3500, it can quickly jump to the 50% Fibonacci retracement level of around 1.3560. However, a convergence of the previous support line from early February and the 200-SMA, around 1.3635 at the latest, appears a tough nut to crack for the USD/USD bulls afterward.

On the flip side, the recent low of 1.3405 and the 1.3400 round figure can join the downbeat RSI conditions to challenge the intraday sellers of the USD/CAD pair.

Also acting as the near-term downside filters are the multiple lows marked during early February around 1.3380 and 1.3320.

It’s worth noting that the Year-To-Date low marked in February near 1.3265 acts as the last defense of the USD/CAD buyers.

USD/CAD: Four-hour chart

Trend: Further recovery expected

Here is what you need to know on Wednesday, April 5:

The US Dollar seems to have stabilized early Wednesday after having suffered heavy losses on Tuesday. The New Zealand Dollar gathers strength against its rivals on unexpected central bank action and the mood remains cautious. Private sector employment data from the US alongside February trade balance figures will be featured in the US economic docket. The ISM will also release the Services PMI survey for March.

The Reserve Bank of New Zealand (RBNZ) announced earlier in the day that it raised the official cash rate (OCR) by 50 basis points (bps) from 4.75% to 5.25%, compared to the market expectation for a 25 bps hike. In its policy statement, the RBNZ noted that risks to inflation pressure from fiscal policy were seen to be skewed to the upside and added that labor market was still strong. With the initial reaction, NZD/USD climbed to its highest level since mid-February at 0.6375 before retreating modestly. In the European morning, the pair was up 0.6% on the day at 0.6350.

Following the Reserve Bank of Australia's (RBA) decision to keep the policy rate unchanged, RBA Governor Philip Lowe explained on Wednesday that the decision to hold rates steady does not necessarily imply that rate hikes are over. Lower further added that it is common practice to move rates multiple times, then wait for a while and move again if necessary. AUD/USD, however, struggled to capitalize on these hawkish remarks and was last seen trading in negative territory below 0.6750.

The disappointing job openings and factory orders data from the US weighed on the US Dollar on Tuesday and the US Dollar Index declined to a fresh two-month low of 101.47 before steadying slightly above 101.50 early Wednesday. Employment in the US private sector is forecast to rise by 200,000 in March and the ISM Services PMI is expected to edge lower to 54.5 from 55.1 in February. Meanwhile, the 10-year US Treasury bond yield stays below 3.4% and US stock index futures trade virtually unchanged on the day.

US ADP Jobs/ISM Service PMI Preview: Slowing but still positive.

EUR/USD advanced to its strongest level since early February above 1.0970 but returned to the 1.0950 area on Wednesday. The data from Germany showed that Factory Orders rose by 4.8% on a monthly basis in February, surpassing the market expectation for an increase of 0.3% by a wide margin.

GBP/USD climbed above 1.2500 for the first time since June on Tuesday. The pair stays in a consolidation phase a few pips below that level early in the European morning.

Gold price gathered bullish momentum after clearing $2,000 resistance on Tuesday and extended its rally to a fresh multi-month high above $2,020. XAU/USD is yet to stage a technical correction but modest recovery in US T-bond yields seem to be limiting the pair's upside for the time being.

Bitcoin registered modest gains on Tuesday and continued to stretch higher early Wednesday. BTC/USD was last seen rising more than 1% on the day at $28,540. Ethereum gathered bullish momentum and broke out of its two-week-old trading range on Tuesday. At the time of press, ETH/USD was trading at its highest level since August at $1,913, gaining 2.2% on a daily basis.

The Polish central bank (NBP) meets today. Economists at Commerzbank analyze how the NBP can impact the Zloty (PLN).

Zloty to appreciate if the NBP remains restrained to cut rates 

“It is likely that the key rate will remain unchanged at 6.75% today. What will be decisive for the Zloty is whether the dovish majority will decide to declare the end of the rate hike cycle at this stage.”

“If the NBP remains restrained today as far as the end of the rate cycle and first rate cuts are concerned that would be a positive sign for the Zloty. It would require slightly restrictive trends in the NBP statement to allow the Zloty to appreciate against HUF and CZK though.”

“If the NBP seems relaxed as regards inflation developments though, thus giving the market a dovish signal, the Zloty is going to suffer, above all against HUF and CZK.”

Considering advanced prints from CME Group for crude oil futures markets, open interest extended the uptrend and increased by around 17.8K contracts on Tuesday. Volume, instead, reversed two daily builds in a row and shrank by around 669.6K contracts.

WTI: Solid resistance comes at the 200-day SMA

Prices of the barrel of the WTI maintained the bid bias on Tuesday and added to the ongoing rally amidst rising open interest. The latter underpins the view that the commodity could extend the upside in the very near term, although the sharp decline in volume and the proximity of the overbought territory (as per the daily RSI) could spark some fresh selling. In the meantime, there is a firm hurdle at the 200-day SMA around $83.80, an area coincident with the December 2022 peaks.

The Reserve Bank of New Zealand (RBNZ) surprised and raised its monetary policy rate by 50 basis points. Economists at TD Securities stick to their 5.50% peak OCR forecast.

RBNZ bucked consensus and stuck with hiking at a 50 bps clip

“The RBNZ surprised the market and hiked the OCR by 50 bps to 5.25%.”

“Upside risks to inflation have been nudged higher in the near term above Feb MPS forecasts, overriding downside risks to growth.”

“Credit conditions not tightening sufficiently played a key role in the Bank's decision to hike 50 bps.”

“After today's decision, we retain our 5.50% peak OCR call. We see limited read-through of today's RBNZ decision for other Central Banks.”

Open interest in gold futures markets rose for the second session in a row on Tuesday, this time by around 14.8K contracts according to preliminary readings from CME Group. Volume followed suit and added around 48.5K contracts to the previous daily build.

Gold: The hunt for $2070

Gold prices extended the weekly rebound on Tuesday and closed above the key $2000 mark per ounce troy amidst increasing open interest and volume. Against that, further gains appear in store for the yellow metal in the very near term and with the immediate target at the 2022 top at $2070 (March 8).

• Gold price prods 13-month high amid sluggish market ahead of key US data.
• US Dollar struggles around multi-day low and favors XAU/USD bulls.
• Clear break of $2,010 support confluence keeps Gold buyers hopeful.

Gold price (XAU/USD) slowly pushes its northward limits to $2,025 as it renews the 13-month high amid broad US Dollar weakness. In doing so, the precious metal benefits from the market’s indecision amid hawkish Fed talks and receding market bets on the aggressive rate hikes by the US central bank. Furthermore, threats to the US Dollar’s reserve currency status and downbeat Treasury bond yields also add strength to the XAU/USD price. On the same line could be the quote’s successful break of the $2,010 key resistance, now immediate support.

It should be noted, however, that the cautious mood ahead of the top-tier US data concerning jobs and activities reins the Gold price amid the recently disappointing outcomes. Additionally challenging the Gold buyers could be the geopolitical woes surrounding Russia and China. Even so, the XAU/USD bulls stay hopeful amid its traditional haven status, as well as broad US Dollar weakness.

Also read: Gold Price Forecast: XAU/USD bulls target $2,043 on pennant breakout, US data holds the key

Gold Price: Key levels to watch

Our Technical Confluence Indicator shows that the Gold price stays firmer past the $2,010 key support confluence to poke the previous yearly high marked in March 2022. The stated support comprises the previous monthly high and Pivot Point one-week R2.

It’s worth noting that the Fibonacci 161.8% on weekly formation joins the middle band of the Bollinger on a one-hour chart to check the immediate downside of the XAU/USD near $2,015.

That said, the $2005 level encompasses the Fibonacci 38.2% in one-day and acts as an additional downside filter ahead of highlighting the $2,000 psychological magnet.

Meanwhile, Pivot Point one-week R3 highlights $2,035 as an immediate upside hurdle to watch for the Gold buyers.

Following that, the Pivot Point one-month R1, near $2,050, appears a tough nut to crack for the bulls before directing them to the previous yearly top of $2,070.

Here is how it looks on the tool

About Technical Confluences Detector

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

India’s Monetary Policy Committee (MPC) is scheduled to announce its Interest Rate Decision on Thursday, April 6 at 04:30 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of five major banks for the upcoming central bank's meeting.  

Reserve Bank of India is expected to hike rates by 25 basis points to 6.75%. At the last policy meeting on February 8, the central bank hiked rates by 25 bps to 6.50%.

ING

“We expect the RBI to hike rates a further 25 bps at its April meeting, taking the repo rate to 6.75% as inflation remains above the top of the upper target band (6%) and core rates of inflation also remain elevated. We do, however, think that this might be the last hike in this cycle as we expect inflation to drop sharply in March.”

ANZ

“We expect the MPC to deliver a 25 bps rate hike albeit with a divided vote. We also do not expect a change in the MPC’s overall hawkish stance as upside inflation risks remain on the radar, especially with the rising probability of an El Niño event this year. As such, the RBI will leave the door open for further rate hikes, if needed. However, banking liquidity has fallen significantly, and sans central bank intervention, it will likely turn negative in the coming months. That said, we expect this to be the final increase in the current hiking cycle for now. From Q2, inflation is expected to thaw below the 6% tolerance limit, which could allow the RBI to pause and switch to wait-and-watch mode to assess the impact of past hikes. Some early signs of them working, like the peaking of bank credit growth, are already visible.”

Standard Chartered

“We expect a 25 bps repo rate hike to 6.75%. Given the recent stabilisation of risk sentiment with regard to global financial sector stability issues and domestic inflation persisting above 6% (upper end of the 4+/-2% target range), we expect the MPC to deliver the final rate hike of this cycle. That said, we expect commentary to be more balanced compared to February, as global central banks attempt to take financial system risks into cognisance. More importantly, the MPC is likely to maintain its ‘withdrawal of accommodation’ stance, to allow for policy flexibility amid economic uncertainty. Overall, we see the MPC on a prolonged pause after April, given that inflation is likely to sustainably moderate below 6% from March 2023; the MPC may maintain its FY24 (year beginning April) CPI inflation forecast at 5.3%. We do not see any rate cuts in FY24.”

TDS

“We expect the RBI to raise its repo rate by 25 bps to 6.75% in what we think will be its last hike of the cycle (275 bps of hikes). Inflation remains above the RBI's 2-6% target range at 6.44% YoY and we think the RBI will try to help nudge inflation lower by raising rates. We also expect the Bank to shift its stance to ‘neutral’ from a ‘withdrawal of accommodation stance’.”

SocGen

“The RBI’s immediate focus would be to ensure that the strength and vitality of the banking system have not been compromised as it tries to cope with the impact of monetary policy tightening. Hence, after having delivered the fastest repo hike pace in more than two decades, we believe it would make sense for the RBI to pause and take stock of the situation. This would allow the lagged effect of transmission of the monetary policy action to play through before deciding on the next rate action. Hence, we expect the central bank to keep the policy rate unchanged at 6.5%.”

• EUR/USD is hovering around 1.0960 as investors have sidelined ahead of the US labor market and Services PMI data.
• Federal Reserve might keep rates unchanged to safeguard the US economy from recession.
• Higher rates from European Central Bank have trimmed annual consumer inflation expectations.
• EUR/USD is approaching the critical resistance of 1.1033, auctioning in a Rising Channel pattern.

EUR/USD is continuously trading sideways around 1.0960 following the footprints of the US Dollar Index (DXY). The major currency pair is struggling to find a decisive move as investors are likely to show interest after the release of the United States Automatic Data Processing (ADP) Employment and ISM Services PMI data.

S&P500 futures have turned negative after some minimal gains in the Asian session, portraying a further decline in the risk appetite of the market participants. US equities witnessed selling pressure on Tuesday as the release of the downbeat US Job Openings data after declining Manufacturing activities triggered the risk of recession.

Meanwhile, the US Dollar Index (DXY) has shown a modest recovery after refreshing its monthly low at 101.45 being supported by firmer US Treasury yields. The demand for US government bonds has turned subdued despite the rising chances of a steady monetary policy by the Federal Reserve (Fed). The 10-year US Treasury yields have rebounded to near 3.35%.

Cooling US labor market supports a steady Federal Reserve policy

One major reason that has been driving US interest rates higher for the past year and keeping inflationary pressures stubborn is the tight labor market. Shortage of labor was loading households with stellar funds, which was keeping the retail demand upbeat and prices of goods and services were not coming down.

On Tuesday, the US Job Openings data displayed the economic data for demand for labor below 10 million for the first time since 2021. This allowed the contracting US Manufacturing sector to join hands with the declining demand for labor and conveyed the message of cooling the US labor market due to a bleak economic outlook.

Back-to-back weak economic data is deepening fears of a recession in the US economy. Therefore the street is anticipating an early pause to the policy-tightening spell by the Federal Reserve. As per the CME Fedwatch tool, investors are advocating an unchanged interest rate decision for May’s monetary policy meeting.

The release of the US ADP Employment data would provide significant guidance about the condition of the US labor market. As per the consensus, the US economy has made fresh additions of 200K jobs in March versus. 242K jobs added in February.

Also, the release of the US ISM Services PMI data will provide major clarity. The US Manufacturing sector has been contracting for the past five months as a figure below 50.0 is considered a contraction. And, contraction in the services sector would stem anticipation of contracting Gross Domestic Product (GDP) on a quarterly basis. The US ISM Services PMI (Mar) is expected to contract to 54.5 from the former release of 55.1. Also, New Orders Index that reflects forward-demand would drop to 57.6 from the prior release of 62.6.

Eurozone annual inflation expectations soften to 4.6%

In Eurozone, the survey of consumer expectations for inflation, conducted by the European Central Bank (ECB) on a monthly basis showed that median inflation expectations for the next 12 months have fallen to 4.6% in February vs. 4.9% recorded in January. Constantly rising rates by European Central Bank President Christine Lagarde to tame sticky Eurozone inflation has trimmed consumer inflation expectations.

However, the economic data is ex-discounted of the recent jump in oil prices, which carries the potential of spurting global inflation. The Eurozone economy is highly dependent on the import of oil, which could result in a rebound in the inflation pressures and could put the shared continent back to square.

Apart from that, expectations for economic growth over the next 12 months became less negative, and expectations for the unemployment rate in 12 months have decreased.

EUR/USD technical outlook

EUR/USD is marching towards the horizontal resistance plotted from February 01 high at 1.1033 on a four-hour scale. The shared currency pair is auctioning in a Rising Channel chart pattern in which each pullback is considered a buying opportunity by the market participants.

Upward-sloping 10-and 20-period Exponential Moving Averages (EMAs) at 1.0931 and 1.0904 respectively indicate that the bullish momentum is extremely strong.

The Relative Strength Index (RSI) (14) is oscillating in the bullish range of 60.00-80.00, showing active upside momentum.

• AUD/USD takes offers to refresh intraday low during two-day downtrend.
• 200-EMA prods Aussie pair’s fall inside one-month-old ascending trend channel.
• Impending bear cross on MACD lures sellers but 0.6670 is the key to confirming bearish trend.

AUD/USD remains depressed for the second consecutive day, refreshing intraday low near 0.6730 amid the early European session on Wednesday. In doing so, the Aussie pair reveres Reserve Bank of Australia (RBA) Governor Philip Lowe induced corrective bounce while poking the 200-bar Exponential Moving Average (EMA).

It’s worth noting that the quote’s U-turn from the aforementioned channel’s top line joins bearish MACD signals to favor the latest pullback in the AUD/USD price.

As a result, the Aussie bears are well-set to conquer the stated key EMA support of 0.6730 and aim for the 0.6700 round figure.

However, a convergence of the ascending trend channel’s lower line and 23.6% Fibonacci retracement level of the pair’s downturn from mid-February to March 10, around 0.6670, appear a tough nut to crack for the bears.

In a case where the AUD/USD drops below 0.6670, the odds of witnessing a fall towards targeting the YTD low, currently around 0.6565, can’t be ruled out.

On the contrary, recovery moves can aim for the aforementioned channel’s top line and 50% Fibonacci retracement, around 0.6800.

Following that, 0.6810 and 61.8% Fibonacci retracement of 0.6852 may act as intermediate halts during the run-up targeting February’s peak of 0.7030.

AUD/USD: Four-hour chart

Trend: Limited downside expected

• German Factory Orders climbs by 4.8% MoM in February vs. 0.3% expected.
• German Factory output tumbled 5.7% YoY in February vs. -10.5% expected.
• EUR/USD remains unfazed near 1.0950 following the upbeat German data.

The German Factory Orders data showed a much bigger-than-expected increase in February, suggesting that the manufacturing sector recovery is gaining momentum.

According to the latest data published by the Federal Statistics Office showed on Wednesday, contracts for goods ‘Made in Germany’ came in at 4.8% on the month vs. 0.3% expected and 0.5% prior.

On an annualized basis, Germany’s Industrial Orders arrived at -5.7% in the reported month vs. -10.5% expected and -12.0% booked in January.

FX implications

The shared currency pays little head to the upbeat German factory data.  At the time of writing, EUR/USD is trading at 1.0953, adding 0.05% on the day.

Economist Lee Sue Ann at UOB Group suggests the RBI could raise the policy rate by 25 bps at its meeting on April 6.

Key Quotes

“RBI’s policy priority is containing inflation pressures while being mindful of the ongoing pass-through of input costs, and the stickiness of core inflation is ‘a matter of concern’.”

“We believe the RBI is likely to deliver one final interest rate hike of 25bps, to 6.75%, at the Apr MPC meeting, and keep it unchanged thereafter.”

Gold price is sitting at the highest level since March 2022. XAU/USD bulls target $2,043 on pennant breakout, FXStreet’s Dhwani Mehta reports.

Pennant breakout on the 1D chart keeps doors open toward $2,043

“Gold price validated a pennant breakout after storming through the critical rising trendline support, then at $1,968, and closing Tuesday well above the latter.”

“Gold buyers need to crack the $2,030 resistance to test the pennant target measured at $2,043. The next upside barrier is envisioned at the $2,050 psychological level.”

“The immediate support is seen at the previous yearly high of $2,010, below which the critical $2,000 mark will challenge the bullish commitments. Should the correction extend, Gold sellers could aim for the pennant resistance-turned-support at $1,988.”

• The index navigates with humble gains around 101.60.
• US yields remain depressed in multi-day lows.
• ADP report, ISM Non-Manufacturing take centre stage later.

The USD Index (DXY), which tracks the greenback vs. a bundle of its main rivals, trades with marginal gains and looks to consolidate the recent pullback on Wednesday.

USD Index focuses on data

After two consecutive daily pullbacks, the index now hovers around the 101.60 region on the back of the generalized flattish mood in the global markets.

The dollar, in the meantime, appears under heavy pressure and trades in the area of multi-week lows well south of the 102.00 mark amidst the broad-based improvement in the risk-associated universe and expectations of a pause by the Fed at the May event.

On the latter, consensus among traders remains pretty divided and CME Group’s FedWatch Tool now sees the probability that the Fed could leave rates unchanged at 55% at the May 3 gathering.

In the NA session, MBA Mortgage Applications are due in the first turn seconded by Balance of Trade, the final Services PMI and the ISM Non-Manufacturing.

What to look for around USD

Price action around the index remains depressed in the sub-102.00 region against the backdrop of rising prudence among market participants ahead of the release of US Nonfarm Payrolls in the second half of the week.

Also weighing on the current bearish outlook for the dollar emerges the almost omnipresent view that the Federal Reserve could pause its ongoing tightening stance in May, which has been propped up by persevering disinflation, nascent weakness in some key fundamentals and fresh concerns surrounding the banking sector

In addition, dwindling hawkishness from Fed rate setters also seems to have removed some strength from the greenback, particularly since the latest FOMC gathering and events around SVB and other medium-size US lenders.

Key events in the US this week: MBA Mortgage Applications, ADP Employment Change, Balance of Trade, Final Services PMI, ISM Non-Manufacturing (Wednesday) – Initial Jobless Claims (Thursday) – Non-Farm Payrolls, Unemployment Rate, Consumer Credit Change (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 0.02% at 102.60 and faces the next resistance level at 103.33 (55-day SMA) followed by 103.91 (100-day SMA) and then 105.88 (2023 high March 8). On the other hand, the breach of 101.43 (monthly low April 5) would open the door to 100.82 (2023 low February 2) and finally 100.00 (psychological level).

• USD/CHF seesaws around 20-month low, snaps two-day downtrend amid sluggish markets.
• Cautious mood ahead of top-tier US data, corrective bounce in yields allow Swiss Franc pair to stabilize at multi-month low.
• Downbeat US data, challenges to USD’s reserve currency status challenge weigh on USD/CHF pair.

USD/CHF makes rounds to 0.9050-60 heading into Wednesday’s European session as traders seek more clues to extend the two-day downtrend at the lowest levels since August 2021. In doing so, the Swiss Franc (CHF) pair traces a corrective bounce in the US Treasury bond yields ahead of the key US employment and PMI data.

While portraying the bond market moves, the US 10-year and two-year Treasury bond yields take a breather around 3.35% and 3.86% respectively, after falling in the last five and three consecutive days. It’s worth noting that downbeat US employment clues joined previously easing hawkish Fed bias to weigh on the US bond coupons.

It should be noted that the downbeat US JOLTS Job Openings and Factory Orders for February weigh on the US Dollar. On the same line could be Russia’s likes for the Chinese Yuan and the China-Brazil pact to ignore the US Dollar as an intermediate currency.

On a different page, the recent hawkish comments from Federal Reserve Bank of Cleveland leader Loretta Mester join the cautious mood before the US ISM Services PMI and ADP Employment Change to allow the yields and the US Dollar to stabilize, especially amid off in China.

Against this backdrop, S&P 500 Futures struggle for clear directions near 4,130 while yields and the US Dollar lick their wounds.

Moving on, USD/CHF may witness further consolidation ahead of the aforementioned US data. However, the likely downbeat outcome of the US statistics may drown the pair prices afterward.

Also read: US ADP Jobs/ISM Service PMI Preview: Slowing but still positive

Technical analysis

A clear downside break of the key ascending support line from early February, now immediate resistance near 0.9080, joins bearish MACD signals to direct USD/CHF bears towards the August 2021 bottom of around 0.9020 and the 0.9000 round figure.

FX option expiries for Apr 5 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0900 4.29b
• 1.1000 2.17b
• 1.0950 2b

- GBP/USD: GBP amounts     

• 1.2500 845m

- USD/JPY: USD amounts                     

• 131.00 1.17b
• 133.00 1.32b

- AUD/USD: AUD amounts  

• 0.6700 559m
• 0.6760 423

- USD/CAD: USD amounts       

• 1.3600 1.37b
• 1.3555 311m

- NZD/USD: NZD amounts

• 0.6215 310m

- EUR/GBP: EUR amounts        

• 0.8800 465m
• 0.8805 370m

• Natural Gas is facing hurdles in extending its recovery above $2.16.
• A delay in the summer season in North America has postponed the requirement of natural gas for cooling homes.
• The USD index has shown some recovery after printing a fresh monthly low at 101.45.

Natural Gas futures are struggling in extending their upside above $2.16 in the Asian session. The fossil gas is facing barricades amid a bleak demand outlook due to a delay in the Summer season in North America. This has postponed the requirement of natural gas for cooling homes from the sheer heat. Meanwhile, contracting manufacturing activities in the United States economy is also marking dents in the forward-demand for natural gas.

US President Joe Biden has introduced some tax credits for energy companies, which are working on clean energy, as reported by Reuters. No doubt, that tax credits would be a motivating factor for companies but subdued demand would keep the upside for the Natural gas price restricted.

Meanwhile, the US Dollar Index has shown some recovery after printing a fresh monthly low at 101.45. Solid US Treasury yields have provided some cushion to the USD Index.

Natural Gas futures have shown a decent recovery after defending further downside near 2.10 on an hourly scale. The asset has formed a Double Bottom chart pattern, which indicates a bullish reversal after a long period of a downside journey. Potential resistance is placed from March 31 high at $2.26.

Bollinger Bands (BB) (20,2) are showing a volatility contraction ahead amid the absence of a critical trigger.

For an upside move, the asset needs to break above the immediate resistance of $2.20, which will drive the asset towards March 28 high around $2.25 followed by March 27 high at $2.29.

On the flip side, a break below March 30 low at $2.09 would expose the asset to a fresh two-year low near the psychological resistance at $2.00.

Natural Gas hourly chart

• USD/MXN struggles to extend two-day uptrend as steady RSI joins five-week-old horizontal resistance to prod buyers.
• Convergence of previous resistance line from March 20, one-month-old ascending support line challenges Mexican Peso bulls.
• Bullish MACD signals, sustained trend line breakout keeps pair buyers hopeful.

USD/MXN treads water around 18.13 ahead of Wednesday’s European session as traders seek more clues to extend the previous two days’ recovery moves.

That said, the Mexican Peso (MXN) pair crossed a fortnight-long descending trend line the previous day and convinced buyers amid bullish MACD signals.

However, an area comprising the 50-SMA and multiple tops marked since early March challenges the USD/MXN bulls afterward around 18.20. Also raising doubts about the quote’s further upside is the steady RSI (14).

Hence, the pair’s further upside momentum needs to cross the 18.20 hurdle to convince bulls, which in turn highlights a nine-week-old resistance zone surrounding 18.50-55.

On the flip side, the previous resistance line from March 20 and an upward-sloping support line from early March together highlight 17.97 as a tough nut to crack for the USD/MXN bears.

In a case where the Mexican Peso buyers dominate past 17.97, the odds of witnessing a quick slump toward the April 2018 bottom of near 17.93 can’t be ruled out. Following that, the August 2017 low of around 17.57 will be in focus.

Overall, USD/MXN portrays bearish consolidation as the market awaits the key US activity and job numbers.

USD/MXN: Four-hour chart

Trend: Further upside expected

• USD/JPY licks its wounds at one-week low after two-day downtrend.
• Market sentiment dwindles as traders keenly await key US job, activity numbers following the latest disappointment.
• Treasury bond yields pare recent losses amid sluggish session, mixed data at home.
• Downbeat US data, challenges to USD’s reserve currency status keep Yen sellers hopeful.

USD/JPY remains indecisive on a daily basis as it flashes 131.70 as a quote heading into Wednesday’s European session. In doing so, the Yen pair tracks the latest consolidation in the US Treasury bond yields amid cautious markets ahead of the key US Data.

US 10-year and two-year Treasury bond yields take a breather around 3.35% and 3.86% respectively, after falling in the last five and three consecutive days. It’s worth noting that downbeat US employment clues joined previously easing hawkish Fed bias to weigh on the US bond coupons.

That said, US JOLTS Job Openings dropped to the lowest levels since May 2021 while flashing a 9.931M figure for February versus 10.4M expected and 10.563M revised prior. On the same line, US Factory Orders for February came in -0.7% MoM versus -0.5% expected and downwardly revised -2.1% prior.

At home, Japan’s Jibun Bank Manufacturing PMI for March improved to 55.0 versus 54.2.

Also weighing on the US Dollar is Russia’s latest likes for the Chinese Tuan and the China-Brazil pact to ignore the US Dollar as an intermediate currency seems to drag the US Dollar.

However, the recent hawkish comments from Federal Reserve Bank of Cleveland leader Loretta Mester join the cautious mood before the US ISM Services PMI and ADP Employment Change to allow the yields and the US Dollar to stabilize, especially amid off in China.

With this, the US Dollar Index (DXY) dropped to the lowest level in five weeks on Tuesday, before renewing the multi-day bottom and then bouncing off the 101.43 level to around 101.54 by the press time.

Amid these plays, S&P 500 Futures struggle for clear directions near 4,130 but Japan’s Nikkei 225 drops near 1.30% intraday as we write.

Moving on, the downbeat concerns about the Fed’s next move and the US Dollar’s reserve status can weigh on the USD/JPY pair unless the scheduled US data offer a positive surprise and/or market sentiment worsen.

Also read: US ADP Jobs/ISM Service PMI Preview: Slowing but still positive

Technical analysis

RSI (14) is below the 50 mark and hence suggests the dip-buying, which in turn highlights an upward-sloping support line from January 16, close to 130.70 at the key level to watch for the USD/JPY bears.

• USD/CAD has shown a decent rebound to near 1.3450 supported by firmer US Yields.
• S&P500 futures have surrendered nominal gains, portraying further depletion of risk appetite.
• Weaker-than-anticipated US Employment data would put more pressure on the USD Index.

The USD/CAD pair has shown a recovery move to near 1.3450 after getting faith from a minor recovery in the US Dollar index (DXY). The Loonie asset is looking to recapture Tuesday’s high at 1.3465 as US Treasury yields remained firm despite rising odds of a steady monetary policy announcement by the Federal Reserve (Fed) for its May meeting.

US government bonds have failed to attract demand despite the street anticipating an unchanged interest rate decision by the Fed ahead. The 10-year US Treasury yields have climbed above 3.35%. Also, S&P500 futures have surrendered nominal gains added in the Asian session and have resumed their downside move, portraying further depletion of risk appetite among market participants.

The USD Index has rebounded marginally to near 101.60 after printing a fresh monthly low at 101.45. The downside bias for the USD Index has not faded yet, however, growing anxiety among market participants ahead of United States Employment data is providing a short-term cushion to the US Dollar.

After a decline in Job Openings and Manufacturing PMI data, it would be fine considering a cooldown in the US labor market. Demand for labor has remained extremely solid, however, rising rates are putting a burden on firms as they are facing problems in dealing with issues of higher interest obligations and tight credit conditions by the US banks.

Considering estimates, the US economy has added 200K jobs in March vs. 242K jobs added in February. Weaker-than-anticipated additions of labor would add more pressure on the USD Index ahead.

On the oil front, oil prices are aiming to sustain comfortably above $81.00 in the Asian session. Volatility in the oil price is anticipated ahead of the release of the weekly oil inventory data by the US Energy Information Administration (EIA) for the week ending March 31. It is worth noting that Canada is the leading exporter of oil to the US and higher oil prices would strengthen the Canadian Dollar.

• Equities in Asia-Pacific region dribble amid softer US job numbers, RBNZ’s hawkish surprise.
• Receding hawkish bias about Fed allows some in the area to print mild gains.
• Mixed data, corrective bounce in yields test investors ahead of the key US ISM Services PMI, ADP Employment Change.
• Off in China, Hong Kong offers additional trading barriers.

Asia-Pacific shares trade mixed during Wednesday as easing hawkish bias about the Fed contrasts with the downbeat US jobs report and the Reserve Bank of New Zealand’s (RBNZ) hawkish surprise. Adding strength to the market’s indecision could be the cautious mood ahead of some more key data from the US concerning employment and activities.

While portraying the mood, MSCI’s Index of Asia-Pacific shares outside Japan prints mild gains but Japan’s Nikkei 225 drops 1.65% intraday during early Wednesday.

That said, US JOLTS Job Openings dropped to the lowest levels since May 2021 while flashing a 9.931M figure for February versus 10.4M expected and 10.563M revised prior. On the same line, US Factory Orders for February came in -0.7% MoM versus -0.5% expected and downwardly revised -2.1% prior. With this, market participants feared slowing of job growth in the world’s largest economy and the consequences of the same for equities.

Additionally challenging the share buyers is RBNZ’s surprise rate hike. That said, RBNZ surpassed market forecasts while announcing 50 basis points (bps) worth increase to its Official Cash Rate (OCR), lifting it to 5.25% from 4.75% prior. Even so, downbeat concerns about the Fed’s next move allow New Zealand’s NZX 50 to tame intraday losses, down 0.35% on a day by the press time. It should be observed that Australia’s ASX 200 remains directionless as RBA’s Lowe defends hawks by showing readiness for further rate hikes if needed.

On a broader front, the S&P 500 Futures print mild gains even as Wall Street closed with minor losses. Further, the US 10-year and two-year Treasury bond yields also take a breather around 3.35% and 3.85% respectively, after falling in the last four and three consecutive days.

Further, the US Dollar Index (DXY) dropped to the lowest level in five weeks on Tuesday, before renewing the multi-day bottom and then bouncing off the 101.43 level to around 101.54 by the press time. Also portraying the mood could be the sluggish prices of Oil and Gold.

Moving on, Asia-Pacific traders may witness inaction as traders remain cautious ahead of the US ISM Services PMI and ADP Employment Change for March. Also restricting the market moves is the holiday in China and Hong Kong.

Also read: US ADP Jobs/ISM Service PMI Preview: Slowing but still positive

• Gold price is continuously auctioning above $2,020 ahead of US labor market data.
• S&P500 futures remained choppy in the Asian session after sensing selling pressure on Tuesday, indicating a quiet market mood.
• The Services PMI is seen declining to 54.5 from the former release of 55.1.

Gold price (XAU/USD) is struggling to find any direction after shifting its auction above $2,020.00 in the Asian session. The precious metal is expected to continue its sideways performance as investors are awaiting the release of the United States Automatic Data Processing (ADP) Employment data for more clarity over the labor market condition.

S&P500 futures remained choppy in the Asian session after sensing selling pressure on Tuesday, indicating mix market mood. The US Dollar Index (DXY) is auctioning marginally above the fresh monthly low at 101.45. The only trigger that could defend the USD Index from further downside is the fear of recovery in global inflation due to solid oil prices.

On the economic front, US ADP Employment data will remain in the spotlight, which is expected to decline to 200K from the former release of 242K. Contracting manufacturing activities in the US economy and lower Job Openings indicate that firms have slowed their hiring process considering the bleak economic outlook. Also, the street is anticipating a sudden pause in the policy-tightening spell by the Federal Reserve (Fed).

Apart from the labor market data, US ISM Services PMI will be keenly watched. The Services PMI is seen declining to 54.5 from the former release of 55.1. And, New Orders Index is expected to soften firmly to 57.6 vs. February’s figure of 62.6.

Gold technical analysis

Gold price is marching towards the horizontal resistance plotted from the 08 March 2022 high at $2,070.54 on a daily scale. Intermediate support is placed from 18 April 2022 high at $1,998.43.

Advancing 10-period Exponential Moving Average (EMA) at $1,984.65 indicates that the bullish momentum is extremely strong.

The Relative Strength Index (RSI) (14) has rebounded after sensing support near 60.00, indicating that every pullback is being considered as a buying opportunity by the market participants.

Gold daily chart

• USD/INR is declining toward 82.00 as investors are yet to discount the overnight sell-off in the USD Index.
• Weak US Job Openings data is indicating that the tight US labor market is cooling-off.
• S&P500 futures have added nominal gains after a bearish Tuesday, portraying caution in the overall market mood.

The USD/INR pair is declining towards the immediate support of 82.00 in the Asian session. The major is expected to continue its downside journey as investors are yet to discount overnight sell-off in the US Dollar post-release of the weak United States Jobs Openings data.

After a fifth straight contraction in the US manufacturing sector, the US hiring department has slowed down recruitment amid higher interest rates by the Federal Reserve (Fed). Job Openings have fallen below 10 million for the first time since 2021, which indicates a bleak outlook. This has also fueled fears of a decline in the employment generation data ahead, which could bolster the need of pausing rate hikes sooner.

S&P500 futures have added nominal gains in the Asian session after a bearish Tuesday, portraying caution in the overall market mood. Investors liquidated longs on Tuesday as weak Job Openings data indicates a potential slowdown in the US economy ahead. The US Dollar Index (DXY) is juggling around 101.50 and looks prone to further downside amid an absence of supportive triggers.

The demand for US government bonds has slowed after a sheer upside. The 10-year US Treasury yields have rebounded to near 3.36%.

Going forward, investors will keep an eye on US Automatic Data Processing (ADP) Employment data. According to the estimates, the US economy has added fresh 200K jobs in March vs. an addition of 242K jobs in February. Less-than-anticipated US job data would solidify the fact that the US labor market has started slowing down and Fed chair Jerome Powell could look for keeping rates steady till 5%.

On the Indian Rupee front, higher oil prices are expected to keep it on the back foot. It is worth noting that India is one of the major importers of oil and higher oil prices are expected to increase the current account deficit of India. Also, a power-pack action is expected as Indian markets will open today after the holiday of Mahavir Jayanti on Tuesday.

• GBP/USD seesaws around multi-month high after rising the most in three weeks.
• US Dollar’s corrective bounce from five-week low, pre-data anxiety prods Cable buyers at the highest levels since June 2022.
• Mixed concerns about Bank of England (BoE) versus Federal Reserve play challenge GBP/USD traders of late.
• Final readings of US/UK PMIs, US ADP Employment Change eyed for fresh impulse.

GBP/USD bulls jostle with the bears at the 10-month high surrounding 1.2500 as they await the key US/UK data during early Wednesday. Not only cautious mood ahead of the important statistics but corrective bounces in the US Dollar and yields also allow the Cable pair buyers to take a breather of late.

On Tuesday, the Cable pair rallied the most in three weeks as it jumped to the June 2022 levels on broad US Dollar weakness, as well as hawkish Bank of England (BoE) officials’ comments.

That said, the US Dollar Index (DXY) dropped to the lowest levels in five weeks on Tuesday, before renewing the multi-day bottom and then bouncing off the 101.43 level to around 101.54 by the press time. It’s worth noting that the downbeat US data and the greenback’s less acceptance among the key global trade players weigh on the US Dollar of late.

Talking about the data, the US JOLTS Job Openings dropped to the lowest levels since May 2021 while flashing a 9.931M figure for February versus 10.4M expected and 10.563M revised prior. On the same line, US Factory Orders for February came in -0.7% MoM versus -0.5% expected and downwardly revised -2.1% prior.

It should be noted that Russia’s latest likes for the Chinese Tuan and the China-Brazil pact to ignore the US Dollar as an intermediate currency seem to drag the US Dollar.

On the other hand, Bank of England (BoE) Chief Economist Huw Pill said on Tuesday that caution is still needed in assessing inflation prospects on account of the potential persistence of domestically generated inflation, as reported by Reuters. However, BoE Policymaker Silvana Tenreyro said, “I expect that the high current level of bank rate will require an earlier and faster reversal, to avoid a significant inflation undershoot.”

Earlier in the day, Federal Reserve Bank of Cleveland leader Loretta Mester recently cited the need to hike rates above 5% and hold them there for a while.

While portraying the mood, the S&P 500 Futures print mild gains even as Wall Street closed with minor losses. Further, the US 10-year and two-year Treasury bond yields also take a breather around 3.35% and 3.85% respectively, after falling in the last four and three consecutive days.

Looking ahead, final readings of the UK’s S&P Global Composite PMI and Services PMI for March can offer immediate directions to the Cable pair ahead of the US ISM Services PMI and ADP Employment Change for March.

Also read: US ADP Jobs/ISM Service PMI Preview: Slowing but still positive

Technical analysis

The existence of a one-month-old rising wedge bearish chart pattern, currently between 1.2550 and 1.2390, teases the GBP/USD pair sellers to take a risk as the RSI (14) line is near the overbought territory.

Reserve Bank of Australia Governor Philip Lowe is addressing the media Q&A session, following his speech on the topic titled ‘Monetary Policy, Demand and Supply’ at the National Press Club, in Sydney, on Wednesday.

Key quotes

Market reaction

At the time of writing, AUD/USD is trading 0.16% higher at 0.6762.

• EUR/USD prints three-day winning streaks as buyers flirt with two-month high.
• Growth optimism surrounding Germany, Eurozone joins hawkish ECB talks to favor Euro bulls.
• US Dollar struggles to defend its reserve currency status amid downbeat data, geopolitical concerns and propel EUR/USD bulls.
• Early signals for Friday’s US Nonfarm Payrolls (NFP) eyed Fed hawks remain hopeful.

EUR/USD remains mildly bid around 1.0960-65 as it portrays a three-day uptrend during early Wednesday in Europe. In doing so, the Euro pair justifies the latest growth optimism from Germany and Eurozone while also portraying the cautious mood ahead of the key US activity and employment numbers for March.

On Tuesday, Reuters cited sources who have seen the so-called Joint Economic Forecasts, to be presented in Berlin today, to mention that the German economy is likely to narrowly skirt recession and post modest growth in the first quarter of the year. On the same line could be the ECB monthly survey of consumer expectations that suggested an easing in inflation and improvement in growth, as well as an easing in the unemployment rate, for the next 12 months.

Not only the upbeat signal for the old continent but downbeat US data and the greenback’s less acceptance among the key global trade players seem to keep the EUR/USD pair buyers hopeful.

That said, US JOLTS Job Openings for February gained major attention the previous day as it dropped to the lowest levels since May 2021 while flashing a 9.931M figure for February versus 10.4M expected and 10.563M revised prior. On the same line, US Factory Orders for February came in -0.7% MoM versus -0.5% expected and downwardly revised -2.1% prior.

On the other hand, Eurozone Producer Price Index (PPI) fell 0.5% MoM and 13.2% YoY in February, versus -2.8% and 15.1% respectively priors. That said, Germany’s Trade Balance also remained static near €16B during the stated month versus market forecasts of €17B.

Elsewhere, Bloomberg released a news report suggesting the US Dollar’s less acceptance in Russia. “Chinese Yuan has surpassed the US Dollar as the most traded currency, in monthly trading volume, for the first time in Russia in February,” said the news while also adding that the gap has continued to widen in March. In the last week, Brazil and China agreed to pause the US Dollar’s usage as an intermediary in trade transactions.

Alternatively, the latest comments from Federal Reserve Bank of Cleveland leader Loretta Mester join the market’s pre-data anxiety to prod the EUR/USD bulls.

Against this backdrop, the S&P 500 Futures print mild gains even as Wall Street closed with minor losses. Further, the US 10-year and two-year Treasury bond yields also take a breather around 3.35% and 3.85% respectively, after falling in the last four and three consecutive days. It’s worth mentioning that the US Dollar Index (DXY) dropped to the lowest levels in five weeks earlier in the day before bouncing off the 101.43 level, around 101.54 by the press time.

Looking forward, EUR/USD traders should pay attention to the final readings of the Germany and Eurozone PMIs for intermediate directions ahead of the US ISM Services PMI and ADP Employment Change for March. Given the recently mixed concerns and the hawkish Federal Reserve (Fed) comments, upbeat figures of the scheduled US data can tease the EUR/USD sellers.

Technical analysis

A clear upside break of the 1.0930 horizontal resistance area, now the immediate support, keeps EUR/USD buyers hopeful of challenging the Year-To-Date high of 1.1033.

• AUD/USD picks up bids to reverse the previous day’s pullback from five-week high, mildly bid of late.
• RBA’s Lowe struggles to tame pessimism emanating from a pause in rate hikes.
• Market’s consolidation ahead of the key US data, RBA’s halt to rate lift after 10 such hawkish moves prod the Aussie bulls.

AUD/USD grinds near an intraday high surrounding 0.6770 as it pares the previous day’s losses after upbeat comments from Reserve Bank of Australia (RBA) Governor Philip Lowe early Wednesday.

The Aussie pair dropped the most in a week the previous day as the Aussie central bank paused a 10-time rate hike trajectory. However, RBA’s Lowe shows the readiness to resume the rate lifts while pushing back the doves and allowing the quote to remain firmer. “Decision to hold rates steady does not imply interest rate rises are over,” said the policymaker.

Also read: RBA’s Lowe: Decision to hold rates steady does not imply interest rate rises are over

It should be noted that the early-day releases of mixed Aussie PMIs and the latest corrective moves in the US Treasury bond yields and the US Dollar Index (DXY) seem to challenge the Aussie pair buyers ahead of the key US data. On the same line could be the hawkish comments from Federal Reserve Bank of Cleveland leader Loretta Mester.

Even so, the recent challenges to the US Dollar’s reserve currency status and downbeat US data weigh on the greenback and keep the AUD/USD buyers hopeful.

Amid these plays, the S&P 500 Future print mild gains even as Wall Street closed with minor losses. Further, the US 10-year and two-year Treasury bond yields also take a breather around 3.35% and 3.85% respectively, after falling in the last four and three consecutive days.

Having witnessed the initial reaction to RBA Governor Lowe’s speech, as well as mixed Aussie data, AUD/USD pair traders should focus on the US ISM Services PMI and ADP Employment Change for March for clear directions.

Considering the recently mixed concerns and the hawkish Federal Reserve (Fed) comments, upbeat figures of the scheduled US data can allow the AUD/USD pair to tease sellers.

Also read: US ADP Jobs/ISM Service PMI Preview: Slowing but still positive

Technical analysis

Unless crossing a convergence of the 50-DMA and 100-DMA, close to 0.6805 at the latest, the AUD/USD traders can aim for a corrective pullback towards the previous resistance of around 0.6750, comprising the 200-DMA.

Reserve Bank of Australia Governor Philip Lowe is speaking on the topic titled ‘Monetary Policy, Demand and Supply’ at the National Press Club, in Sydney, on Wednesday. Audience questions are expected.

Key quotes

Market reaction

In reaction to the above comments, AUD/USD is trading 0.25% higher on the day at 0.6767. The comments fail to have limited impact on the Australian Dollar.

• NZD/JPY takes a U-turn from the key EMAs to renew multi-day top after RBNZ move.
• RBNZ surprises markets by announcing 0.50% rate hike, the 11^th consecutive rate increase.
• Given the sustained bounce of the 50-EMA, 200-EMA, backed by upbeat RSI, the bulls are likely to keep the reins.

NZD/JPY rises to 83.86 as it pokes a three-week-long resistance line on the Reserve Bank of New Zealand’s (RBNZ) 11^th rate hike during early Wednesday. In doing so, the cross-currency pair also portrays a clear rebound from the 50 and 200 Exponential Moving Averages (EMAs).

That said, the RBNZ surpasses market forecasts while announcing 50 basis points (bps) worth increase to its Official Cash Rate (OCR), lifting it to 5.25% from 4.75% prior. It’s worth noting that the RBNZ Minutes stated that the policymakers also discussed a 25 bps rate hike and hence prod the pair buyers of late.

Also read: Breaking: RBNZ raises rates by 50 bps to 5.25% in April, hawkish surprise

Even so, a successful rebound from the key EMAs joins the upbeat RSI (14) to allow the NZD/JPY buyers in poking a downward-sloping resistance line from mid-March, around 83.85 by the press time.

It’s worth noting that the March 15 high of near 84.10 can act as an extra filter towards the north for the NZD/JPY buyers before directing them to the previous monthly high of 85.33.

Meanwhile, pullback moves remain elusive unless the quote stays beyond the 50-EMA level of 82.80.

Following that, multiple supports near 81.50 and March’s bottom of around 80.45 can test the NZD/JPY bears ahead of highlighting the 80.00 psychological magnet.

NZD/JPY: Four-hour chart

Trend: Further upside expected

• AUD/NZD has dived to near 1.0618 as the RBNZ has hiked rates by 50 bps to 5.25%.
• RBNZ Governor Adrian Orr went for a bumper rate hike as NZ’s inflation has remained extremely sticky.
• RBA Lowe would deliver guidance on interest rates and the economic outlook.

The AUD/NZD pair has dived significantly below 1.0620 as the Reserve Bank of New Zealand (RBNZ) has surprisingly pushed the Official Cash Rate (OCR) by 50 basis points (bps) to 5.25%. Contrary to that, the street was anticipating a rate hike of 25 bps.

RBNZ Governor Adrian Orr went for a bumper rate hike as New Zealand’s inflation has turned extremely sticky. The quarterly inflation rate has remained steady at 7.2% in the last three quarters.

Reuters reported that the New Zealand economy is expected to have shrunk by 0.3% this quarter, following a 0.6% contraction in the final three months of 2022. Despite the anticipation of a contraction in economic activities, the RBNZ went for a mega rate hike.

Meanwhile, the Australian Dollar has remained in action after the Reserve Bank of Australia (RBA) kept its interest rate policy unchanged as expected by the market participants. RBA Governor Philip Lowe kept rates steady at 3.6% because Australian inflation has started responding significantly to higher interest rates.

Australian monthly Consumer Price Index (CPI) has softened to 6.8% from its peak of 8.4% recorded in December. A further deceleration in Australian inflation is expected as RBA policymakers are anticipating a slowdown in the economic activities ahead. This might cool off the tight labor market and a higher Unemployment Rate would aim to contain persistent inflation.

Going forward, the speech from RBA Governor Philip Lowe will be keenly watched. RBA Governor would deliver guidance on interest rates and the economic outlook.

Key highlights from the Minutes of the April Reserve Bank of New Zealand (RBNZ) meeting are as follows. The RBNZ unexpectedly hikes the key rate by 50 bps to 5.25%.

• NZD/USD cheers RBNZ’s 50 bps rate hike to renew multi-day top near 0.6380, US data eyed
• AUD/NZD plunges below 1.0620 as the RBNZ hikes rates surprisingly by 50 bps to 5.25%

Why the RBNZ decision matters to traders?

The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and an upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish.

• NZD/USD picks up bids to reverse early-day pullback from a seven-week high on RBNZ rate hike.
• RBNZ announces 50 bps rate increase to defy market expectations, the 11^th in a row.
• Corrective bounce in yields, US Dollar challenge Kiwi pair buyers.
• US ISM Services PMI, ADP Employment Change will be crucial for clear directions amid broad USD weakness.

NZD/USD justifies the Reserve Bank of New Zealand’s (RBNZ) 11^th rate hike as it renews the seven-week top following the Interest Rate Decision during early Wednesday, picking up bids to 0.6380 by the press time.

RBNZ surpasses market forecasts while announcing 50 basis points (bps) worth increase to its Official Cash Rate (OCR), lifting it to 5.25% from 4.75% prior.

Also read: Breaking: RBNZ raises rates by 50 bps to 5.25% in April, hawkish surprise

While the hawkish RBNZ moves can be linked to the NZD/USD pair’s latest run-up, the broad-based US Dollar weakness shouldn’t also be missed while citing the bullish catalysts. That said, the US Dollar Index (DXY) dropped to the fresh low since February 02 late Tuesday, keeping the downside bias to renew the multi-day bottom around 101.43 of late, as softer US data joins downbeat fundamentals to weigh on the greenback.

Among the major negatives for the DXY was the US JOLTS Job Openings which dropped to the lowest levels since May 2021 while flashing a 9.931M figure for February versus 10.4M expected and 10.563M revised prior. On the same line, US Factory Orders for February came in -0.7% MoM versus -0.5% expected and downwardly revised -2.1% prior.

It should be noted that the cautious optimism in the market and challenges to the US Dollar’s reserve currency status also contributed to the US Dollar’s weakness even if the Federal Reserve (Fed) policymakers tried to defend hawks.

On Tuesday, Bloomberg released a news report suggesting the US Dollar’s less acceptance as a reserve currency in Russia while highlighting the greenback’s latest weakness. “Chinese Yuan has surpassed the US Dollar as the most traded currency, in monthly trading volume, for the first time in Russia in February,” said the news while also adding that the gap has continued to widen in March. In the last week, Brazil and China agreed to pause the US Dollar’s usage as an intermediary in trade transactions.

On the contrary, hawkish Federal Reserve (Fed) talks challenge the XAU/USD buyers after the previous day’s stellar run-up. Federal Reserve Bank of Cleveland leader Loretta Mester recently cited the need to hike rates above 5% and hold them there for a while.

It’s worth observing that the geopolitical fears emanating from the US-China tension and the EU-Russia tussles also should have prodded the NZD/USD prices but did not mostly downbeat concerns about the US Dollar.

While portraying the market’s mood, the S&P 500 Future print mild gains even as Wall Street closed with minor losses. Further, the US 10-year and two-year Treasury bond yields also take a breather around 3.35% and 3.85% respectively, after falling in the last four and three consecutive days.

Having witnessed the initial reaction to the RBNZ moves, the market’s consolidation may challenge the NZD/USD buyers ahead of the US ISM Services PMI and ADP Employment Change for March.

Given the recently mixed concerns and the hawkish Federal Reserve (Fed) comments, upbeat figures of the scheduled US data can allow the Kiwi pair to consolidate recent gains.

Technical analysis

Although a convergence of the 100-DMA and a five-week-old ascending trend line puts a floor under the NZD/USD prices near 0.6300, the Kiwi pair buyers need validation from the 61.8% Fibonacci retracement level of its February-March fall, around 0.6365, to keep the reins.

The Reserve Bank of New Zealand (RBNZ) board members decided to raise the official cash rate (OCR) by 50 basis points (bps) from 4.75% to 5.25% at the April monetary policy meeting. The rate hike decision surpassed market expectations.

Summary of the statement

Market reaction

In an immediate reaction to the RBNZ announcement, NZD/USD spiked nearly 75 pips to 0.6378 highs on the hawkish RBNZ surprise before reversing sharply to 0.6348, where it now wavers. The pair is up 0.62% on the day.

Why the RBNZ decision matters to traders?

The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and an upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish.

• USD/JPY bears stay in charge as the US Dollar hovers near 2-month lows. 
• Attention will now turn to Friday's Nonfarm Payrolls jobs data.

USD/JPY is lower in Tokyo as the US Dollar remains soft. The pair is trading near 131.50 and has fallen from a high of 131.73 to a low of 131.30 so far. 

The US Dollar is pressured still near the two-month lows following a series of troublesome data from the United States has cooled bets of a more hawkish Federal Reserve that now appears to be near the end of its monetary tightening cycle. Labor market conditions could finally be easing as per the data that was released overnight with the Job openings, a measure of labor demand, down some 632,000 to 9.9 million on the last day of February.

US factory orders also declined for a second straight month, down 0.7% in February after falling 2.1% in January from the 1.7% jump in December. This data comes on the heels of the Institute for Supply Management (ISM) that yesterday reported that its Manufacturing PMI fell to 46.3 last month. This was the worst since May 2020, from 47.7 in February. 

Traders' attention will now turn to Friday's Nonfarm Payrolls jobs report, although many markets will be closed for the Easter holiday. ´´US payrolls likely stayed firm at a still above-trend pace in March, though slowing from stronger prints in Jan-Feb,´´ the analysts at TD Securities explained. ´´We also look for the Unemployment Rate to stay unchanged at 3.6%, and wage growth to print a firm 0.3% MoM.´´

• GBP/JPY is eyeing more weakness below 164.00 amid a decent UK economic outlook.
• UK business sentiment improved as political turmoil and inflationary pressures showed some signs of easing.
• A positive contribution to Japan’s inflation through international forces would only create troubles for BoJ policymakers.

The GBP/JPY pair looks vulnerable above the immediate cushion of 164.00 in the Tokyo session. The cross is struggling to firm its feet despite the Bank of England (BoE) is likely to continue its quantitative restrictive program to tame galloping inflation.

BoE policymakers considered the rebound in February’s inflation a one-time thing and anticipated that inflation will drop below 4% by the end of this year as energy costs fall, however, the booming economic outlook is telling a different story. Reuters reported on Tuesday that the British Chambers of Commerce (BCC) said, Most British businesses expect their sales to rise over the coming year - an improvement from late 2022 - despite seeing no sales growth over the past three months.

BCC further that, “After a slump in business confidence in the second half of 2022, business sentiment improved as political turmoil and inflationary pressures showed some signs of easing.”

Meanwhile, BoE Chief Economist Huw Pill said on Tuesday that caution is still needed in assessing inflation prospects on account of the potential persistence of domestically generated inflation, as reported by Reuters. He further added, "Wage developments, particularly higher frequency indicators of current momentum, appear to be easing."

On the Tokyo front, the Japanese Yen has remained subdued amid rising oil prices. This would step-up Japan’s inflation ahead, however, a positive contribution to Japan’s inflation through international forces would only create troubles for Bank of Japan (BoJ) policymakers.

• Gold price seesaws at YTD high, bulls cheer upside break of short-term key resistance of late.
• US Dollar remains depressed amid firmer sentiment, threats to its reserve currency status and propels XAU/USD.
• United States ISM Services PMI, ADP Employment Change eyed for fresh Gold price directions.

Gold price (XAU/USD) treads water at the highest levels in 11 months, making rounds to $2,020 early Wednesday, as the bullion traders await key United States statistics for clear directions. It’s worth noting that the broad US Dollar weakness allowed the XAU/USD to refresh the multi-day high the previous day.

Gold price rallies on US Dollar weakness

Gold price marked the biggest daily jump in three weeks the previous day as it managed to cheer the US Dollar’s weakness, as well as a technical breakout of the $2,000 resistance-turned-support.

US Dollar Index (DXY) dropped to the fresh low since February 02 late Tuesday, keeping the downside bias to renew the multi-day bottom around 101.43, as softer US data joins downbeat fundamentals to weigh on the DXY and propel the XAU/USD.

On Tuesday, US Factory Orders for February came in -0.7% MoM versus -0.5% expected and downwardly revised -2.1% prior. Further, the US JOLTS Job Openings dropped to the lowest levels since May 2021 while flashing a 9.931M figure for February versus 10.4M expected and 10.563M revised prior.

That said, the risk-on mood joins news suggesting recent challenges to the US Dollar’s reserve currency status appear to weigh on the greenback and allow the Gold price to remain firmer.

Bloomberg released a news report suggesting the US Dollar’s less acceptance as a reserve currency in Russia while highlighting the greenback’s latest weakness. “Chinese Yuan has surpassed the US Dollar as the most traded currency, in monthly trading volume, for the first time in Russia in February,” said the news while also adding that the gap has continued to widen in March. In the last week, Brazil and China agreed to pause the US Dollar’s usage as an intermediary in trade transactions.

On the contrary, hawkish Federal Reserve (Fed) talks challenge the XAU/USD buyers after the previous day’s stellar run-up. Federal Reserve Bank of Cleveland leader Loretta Mester recently cited the need to hike rates above 5% and hold them there for a while.

United States data awaited for clear XAU/USD direction

While the aforementioned catalyst allows the XAU/USD to remain firmer mixed indicators suggesting the market’s risk appetite highlight today’s US ISM Services PMI and ADP Employment Change for March.

While portraying the mood, Wall Street closed with minor losses but the US Treasury bond yields remain depressed with the benchmark 10-year coupons holding lower grounds near 3.34% after falling in the last five consecutive days. It should be observed that the CME’s FedWatch Tool suggests almost even chances of the US central bank’s 0.25% rate hike in May.

Given the recently mixed concerns and the hawkish Federal Reserve (Fed) comments, upbeat figures of the scheduled United States (US) data can allow the Gold price to pare the latest gains above the $2,000 round figure.

Also read: US ADP Jobs/ISM Service PMI Preview: Slowing but still positive

Gold price technical analysis

Gold price justifies a clear upside break of two-week-old horizontal resistance, now immediate support around $2,005, by approaching the 61.8% Fibonacci Expansion (FE) of its March 10-21 moves, close to $2,050.

It’s worth noting, however, that the bullish signals from the Moving Average Convergence and Divergence (MACD) indicator do support the XAU/USD upside. However, the Relative Strength Index (RSI) line prods the overbought territory and hence suggests limited room towards the north, which in turn highlights $2,050 as the short-term key hurdle.

In a case where the Gold price rallies beyond $2,050, the previous yearly peak of around $2,070 could gain the market’s attention.

Alternatively, a downside break of the $2,005 resistance-turned-support needs validation from the $2,000 round figure to convince intraday sellers of the Gold price.

Even so, the 100-SMA and a three-week-long horizontal support zone, respectively near $1,958 and $1,935-33, could restrict the short-term downside of the precious metal.

To sum up, the Gold price is all set for further advances but the room towards the north appears limited.

Gold price: Four-hour chart

Trend: Further upside expected

• USD/CHF holds lower grounds after refreshing multi-day bottom.
• Downside break of two-month-old ascending trend line, bearish MACD signals favor sellers.
• Oversold RSI highlights August 2021 low as nearby key support, 61.8% FE lures bears.
• Buyers remain away unless the quote stays below 0.9180.

USD/CHF bears take a breather at the lowest levels since August 2021, making rounds to 0.9050 during early Wednesday.

The Swiss Franc (CHF) pair refreshed the multi-day low and portrayed a three-day downtrend earlier in Asia while justifying the previous day’s break of the key ascending support line from early February, now immediate resistance near 0.9080.

Adding strength to the downside bias are the bearish MACD signals and the quote’s one-month-old downward trajectory, as indicated by a descending resistance line from early March.

However, the RSI (14) inches close to the oversold territory and hence suggests the dip-buying, which in turn highlights the August 2021 bottom of around 0.9020 and the 0.9000 as the important supports.

Following that, the 61.8% Fibonacci Expansion (FE) of the pair’s moves between November 2022 and March 2023, around 0.8920, will be in focus.

Alternatively, the support-turned-resistance line challenges the USD/CHF pair’s immediate recovery moves around 0.9080, a break which can direct the buyers toward challenging the 10-DMA hurdle of 0.9145.

In a case where the USD/CHF remains firmer past 0.9145, the aforementioned one-month-old resistance line of near 0.9180 can act as the last defense of the bears.

USD/CHF: Daily chart

Trend: Further downside expected

• USD/CAD bulls are moving in as bears move out. 
• The focus will turn to Canadian data and then US NFP.

USD/CAD is flat on the day so far sticking to a range of between 1.3425 and 1.3448 so far as the price continues to consolidate at the bottom of the prior day's bearish sell-off when the price fell from the 1.37s towards the end of last month´s trade. 

Gains in the CAD in recent times come on the back of a calming in financial markets as stress in the global banking sector showed signs of easing and stronger oil prices. The price of oil, one of Canada's major exports, added to Monday's impressive rally that followed OPEC+ plans to cut more production. WTI is sat near the $81.75 highs made yesterday. 

However, the Loonie has been unable to fully capitalize on the US dollarçs weakness and poor data this week as it tests into key daily support that has resulted in profit taking. The greenback was pressured after a plunge in US factory activity raised concerns over slowing economic growth. US factory orders declined for a second straight month, down 0.7% in February after falling 2.1% in January from the 1.7% jump in December. This data comes on the heels of the Institute for Supply Management (ISM) that yesterday reported that its Manufacturing PMI fell to 46.3 last month. This was the worst since May 2020, from 47.7 in February. 

The greenback was pressured last week on the back of Friday´s PCE data, the Federal Reserve´s preferred inflation measure. this came in mixed. While headline and core both came in a tick lower than expected, super core accelerated for a second straight month to 4.63% YoY which is the highest since October. ´´This is not the direction that the Fed desires and so we look for the hawkish tilt in Fed comments to continue,´´ analysts at Brown Brothers Harriman explained. 

The market´s attention will turn to Friday's Nonfarm Payrolls jobs report, although many markets will be closed for the Easter holiday. ´´US payrolls likely stayed firm at a still above-trend pace in March, though slowing from stronger prints in Jan-Feb,´´ the analysts at TD Securities explained. ´´We also look for the Unemployment Rate to stay unchanged at 3.6%, and wage growth to print a firm 0.3% MoM.´´

Domestically,  Canadian building permits jumped 8.6% in February compared to the previous month, after a revised 3.7% decline in January. Looking ahead, Canada's trade balance for February will be reported on Wednesday and the March employment report, set for release on Thursday, will be eyed.

• The oil price has stretched its recovery above $81.70 as the Fed is expected to adopt a neutral stance ahead.
• Accelerating fears of a recession in the US have stemmed the need of pausing the rate-hiking spell sooner.
• The oil price is expected to remain volatile ahead of the release of the weekly inventory data by the US EIA.

West Texas Intermediate (WTI), futures on NYMEX, have stretched their recovery to near $81.00 in the Asian session. The oil price is expected to recapture a two-month high of $81.74 as the cooling United States economy due to contracting manufacturing activities and a slowdown in job openings have triggered the requirement of an early pause in the policy-tightening spell by the Federal Reserve (Fed).

The upside move in the oil price is also backed by the weak US Dollar Index (DXY), which has refreshed its monthly low below 101.50. Accelerating fears of a recession in the United States have stemmed the need of pausing the rate-hiking spell sooner. Investors would get more clarity after the release of the US Employment data.

Also, the oil price is expected to remain volatile ahead of the release of the weekly inventory data by the US Energy Information Administration (EIA) for the week ending March 31. On Tuesday, the US American Petroleum Institute (API) reported a decline in oil inventories by 4.3 million barrels.

On a daily scale, the oil price is marching towards the horizontal resistance plotted from December 01 high at $83.30 after a V-shape recovery. The V-shape recovery indicates the presence of strong buyers at lower levels, which considered the asset a value buy at those levels.

The asset is highly skewed from the 10-period Exponential Moving Average (EMA) at $76.38, which indicates a solid upside momentum.

Also, the Relative Strength Index (RSI) (14) has climbed into the bullish range of 60.00-80.00 for the first time in the past nine months, indicating signs of a bullish reversal.

Should the oil price break above April 03 high near $81.60, bulls will drive the asset towards December 01 high at $83.30 followed by October 21 high at $85.66.

On the flip side, a downside move below March 31 low at $73.31 would drag the asset towards March 23 high at $71.69. A break below the latter would further drag the oil price toward March 27 low at $69.18.

WTI daily chart

Early Wednesday at 02:00 GMT market sees the key monetary policy decision by the Reserve Bank of New Zealand (RBNZ) amid hopes of another hawkish play by the New Zealand central bank, despite doves flexing muscles of late.

RBNZ is up for fueling the market moves with its 11^th consecutive rate hike, expectedly worth 0.25%, during early Wednesday. The Interest Rate Decision will be accompanied by the RBNZ Rate Statement which can provide further details on the central bank’s next moves, making it crucial for the NZD/USD pair traders to watch.

Ahead of the event, Australia and New Zealand Banking Group (ANZ) said,

On the same line, analysts at the National Australia Bank (NAB) said,

Furthermore, FXStreet’s Dhwani Mehta said,

How could it affect NZD/USD?

NZD/USD retreats from a seven-week high while portraying the pre-RBNZ consolidation around 0.6310 by the press time. The Kiwi pair’s latest pullback could also be linked to the corrective bounce in the US Treasury bond yields and the US Dollar after refreshing the multi-day low.

Earlier in the week, the RBNZ Shadow board backed the market expectations of witnessing a 0.25% rate hike but also mentioned the strain on demand the central bank’s rate hike offers. As a result, the Reserve Bank of New Zealand may announce a dovish hike to defend the policymakers from criticism.

Given the clear early signals of witnessing a 0.25% rate hike, the NZD/USD appears well-set to consolidate the latest pullback around the seven-week high. However, a negative surprise due to the natural calamity at home won’t hesitate to drown the Kiwi pair.

Apart from the interest rates, the economic forecasts and language of the RBNZ Rate Statement will also be the key for the NZD/USD pair traders to watch. That said, the bleak economic outlook and early signals for peak rates might tease the sellers despite the 0.25% rate hike announcement.

Technically, NZD/USD justifies the previous day’s upside break of the 100-DMA and a five-week-old ascending trend line, around 0.6300, to aim for the 61.8% Fibonacci retracement level of its February-March fall, around 0.6365.

Keynotes

RBNZ Interest Rate Decision Preview: Hawkish guidance yet again? 

NZD/USD traders await the RBNZ

NZD/USD Price Analysis: Renews seven-week high above 0.6300 as RBNZ Interest Rate Decision looms

About the RBNZ interest rate decision and rate statement

The RBNZ interest rate decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the NZD. The RBNZ rate statement contains explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.

• AUD/USD picks up bids to reverse RBA-inflicted losses despite mixed PMIs at home.
• US Dollar weakness, market’s cautious optimism allow Aussie pair to remain firmer.
• Hopes that RBA’s Lowe may try to convince hawks also underpin AUD/USD rebound.
• Holiday in China, anxiety ahead of key US data may restrict Aussie pair’s immediate moves.

AUD/USD extends late Tuesday’s rebound from the 200-DMA while refreshing intraday high near 0.6770 amid Wednesday’s mid-Asian session.

In doing so, the Aussie pair consolidates the Reserve Bank of Australia (RBA) induced losses ahead of RBA Governor Philip Lowe’s speech. It’s worth noting, however, that the mixed Aussie PMIs for March seem to fail in stopping the quote’s latest recovery moves.

That said, Australia’s AiG Construction PMI for January dropped to -5.8 from -5.0 but the Manufacturing counterpart for the said month improved to 5.6 from -6.4 in previous readings. Further, S&P Global Services PMI for March rose to 50.7 from 48.2 while the S&P Global Composite PMI also improved to 48.5 versus 48.1 prior readings.

While tracing the Aussie pair’s latest run-up, the previous day’s RBA Rate Statement gains major attention as it said, “Board expects that some further tightening of monetary policy may well be needed.”

Additionally favoring AUD/USD bulls is the broad US Dollar weakness amid cautious optimism in the market and the latest challenges to the greenback’s reserve currency status, mainly emanating from Russia, China and Brazil.

Furthermore, the recent declines in the hawkish Fed bets, despite the upbeat comments from Federal Reserve (Fed) officials, also allow the quote to remain firmer. Federal Reserve Bank of Cleveland leader Loretta Mester recently cited the need to hike rates above 5% and hold them there for a while.

While portraying the mood, Wall Street closed with minor losses but the US Treasury bond yields remain depressed with the benchmark 10-year coupons holding lower grounds near 3.34% after falling in the last five consecutive days. It should be observed that the CME’s FedWatch Tool suggests almost even chances of the US central bank’s 0.25% rate hike in May.

Moving on, RBA’s Lowe needs to strike a strong hawkish message to defend the latest gains. Following that, US ISM Services PMI and ADP Employment Change for March will be in focus. It’s worth mentioning that the yields are crucial to watch as their fall has recently weighed on the greenback and allowed the AUD/USD price to remain firmer.

Technical analysis

Successful trading beyond the 200-DMA, around 0.6750 by the press time, directs AUD/USD bulls toward a confluence of the 50-DMA and 100-DMA, close to 0.6805 at the latest.

• GBP/USD bulls stay in control in bullish territory.
• US Dollar losing its appeal as US data deteriorates. 

GBP/USD is firm on the day and remains in bullish territory following two consecutive days of higher highs and lows. At the time of writing, GBP/USD is holding near 1.2500 in a tight 15-pip range. The Pound Sterling is riding the weakness in the US Dollar that was pressured after a plunge in US factory activity raised concerns over slowing economic growth.

Firstly, US manufacturing PMI fell in March to the lowest since May of 2020 and US factory orders declined for a second straight month, down 0.7% in February after falling 2.1% in January from the 1.7% jump in December. The Institute for Supply Management (ISM) reported yesterday that its Manufacturing PMI fell to 46.3 last month. This was the worst since May 2020, from 47.7 in February. 

Then, we had US Feb JOLTS job openings fall 630k to 9.93m, their lowest level since May 2021. ´´The ratio of job openings to unemployed fell to 1.67 vs 1.86, indicating some easing in demand for labour but still well off a balanced labour market,´´ analysts at ANZ Bank explained, adding, ´´the largest drop in openings was in professional and business services, followed by healthcare. Accommodation and food services, saw openings fall back to middle of 2022 levels. Construction job openings picked up despite the sector’s interest rate sensitivity.´´

This batch of data this week falls on the heels of last Friday´s PCE data, the Federal Reserve´s preferred inflation measure, that was also mixed and weighed on the greenback. However, while headline and core both came in a tick lower than expected, super core accelerated for a second straight month to 4.63% YoY which is the highest since October.  ´´This is not the direction that the Fed desires and so we look for the hawkish tilt in Fed comments to continue,´´ analysts at Brown Brothers Harriman explained. 

Nevertheless, markets viewed the reduction in job openings in the US as a sign that the Federal Reserve will be able to back off on its monetary policy tightening. Markets repriced the risk of a 25bp rate rise in May to 50% (from 70% prior to the release of the data). 

US Nonfarm Payrolls eyed

Looking ahead, the focus this week will be on Friday's jobs report, although many markets will be closed for the Easter holiday.

´´US payrolls likely stayed firm at a still above-trend pace in March, though slowing from stronger prints in Jan-Feb,´´ the analysts at TD Securities explained. 

´´We also look for the Unemployment Rate to stay unchanged at 3.6%, and wage growth to print a firm 0.3% MoM.´´

• EUR/GBP is making efforts in surpassing the immediate resistance of 0.8770.
• Inflationary pressures in the UK economy have remained extremely high led by a shortage of labor.
• Fears of a recession in Eurozone are accelerating as retail demand in Germany is constantly contracting.

The EUR/GBP pair is making efforts in extending its recovery above the immediate resistance of 0.8770 in the Asian session. The cross witnessed a stellar buying interest on Tuesday after dropping to near 0.8730. The Pound Sterling came inside the volatile territory after Bank of England (BoE) interest rate-setter Silvana Tenreyro advocated a contra approach to bring down stubborn inflation.

BoE Tenreyro advocated for consideration of cutting rates sooner than thought as the absence of cost-push shocks would bring down inflation well below targets. He further added, “I expect lower price inertia from second-round effects via wage growth, given a lower rate of headline inflation.”

Contrary to that, BoE Chief Economist Huw Pill said on Tuesday that caution is still needed in assessing inflation prospects on account of the potential persistence of domestically generated inflation, as reported by Reuters.

Inflationary pressures in the United Kingdom have remained extremely high led by a shortage of labor due to the early retirement adaptation approach by individuals. Apart from that, rising food prices are continuously fueling overall inflation and in turn building a burden on households.

On the Eurozone front, fears of a recession are accelerating as retail demand in Germany is constantly contracting. Apart from that, rising oil prices are expected to shock inflationary pressures again. Contrary to that, “Joint Economic Forecasts expect a 0.1% expansion in the gross domestic product (GDP) in the first quarter in the German economy. This follows a 0.4% contraction in the fourth quarter of 2022.”

• NZD/USD picks up bids to refresh multi-day high during three-day uptrend.
• Clear upside break of 0.6300 resistance confluence directs bulls towards 61.8% Fibonacci retracement level.
• RBNZ is up for consecutive 11^th rate hike but future guide will be crucial to watch for clear directions.

NZD/USD marches to the highest levels since mid-February as the Kiwi pair traders await the Reserve Bank of New Zealand (RBNZ) monetary policy decision on early Wednesday. That said, the quote rises to 0.6323 by the press time.

It’s worth noting that the RBNZ is expected to announce the 11^th consecutive rate hike, worth 0.25% this time, and can keep the NZD/USD buyers hopeful. However, the receding hawkish bias highlights the RBNZ Rate Statement as the key catalyst to watch for clear directions.

Also read: RBNZ Interest Rate Decision Preview: Hawkish guidance yet again?

In doing so, the major currency pair justifies the previous day’s upside break of the 100-DMA and a five-week-old ascending trend line, around 0.6300.

Not only the RBNZ rate hike and the NZD/USD breakout but the bullish MACD signals and upbeat RSI (14), not overbought, also favor the Kiwi pair buyers as they approach the 61.8% Fibonacci retracement level of its February-March fall, around 0.6365.

However, the quote’s further upside appears to have a bumpy road as multiple levels near 0.6400 and 0.6415-20 can test the bulls before directing them to the Year-To-Date high of around 0.6540, marked in February.

Alternatively, the 50% Fibonacci retracement level of 0.6310 and the aforementioned resistance-turned-support of 0.6300 restrict the short-term downside of the NZD/USD pair.

Following that, a one-month-old ascending support line, near 0.6230 by the press time, will gain the market’s attention.

NZD/USD: Daily chart

Trend: Further upside expected

• EUR/USD bulls are in the market and eyed higher highs. 
• The bulls can target the 1.1050s while above 1.0900 support. 

Despite the tweezer top, we have seen two consecutive days of rally and we are on the third day of bullñsi price action in EUR/USD. The price has rallied into the 1.0970s and is showing little signs of slowing down with the 1.1030/50s eyed for the near future. 

EUR/USD daily chart

EUR/USD H4 chart

The 4-hour chart is so far bullish for the Asian day. EUR/USD is on the front side of the macro trend and above the support of 1.0900.

• USD/JPY takes offers to refresh intraday low, drops for the third consecutive day.
• Clear U-turn from the key DMAs, unimpressive oscillators keep sellers hopeful.
• Ascending trend line from mid-January lures bears; bulls remain off the table below 134.00.

USD/JPY takes offers to refresh the intraday low near 131.40 as Tokyo opens on Wednesday. In doing so, the yen pair drops for the third consecutive day after reversing from the 100-DMA during the last week.

Not only the U-turn from the 100-DMA but a following downturn past convergence of the 50-DMA and 23.6% Fibonacci retracement level of its October 2022 to January 2023 fall, around 133.05 at the latest, also keep USD/JPY bears hopeful.

Adding strength to the downside bias is the steady RSI (14) and sluggish MACD signals.

However, the RSI level is below the 50 mark and hence suggests the dip-buying, which in turn highlights an upward-sloping support line from January 16, close to 130.70 at the key level to watch for the USD/JPY bears.

Should the quote drop below 130.70, the odds of witnessing a break of the 13.0.00 psychological magnet can’t be ruled out.

Alternatively, the aforementioned resistance confluence of around 133.05, comprising 50-DMA and 23.6% Fibonacci retracement, restricts short-term advances of the USD/JPY pair.

Following that, the 100-DMA and a downward-sloping trend line from late October 2022, respectively near 133.65 and 135.00 in that order, could challenge the Yen pair buyers.

It’s worth noting, however, that the USD/JPY run-up beyond 135.00 won’t hesitate to challenge the Year-To-Date (YTD) high surrounding 137.90.

USD/JPY: Daily chart

Trend: Further downside expected

• EUR/JPY renews intraday low, extends previous day’s losses.
• Hopes of upbeat growth prospects for Germany and Eurozone keep Euro buyers hopeful.
• Downbeat yields, hopes of BoJ’s exit from easy money policies weigh on prices.
• Second readings of March PMIs eyed for further directions, risk catalysts are the key.

EUR/JPY remains depressed near 144.00 while defending bears early Wednesday. In doing so, the cross-currency pair fails to cheer upbeat growth signals from the Eurozone amid weaker Treasury bond yields, as well as hopes of the Bank of Japan’s (BoJ) exit from the ultra-easy monetary policy and the receding odds of the European Central Bank’s (ECB) further aggression in rate hikes.

On Tuesday, Eurozone Producer Price Index (PPI) fell 0.5% MoM and 13.2% YoY in February, versus -2.8% and 15.1% respectively priors. That said, Germany’s Trade Balance also remained static near €16B during the stated month versus market forecasts of €17B.

However, Reuters cited sources who have seen the so-called Joint Economic Forecasts, to be presented in Berlin on Wednesday, to mention that the German economy is likely to narrowly skirt recession and post modest growth in the first quarter of the year.

On the same line could be the ECB monthly survey of consumer expectations that suggested an easing in inflation and improvement in growth, as well as an easing in the unemployment rate, for the next 12 months.

Above all, the market’s rush towards bonds drowned the Treasury yields and join the hawkish chatters surrounding the BoJ to weigh on the EUR/JPY prices of late.

Against this backdrop, Wall Street closed with minor losses but the US Treasury bond yields remain depressed with the benchmark 10-year coupons holding lower grounds near 3.34% after falling in the last five consecutive days.

Looking forward, the second readings of Japan’s Jibun Bank Manufacturing PMI and S&P Global PMIs for the Eurozone can direct immediate EUR/JPY moves. However, major attention should be given to the risk catalysts and yields for a clear guide.

Technical analysis

Repeated failures to cross a descending resistance line from October 2022, close to 144.85 by the press time, directs EUR/JPY towards a convergence of the 21-DMA and 50-DMA, around 142.80.

• AUD/JPY has faced resistance after a pullback move to near 89.00.
• The RBA kept rates steady at 3.60% amid the quick softening of Australia’s inflation this year.
• Higher oil prices are likely to put a burden on Japanese households.

The AUD/JPY pair has retreated after a short-lived pullback to near 89.00 in the early Asian session. The risk barometer is expected to show significant volatility as Reserve Bank of Australia (RBA) Governor Philip Lowe would put some light on the steady interest rate decision taken on Tuesday.

After 10 consecutive interest rate hikes and three consecutive 25 basis points (bps) rate escalations, RBA kept the interest rate policy unchanged on Tuesday. The rationale behind keeping rates steady at 3.60% is the quick softening of Australia’s inflation this year.

Australia’s monthly Consumer Price Index (CPI) indicator has shown a decline in the inflation peak recorded at 8.4% in December to 6.8% in February. This infused confidence in RBA policymakers that the monetary policy is restrictive enough to tame inflation further.

RBA policymakers are anticipating that the Australian economy is slowing ahead, which will cool down the tight labor market. This would result in a lower offering of funds for hiring talent and the stubborn inflation would soften further. The speech from RBA Lowe would provide more clarity about the mindset of the central bank on the maintenance of the status quo and further guidance on interest rates.

On Thursday, the release of the Australian Financial Stability Review report will be released, which will provide a detailed explanation of the financial conditions of the economy and any risk associated with commercial banks due to higher interest rates.

On the Japanese Yen front, higher oil prices are likely to put a burden on households. The Bank of Japan (BoJ) and the administration are constantly working on raising wages to push demand, however, the efforts would go in vain if extra wages would get utilized in offsetting the impact of costly oil.

• AUD/NZD holds lower ground after reversing from two-week high the previous day.
• RBNZ is likely to increase benchmark rates by 0.25% but Rate Statement will be crucial to watch amid recent dovish bias.
• One-month-old descending triangle restricts short-term moves amid sluggish MACD.
• 100-DMA acts as an extra filter towards the north.

AUD/NZD remains pressured around 1.0700 as traders await the Reserve Bank of New Zealand (RBNZ) monetary policy decision on early Wednesday.

Also read: RBNZ Interest Rate Decision Preview: Hawkish guidance yet again?

The exotic pair dropped the most in a month the previous day while reversing from a resistance line of a one-month-old descending triangle formation.

It should be noted, however, that the sluggish MACD and unimpressive RSI (14) suggest that the AUD/NZD price may defend the triangle formation, which in turn hints at a limited downside room towards the stated pattern’s support line of near 1.0670 by the press time.

That said, the quote’s sustained trading below the 100-DMA and the 61.8% Fibonacci retracement of its December 2022 to February 2023 upside keeps it on the bear’s radar.

Hence, a downside break of 1.0670 won’t hesitate to target the late 2022 low of near 1.0470. Though, the 1.0600 and 1.0500 levels may act as intermediate halts during the expected fall.

On the flip side, a clear break of the triangle’s top line, close to 1.0775 at the latest, becomes necessary for the AUD/NZD buyers to get in.

Even so, the 50% Fibonacci retracement level and 100-DMA hurdles of 1.0780 and 1.0795 in that order can challenge the pair bulls before giving them control.

AUD/NZD: Daily chart

Trend: Further downside expected

• Gold price is comfortably shifted above 2,020.00 amid rising bets for a steady Fed monetary policy.
• A slowdown in the hiring process by US firms has scaled expectations of an unchanged Fed policy towards north.
• Gold price is marching towards the horizontal resistance plotted from 08 March 2022 high at $2,070.54.

Gold price (XAU/USD) has shifted its auction profile comfortably above $2,020.00 in the early Asian session. The precious metal delivered a decisive break above the psychological resistance of $2,000.00 on Tuesday after the release of weak Job Openings data confirmed that the United States labor market is cooling-off and the Federal Reserve (Fed) would prefer to adopt a neutral stance on interest rates.

As per the CME Fedwatch tool, the chances of an unchanged policy have scaled near 59%.

The US Dollar Index (DXY) has refreshed its monthly low at 101.45 and more losses are in pipeline as policy divergence of the Fed with central banks would trim ahead. Meanwhile, S&P500 futures are adding gains in early Tokyo after a negative Tuesday, indicating a recovery in the risk-taking capacity of the market participants.

Investors will keep an eye on oil prices, as the only measure, which could impact the upside rally in the Gold price. Higher oil prices would stimulate global inflation as factory owners would pass on the impact of costly oil to end users. This could trigger some recovery in expectations for the continuation of a policy-tightening spell by the Fed.

Going forward, US Employment and ISM Services PMI data will remain in the spotlight. According to the consensus, the US economy has added fresh 200K jobs in March than the former additions of 242K.

Gold technical analysis

Gold price is marching towards the horizontal resistance plotted from the 08 March 2022 high at $2,070.54 on a daily scale. Intermediate support is placed from March 20 high at $2,009.88.

Upward-sloping 10-and 20-period Exponential Moving Averages (EMAs) at $1,984.00 and $1,956.12 respectively, indicate that the bullish momentum is extremely strong.

The Relative Strength Index (RSI) (14) is oscillating in the bullish range of 60.00-80.00, showing active upside momentum.

Gold daily chart

• US Dollar Index grinds near the lowest levels in two months ahead of the key US data.
• Challenges to the greenback’s reserve currency status, downbeat US data and yields weigh on DXY.
• Geopolitical challenges to sentiment, hawkish Fed talks fail to limit US Dollar’s downside.
• US ISM Services PMI, ADP Employment Change appear the key for intraday directions amid receding hawkish Fed bets.

US Dollar Index (DXY) bears take a breather at a two-month low, also probing the two-day downtrend, as traders await the key US activity and employment data during early Wednesday. In doing so, the greenback’s gauge versus the six major currencies makes rounds to 101.50, fading the late Tuesday’s bounce off a multi-day low of 101.45 by the press time.

DXY bears the burden of downbeat US data and challenges to the greenback’s reserve currency status. Adding strength to the US Dollar’s bearish bias is the latest reduction in the hawkish Federal Reserve (Fed) even if the Fed policymakers suggest more rate hikes.

That said, Bloomberg released a news report suggesting the US Dolllar’s less acceptance as a reserve currency in Russia while highlighting the greenback’s latest weakness. “Chinese Yuan has surpassed the US Dollar as the most traded currency, in monthly trading volume, for the first time in Russia in February,” said the news while also adding that the gap has continued to widen in March. In the last week, Brazil and China agreed to pause the US Dollar’s usage as an intermediary in trade transactions.

On Tuesday, US Factory Orders for February came in -0.7% MoM versus -0.5% expected and downwardly revised -2.1% prior. Further, the US JOLTS Job Openings dropped to the lowest levels since May 2021 while flashing a 9.931M figure for February versus 10.4M expected and 10.563M revised prior.

Talking about the Fed policymakers, Federal Reserve Bank of Cleveland leader Loretta Mester recently cited the need to hike rates above 5% and hold them there for a while.

Elsewhere, geopolitical challenges to the sentiment should have also put a floor under the DXY prices but did not of late. That said, Russian Foreign Minister Sergei Lavrov raised fears of escalating Moscow-Brussels tussle by saying, “The European Union (EU) has "lost" Russia.” The policymaker also added that Moscow will deal with Europe in a tough fashion if need be. The US-China tension is also on the table as Beijing keeps reiterating its dislike for the US-Taiwan ties but Washington seems to ignore it. China’s Consulate General in Los Angeles spokesperson criticized a meeting between Taiwan President Tsai Ing-wen and US House Speaker Kevin McCarthy on early Tuesday.

Amid these plays, Wall Street closed with minor losses but the US Treasury bond yields remain depressed with the benchmark 10-year coupons holding lower grounds near 3.34% after falling in the last five consecutive days. It should be observed that the CME’s FedWatch Tool suggests almost even chances of the US central bank’s 0.25% rate hike in May.

Looking forward, US Dollar Index traders should look out for firmer prints of US ISM Services PMI and ADP Employment Change to pare recent losses and push back the odds of witnessing a fresh Year-To-Date low, currently around 101.00.

Also read: US ADP Jobs/ISM Service PMI Preview: Slowing but still positive

Technical analysis

A one-year-old ascending support line around 101.35 appears the key support for the US Dollar Index bear to watch amid oversold RSI (14). The DXY recovery, however, remains elusive unless the quote stabilizes above the previous support line from January 2022, close to 101.75 by the press time.

• The USD/CAD shifted neutral-downwards, with bears capping the pair’s upside as they eye the 200-day EMA.
• USD/CAD Price Analysis: Bearish below 1.3500; otherwise, buyers could reclaim resistance levels.

The USD/CAD gained traction on Tuesday, barely gaining 0.06%, and formed a spinning top. As the Asian session begins, the USD/CAD is subdued, with minuscule losses of 0.02%, trading at 1.3442.

USD/CAD Price action

The USD/CAD shifted from neutral to neutral-downward biased, based on price action tumbling below the 50 and 100-day Exponential Moving Averages (EMAs) at 1.3571 and 1.3515. That price action opened the door for further losses, with sellers eyeing a challenge of the 200-day EMA at 1.3372. Nevertheless, a spinning top emerged, with sellers taking a respite before committing to lower prices.

If USD/CAD drops below 1.3405, the current week’s low, that would open the door to testing the 200-day EMA. A break below and USD/CAD would dive into testing the YTD low at 1.3262.

Otherwise, a rebound at the 200-day EMA will underpin the USD/CAD towards the 1.3400 area. A decisive break and the major could rally initially toward the 100 and 50-day EMAs before challenging the 20-day EMA At 1.3584. Upside risks lie at 1.3600.

USD/CAD Technical Daily Chart

USD/CAD Technical Levels