• WTI is held up in resistance near $81bbls.
• Short squeeze orchestrated by the OPEC+ cuts could be running out of steam.

West Texas Intermediate, WTI, crude oil was higher on Tuesday and reached $83.08bbls after traveling from a low of $81.80bbls. At the time of writing, Wednesday early Asia, the black gold is trading at $80.86bbls and down on yesterday by some 2%. 

Nevertheless, the Oil price rallied overnight on the back of China reporting a 4.5% rise in its first-quarter Gross Domestic Product and on the back of a softer US Dollar that was thrown into a bearish correction. 

However, demand concerns persist on the other side of the Pacific and wider Asian nations where demand is dwindling over concerns about inflation and a looming recession. 

´´The fact that its economy is growing at its fastest pace in a year should buoyed well for demand in coming months. However, this is being offset by weakness elsewhere. Plunging crack spreads for diesel and jet fuel suggest global demand is soft,´´ analysts at ANZ Bank explained.

´´This is blunting the impact of OPEC’s recent decision to cut output. Outside of OPEC, there are signs of growth. Russian crude exports bounced back above 3mb/d this week. The Energy Information Administration also raised its forecast for US shale. It now expects output to reach 9.28mb/d in April,´´ the analysts added.

Meanwhile, analysts at TD Securities explained that ´´the significant short squeeze orchestrated by the OPEC+ cuts could be running out of steam, but marginal buying activity in WTI crude could temporarily put a halt to the bleeding, keeping prices locked in a tight range.´´

´´Importantly,´´ the analysts said, ´´the production curtailments still underscore our view that the West is losing control over commodity pricing, with significant long-term implications for pricing, geopolitics, inflation and currencies.´´

• GBP/USD struggles to extend the previous day’s corrective bounce off one-week low.
• 12-day-old rising wedge bearish chart formation keeps sellers hopeful.
• Lackluster MACD, sustained trading beyond 200-SMA keeps buyers hopeful.

GBP/USD makes rounds to 1.2425-20 within a two-week-old rising wedge bearish chart formation during early Wednesday morning in Asia. In doing so, the quote portrays a cautious mood ahead of the key UK inflation data for March, namely the Consumer Price Index (CPI).

The Cable pair recently bounced off the bottom line of the stated rising wedge, which in turn joins the steady RSI (14) to suggest further recovery of the quote. However, the 21-SMA surrounding 1.2435 restricts the immediate upside of the GBP/USD price.

Following that, the 1.2500 round figure and the top line of the aforementioned bearish chart formation, around 1.2555 by the press time, could challenge the Cable pair buyers.

Should the GBP/USD price remains firmer past 1.2555, it defies the bearish chart formation and can propel the quote toward the May 2022 high of near 1.2665. That said, the 1.2600 round figure may act as an intermediate halt during the run-up.

Alternatively, a downside break of 1.2365 confirms the rising wedge bearish pattern and suggests a theoretical fall targeting 1.2000 psychological magnet. However, the 200-SMA level can act as an extra filter towards the south, around 1.2265.

It should be observed that the highs marked in mid-March around 1.2200 can also act as extra support to watch during the GBP/USD pair’s fall past 1.2365.

GBP/USD: Four-hour chart

Trend: Further upside expected

• EUR/JPY fluctuates as the Asian session begins and stays above the 147.00 mark.
• Sentiment shifted sour, keeping the EUR/JPY from breaking to new YTD highs above 147.45.

EUR/JPY trades almost flat as the Asian session begins. At the time of writing, the EUR/JPY exchanges hand at 147.09 after hitting a weekly high at 147.45 on Monday and achieving gains of 0.17% on Tuesday.

Wall Street finished Tuesday’s session almost unchanged as market participants assessed comments from US Federal Reserve officials. Sentiment remains sour, though the CBOE Volatility Index (VIX) remains below 17, its lowest level since January 2022. Stock’s failure to rally on the VIX edging lower suggests investors could park cash aside amidst uncertainty regarding the Federal Funds rate (FFR) peak.

EUR/JPY Price Action

The EUR/JPY remains upward biased, though on Monday printed a new YTD high at 147.45. The Relative Strength Index (RSI) remained in bullish territory and shifted flat, while the Rate of Change (RoC) is neutral. Hence, those two signals indicate that the EUR/JPY could remain sideways within the 146.72-147.50 area.

If EUR/JPY resumes its uptrend, its first resistance would be 147.45. A breach of the latter will expose the 147.75 area, followed by the 148.00 mark and the 2022 high at 148.40. On the other hand, the EUR/JPY first support would be the December 15 high turned support at 146.72. Once cleared, the cross-currency could tumble towards the December 20 high-shifted-support at 145.83 before testing the 20-day EMA At 145.09.

EUR/JPY Daily Chart

EUR/JPY Technical Levels

• AUD/USD seesaws in a choppy range after snapping two-day downtrend the previous day.
• Slightly hawkish RBA Minutes, downbeat US data and firmer China statistics allowed Aussie buyers to return.
• Risk catalysts eyed for immediate directions amid a light calendar at home.

AUD/USD struggles to cheer the first daily gain in three as the quote dribbles around 0.6725-20 amid early Wednesday morning in Asia. In doing so, the Aussie pair seeks fresh clues to defend the previous day’s upbeat performance, mainly led by the Reserve Bank of Australia (RBA) Monetary Policy Meeting Minutes, China data dump and downbeat US housing market statistics.

That said, RBA Minutes appear slightly hawkish as it said that the board considered a rate hike at the April meeting, before deciding to pause.

On the other hand, China’s Q1 GDP grows 2.2% QoQ versus 2.2% expected and 0.0% prior. Further, Retail Sales growth jumps 10.9% YoY in March versus 7.4% expected and 3.5% prior whereas Industrial Production eased below 4.0% expected growth figures to 3.9%, versus 2.4% previous readings. Further, the International Monetary Fund (IMF) said in its latest report on Tuesday, China will be the top contributor to global growth over the next five years, with its share set to be doubled that of the US, per Bloomberg.

Elsewhere, after witnessing upbeat prints of the NY Empire State Manufacturing Index and the US National Association of Home Builders (NAHB) housing market index on Monday, the US Housing Starts and Building Permits roiled the mood with downbeat prints for March on Tuesday. That said, the Housing Starts eased to 1.42M versus 1.432M prior and 1.40M market forecasts whereas the Building Permits dropped to 1.413M from 1.55M previous readings and analysts’ estimations of 2.2M.

It should be noted that the hawkish Fed talks couldn’t save the US Dollar of late as St. Louis Federal Reserve President James Bullard said, in an interview with Reuters, “Interest rates will need to continue to rise in the absence of clear progress on inflation.” On Monday, Richmond Fed President Thomas Barkin said that he wants to see more evidence of inflation settling back to target.

Amid these plays, US Treasury bond yields retreat while Wall Street closed mixed.

Moving on, a light calendar in the Asia-Pacific region could restrict immediate moves, which in turn highlights risk catalysts as the key factors to watch for clear directions.

Technical analysis

AUD/USD rebounds from a 21-DMA inside a six-week-old rising trend channel, suggesting a gradual recovery in Aussie prices.

• The USD/CAD lasted two days and was capped at 1.3400 as USD/CAD sellers piled on that area.
• If USD/CAD buyers reclaim 1.3400, a move towards the 100-day EMA at 1.3500 is on the cards.

The USD/CAD rally was short-lived to just two days, but the pair remains above the 200-day Exponential Moving Average (EMA), suggesting that the neutral bias remains intact. At the time of typing, the USD/CAD is trading at 1.3389, below the 1.3400 figure, after hitting a high of 1.3399.

USD/CAD Price Action

The USD/CAD is neutrally biased, though tilted to the downside, as the exchange rate is some ten pips shy of cracking below the 200-day EMA at 1.3377. The Relative Strength Index (RSI) is in bearish territory but shifted flat, while the Rate of Change (RoC) is about to turn neutral. Therefore, the path of least resistance in the near term could be downwards.

If USD/CAD tumbles below the 200-day EMA, the next support would be the April 14 swing low at 1.3300. A breach of the latter, and the USD/CAD pair will challenge the YTD low at 1.3262 before sliding towards the November 15 daily low at 1.3225, before threatening 1.3200.

On the flip side, if USD/CAD breaks above 1.3400, a rally toward the 20-day EMA At 1.3478 is on the cards, ahead of challenging the 100-day EMA at 1.3500. If buyers reclaim that area, nothing will be on the way toward the 50-day EMA at 1.3523, ahead of testing 1.3600.

USD/CAD Daily Chart

USD/CAD Technical Levels

The Melbourne Institute will release the Westpac–Melbourne Institute Leading Index of Economic Activity and Japan reports Industrial Production. Those numbers should not trigger much action. Markets were quiet on Tuesday, with the US Dollar giving back half of its recent gains.

Here is what you need to know on Wednesday, April 19:

The Greenback dropped on a quiet Tuesday across financial markets. The US Dollar Index (DXY) fell below 102.00 but still remains far from the recent bottom. US yields were little changed, holding near recent monthly highs.

China reported its economy expanded 4.5% YoY in the first quarter, surpassing expectations. It reflects the rebound after the end of the zero-Covid policy. March retail sales jumped 10.6%. The numbers helped market sentiment modestly. Wall Street finished mixed as investor digests Q1 earnings.

EUR/USD rose above 1.0950 but still remains capped below 1.1000. The trend is still up. On Wednesday, the Final March Consumer Price Index is due in the Euro Zone and the Federal Reserve (Fed) will release the Beige Book. US Housing data came in mixed on Tuesday.

GBP/USD rose from the 20-day Simple Moving Average back above 1.2400 while EUR/GBP bottomed at 0.8808 (three-day low) and then bounced toward 0.8830. In the UK, the Unemployment Rate rose to 3.8% in the three months ending in February and wage growth came in at 5.9% from a year ago.  On Wednesday, critical consumer inflation is due in the UK, with the headline Consumer Price Index expected at 9.8% YoY.

USD/CAD finished flat around 1.3390, with the Loonie lagging following inflation data from Canada. AUD/USD peaked around 0.6740 boosted by hawkish Reserve Bank of Australia (RBA) minutes and then lost momentum. NZD/USD recovered from weekly lows to the 0.6200 zone.

Gold retook $2,000 and Silver $25.00 benefiting from a weaker US Dollar. Cryptocurrencies also had a mixed day. Bitcoin remains firm above $30,000. Crude oil prices were flat, with WTI slightly below $81.00.

• NZD/USD bulls are in play and taking on the 0.62 territories as the US dollar tails off.
• RBNZ and Fed sentiment are at the helm of the moves. 

NZD/USD is up on the day as the US Dollar slides in a correction, supporting the bird up from a one-month low of 0.618 overnight on Monday. At the time of writing, NZD/USD is trading at 0.6200 and has moved up from a low of 0.6175 to score a high of 0.6224 so far. 

it has been more of a US dollar story in the currency markets at the start of the week which has fallen against most FX on Tuesday after better-than-forecast growth data from China. China's gross domestic product (GDP) grew 4.5% year on year in the first three months of the year, data showed, beating analyst forecasts for a 4% expansion after the end of COVID-19 restrictions lifted the world's second-largest economy. ANZ Bank wrote in a note on Tuesday that it sees upside risks to its GDP forecast of 5.4% for 2023. Q2 GDP could hit 8% YoY. ´´If the property recovery is sustained, GDP may approach 5% in the second half of the year. The authorities will likely keep interest rates on hold.´´Meanwhile, March activity in China also showed Retail Sales jump sharply by 10.6%, beating expectations and hitting a near two-year high.

The data and growth sentiment around China has hurt the US Dollar that had otherwise found a bid on Monday after New York state factory activity in April increased for the first time in five months. There has been a series of events that have been helping bolster expectations that the Federal Reserve will raise interest rates in May, including Friday´s hawkish rhetoric from a top Federal Reserve official.

Federal Reserve´s Governor Christopher Waller said that despite a year of aggressive rate increases, the Fed "hasn't made much progress" in returning inflation to their 2% target and argued that rates still need to go up. There were some bullish components in the latest US Retail Sales as well and Consumer spending for the past quarter was also solid. 

Looking ahead, the Federal Open Market Committee will enter a blackout this weekend ahead of the 2/3 May meeting. The latest guidance is very much in line with market pricing and Atlanta Fed President Bostic said that he favors one more 25bp rate hike and then a pause. Bostic explained that tightening in credit conditions could do some of the Fed’s work. ´´The Atlanta Fed has historically been seen, rightly or wrongly, as a barometer of consensus on the FOMC,´´ analysts at ANZ Bank said.

´´ The Atlanta Fed’s GDPNow indicator was little changed following the data at 2.5% saar for Q1. The advance estimate of Q1 GDP will be released next week. The early median estimate is for a 0.5% q/q gain, 2.0% saar,´´ the analysts added.

On April 21, the S&P PMIs for early April will be in focus as an indicator for the US economy but they will also offer a first comprehensive look at the state of the US economy post-banking turmoil, analysts at TD Securities said. ´´Note that the March data was not clearly impacted by banking jitters, but perhaps it was too soon to be reflected: both the mfg and services PMIs registered their third consecutive increase then, with the latter advancing further into expansion territory.´´

Domestically, amid bets that the Reserve Bank of New Zealand will stay hawkish and deliver a 25bps hike in May or July following the surprise cash rate lift by 50bps to 5.25% in early April, NZD is supported. In the minutes of the prior meeting, it was stated that inflation in the nation remained too high, with employment beyond its sustainable level.

• USD/CHF faces resistance at 0.9000 and falls for the first time in three days.
• USD/CHF Price Analysis: It might print a leg-up above 0.9000; otherwise, a bearish continuation would resume below 0.8900.

USD/CHF retreats after posting back-to-back days of gains, down 0.17%, after hitting a weekly high of 0.8996. At the time of writing, the USD/CHF exchanges hands at 0.8969, ahead of the Wall Street close.

USD/CHF Price Action

From a technical perspective, the USD/CHF daily chart portrays the major as downward biased, losing almost 3% annually. However, last Friday, the USD/CHF pair snapped three days of straight losses, forming a bullish piercing pattern that failed to extend above the psychological 0.9000 figure. Even though the USD/CHF is in a pullback, the Rate of Change (RoC) suggests that buyers are outpacing sellers, which could put into play a challenge of the 0.9000 figure.

If USD/CHF cracks the latter, that will expose the 20-day Exponential Moving Average (EMA) at 0.9065, followed by the 0.9100 mark. Once cleared, the USD/CHF could rally towards the 50-day EMA at 0.9164.

Conversely, a bearish continuation will resume once the USD/CHF breaks below 0.8921. A breach of the latter will expose the 0.8900 figure, followed by the YTD low at 0.8859.

USD/CHF Daily Chart

USD/CHF Technical Levels

• USD/JPY bulls are waiting in the flanks as price corrects.
• USD/JPY remains on the front side of the bullish trend. 

As per the prior analysis, USD/JPY Price Analysis: Bulls stay front side of trend and above the 134 figure but correction eyed, the correction is underway. The following illustrates the prospects of a bullish continuation following a move into the in-the-money longs: 

USD/JPY prior analysis

The bulls had picked up a discount and the market has subsequently rallied, reaching very close to a -272% Fibonacci retracement of the correction´s range:

With the bulls still in control, it was stated that there are prospects of a continuation toward the greyed price imbalance area in the 135s:

However, it was reasonable to expect a correction, and the support area was illustrated as shown above as being an area that could be tested in this and the following sessions. Trendline support into the depths of the 133s is still eyed:

USD/JPY update

USD/JPY H4 outlook

The price is drifting toward a 38.2% Fibonacci retracement of the prior bullish impulse. Patient bulls could be in for a discount and the above is an illustration of a theoretical schematic that could play out over the coming days.

A break of trendline support, however, would be troublesome to such a bias as illustrated in the prior analysis as follows:

The above chart illustrated a theoretical bearish schematic on the daily chart that is still valid. 

• Hawkish comments by Fed policymakers capped the Australian Dollar rally.
• China’s economic data foreseeing solid growth is a tailwind for the AUD/USD.
• RBA minutes showed that their latest meeting decision was a hawkish hold.

AUD/USD caps its two-day downtrend at around the 20-day EMA and climbs toward the 50-day EMA, bolstered by a soft US Dollar (USD), which is undermined by falling US Treasury bond yields. Federal Reserve officials continued reinforcing their hawkish posture, but investors have ignored it. At the time of writing, the AUD/USD is trading at 0.6726.

Despite a sour sentiment, the Australian Dollar gains on a soft US Dollar

After falling to weekly lows at around 0.6681, buyers entered the market as the AUD/USD reclaimed 0.6700. On Tuesday, two Fed officials reiterated that the Fed needs to raise rates, coinciding that a recession is not the baseline scenario for both. However, St. Louis Fed President James Bullard expects the Federal Funds Rate (FFR) to end between the 5.50%-5.75% range.

Most US Treasury bond yields dropped, except for the 2-year, which sits at 4.218%, erasing its earlier losses, following Monday’s gains of 10 bps. Hence, the greenback remains pressured, as shown by the performance of a basket of six currencies vs. the US Dollar, namely the US Dollar Index, down 0.34% at 101.752.

Although market participants are bracing for a 25 bps rate hike by the Federal Reserve, as shown by the CME FedWatch Tool odds at 86.7% chance, the US Dollar could not extend its gains to three consecutive days.

The US economic agenda featured Housing Starts for March, which decreased by 0.80% MoM after a 7.3% surge in the prior’s month. In the meantime, Building Permits plunged 8.8%, missing estimates of a gain of 1.45%, though figures for February.

On the Australian front, China’s data underpinned the Australian Dollar (AUD). China’s GDP grew 4.5% YoY in Q1, crushing the latest 2022 quarter of 2.9%. Retail Sales jumped 10.6%, while Industrial Production missed estimates of 4% at 3.9%.

Furthermore, the Reserve Bank of Australia (RBA) monetary policy minutes showed that the board discussed a possible 25 bps rate hike, though they decided to keep rates unchanged at 3.60%. Of note, the minutes included comments that inflation “remained too high and the labor market was very tight,” a signal that the RBA kept the door open for further tightening.

AUD/USD Technical Analysis

Even though the AUD/USD fall was capped at the 20-day EMA, the pair remains neutral to downward biased. For a bullish resumption, the AUD/USD must break the 50-day EMA at 0.6735, exposing the 100-day EMA at 0.6756. Once cleared, the 0.6800 psychological level would be up for grabs. Contrarily, if AUD/USD slides back below 0.6700, expect a bearish continuation. The first support would be the weekly low of 0.6681, followed by a one-and-a-half-month upslope support trendline at 0.6630. Break below, and 0.6600 will be next.

• GBP/USD bulls are in the market ahead of key data on Wednesday. 
• UK inflation data will be reported and could confirm the hawkish bias at the BoE. 

GBP/USD was last trading at 1.2426, up 0.41% on the day, and has traveled from a low of 1.2366 to a high of 1.2449 so far. The market has been dominated by a correction in the US Dollar that has enabled GBP/USD to move up despite an unexpected rise in the unemployment rate in the three months to February.

UK data gave the markets a mixed labor report with the Unemployment for the three months ending February that was expected to remain steady at 3.7% instead rose a tick to 3.8%. However, average hourly earnings came in at 5.9% YoY vs. the 5.1% expected and a revised 5.9% (was 5.7%) previously.  Excluding bonuses, earnings grew even faster at 6.6% YoY. With the pay growth staying higher than forecast, this could prompt the Bank of England to hike its interest rate again in May which is supporting the price of the Pound Sterling. 

UK CPI eyed

´´Wage growth has remained sticky, which helps explain some of the recent upside surprises in the inflation data,´´ analysts at Brown Brothers Harriman explained, noting that March Consumer Price Index will be reported tomorrow. In this regardd, the headline is expected at 9.8% YoY vs. 10.4% in February, core is expected at 6.0% YoY vs. 62% in February, and CPIH is expected at 8.7% YoY vs. 9.2% in February.

Analysts at TD Securities explained that ´´inflation is proving stickier than the MPC expected in its February projections.´´ The analysts note that ´´both core goods and services prices are proving persistent. March's inflation data is likely to be boosted by rail fares and food.´´ The analysts argue that ´´the risks to our forecast lie around the latter: we assume that despite some improvement in supplies, prices remained moderately high through March, as seen elsewhere in Europe in other March inflation data.´´

The inflation data on Wednesday could cement expectations for the Bank of England to raise interest rates further, supporting GBP/USD as the data would confirm recent views of BoE chief economist Huw Pill that inflation is proving much harder to bring under control than anticipated. 

BoE tightening expectations have picked up 

The next Bank of England policy meeting is May 11 and analysts at Brown Brothers Harriman note that the WIRP suggests around 90% odds of a 25 bp hike, with another 25 bp hike priced in for August 3. ´´The odds of one last hike in September or November top out near 20%.  As a result, the peak policy rate is seen near 4.75% vs. between 4.50-4.75% at the start of last week.´´

• Federal Reserve’s policymakers’ hawkish comments did not underpin the US Dollar
• US housing data missed estimates, though EUR/USD traders ignored it.
• EUR/USD Price Analysis: Upside risks lie at 1.1000, potentially exposing the YTD high; downside risks are below 1.0900.

EUR/USD snaps two days of consecutive losses and climbs, and seesaws around the 1.0950 figure, spurred by falling US Treasury bond yields and broad American Dollar (USD) weakness. Hence, the EUR/USD is trading at 1.0961 after hitting a low of 1.0920.

The Euro gained on a soft US Dollar as US Treasury bond yields dropped

Sentiment deteriorated as Wall Street registers losses. Federal Reserve officials led by the St. Louis Fed President James Bullard reinforced the need for further tightening. Nevertheless, Bullard commented that he does not see a recession and expects rates to go between 5.50% and 5.75%. Of late, Atlanta’s Fed President Raphael Bostic noted that he estimates another hike and then a pause. He added that inflation would take some time to ease to the Fed’s target, and he also does not foresee a recession.

In the meantime, Federal Reserve’s expectations for the May meeting lie at an 86.7% chance for a 25 bps hike, according to the CME FedWatch Tool.

In terms of data, the economic agenda in the US showcased a decline of 0.80% month-over-month in Housing Starts for March, following a 7.3% surge in February (revised down from 9.8%). Meanwhile, Building Permits fell by 8.8%, which was lower than the expected gain of 1.45%, although the figures for February were revised upward to 15.8% from 13.8%.

On the Eurozone (EU) front, the European Central Bank (ECB) Chief Economist Philip Lane said the ECB’s baseline is to raise rates at the May 4 meeting. He added that data showed that supply chain shocks have eased and lower energy prices would help tackle inflation. Lastly, he said that the ECB is in “wait-and-see mode.”

The EU’s calendar featured Germany’s Zew Index for April. Although they remained optimistic, expectations for future conditions missed estimates at 4.1 vs. 15.6 forecasts. Regarding current conditions, the index was -32.5 less than the -40 expected, an improvement considering that the prior’s month reading was -46.5. A senior ZEW official noted that “Experts expect banks to be more cautious in granting loans” and added that “high inflation rates and the internationally restrictive monetary policy are also weighing on the economy.”

EUR/USD Technical Analysis

From a daily chart perspective, the EUR/USD is still upward biased, with the 20-day Exponential Moving Average (EMA) tracking the price action as a dynamic support. The 1.50% drop from April 14 to 17 was capped around 1.0909 before bouncing off from the latter toward current exchange rates. Although mixed, oscillators suggest that the EUR/USD could be poised for another leg-up.

If EUR/USD cracks 1.1000, that could put into play a challenge of the YTD high at 1.1075 before testing 1.1100. On the other hand, a fall below 1.0900, and the EUR/USD could dip to the 20-day EMA At 1.0890 before plunging to the 50-day EMA At 1.0795.

• Silver has corrected into a 61.8% Fibonacci area and bears are moving in.
• However, the confirming break-of-structure-point is not until $24.9332 to confirm a downside bias. 
• US Dollar could continue to correct lower, bullish for Silver. 

As per the prior session´s analysis, ´´Silver bulls are lining up as the US Dollar hits a 61.8% Fibo area,´´ the US Dollar did indeed come under pressure and Silver has corrected bullishly as the following will illustrate:

Silver prior analysis

It was stated that Silver had broken below the trendline support and that the Silver price could close on a daily candle in the support area.

$24.5664 was the first import structure level that may otherwise have given way to sell-off as illustrated below. However, it was explained that there could be some consolidation and price discovery to follow over the coming days in and around the recent highs and lows.

US Dollar took on a 61.8% Fibo:

It was acknowledged that f the DXY stalled, then Silver bulls would be in play:

Silver & DXY updates 

We are seeing the correction in the US Dollar on Tuesday. However, so long as 101.50 holds on a closing basis, then the bulls will likely be encouraged within a bullish schematic that is in development. 

This is giving rise to a bullish correction in the white metal:

However, while being on the backside of the bearish trend, the $24.5664 structure remains vulnerable:

Zooming in:

Silver has corrected into a 61.8% Fibonacci area and is being rejected toward trendline support. However, the confirming break-of-structure-point is not until $24.9332 to confirm the downside bias. 

Silver H1 chart

US Dollar bearish scenario

All in all, this could be too premature and the US Dollar could remain under pressure for some time to come, leading to a firmer correction in Silver for the sessions and days ahead:

• Gold rises after a sharp correction on a quiet day.
• XAU/USD found support above the 20-day SMA.
• US Dollar falls across the board ending a two-day rally.

Gold price rose $2,011/oz after the beginning of the American session, reaching a fresh daily high. The yellow metal remains near the high, supported by a weaker US Dollar.

Dollar down, ends 2-day rally

The US Dollar Index is falling by 0.30%, back under 102.00 while US Treasury yields are little changed. Economic data from the US came in mixed. Housing Starts declined to 1.42 million in March, above the 1.4 million markets consensus, but Building Permits fell to 1.41 million against the consensus of 1.5 million.

On a quiet session, recently, XAU/USD spiked down to $1,991 and then rebounded to the $2,010 area where it is trading. It is moving with a bullish intraday bias, still within Monday’s price range.

Federal Reserve expectations are little change. Markets participants continue to see a rate hike in May as the most likely scenario and one rate cut before year-end as possible. The rally in Gold lost momentum during the last days as investors pared bets for deep rate cuts.

In the daily chart, Gold found support above the 20-period Simple Moving Average (SMA). The trend is still up. Above $2,025, more gains seem likely, and while below, a consolidation between that area and the 20-SMA could take place.

A daily close below $1,990 should keep the door open to an extension of the retreat with key support levels seen at $1,975 and $1,955.

Gold daily chart

The Bank of Canada´s Governor Tiff Macklem said in an opening statement before the House of Commons Standing Committee on Finance that the central bank considered the need for rates to stay higher longer to return inflation to 2% target.

More to come...

• USD/MXN rises amid speculation that Banxico’s will pause while the Fed tightens conditions.
• St. Louis Fed President Bullard advocates for continued rate hikes in the US; see rates between 5.50% - 5.75%.
• Atlanta Fed President Bostic expects one more rate hike and a pause.

The Mexican Peso (MXN) continues to weaken for the second consecutive day, despite overall American Dollar (USD) weakness across the board. Outflows from the emerging market currency increased, spurred by an almost certain case for a 25 bps rate hike by the Federal Reserve (Fed) at the May meeting. At the time of writing, the USD/MXN is exchanging hands at 18.0719 after hitting a low of 17.9625.

Sentiment shifted sour, weakening the Mexican Peso, on possible central bank divergence

US equities fluctuate with market participants assessing Q1 earnings. Federal Reserve officials continued reinforcing their hawkish stance, though they failed to bolster the greenback. The US Dollar Index (DXY), which tracks the performance of six currencies vs. the buck, drops 0.31%, at 101.770.

The reasons behind the USD/MXN rise could be attributed to ebbs and flows. Estimates that the Bank of Mexico (Banxico) is about to end its tightening campaign weighed on the Mexican Peso. Additionally, a deceleration in inflation increased the odds for a Banxico’s pause.

On the US front, the St. Louis Fed President James Bullard commented that the Fed should continue to raise rates as the latest tranche of inflation data proved to be stickier than estimated. “Wall Street’s very engaged in the idea there’s going to be a recession in six months or something, but that isn’t really the way you would read an expansion like this,” Bullard said.

Bullard added that he feels rates need to go between 5.50% - 5.75%.

Data-wise, the US economic docket featured Building Permits and Housing Starts, which decreased by 0.80% MoM in March, after February’s 7.3% jump (downward revised from 9.8%). Building Permits dropped 8.8%, below estimates for a 1.45% gain, though February’s figures were upward revised to 15.8% from 13.8%.

In the meantime, Federal Reserve’s expectations for the May meeting lie at an 86.7% chance for a 25 bps hike, according to the CME FedWatch Tool.

Lately, the Atlanta Fed President Raphael Bostic said he favors one more rate hike and then a pause. Bostic commented that inflation would take some time to return to the Fed’s target and that his baseline does not foresee a recession.

USD/MXN Technical Analysis

From a technical analysis perspective, the USD/MXN is still downward biased. However, the recent leg-up could put up a test to the 20-day Exponential Moving Average (EMA) at 18.1772, which, once cleared, could exacerbate a rally, initially to the 50-day EMA at 18.3889. Break above, and the USD/MXN pair could rally toward the 100-day EMA at 18.7133. Conversely, if USD/MXN drops beneath 18.0000, that could open the door for a re-test of the YTD low at 17.8968.

Speaking on Bloomberg TV, the European Central Banker Philip R. Lane has stated that he will not commit to the size of a May rate increase just yet.

Key comments

More to come..

Meanwhile, bank lending the survey will be released at the start of May, just ahead of the ECB meeting on May 4.

Raphael W. Bostic, president, and CEO of the Federal Reserve Bank of Atlanta said that his baseline forecast does not include a recession.

Key comments

US Dollar update

The US Dollar fell against most major currencies on Tuesday after better-than-forecast growth data from China. DXY, a measure of the greenback vs. a basket of currencies is down some 0.3% to 101.80 currently from a high of 102.14. 

• Prices of the WTI add to Monday’s decline near $80.00.
• Auspicious Chinese data lent initial support to crude oil.
• The API will release its weekly report on inventories.

Renewed selling pressure drags prices of the barrel of the American reference for the sweet light crude oil to the vicinity of the key $80.00 mark on Tuesday.

WTI looks at weekly inventories, Fed

Prices of the barrel of the West Texas Intermediate extends the weekly leg lower and put the $80.00 mark to the test after traders seem to have already digested the positive readings from the Chinese calendar released during early trade.

However, the likelihood of an economic slowdown appears to have encourage bears to return to the markets in light of firmer conviction of a 25 bps rate hike by the Fed at the May 3 gathering.

In addition, the likeliness that exports of crude oil from the port of Ceyhan (Turkey) could resume their activity in the very near term also lent extra wings to the selling mood in the commodity.

Later in the NA session, the API will report on US crude oil inventories in the week to April 14 ahead of the EIA’s report on Wednesday.

WTI significant levels

At the moment the barrel of WTI is down 0.62% at $80.43 and a breach of $79.05 (monthly low April 3) would open the door to $66.86 (low March 24) and then $64.41 (2023 low March 20). On the upside, the next hurdle is located at $82.56 (200-day SMA) followed by $83.37 (2023 high April 12) and finally $92.90 (monthly high November 7 2022).

• EUR/GBP continues losing ground for the second successive day on Tuesday.
• Bets for a smaller ECB rate hike contribute to the Euro's underperformance.
• The stronger UK wage growth data boosts the GBP and weighs on the cross.

The EUR/GBP cross extends the previous day's retracement slide from the 0.8865 region, or over a three-week high and remains under some selling pressure for the second successive day on Tuesday. The cross maintains its offered tone through the mid-European session and is currently placed just above the 0.8800 mark, down over 0.20% for the day.

The shared currency's underperformance could be attributed to the fact that the European Central Bank (ECB) policymakers have left the door open to a downshift in the pace of interest rate hikes. In fact, ECB member Martins Kazaks said on Monday that the central bank might opt for a 25 bps hike at the next meeting in May. The British Pound, on the other hand, gets a strong lift following the release of the UK monthly jobs report, which turns out to be another factor exerting some downward pressure on the EUR/GBP cross.

The UK Office for National Statistics (ONS) reported this Tuesday that Average Earnings (including bonuses) rose 5.9% during the three months to February, while labor cost (excluding bonuses) came in at 6.6%, both surpassing consensus estimates. This helps offset a rise in the jobless rate and an unexpected jump in the number of people claiming unemployment-related benefits. Nevertheless, the hot wage growth data should keep pressure on the Bank of England (BoE) to raise interest rates further, which, in turn, underpins the GBP.

The aforementioned fundamental backdrop favours bearish traders and supports prospects for a further near-term depreciating move. Some follow-through selling and acceptance below the 0.8800 mark will be seen as a fresh trigger for bears, reaffirming the negative bias. Traders, however, might prefer to wait on the sidelines ahead of the release of the UK consumer inflation figures, due on Wednesday. The crucial UK CPI will play a key role in influencing the Sterling Pound and determining the short-term direction for the EUR/GBP cross.

Technical levels to watch

• NZD/USD regains strong positive traction on Tuesday amid broad-based USD weakness.
• The upbeat Chinese GDP print lifts market sentiment and weighs on the safe-haven buck.
• Bets for more Fed rate hikes and elevated US bond yields should lend support to the USD.

The NZD/USD pair attracts fresh buyers near the 0.6170-0.6160 horizontal support on Tuesday and maintains its strong bid tone through the early North American session. The pair is currently placed around the 0.6200 mark, just a few pips below the daily top, and for now, seems to have snapped a two-day losing streak amid broad-based US Dollar (USD) weakness.

In fact, the USD Index, which tracks the Greenback against a basket of currencies, stalls its recent recovery move from a one-year low touched last week amid a generally positive tone around the equity markets. The stronger-than-expected Chinese Q1 GDP print helps ease fears about a deeper economic downturn and boosts investors' confidence, which, in turn, is seen weighing on the safe-haven buck and benefitting the risk-sensitive Kiwi.

The downside for the USD, however, seems limited amid speculations that the Federal Reserve (Fed) will continue lifting interest rates. In fact, the current market pricing indicates a greater chance of another 25 bps lift-off at the next FOMC meeting in May. The bets were lifted by the latest hawkish comments by St. Louis Fed President James Bullard, reiterating that interest rates will need to continue to rise in the absence of clear progress on inflation.

The prospects for further policy tightening by the Fed remain supportive of elevated US Treasury bond yields, which favours the USD bulls and might keep a lid on any meaningful upside for the NZD/USD pair, at least for the time being. Hence, it will be prudent to wait for strong follow-through buying before confirming that the downfall witnessed over the past two sessions has run its course and before positioning for any further appreciating move.

Technical levels to watch

In an interview with Reuters, St. Louis Federal Reserve President James Bullard reiterated that interest rates will need to continue to rise in the absence of clear progress on inflation.

Key takeaways

"US recession predictions ignore strength of labor market, pandemic savings still to be used."

"Still seeing adequately restrictive policy rate at 5.50%-5.75% range, bias to hold for longer until inflation contained."

"Risk of bank stress causing broad problems seems to have diminished, though policymakers monitoring situation closely."

"Fed should avoid extensive forward guidance at next meeting, keep options open."

Market reaction

The US Dollar Index recovered modestly on these hawkish remarks and was last seen losing 0.25% on the day at 101.84.

• USD/CAD meets with some supply on Tuesday and snaps a two-day winning streak.
• A positive risk tone undermines the safe-haven USD and exerts pressure on the pair.
• The mostly inline Canadian inflation figures fail to provide any meaningful impetus.

The USD/CAD pair recovers a few pips from the daily low and trades with modest intraday losses, around the 1.3380 region following the release of the latest Canadian consumer inflation figures.

Statistics Canada reported this Tuesday that the headline CPI rose 0.5% in March as compared to 0.4% in the previous month and the yearly rate decelerated from 5.2% in February to 4.3%, both matching consensus estimates. More importantly, the Bank of Canada's (BoC) Core CPI, which excludes volatile food and energy prices, eased to a 4.3% YoY rate against market expectations for a fall to 4.2% from the 4.7% recorded in the previous month.

The data, meanwhile, does little to influence the Canadian Dollar, though broad-based US Dollar (USD) weakness continues to exert some downward pressure on the USD/CAD pair. The stronger-than-expected Chinese growth figures released earlier this Tuesday ease fears about a deeper global economic downturn and boost investors' confidence. This remains supportive of a generally positive risk tone and undermines the safe-haven buck.

That said, speculations that the Federal Reserve (Fed) will continue lifting interest rates should act as a tailwind for the buck and help limit the downside for the USD/CAD pair, at least for the time being. In fact, the current market pricing indicates a greater chance of another 25 bps lift-off at the next FOMC meeting in May. This remains supportive of elevated US Treasury bond yields and supports prospects for the emergence of some USD dip-buying.

Hence, it will be prudent to wait for strong follow-through selling before confirming that the USD/CAD pair's recent bounce from the 1.3300 mark, or a two-month low touched last week, has run its course. From a technical perspective, the overnight failure to find acceptance above the very important 200-day Simple Moving Average (SMA) warrants some caution for bullish traders and before positioning for any meaningful near-term appreciating move.

Technical levels to watch

• Housing Starts and Building Permits in the US contracted in March.
• US Dollar Index stays deep in negative territory below 102.00.

The monthly data published by the US Census Bureau revealed on Tuesday that Housing Starts declined by 0.8% on a monthly basis in March following February's increase of 7.3% (revised from 9.8%). This reading came in much worse than the market expectation for an increase of 0.4%.

In the same period, Building Permits plunged by 8.8%, compared to market expectation of +1.45%. On a positive note, February's increase of 13.8% got revised higher to 15.8%.

Market reaction

The US Dollar Index stays on the back foot after this report and the US Dollar Index was last seen losing 0.35% on the day at 101.72.

• Annual CPI inflation in Canada continued to soften in March.
• USD/CAD trades in negative territory below 1.3400 after the data.

Inflation in Canada, as measured by the Consumer Price Index (CPI), declined to 4.3% on a yearly basis in March from 5.2% in February, Statistics Canada reported on Tuesday. This reading came in line with the market forecast. On a monthly basis, the CPI rose by 0.5% as expected. 

Additionally, the Bank of Canada's Core CPI, which excludes volatile food and energy prices, dropped to 4.3% on a yearly basis from 4.7% in February, compared to analysts' estimate of 4.2%.

Market reaction

USD/CAD edged slightly lower with the initial reaction and the pair was last seen losing 0.2% on the day at 1.3365.

Analysts at TD Securities (TDS) offer a brief preview of Tuesday's release of the latest Canadian consumer inflation figures and forecast a sharp deceleration for headline CPI in March.

Key quotes:

“With inflation falling to just 4.3% y/y from 5.2% in February, as a 0.5% m/m increase is countered by a large base-effect from 2022 (market: 4.3% y/y, 0.6% m/m). Groceries will remain a key driver even with some moderation on a year-ago basis, while the persistence of tight labour markets and strong wage growth will continue to put pressure on restaurant prices. We also look for another large increase in rents and mortgage interest costs, although March will see a larger offset from homeowner replacement costs. Elsewhere, we look for energy prices to post a modest increase while clothing provides another source of strength with help from seasonal factors. We also look for a large drop in core inflation measures, with the average of CPI-trim/median falling 0.35pp to 4.50% in March.”

• USD/JPY pulls back from a multi-week high amid the emergence of fresh USD selling.
• Elevated US Treasury bond yields should limit the USD losses and act as a tailwind.
• The BoJ’s dovish stance, a positive risk tone could undermine the JPY and lend support.

The USD/JPY pair retreats from a nearly five-week high, around the 134.80 region touched earlier this Tuesday and extends its steady intraday descent through the mid-European session. Spot prices slide below the 134.00 mark in the last hour, eroding a major part of the previous day's gains and snapping a two-day winning streak.

The US Dollar (USD) comes under some renewed selling pressure and stalls a two-day-old recovery trend from a one-year low set last week, which, in turn, is seen as a key factor dragging the USD/JPY pair lower. The better-than-forecast growth data from China, along with a hawkish tone from the Reserve Bank of Australia (RBA) meeting minutes, boost the Australian Dollar. Adding to this, stronger UK wage growth data supported the British Pound and turns out to be a key factor weighing on the Greenback.

That said, speculations that the Federal Reserve (Fed) will continue raising interest rates should help limit losses for the buck. In fact, the markets are pricing in a greater chance of another 25 bps lift-off at the next FOMC meeting in May, which keeps the US Treasury bond yields elevated. This results in the widening of the US-Japan rate differential, which along with the Bank of Japan's (BoJ) dovish stance and a positive risk tone, undermine the safe-haven Japanese Yen (JPY) and lend some support to the USD/JPY pair.

The aforementioned fundamental backdrop makes it prudent to wait for strong follow-through selling before positioning for any further intraday depreciating move. Market participants now look forward to the US housing market data - Building Permits and Housing Starts - for a fresh impetus during the early North American session. Apart from this, the US bond yields will influence the USD price dynamics. Traders will further take cues from the broader risk sentiment to grab short-term opportunities around the USD/JPY pair.

Technical levels to watch

• EUR/USD leaves behind two sessions in a row with losses on Tuesday.
• Extra gains are expected to retarget the key 1.1000 mark in the near term.

EUR/USD manages to regain upside traction and approaches the key 1.1000 region on turnaround Tuesday.

If the rebound gathers extra impulse, then the pair could embark on a potential test of the 1.1000 mark ahead of the 2023 high at 1.1075 (April 14).

Looking at the longer run, the constructive view remains unchanged while above the 200-day SMA, today at 1.0377

EUR/USD daily chart

Analysts at TD Securities review the latest jobs report from the UK:

"The unemployment rate increased to 3.8% (mkt: 3.7%) in the three months ending in February, as the labour market continues to soften."

"On the other hand, wage growth was broadly unchanged on a year-ago basis, with headline wage growth coming in at 5.9% 3m/y (mkt: 5.1%) and ex-bonus wage growth actually increasing to 6.6% 3m/y (mkt: 6.2%). Both measures surprised sharply to the upside, however."

"Private sector regular pay, the MPC's favorite wage growth measure, increased 0.9% m/m. The data appears to confirm our view that strike action in December and January weighed on wage growth those months. As such, the slowdown in wage growth momentum has yet to properly materialize."

"Overall, while the uptick in the unemployment rate will be welcomed by the MPC, the main takeaway from this report is the substantial increase in wage growth. This will continue to make the case for another 25bps hike from the MPC at its next meeting."

Canada CPI Overview

Statistics Canada is scheduled to release the consumer inflation figures for March later during the early North American session this Wednesday, at 12:30 GMT. The headline CPI is expected to have risen by 0.5% during the reported month as compared to the 0.4% increase in February. The yearly rate, however, is expected to decelerate further from 5.2% to 4.3% in March. More importantly, the Bank of Canada's (BoC) Core CPI, which excludes volatile food and energy prices, is estimated to rise by 0.4% in March and ease to 4.2% on a yearly basis as compared to 0.5% MoM and 4.7% YoY, respectively, in February.

How Could It Affect USD/CAD?

Heading into the key release, the USD/CAD pair attracts fresh sellers on Tuesday and stalls a two-day recovery trend from the 1.3300 mark, or a two-month low touched last week. Given that the Bank of Canada (BoC) remains ready to raise borrowing costs again, if needed, to restore price stability, stronger inflation figures should provide additional lift to the domestic currency and exert additional downward pressure on the major.

Conversely, a softer Canadian CPI print is more likely to be overshadowed by the emergence of fresh selling around the US Dollar (USD) and might do little to provide any respite to the USD/CAD pair. This, in turn, suggests that the path of least resistance for spot prices is to the downside and any attempted bounce might still be seen as a selling opportunity, rather runs the risk of fizzling out quickly.

Key Notes

  •   USD/CAD Analysis: Struggles to find acceptance above 200 DMA, focus shifts to Canadian CPI

  •   USD/CAD Price Analysis: Retreats towards 1.3300 with eyes on Canada inflation, BoC’s Macklem

  •   Week Ahead: Canada Macro Market Movers – TDS

About Canadian CPI

The Consumer Price Index (CPI) released by Statistics Canada is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of CAD is dragged down by inflation. The Bank of Canada aims at an inflation range (1%-3%). Generally speaking, a high reading is seen as anticipatory of a rate hike and is positive (or bullish) for the CAD.

• DXY fades part of the recent 2-day advance beyond 102.00.
• Further selling could put the dollar en route to the 2023 top near 100.80.

DXY comes under pressure and gives away part of the recent move to the area beyond 102.00 the figure.

Despite the ongoing rebound, the index is expected to remain under pressure for the time being. Against that, losses could accelerate and revisit the 2023 low at 100.78 (April 14). Once this level is cleared, the index could attempt a move to the psychological 100.00 mark.

South from here aligns the late-March 2022 lows near 97.70.

Looking at the broader picture, while below the 200-day SMA, today at 106.30, the outlook for the index is expected to remain negative.

DXY daily chart

Economist at UOB Group Lee Sue Ann suggests the Ban Indonesia could eep its policy rate unchanged at its meeting later in the week.

Key Quotes

“BI remains of the view that inflation expectations are anchored and rupiah stability is here to stay.”

“Thus, we keep our BI rate forecast to remain unchanged at 5.75% for the rest of this year and for BI to potentially embark on a rate cut cycle in 1H24.”

• EUR/JPY resumes the upside above the 147.00 mark
• Next on the upside comes the 2022 high past 148.00.

EUR/JPY leaves behind Monday’s drop and regains upside traction above the ey 147.00 hurdle on Tuesday.

Considering the ongoing price action, further gains in the cross remain in store for the time being. That said, the continuation of the upside momentum could extend further and challenge the 2022 peak at 148.40 (October 21) sooner rather than later.

So far, further upside looks favoured while the cross trades above the 200-day SMA, today at 142.11.

EUR/JPY daily chart

• Gold price edges higher on Tuesday, albeit the intraday uptick lacks follow-through.
• The emergence of fresh selling around the US Dollar lends support to the XAU/USD.
• Bets for more Fed rate hikes keep the US bond yields elevated and cap the upside.

Gold price regains some positive traction on Tuesday and moves away from a one-and-half-week low, around the $1,981 region touched the previous day. The XAU/USD sticks to its modest intraday gains, around the $2,000 psychological mark, through the first half of the European session, though the intraday uptick lacks bullish conviction.

Modest US Dollar weakness benefits Gold price

The US Dollar (USD) comes under some selling pressure and for now, seems to have stalled a two-day-old recovery trend from a one-year low touched last week. This, in turn, is seen lending some support to the US Dollar-denominated Gold price, though a combination of factors keeps a lid on any meaningful appreciating move. The Federal Reserve (Fed) is expected to continue lifting interest rates amid a rise in short-term inflation expectations. This, along with a positive tone around the equity markets, might hold back traders from placing aggressive bullish bets around the XAU/USD.

Bets for more Fed rate hikes act as a headwind for XAU/USD

The University of Michigan's preliminary report released last Friday showed that one-year inflation expectations rose from 3.6% to 4.6% in April. Furthermore, Fed Governor Christopher Waller on Friday called for further rate hikes and said that the job was still not done as inflation remains far too high. Adding to this, the New York Fed reported on Monday that its barometer of manufacturing activity in the state increased for the first time in five months. This, in turn, lifted bets for another 25 basis points (bps) lift-off at the next Federal Open Market Committee (FOMC) meeting in May.

Positive risk tone contributes to capping gains for Gold price

The prospects for further policy tightening by the Fed keep the US Treasury bond yields elevated, which, in turn, caps gains for the non-yielding Gold price. Meanwhile, stronger-than-expected Chinese economic growth eases fears about an imminent global recession and boosts investors' confidence. Data released earlier this Tuesday showed that the Chinese economy expanded by 4.5% during the January-March quarter, well above estimates and the 2.9% in the previous quarter. This, in turn, dents demand for traditional safe-haven assets and keeps a lid on any further gains for the XAU/USD.

Traders now eye US housing market data for some impetus

Market participants now look forward to the US economic docket, featuring the release of Building Permits and Housing Starts 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 around the XAU/USD.

Gold price technical outlook

From a technical perspective, the $1,980 area now seems to have emerged as an immediate strong support. A convincing break through the said level will negate the positive outlook and prompt some technical selling. The Gold price might then accelerate the corrective decline towards the $1,965-$1,960 intermediate support en route to the $1,950 horizontal zone.

On the flip side, bulls might now wait for a move beyond the overnight swing high, around the $2,015-$2,016 area before placing fresh bets. The Gold price might then climb to the YTD peak, around the $2,047-$2,049 region touched last Thursday, before climbing further towards retesting the all-time high, around the $2,070-$2,075 region set in August 2020.

Key levels to watch

• US Dollar has lost its strength following a decisive two-day rebound.
• Markets expect the Federal Reserve to raise its policy rate again in May.
• EUR/USD technical outlook suggests that the bullish bias stays intact.

The US Dollar (USD) has lost its footing after having registered strong gains against its major rivals for two straight trading days. The upbeat macroeconomic data releases from China seem to have eased fears over a global economic slowdown. Hence, the USD is having a difficult time attractions investors as a safe haven.

The US Dollar Index, which tracks the USD performance against a basket of six major currencies, turned south and declined toward 101.50 despite having closed above 102.00 on Monday.

Daily digest market movers: US Dollar reverses direction following Monday’s climb

• US stock index futures trade in positive territory early Tuesday, pointing to a higher opening in Wall Street following Monday’s choppy action.
• The data from China showed that the world’s second-largest economy expanded by an annualized rate of 4.5% in the first quarter, much stronger than the 2.9% growth recorded in the last quarter of 2022. This reading also came in better than analysts' estimate for an expansion of 4%. Other data revealed that Industrial Production expanded by 3.9% and Retail Sales rose by 10.6% on a yearly basis, compared to analysts' estimate of 7.4%.
• 10-year US Treasury bond yield holds steady above 3.5% after having gained nearly 6% in the last three trading day. 
• Richmond Fed President Thomas Barkin said on Monday that he wants to see more evidence of inflation settling back to target.
• The US Census Bureau will release Housing Starts and Building Permits data for March on Tuesday.
• The data published by the US Census Bureau revealed on Friday that Retail Sales declined by 1% on a monthly basis in March. On a positive note, March’s reading of -0.4% got revised higher to -0.2%.
• The University of Michigan’s (UoM) Consumer Confidence Index improved modestly to 63.5 in April’s flash estimate from 62 in March.
• The one-year consumer inflation expectation component of the UoM’s survey climbed to 4.6% from 3.6% in March, providing a boost to the USD.
• "Monetary policy will need to remain tight for a substantial period and longer than markets anticipate,” Federal Reserve Governor Christopher Waller said on Friday. Waller further argued that the recent data show that the Fed hasn't made much progress on its inflation goal.
• In an interview with Reuters on Friday, Atlanta Fed President Raphael Bostic noted that recent developments in the US economy were consistent with one more rate hike.
• According to the CME Group’s FedWatch Tool, markets are currently pricing in a more-than-80% probability of a 25 basis points (bps) Fed rate hike in May.
• NY Fed Empire State Manufacturing Index improved sharply to 10.8 in April from -24.6 in March, compared to the market expectation of -18.
• On Wednesday, the Fed will release the Beige Book. Existing Home Sales and Initial Jobless Claims data will be featured in the US economic docket on Thursday ahead of S&P Global’s Manufacturing and Services PMI surveys on Friday.
• Previewing the Fed’s publication, “since the March 21-22 meeting, the data suggest that activity is slowing, the labor market is softening, and price pressures are easing,” said analysts at BBH. “Notably, supply chains continue to improve. We believe the Beige Book will highlight these trends that support a pause after what is widely expected to be another 25 bps hike whilst leaving the door open for further tightening if needed.”

Technical analysis: US Dollar struggles to continue to outperform Euro

Following the two-day slide that saw the pair come within a touching distance of 1.0900, EUR/USD has regained its traction early Tuesday. The Relative Strength Index (RSI) indicator on the daily chart has returned to the 60 area, reflecting the lack of seller interest. Furthermore, the pair continues to trade within the ascending regression channel coming from late September.

EUR/USD faces immediate resistance at 1.1000 (psychological level, static level). Once the pair reaffirms that level as support, it could target 1.1100 (psychological level, static level), 1.1160 (static level from April 2022) and 1.1200 (psychological level).

On the downside, 1.0900 (20-day Simple Moving Average (SMA) stays intact as support ahead of 1.0800 (psychological level), 1.0760 (50-day SMA) and 1.0720 (100-day SMA).

How does Fed’s policy impact US Dollar?

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

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

Further side-lined trading is likely in USD/CNH for the time being, comment Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group.

Key Quotes

24-hour view: “We indicated yesterday that ‘upward momentum is building but any advance in USD is expected to face solid resistance at 6.9000’. While USD rose, it eased off from a high of 6.8883. The price actions appear to be part of a consolidation phase and USD is likely to trade between 6.8600 and 6.8900 today.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (17 Apr, spot at 6.8820). As highlighted, there is no clear USD direction. For the time being, USD could trade in a relatively broad range of 6.8500/6.9250.”

Analysts at Australia and New Zealand Banking Group (ANZ) offer their afterthoughts on the Minutes of the Reserve Bank of Australia’s (RBA) April policy meeting.

Key quotes

“The two key pieces of information for us in the Minutes of the RBA’s April Board meeting are:

• The Board appears to have spent some time considering the case for a rate hike  –  reflected in the length of that discussion in the Minutes. On the decision itself, it notes that:

Members recognized the strength of both sets of arguments, but, on balance, agreed that there was a stronger case to pause at this meeting and reassess the need for further tightening at future meetings.

• On the length of any such pause the word ‘month’ as opposed to ‘months’ is worthy of note. Specifically, it states:

Over the coming month, members observed that they would receive another quarterly reading on inflation, additional monthly readings on the labor market, household spending and business conditions, and further information on developments in the global economy and financial markets.”

“The staff were also due to present a full set of updated forecasts at the following meeting.

The above suggests to us that the decision to pause was a relatively close one –with a case able to be made for both an increase in interest rates and a pause.

It further suggests that the May meeting is live – with the Board in a position to be persuaded either way based on the balance of the data and the updated  set of forecasts they will receive at that meeting (and which will be published in the Statement on Monetary Policy a few days later).”

Economists at Standard Chartered provide a brief outlook on the Chinese economy for the second quarter of 2023, based on the mixed economic performance witnessed in the first quarter.

Key quotes

“China’s headline GDP growth rebounded to 4.5% y/y in Q1 from 2.9% y/y in Q4-2022, beating the consensus forecast of 4.0% y/y. On a q/q seasonally adjusted (SA) basis, growth accelerated to 2.2% q/q in Q1, faster than 0.6% in Q4 and average pre-pandemic Q1 growth of 1.8% from 2017-19. Our calculation shows that China’s output gap narrowed to -1.2% of GDP in Q1 from -2.8% in Q4.”

“On a rolling annual sum basis, nominal GDP growth moderated to 4.5% y/y in Q1 from 5.3% in Q4. The widening gap between nominal GDP growth and reaccelerating M2 and total social financing (TSF) growth could, in our view, prompt the People’s Bank of China (PBoC) to temper credit growth in Q2 to ensure new loans are efficiently channelled to the real economy rather than circulated within the financial system.”

“We see modest upside risk to our annual GDP growth forecast of 5.8%. A strong base effect could see China’s Q2 GDP growth coming in higher than our forecast of 7.0% y/y, but a slowdown in the US and euro-area economies will likely weigh on China’s growth in H2.”

• GBP/USD regains strong positive traction on Tuesday and snaps a two-day losing streak.
• The upbeat UK wage growth data lifts bets for more BoE rate hikes and underpins the GBP.
• A positive risk tone weighs on the safe-haven USD and provides an additional lift to the pair.

The GBP/USD pair catches aggressive bids on Tuesday and stalls a two-day corrective decline from its highest level since June 2022, around the 1.2545 region touched last week. The pair sticks to its strong intraday gains, around the 1.2435-1.2440 area, through the first half of the European session and for now, seems to have snapped a two-day losing streak to a one-week low set on Monday.

The British Pound strengthens across the board after the UK Office for National Statistics (ONS) reported stronger-than-expected wage growth data from the UK, which will keep pressure on the Bank of England (BoE) to raise interest rates further. In fact, the UK Office for National Statistics (ONS) reported that Average Earnings (including bonuses) rose 5.9% during the three months to February, while labor cost (excluding bonuses) came in at 6.6%, both beating consensus estimates. The hot wage growth figures, to a larger extent, overshadow an uptick in the jobless rate and an unexpected jump in the number of people claiming unemployment-related benefits.

Apart from this, a generally positive risk tone undermines the safe-haven US Dollar (USD) and provides an additional boost to the GBP/USD pair. The downside for the USD, however, seems cushioned amid speculations that the Federal Reserve (Fed) will continue raising interest rates. In fact, the current market pricing indicates a greater chance of another 25 bps lift-off at the next FOMC monetary policy meeting in May. This, in turn, keeps the US Treasury bond yields elevated, which supports prospects for the emergence of some dip-buying around the USD and keeps a lid on any further intraday appreciating move for the GBP/USD pair, at least for the time being.

Market participants now look forward to the US housing market data - Building Permits and Housing Starts - for some impetus later during the early North American session. This, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and allow traders to grab short-term opportunities around the GBP/USD pair. The focus, however, will remain glued to the release of the latest consumer inflation figures from the UK on Wednesday, which will play a key role in driving demand for the Sterling Pound.

Technical levels to watch

• Germany’s ZEW Economic Sentiment Index unexpectedly dropped in April.
• EUR/USD bulls keep highs near 1.0980 on the mixed ZEW surveys.

The German ZEW headline number showed that the Economic Sentiment Index unexpectedly worsened in April, arriving at 4.1 from 13.0 in March, missing the market expectation of 15.1 by a wide margin.

Meanwhile, the Current Situation Index came in at -32.5 from -46.5, better than the market expectation of -40.0.

During the same period, the Eurozone ZEW Economic Sentiment Index worsened to 6.4 from 10.0, compared to the estimates of 19.8. 

Key points

Market reaction

The EUR/USD pair has ignored the mixed data, holding the higher ground near 1.0980, up 0.47% on the day.

Kit Juckes, Global Macro Strategist at Societe Generale, offers a brief outlook for the US Dollar (USD) and maintains a near-term bearish outlook.

Key quotes:

“The FX market repeated a familiar recent pattern, the dollar getting an afternoon lift as decent data sent MOVE and yields higher. With US equities shrugging off the bond market (again), solid Chinese data (GDP and retail sales, notably) risk sentiment is buoyant this morning and that’s got the dollar back on the back foot. The US calendar throws out housing starts, building permits and NY Fed services activity this afternoon, which doesn’t sound exciting enough to move things much.”

“The biggest winner from dollar softness overnight has been AUD. Stronger Chinese GDP (4.5% y/y) confirms robust reopening and that along with discussion of further rate hikes in the RBA Minutes, has given it a bit of a lift. Not enough of one to break the recent 0.66-0.68 range in AUD/USD, however. Still, if the AUD can break above that level, I think it has a chance of accelerating.”

“With little US data today, Canadian CPI can be a focus instead. Consensus looks for headline inflation to drop from 5.2% to 4.3%, with the trimmed mean falling from 4.8% to 4.4%. Soft inflation plays into BOC doves’ hands, but helps the economy, too. As long as USD/CAD doesn’t get back above 1.3450, the current downtrend remains intact.”

• AUD/USD regains positive traction on Tuesday and draws support from a combination of factors.
• A hawkish tone from the RBA minutes and the upbeat Chinese data boost the Australian Dollar.
• A positive risk tone undermines the safe-haven USD and further benefits the risk-sensitive Aussie.
• Rising US bond yields could limit the USD losses and keep a lid on any further gains for the major.

The AUD/USD pair catches fresh bids following the previous day's two-way directionless price move and maintains its bid tone through the early part of the European session on Tuesday. The pair currently trades around the 0.6735-0.6740 area, up nearly 0.60% for the day, and draws support from a combination of factors.

The hawkish tone from the Reserve Bank of Australia’s (RBA) minutes of the April meeting, along with the upbeat China macro data, underpin the Australian Dollar amid the emergence of some US Dollar selling. In fact, the RBA meeting minutes showed that board members considered the case for another 25 bps rate hike in April as inflation remained too high and the labour market was very tight. Meanwhile, data released on Tuesday showed that the Chinese economy grew 4.5% during the January-March quarter, well above estimates and the 2.9% in the previous quarter.

Adding to this, Industrial Production rose 3.9% in March, up from 2.4% in February, while Retail sales rose more than expected, by 10.6% last month. Furthermore, Fixed Asset Investment grew 5.1% in March Vs 5.5% in February, which, in turn, fueled optimism about the post-COVID recovery in the world's second-largest economy and eased fears about a deeper global economic downturn. This remains supportive of a generally positive tone around the equity markets, which attracts fresh selling around the safe-haven US Dollar (USD) and further benefits the risk-sensitive Aussie.

That said, speculations that the Federal Reserve (Fed) will continue raising interest rates could limit the downside for the buck and act as a headwind for the AUD/USD pair, at least for the time being. In fact, the markets are currently pricing in a greater chance of another 25 bps lift-off at the next FOMC policy meeting in May. This remains supportive of elevated US Treasury bond yields and supports prospects for the emergence of some dip-buying, warranting some caution before placing fresh bullish bets around the major and positioning for any further intraday appreciating move.

Market participants now look forward to the US housing market data - Building Permits and Housing Starts - for some impetus later during the early North American session. This, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and allow traders to grab short-term opportunities around the AUD/USD pair.

Technical levels to watch

Here is what you need to know on Tuesday, April 18:

The market sentiment seems to have improved slightly in response to robust macroeconomic data releases from China early Tuesday. In turn, the US Dollar struggles to build on Monday's gains and US stock index futures trade modestly higher. Building Permits and Housing Starts data will be featured in the US economic docket. Statistics Canada will release the Consumer Price Index (CPI) figures for March later in the day. Investors will continue to keep an eye on central bank speak.

China's economy expanded by an annualized rate of 4.5% in the first quarter, much stronger than the 2.9% growth recorded in the last quarter of 2022. This reading also came in better than analysts' estimate for an expansion of 4%. Additionally, Industrial Production expanded by 3.9% and Retail Sales rose by 10.6% on a yearly basis, compared to analysts' estimate of 7.4%.

After having declined toward 1.0900 on Monday, EUR/USD has regained its traction and climbed above 1.0950 early Tuesday. ZEW Survey - Economic Sentiment for the Eurozone and Germany will be released in the European session.

The UK's Office for National Statistics reported on Tuesday that the ILO Unemployment Rate ticked up to 3.8% in February. In the same period, the annual wage inflation, as measured by the Average Earnings Excluding Bonus, grew by 6.6% and surpassed the market forecast of 6.25%. Moreover, the Average Earnings Including Bonus rose by 5.9%, matching January's print. GBP/USD reversed its direction on Tuesday and reclaimed 1.2400.

The minutes of the Reserve Bank of Australia's (RBA) April 4 policy meeting revealed that policymakers actively considered one more rate hike before deciding to pause. "Members agreed there was a stronger case to pause at this meeting and reassess the need for further tightening at future meetings," the publication further read. Hawkish tone of the RBA's minutes helped AUD/USD gain traction and the pair was last seen rising nearly 0.5% on the day at 0.6730.

Annual CPI in Canada is forecast to decline to 4.3% in March from 5.2% in February. The Core CPI is expected to edge lower to 4.2% in the same period from 4.7%. Following Monday's recovery, USD/CAD stays under modest bearish pressure early Tuesday and trades below 1.3400. 

Gold price closed in negative territory on Monday pressured by rising US Treasury bond yields. XAU/USD seems to have found its footing early Tuesday and was last seen trading slightly above $2,000.

USD/JPY is struggling to build on Monday's gains and trades in a relatively tight channel above 134.00 on Tuesday. 

Bitcoin lost nearly 3% on Monday and declined below $30,000. BTC/USD stages a recovery but remains below that key level in the European morning. Ethereum registered losses on Monday but managed to shake off the bearish pressure early Tuesday. At the time of press, ETH/USD was up more than 1% on the day at $2,100.

Analysts at TD Securities (TDS) upgrade their growth forecast for China following Tuesday's release of the Q1 GDP, which showed that the world's second-largest economy expanded by 4.5% against the 4.0% expected and the 2.9% previous.

Key quotes:

“Various sentiment data and high frequency measures have shown strong momentum while hard data in the form of today's release of Q1 GDP, March industrial production and retail sales have been firm. As a result, our China Economic Surprise Index has surged to a multi-year high as Chinese data have repeatedly beaten expectations. Although we remain cautious about the momentum of growth in the months ahead and see likely below trend growth in H2 2023, our current 5.3% GDP forecast for 2023, while still above the official forecast of around 5.0%, appears to be conservative. As such, we upgrade our GDP forecast to 6.0% this year.”

“The market impact has been muted, and we think this is largely a function of markets placing more focus on the Fed with US rates backing up recently. This may explain the limited reaction in USDCNH and CGB 10Y yields after the strong Chinese data, in contrast to the positive price action from onshore equities. Despite the banking turmoil, hawkish comments from senior members of the FOMC suggest that the Fed's hiking cycle isn't over and markets are reassessing the Fed Funds trajectory for the year. This should keep the USD supported in the short term, while a string of firmer US data may seal the case for another 25bps hikes from the Fed. Thus, we think USDCNY will likely continue to consolidate further in a 6.83-6.95 range though we think the eventual path for the pair is lower given our bearish USD profile and a more positive China outlook.”

According to Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group, the upside momentum in USD/JPY remains focused on the 134.80 zone.

Key Quotes

24-hour view: “While we expected USD to strengthen further yesterday, we indicated that ‘in view of the overbought conditions, the major resistance level at 134.80 could be out of reach today’. USD strengthened in line with our expectations and it did not reach 134.80 (high of 134.57). Despite the advance, upward momentum appears to be fading and USD is unlikely to rise much further. Today, we expect USD to trade sideways, likely between 133.80 and 134.80. In other words, a clear break above 134.80 is unlikely.”

Next 1-3 weeks: “Our view from yesterday (17 Apr, spot at 133.80) still stands. As highlighted, while it is too early to expect the start of a sustained advance in USD, it is likely to trade with an upward bias to 134.80. Looking ahead, it has to break clearly above this level before further gains can be expected. The next resistance above 134.80 is at 135.50. Overall, only a breach of 133.00 (‘strong support’ level was at 132.70 yesterday) would suggest that the upward bias has eased.”

• EUR/USD leaves behind part of the recent weakness on Tuesday.
• The dollar looks offered as investors favour the risk complex.
• Germany, EMU ZEW survey next of note in the euro docket.

Fresh buying interest returns to the single currency and lifts EUR/USD to the 1.0960 zone on Tuesday.

EUR/USD now focuses on data

EUR/USD prints decent gains well north of the 1.0900 hurdle and manages to leave behind at the same time two consecutive daily pullbacks amidst increasing selling pressure surrounding the dollar.

In the meantime, expectations of further tightening by the ECB in May remain well on the cards for the time being. While investors appear tilted to a 25 bps rate raise for the time being, some ECB policy makers have opened the door to a larger rate increase in past sessions.

Later in the domestic calendar, the always relevant Economic Sentiment gauged by the ZEW institute for Germany and the euro bloc will take centre stage along with trade balance figures in the euro area.

Across the Atlantic, housing data and the speech by FOMC’s M. Bowman will be in the limelight later in the NA session.

What to look for around EUR

EUR/USD manages to gather some fresh upside traction following the recent retracement to the vicinity of the 1.0900 neighbourhood.

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 ZEW Economic Sentiment (Tuesday) - EMU Final Inflation Rate (Wednesday) – ECB Accounts, EMU Flash Consumer Confidence (Thursday) – Advanced Manufacturing/Services PMIs (Friday).

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

EUR/USD levels to watch

So far, the pair is gaining 0.34% at 1.0960 and a break above 1.1075 (2023 high April 14) would target 1.1100 (round level) en route to 1.1184 (weekly high March 21 2022). On the flip side, the next support comes at 1.0831 (monthly low April 10) seconded by 1.0788 (monthly low April 3) and finally 1.0756 (55-day SMA).

• USD/JPY consolidates its recent gains to a multi-week high touched earlier this Tuesday.
• A modest USD weakness turns out to be a key factor acting as a headwind for the major.
• Elevated US bond yields favour the USD bulls and help limit the downside for the pair.

The USD/JPY pair touches a nearly five-week high on Tuesday, albeit struggles to capitalize on the move and seesaws between tepid gains/minor losses through the early European session. The pair is currently placed around the 134.40-134.35 area, nearly unchanged for the day, though the fundamental backdrop seems tilted in favour of bullish traders and supports prospects for additional near-term gains.

The US Dollar (USD) comes under some selling pressure and stalls a two-day-old recovery trend from a one-year low touched last week, which, in turn, is seen acting as a headwind for the USD/JPY pair. That said, fresh speculations that the Federal Reserve (Fed) will continue raising interest rates should continue to lend some support to the Greenback and help limit the downside for the major, at least for the time being.

In fact, the markets are pricing in a greater chance of another 25 bps lift-off at the next FOMC meeting in May and the bets were lifted by a rise in short-term inflation expectations. Adding to this, the New York Fed reported on Monday that its barometer of manufacturing activity in the state increased for the first time in five months. In fact, the Empire State Manufacturing Index shot to 10.8 from -24.6 in March, beating estimates.

This, in turn, remains supportive of the elevated US Treasury bond yields and favours the USD bulls. In fact, the yield on the benchmark 10-year US government bond holds steady near a multi-week top, widening the US-Japan rate differential. This, along with the Bank of Japan's (BoJ) dovish outlook and a generally positive risk tone, undermines the safe-haven Japanese Yen (JPY) and lends support to the USD/JPY pair.

Even from a technical perspective, the recent sustained move beyond the 50-day and the 100-day Simple Moving Averages (SMAs) adds credence to the near-term positive outlook. This, in turn, suggests that the path of least resistance for the USD/JPY pair is to the upside and any corrective slide is likely to get bought into. Traders now look to the US housing market data for some impetus later during the early North American session.

Technical levels to watch

Considering advanced prints from CME Group for natural gas futures markets, open interest shrank by around 11.9K contracts after two consecutive daily pullbacks on Monday. In the same line, volume set aside the previous daily build and dropped by nearly 18K contracts.

Natural Gas: Solid support lines up around $2.00

Prices of the natural gas started the new trading week in a positive fashion. However, the daily uptick was amidst shrinking open interest and volume and this is indicative that the continuation of the rebound appears not favoured in the very near term. On the downside, there is still solid contention around the $2.00 region per MMBtu.

NZD/USD should keep the consolidation theme unchanged between 0.6140 and 0.6285 for the time being, suggest Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that NZD could decline further to 0.6180 before stabilization is likely. We added, ‘the major support at 0.6140 is not expected to come under threat’. Our view was not wrong as NZD dropped to 0.6162 and then rebounded to close at 0.6182 (0.46%). The weakness in NZD appears to have stabilized. In other words, instead of declining further, NZD is more likely to trade in a range, expected to be between 0.6170/0.6215.”

Next 1-3 weeks: “Our update from yesterday (17 Apr, spot at 0.6210) is still valid. As highlighted, the recent choppy swings have resulted in a mixed outlook NZD could trade in a range of 0.6140/0.6285 for now.”

• USD/CAD renews intraday low as it fades bounce off five-month-old support line, snaps two-day recovery.
• Canada CPI, BoC Governor Tiff Macklem’s speech appear crucial for Loonie pair traders.
• Failures to cross 200-DMA, descending resistance line from late March challenge USD/CAD bulls.
• Downbeat oscillators keep Loonie bears hopeful of breaking multi-month-old support trend line.

USD/CAD holds lower grounds near the intraday bottom of 1.3375 heading into Tuesday’s European session. In doing so, the Loonie pair reverses from the 200-DMA, as well as a three-week-old resistance line while printing the first daily loss in three.

Not only the failures to cross the key DMA hurdle and the trend line but bearish MACD signals and the RSI’s (14) failure to recover also keeps USD/CAD sellers hopeful ahead of key Canada Consumer Price Index (CPI) data and a speech from the Bank of Canada (BoC) Governor Tiff Macklem.

Also read: USD/CAD Analysis: Struggles to find acceptance above 200 DMA, focus shifts to Canadian CPI

As a result, the USD/CAD pair is well set to break the immediate support, namely the 50% Fibonacci retracement of its August-October 2022 upside, near 1.3350.

Following that, an upward-sloping support line from late November 2022, close to the 1.3300 round figure, will be crucial to watch for the USD/CAD bears as a clear downside break of the same won’t hesitate to refresh the 2023 low, currently around 1.3225.

In that case, the 61.8% Fibonacci retracement level of near 1.3200 will be in focus.

On the contrary, the 200-DMA and aforementioned resistance line from late March, respectively near 1.3405 and 1.3415, guard short-term USD/CAD rebound.

Should the Loonie pair remains firmer past 1.3415, the monthly high of around 1.3455 can act as the last defense of the USD/CAD bears.

USD/CAD: Daily chart

Trend: Further downside expected

• Silver edges higher on Tuesday and stalls a two-day corrective decline from a one-year top.
• The technical setup still supports prospects for the resumption of a one-month-old uptrend.
• A convincing break below the $24.00 mark is needed to negate the near-term positive bias.

Silver edges higher during the early European session on Tuesday and looks to build on the overnight modest bounce from the $24.80 area, or a one-week low. The white metal is currently placed just above the $25.00 psychological mark and for now, seems to have stalled its retracement slide from a one-year high, around the $26.10 region touched last Friday.

From a technical perspective, the recent breakout through the $24.30-$24.40 strong horizontal barrier was seen as a fresh trigger for bullish traders and supports prospects for additional gains. Moreover, the Relative Strength Index (RSI) on the daily chart has also eased from the overbought territory and adds credence to the near-term positive outlook for the XAG/USD.

Bulls, however, might wait for some follow-through buying beyond the $25.50 horizontal resistance before placing fresh bets. The XAG/USD might then make aim to conquer the $26.00 mark. The momentum could get extended further towards the next relevant hurdle near the $26.40-$26.50 region en route to the 2022 peak, just ahead of the $27.00 round-figure mark.

On the flip side, weakness below the overnight swing low, around the $24.80 area, is likely to find decent support and attract fresh buyers near the $24.40-$24.30 horizontal resistance breakpoint. This is followed by support near the $24.00 round-figure mark, which if broken decisively will negate the positive outlook and shift the near-term bias in favour of bearish traders.

The corrective decline could then drag the XAG/USD towards the $23.40-$23.35 static support en route to the $23.00 round-figure mark.

Silver daily chart

Key levels to watch

Open interest in crude oil futures markets rose for the second straight session on Monday, this time by around 27.5K contracts. Volume, instead, remained choppy and went down by around 103.2K contracts.

WTI: Upside appears capped by $83.50

Monday’s marked retracement in prices of the WTI was in tandem with rising open interest and a sharp decline in volume. Against that backdrop, prices of the commodity seem to be in the early stages of a potential consolidative phase. On the upside, the 2023 high near $83.50 (April 12) continues to limit the upside for the time being.

The selling bias in GBP/USD is expected to lose traction beyond 1.2475, note Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group.

Key Quotes

24-hour view: “Yesterday, we were of the view that ‘severely oversold decline in GBP could extend but a break of 1.2345 is unlikely’. In line with our expectations, GBP did not break 1.2345 as it dropped to 1.2353 before rebounding slightly to close at 1.2378 (-0.29%). Despite the decline, downward momentum has not improved much. That said, there is scope for GBP to dip below 1.2345 before stabilization is likely. Today, the major support at 1.2275 is not expected to come under threat. The downside risk is intact as long as GBP stays below 1.2425 (minor resistance is at 1.2400).”

Next 1-3 weeks: “We continue to hold the same view as yesterday (17 Apr, spot at 1.2405) wherein GBP could edge lower but any decline is unlikely to break clearly below the major support at 1.2275. Overall, only a breach of 1.2475 (strong resistance level was at 1.2510 yesterday) would indicate that the downside bias has faded.”

Analysts at TD Securities (TDS) expect Germany’s Current Conditions Index to improve slightly in April.

Key quotes

"We expect little improvement in the Current Conditions Index of the ZEW with a slight tick up to 14 (mkt: 15.6)."

"On the forward-looking Expectations Index, however, we expect more of a gain as banking system stress looks to be increasingly in the rear-view mirror. We forecast a gain to -40, roughly in line with the consensus."

• NZD/USD picks up bids to extend early-day recovery from one-month low.
• RSI, MACD conditions suggest Kiwi bears are running out of steam.
• Six-week-old previous support line, 200-SMA challenges NZD/USD buyers before giving them control.
• Sellers need validation from 0.6165 to retake control.

NZD/USD snaps a two-day downtrend while extending the early-day rebound from the lowest levels in a month during the initial hour of Tuesday’s European session.

In doing so, the Kiwi pair cheers China data-inspired optimism for the Antipodeans while approaching a 1.5-month-old previous support line, now immediate resistance around 0.6200.

Apart from the China data-led upbeat signals for NZD/USD, the RSI rebound from the oversold territory and the receding bearish bias of the MACD also keeps the buyers hopeful.

However, a clear upside break of the stated support-turned-resistance of around 0.6200 becomes necessary for the intraday buyers of the Kiwi pair. Even so, the 200-SMA level surrounding 0.6220 can act as an extra upside filter before giving control to the bulls.

Following that, the NZD/USD pair can approach a fortnight-long descending resistance line, close to 0.6290 by the press time.

On the flip side, a horizontal area comprising lows marked in the last month, near 0.6170-65, restricts the immediate downside of the Kiwi pair.

Also challenging the short-term NZD/USD bears is the 78.6% Fibonacci retracement of the pair’s March-April moves, near 0.6145.

Overall, NZD/USD is likely to witness a corrective bounce but the bullish trend is still unconvincing to expect.

NZD/USD: Four-hour chart

Trend: Further recovery expected

• The index reverses two daily pullbacks and revisits 102.00.
• The risk-on trade seems to prevail early in the European session.
• Housing data, Fed’s Bowman next on tap later on Tuesday.

The greenback trades slightly on the defensive and returns to the 102.00 neighbourhood when tracked by the USD Index (DXY) on turnaround Tuesday.

USD Index looks at data, risk trends

The index reverses two daily advances in a row and retreats from Monday’s peaks around the 102.20 region against the backdrop of the better mood in the risk complex on Tuesday.

Indeed, mixed data releases in the Chinese calendar published earlier in the Asian trading hours appear to have reignited the appetite for the risk complex and puts the buck under some downside pressure.

On another front, bets on another 25 bps rate hike by the Federal Reserve at the May 3 gathering remain firm and are expected to limit occasional bouts of weakness in the dollar in the short term.

Data wise in the US, Housing Starts and Building Permits are due seconded by the speech by FOMC M. Bowman (permanent voter, centrist).

What to look for around USD

The upside momentum in the greenback met an initial resistance around 102.20 so far this week.

In the meantime, the marked retracement in the buck since March has been underpinned by the pick-up in the perception that the Federal Reserve could make a pause in its current tightening cycle just after the May meeting.

In favour of a pivot in the Fed’s normalization process, however, still emerges the persevering disinflation, nascent weakness in some key fundamentals and somewhat persistent concerns surrounding the banking sector.

Key events in the US this week: Building Permits, Housing Starts (Tuesday) – MBA Mortgage Applications, Fed’s Beige Book (Wednesday) – Initial Claims, Philly Fed Index, CB Leading Index, Existing Home Sales (Thursday) - Flash Manufacturing/Services PMIs (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 0.11% at 101.98 and the breach of 100.78 (2023 low April 14) would open the door to 100.00 (psychological level) and finally 99.81 (weekly low April 21 2022). On the other hand, the next hurdle comes at 102.80 (weekly high April 10) followed by 103.05 (monthly high April 3) and then 103.32 (55-day SMA).

New Bank of Japan (BoJ) Governor Kazuo Ueda said on Tuesday, there is “no immediate need to review the 2013 joint statement with the government.”

Ueda added that the “government labor reform has helped revive the economy.”

Market reaction

USD/JPY is unfazed by the above comments, keeping its range near 134.35, down 0.08% on the day.

FX option expiries for Apr 18 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0865 1.8b
• 1.0900 431m
• 1.0920-25 320m
• 1.1000 1.5b
• 1.1050 1.1b

- USD/JPY: USD amounts                     

• 134.15 301m
• 134.50 236m
• 135.00 417m

- USD/CHF: USD amounts        

• 0.9000 230m

- AUD/USD: AUD amounts  

• 0.6800 1.25b

- EUR/GBP: EUR amounts        

• 0.8700 350m
• 0.8810 279m

- EURCHF: EUR amounts

• 0.9830 258m
• 0.9870 250m
• 0.9900 241m

The International Monetary Fund (IMF) said in its latest report on Tuesday, China will be the top contributor to global growth over the next five years, with its share set to be double that of the US, per Bloomberg.

Key takeaways

According to Bloomberg calculations using data the fund released in its World Economic Outlook released last week, “the nation’s slice of global gross domestic product expansion is expected to represent 22.6% of total world growth through 2028.”

“In total, 75% of global growth is expected to be concentrated in 20 countries and over half in the top four: China, India, the US and Indonesia.” 

CME Group’s flash data for gold futures markets noted traders scaled back their open interest positions for the second session in a row on Monday, this time by around 2.7K contracts. Volume followed suit and shrank by around 21.2k contracts, reversing at the same time four consecutive daily builds.

Gold: Next on the upside aligns the 2023 high

Gold prices started the week on the back foot amidst shrinking open interest and volume. That said, a sustained pullback looks out of favour for the time being and occasional bouts of strength should keep targeting the 2023 peak near $2050 per ounce troy (April 13).

• GBP/USD has scaled above 1.2400 on better-than-anticipated UK Average Earnings data.
• CUK’s Claimant Count Change has increased by 28.2K and the Unemployment Rate has increased to 3.8%.
• The USD Index has slipped below 102.00 as investors are digesting fears of one more rate hike from the Fed.

The GBP/USD pair has climbed above 1.2400 as United Kingdom’s Office for National Statistics (ONS) has reported upbeat Average Earnings (Feb) data. Three month Labor cost index (excluding bonuses) has landed higher at 6.6% than the consensus of 6.2% but in line with the prior release.

The number of individuals who applied for jobless claims has jumped by 28.2K while the street was anticipating a decline of 11.8K. Three-month Unemployment Rate has jumped to 3.8% vs. the consensus and the prior release of 3.7%. An upbeat labor cost index might leave no other option for the Bank of England (BoE) than to hike rates further.

Contrary to that, UK Finance Minister was very confident about UK’s economic progress. UK Hunt cited that the British economy will outperform this year. Also, the economy will avoid recession.

S&P500 futures have remained choppy in the Asian session as investors s worried about quarterly results from banking and technology stocks, portraying a cautionary market mood. The US Dollar Index (DXY) has surrendered the crucial support of 102.00 as investors are digesting fears of one more rate hike from the Federal Reserve (Fed), which is expected to get announced in May.

Fed chair Jerome Powell eyes one more rate hike as United States core inflation rebounded in March, indicating extreme stubbornness due to the robust labor cost index. Meanwhile, retail demand for costly products has dropped as households are avoiding the higher cost of financing.

• EUR/GBP extends the previous day’s pullback from three-week high.
• UK Claimant Count Change improved to 28.2K in March, ILO Unemployment Rate rose to 3.8% in three months to February.
• ECB policymakers’ indecision joins cautious mood ahead of EU/German ZEW data to prod EUR/GBP traders.

EUR/GBP takes offers to refresh intraday low near 0.8825 after upbeat UK jobs report during early Tuesday. Adding strength to the bearish bias is the latest indecision of the European Central Bank (ECB) policymakers, as well as the cautious mood ahead of the Eurozone and Germany’s ZEW Survey data for April.

UK’s latest Claimant Count Change rose to 28.2K in March, versus -11.8K expected and -11.2K prior, whereas the ILO Unemployment Rate rose to 3.8% during three months to February from 3.7% prior and market forecasts. Further, Average Earnings rose during the three months to February.

Also read: UK ILO Unemployment Rate rises to 3.8% in February vs. 3.7% expected

Given the latest firmer UK data, coupled with the Bank of England (BoE) policymakers’ readiness to keep the rates higher, the EUR/GBP pair bears the burden of the hawkish BoE bias due to the data.

On the other hand, ECB policymakers appear divided between the 25 basis points (bps) and 50 bps move. On Monday, ECB policymaker Martins Kazaks said, “The central bank has the option of 25 basis points (bps) or 50 bps move in May.”

Against this backdrop, S&P 500 Futures remain indecisive even as Wall Street closed with mild gains. That said, the US 10-year and two-year Treasury bond yields snap a three-day uptrend with mild losses around 3.60% and 4.18% by the press time.

Looking forward, EUR/GBP traders should pay attention to the Eurozone and Germany’s sentiment figures from the ZEW Survey for April as market sentiment dwindles ahead of the data and can allow the bloc’s currency to regain upside momentum.

Technical analysis

A daily closing beyond a 10-week-old descending resistance line, around 0.8850 at the latest, becomes necessary for the EUR/GBP bulls.

In opinion of Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group, further downside in EUR/USD should meet tough contention around 1.0830.

Key Quotes

24-hour view: “While we expected EUR to drop yesterday, we indicated that ‘any weakness is viewed as part of a 1.0940/1.1045 range’. However, EUR easily breached 1.0940 and dropped to 1.0907. Downward momentum is improving and EUR is likely to decline further. In view of the oversold conditions, a sustained drop below 1.0890 is unlikely. The major support at 1.0830 is not expected to come into view. Resistance is at 1.0950; a break above 1.0975 would suggest that EUR is not declining further.”

Next 1-3 weeks: “We noted yesterday (17 Apr, spot at 1.0990) that while upward momentum is beginning to fade, only a breach of 1.0940 would indicate that EUR is not strengthening further. In NY trade, EUR cracked 1.0940 and fell to a low of 1.0907. Downward momentum appears to be building, albeit tentatively. From here, EUR is likely to trade with a downward bias but any decline is expected to face solid support at 1.0830. To put it another way, at this stage, a clear break below 1.0830 appears unlikely. The downside bias is intact as long as EUR stays below the ‘strong resistance’ level, currently at 1.1025.”

• The British Unemployment Rate unexpectedly rises to 3.8% in February.
• UK Claimant Count Change came in at 28.2K in March.
• The UK wages excluding bonuses advances to 6.6% YoY in February vs. 6.2% expected.

The latest data released by the Office for National Statistics (ONS) showed on Tuesday that the United Kingdom’s (UK) ILO Unemployment Rate climbed to 3.8% in February vs. the 3.7% expected while the claimant count change showed a surprise increase in the reported month.

The number of people claiming jobless benefits jumped by 28.2K in March, compared with -11.8K expected and -18.8K booked previously.

The UK’s average weekly earnings, excluding bonuses, arrived at 6.6% 3Mo/YoY in February versus 6.6% prior and 6.2% expected while the gauge including bonuses stood at 5.9% 3Mo/YoY in the second month of the year versus 5.9% previous and 5.1% expected.

Key points (via ONS)

GBP/USD reaction

GBP/USD picks up fresh bids to briefly recapture 1.2400 on the mixed UK employment data before retreating to 1.2397, where it now wavers. The pair is up 0.18% on the day.

About UK jobs

The UK Average Earnings released by the Office for National Statistics (ONS) is a key short-term indicator of how levels of pay are changing within the UK economy. Generally speaking, positive earnings growth anticipates positive (or bullish) for the GBP, whereas a low reading is seen as negative (or bearish).

• USD/MXN struggles for clear directions as it flirts with short-term key support.
• Multiple Doji candlesticks, sluggish oscillators suggest Mexican Peso buyers run out of steam.
• USD/MXN needs validation from 21-day EMA to convince short-term

USD/MXN appears indecisive around 18.00 amid early Tuesday in Europe, keeping the three-day trend of inaction.

That said, the Mexican Peso (MXN) pair has been lackluster and portrays Doji candlesticks since the last Friday. While doing the same, the quote also seesaws around a five-week-old ascending support line, close to 17.99 by the press time.

Apart from the Doji candlesticks that show traders’ indecision and challenge the USD/MXN pair’s downward trajectory from late March, the sluggish RSI (14) and MACD signals also tease the Mexican Peso sellers.

However, a daily closing beyond the 21-day Exponential Moving Average (EMA), close to 18.20 at the latest, becomes necessary for the USD/MXN buyers to convince intraday traders.

Following that, the monthly high of 18.40 and the 19.00 round figure will gain the market’s attention.

Should the USD/MXN bulls keep the reins past 19.00, tops marked during March and February, around 19.23 and 19.30 respectively, will be in the spotlight.

Alternatively, a daily closing below the aforementioned support line, close to 17.99, will be enough to challenge the multi-month low marked earlier in March, near 17.89.

If at all the USD/MXN remains bearish past 17.89, multiple lows marked in June 2017 around 17.80 and the year 2017 bottom surrounding 17.44 could please the bears afterward.

USD/MXN: Daily chart

Trend: Recovery expected

• AUD/USD climbed above 0.6720 after a decent recovery backed by mildly-hawkish RBA minutes.
• RBA policymakers were actively considering a continuation of a rate hike before keeping rates steady.
• The Aussie asset has been juggling between the 50% and 61.8% Fibonacci retracements.

The AUD/USD pair has stretched its recovery above 0.6720 in the early European session. The recovery in the Aussie asset is backed by mildly-hawkish Reserve Bank of Australia (RBA) minutes and a minimal correction in the US Dollar Index (DXY).

The USD Index has corrected to near 102.00 after a stellar recovery. The upside bias in the USD Index has not faded yet amid supportive fundamentals.

A scrutiny of RBA minutes showed that policymakers were actively considering a continuation of the rate hike but later settled on keeping rates steady at 3.6% to allow time to gather more information.

AUD/USD has shown a stellar recovery after building a strong base inside the 50% and the 61.8% Fibonacci retracements, which are placed at 0.6713 and 0.6690 respectively. The Fibonacci retracement is plotted from April 10 low at 0.6620 to April 14 high at 0.6806.

The Aussie asset has comfortably established above the 20-period Exponential Moving Average (EMA) at 0.6708, which indicates that the short-term trend is bullish.

After a range shift move from the bearish territory of 20.00-40.00 to the neutral range of 40.00-60.00, the Relative Strength Index (RSI) (14) is making efforts to climb above the 60.00 hurdle.

Going forward, a break above March 22 high at 0.6759 will drive the asset toward April 03 high at 0.6693. A breach above the latter would further drive the asset to February 06 low at 0.6855.

In an alternative scenario, more weakness will be observed on a breakdown of April 10 low at 0.6620, which will expose the Aussie asset to March 10 low at 0.6564 followed by the round-level support at 0.6500.

AUD/USD hourly chart

• Gold price stays defensive after declining in the last two consecutive days.
• Upbeat United States data, hawkish Federal Reserve bets challenge recent pullback in Treasury bond yields and US Dollar.
• Firmer China GDP allows XAU/USD to grind higher, anxiety ahead of US debt ceiling talks prod Gold buyers.
• Second-tier US data, Fed talks eyed for intermediate XAU/USD directions ahead of Friday’s Purchasing Managers Indexes.

Gold price (XAU/USD) struggles to defend early Tuesday’s corrective bounce around the $2,000 round figure as XAU/USD bears the burden of the US Dollar’s retreat heading into the European session. That said, the market’s mixed sentiment joins the cautious mood ahead of top-tier United States events and data to prod the Gold buyers, even if the recent China statistics have been impressive.

Gold price rebounds on US Dollar’s pullback

Despite the latest struggle of the XAU/USD bulls, Gold price manages to push back the bearish bias that dominated in the last two days amid a retreat of the United States Treasury bond yields and the US Dollar. That said, the US Dollar Index (DXY) eases to 102.00 as the 10-year and two-year Treasury bond yields snap a three-day uptrend with mild losses around 3.60% and 4.18% respectively by the press time.

United States statistics, hawkish Federal Reserve concerns prod XAU/USD bulls

Despite the latest retreat of the US Dollar and Treasury bond yields, the upbeat United States statistics join hawkish Federal Reserve (Fed) bets to put a floor under the USD, which in turn challenges the Gold buyers.

On Monday, the NY Empire State Manufacturing Index jumped to 10.8 for April while snapping the four-month downtrend, as well as marking the highest level since July last year. Further, the US National Association of Home Builders (NAHB) housing market index also rose for the fourth consecutive month in April to 45, versus 44 expected and prior reading. Following the data, Richmond Fed President Thomas Barkin said on Monday that he wants to see more evidence of inflation settling back to target. The policymaker also added that he feels reassured by what he is seeing in the banking sector.

It’s worth noting that Friday’s US consumer-centric data triggered the XAU/USD pullback from a multi-day high.

Cautious mood ahead of debt ceiling plan, China data favor Gold buyers

The latest cautious mood ahead of the US debt ceiling plan, up for publishing on Wednesday, challenges the US Dollar bulls, while also luring the Gold buyers, as the policymakers appear divided about the details before the June deadline.

Earlier in the day, “Stephen Joseph Scalise who serves as the House Majority Leader and representative for Louisiana's 1st congressional district has stated that the Grand Old Party, (GOP) debt ceiling plan is coming tomorrow,” per Reuters.

Over the weekend, President Christine Lagarde said that she has “huge confidence” the US will not allow the country to default on its debt.

Elsewhere, upbeat economics from China, one of the biggest Gold consumers, also favor the XAU/USD bulls. That said, China’s Q1 GDP grows 2.2% QoQ versus 2.2% expected and 0.0% prior. Further, Retail Sales growth jumps 10.9% YoY in March versus 7.4% expected and 3.5% prior whereas Industrial Production eased below 4.0% expected growth figures to 3.9%, versus 2.4% previous readings.

Multiple catalysts to watch for clear XAU/USD directions

Having witnessed Gold’s initial reaction to China’s first quarter Gross Domestic Product (GDP), the XAU/USD traders should wait for the US Housing Starts and Building Permits for March to aptly predict intraday moves of the metal. However, major attention will be given to the talks surrounding the US debt ceiling and Federal Reserve (Fed) as recent hawkish bias about the US central bank allowed the US Dollar to rebound and weigh on the Gold price.

Also read: Gold Price Forecast: XAU/USD bulls fight for control amid a potential bearish wedge

Gold price technical analysis

Gold price picks up bids inside a one-month-old bullish trend channel, suggesting overall upside momentum. However, the latest break of the 10-DMA support, as well as the latest bearish Moving Average Convergence and Divergence (MACD) signals, keep XAU/USD sellers hopeful.

That said, the stated channel’s bottom line, around $1,964, precedes the February 2023 peak surrounding $1,960, to restrict the short-term Gold price downside of the metal.

Meanwhile, XAU/USD recovery needs validation from the 10-DMA support-turned-resistance, close to $2,010 at the latest.

Following that, the stated channel’s top line, near $2,045, can act as the last defense of the Gold price before directing XAU/USD towards the previous yearly top surrounding $2,070. Above all, the all-time high of around $2,075, marked in 2020, acts as the last defense of the Gold sellers.

To sum up, Gold remains firmer within a bullish chart formation, despite the pullback in the XAU/USD price.

Gold price: Daily chart

Trend: Further downside expected

Analysts at TD Securities (TDS) provide a sneak peek at what to expect from the UK labor market report due for release at 06:00 GMT this Tuesday.

Key quotes

“Wage growth has slowed notably on a monthly basis since December, and we look for that to continue through February, helping to bring annual wage inflation down further.“

“We forecast headline wage growth of 5.00% 3m/y for the three months ending February (mkt: 5.1%) and ex-bonus wage growth of 6.2% (mkt: 6.2%). Risks skew to an upside surprise, though, if Dec & Jan were weighed on by strike action.”

“While the labor market is showing early signs of cooling, we expect an unchanged unemployment rate at 3.7% (mkt: 3.8%).”

• Asian stocks are majorly bearish as the quarterly result season has kicked off worldwide.
• Japanese equities are showing resilience after the BoJ announced anticipation for Japan’s inflation in a 1.6-1.9% range for CY2025.
• Chinese indices failed to capitalize on upbeat GDP and Retail Sales data.

Markets in the Asian domain are mostly bearish as investors are worried about earnings season amid a quantitative tightening environment. S&P500 ended Monday’s session on a mildly positive note after finding support from the banking sector. However, a sell-off in tech-giant Google kept upside capped. Tech-giant Google witnessed a sheer sell-off after reports that South Korea's Samsung Electronics was considering replacing Google with Microsoft-owned Bing as the default search engine on its devices.

The US Dollar Index (DXY) has shown a minor correction after a sheer recovery and is defending the immediate support of 102.00. Investors channelized their funds in the USD Index as chances for more rate hikes from the Federal Reserve (Fed) are extremely solid despite loosening labor market conditions and softening inflationary pressures.

At the press time, Japan’s Nikkei225 jumped 0.40%, SZSE Component dropped 0.18%, Hang Seng tumbled 0.80%, and Nifty50 slipped 0.28%.

Japanese stocks are showing resilience after the Bank of Japan (BoJ) announced anticipation for Japan’s inflation in a 1.6-1.9% range for CY2025. This has postponed consideration of an exit from the decade-long ultra-loose monetary policy. Also, a further tweak in Yield Curve Control (YCC) seems out of the picture. It seems confirmed that the pipeline of monetary stimulus will remain active to support the overall demand.

Chinese equities are struggling to gain traction despite the release of upbeat Gross Domestic Product (GDP) and Retail Sales data. China’s GDP has expanded by 2.2% in the first quarter of CY2023 as expected by the market participants. On an annual basis, China’s growth rate data has soared to 4.5% vs. the expectations of 4.0% and the former release of 2.9%. Apart from that, Retail Sales data has jumped dramatically to 10.6% against 7.4% as expected.

On the oil front, oil prices remained under pressure after a solid recovery in the USD Index. The black gold has shown some recovery after upbeat China economic data. It is worth noting that China is the leading importer of oil in the world and economic recovery in China supports recovery in oil demand.

UK Jobs report overview

Early Tuesday, the UK’s Office for National Statistics (ONS) will release the March month Claimant Count figures together with the ILO Unemployment Rate in the three months to February at 06:00 AM GMT.

Today’s UK employment data becomes more important for the GBP/USD pair traders considering the latest retreat indecision among the Bank of England (BoE) policymakers, especially amid looming recession woes.

The UK job market report is expected to show that the Average Weekly Earnings, Including Bonuses, in the three months to February, eased to 5.1% YoY versus 5.7% prior while ex-bonuses, the wages are seen declining to 6.2% from 6.5% prior readings.

Further, the ILO Unemployment Rate is likely to remain unchanged at 3.7% for the three months ending in February. It’s worth noting that the market consensus suggests the Claimant Count Change figures arrive at -11.8K in March versus -11.2K prior.

How could they affect GBP/USD?

GBP/USD grinds higher towards the 1.2400 round figures, printing mild gains while making rounds to intraday high during the first positive day in three. In doing so, the Cable pair cheers the latest US Dollar retreat amid a cautious mood ahead of Wednesday’s US debt ceiling plan. Also favoring the Cable pair buyers could be the latest recovery in the UK data and chatters suggesting no nearness to the Bank of England’s (BoE) policy pivot.

It’s worth noting that the recent chatters surrounding upbeat UK employment conditions and a likely increase in government investments could allow today’s British data to provide a positive surprise and help extend the latest GBP/USD rebound. However, the hawkish Fed concerns are a much stronger catalyst that weighs on the Cable pair and hence unless witnessing a strong UK jobs report, the Cable bears remain hopeful, apart from witnessing a kneejerk reaction to the mildly positive data.

Technically, a clear downside break of an upward-sloping support line from March 24, now immediate resistance near 1.2435, joins bearish MACD signals to keep the GBP/USD bears hopeful. However, the 21-DMA challenges the pair sellers around 1.2375 of late.

Key notes

GBP/USD Price Analysis: Approaches 1.2400 ahead of UK Employment data 

GBP/USD justifies pre-data anxiety around 1.2380 ahead of UK employment numbers

About UK jobs

The UK Average Earnings released by the Office for National Statistics (ONS) is a key short-term indicator of how levels of pay are changing within the UK economy. Generally speaking, positive earnings growth anticipates positive (or bullish) for the GBP, whereas a low reading is seen as negative (or bearish).

• GBP/JPY grinds near intraday high during three-day uptrend ahead of UK employment statistics.
• Seven-week-old ascending resistance line challenges buyers amid nearly overbought RSI (14).
• Multiple failures to cross immediate trend line resistance join price-negative RSI conditions to tease sellers.
• 10-DMA restricts immediate downside, 161.00 appears a tough nut to crack for GBP/JPY bears.

GBP/JPY buyers struggle to keep the reins as they prod a short-term key upside hurdle near 166.50 heading into Tuesday’s London open. In doing so, the cross-currency pair portrays the trader’s anxiety ahead of the UK’s March month Claimant Count figures, as well as the ILO Unemployment Rate in the three months to February.

Also read: GBP/USD justifies pre-data anxiety around 1.2380 ahead of UK employment numbers

Not only an upward-sloping resistance line from late February, around 166.50 at the latest, but a nearly overbought RSI (14) line also challenges the GBP/JPY pair buyers as traders await the key UK data.

Even if the cross-currency pair manages to cross the immediate trend line hurdle, it needs to be backed by upbeat British jobs report to aim for the December 2022 peak of around 169.30.

Following that, the 170.00 psychological magnet may challenge the GBP/JPY bulls before directing them to October 2022 high surrounding 172.15.

Meanwhile, the 10-DMA level of near 165.40 puts a floor under the GBP/JPY prices before convincing the short-term bears to aim for the monthly low of 162.90.

However, the pair sellers need to remain cautious unless the quote stays beyond the 161.00 support confluence encompassing the previous resistance line from October 2022 and an upward-sloping support line from the last September.

GBP/JPY: Daily chart

Trend: Pullback expected

• USD/CAD has gauged an intermediate cushion around 1.3380 as focus shifts to Canada’s Inflation.
• Stubborn US core inflation is still a cause of worry for Fed policymakers.
• A continuous decline in Canada’s inflation will allow the BoC to keep rates steady.

The USD/CAD pair has gauged an intermediate cushion after a gradual correction to near 1.3380 in the Tokyo session. The Loonie asset needs support for a confident recovery to defend further downside. A supportive move to the Loonie asset has come from the US Dollar Index (DXY), which has also found a cushion near 102.00.

S&P500 futures have generated nominal losses in the Tokyo session after a bullish settlement on Monday, portraying a minor caution in the overall upbeat market mood. Investors should brace for sheer volatility in United States equities as banking stocks will report their quarterly results and any sort of impact of banking turmoil on their asset quality.

Investors seem supportive of the USD Index as the Federal Reserve (Fed) is expected to elevate rates further to tame stubborn inflation. No doubt, US labor market conditions have eased and headline inflation has softened, the core inflation is still persistent and demands more restrictions on the interest rate policy.

The Canadian Dollar is likely to dance to the tunes of Canada’s inflation data. As per the expectations, the headline inflation will decelerate to 4.3% from the prior release of 5.2%. However, the monthly headline figure is seen expanding by 0.6% against an expansion of 0.4%, reported earlier.

Core CPI that excludes oil and food prices would soften to 4.2% vs. the former release of 4.7%. This may allow the Bank of Canada (BoC) Governor Tiff Macklem to continue its unchanged policy stance.

On the oil front, oil prices have attempted a recovery after $81.00 after the release of upbeat China’s Gross Domestic Product (GDP) data. It is worth noting that Canada is the leading exporter of oil to the United States and a recovery in oil prices will support the Canadian Dollar.

• GBP/USD is marching towards 1.2400 ahead of UK labor market data.
• March’s UK Employment data will have a significant impact on the interest rate decision by the BoE.
• A mind correction in the USD Index to 102.00 has provided some support to the cable.

The GBP/USD pair has extended its recovery above the immediate resistance of 1.2380 in the Asian session. The Cable is approaching the round-level resistance of 1.2400 ahead of the release of the United Kingdom Employment data.

Sheer volatility is expected from the Pound Sterling as the labor market data will have a significant impact on the interest rate decision by the Bank of England (BoE), which is scheduled for May. The Claimant Count Change is expected to decline by 11.8k, higher than the former release of 11.2K. The continuous addition of job seekers into the labor force indicates tight labor market conditions. Three-month Unemployment Rate is likely to remain steady at 3.7%. Average Earnings excluding bonuses are expected to soften to 6.2% from the former recording of 6.5%.

The US Dollar Index (DXY) has slipped to near 102.00, showing lackluster performance amid an absence of economic indicators this week. However, investors will keep an eye on the Federal Reserve’s (Fed) Beige Book, which provides the current economic situation of 12 Fed districts.

GBP/USD has shifted into a bearish trajectory after a breakdown of the Ascending Triangle chart pattern formed on a two-hour scale. The upward-sloping trendline of the aforementioned chart pattern is plotted from March 24 low at 1.2191 while the horizontal resistance is placed from April 04 high at 1.2525.

The 20-period Exponential Moving Average (EMA) at 1.2404 is acting as a barricade for the Pound Sterling bulls.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in the bearish range of 20.00-40.000, indicating the downside momentum is active.

A slippage below April 10 low at 1.2345 will expose the asset to March 30 low at 1.2294 followed by March 27 low at 1.2219.

On the flip side, a recovery move above April 13 high at 1.2537 will drive the asset towards a fresh 10-month high at 1.2597, which is 08 June 2022 high. A breach of the latter will expose the asset to May 27 high at 1.2667.

GBP/USD two-hour chart

• USD/INR struggles to extend two-day rebound from the lowest levels in 11 weeks.
• One-month-old descending resistance line, 200-SMA challenge Indian Rupee sellers.
• Multiple bottoms around 81.50, bullish MACD signals keep pair buyers hopeful.

USD/INR bulls prod the short-term key hurdles while trying to defend the latest recovery from a multi-day low during early Tuesday. In doing so, the Indian Rupee (INR) pair grinds higher around the 82.00 threshold after rising in the last two consecutive days.

It’s worth noting that the USD/INR pair’s multiple rebounds from the 81.50 horizontal support, stretched since early February, join bullish MACD signals to keep buyers hopeful.

However, a clear upside break of a downward-sloping resistance line from March 15 and the 200-SMA, respectively near 82.05 and 82.15, becomes necessary for the USD/INR bulls to keep the reins.

Following that, the monthly high of around 82.50 may challenge the pair buyers before directing them to the multi-day resistance area surrounding the 83.00 round figure.

Meanwhile, pullback moves may initially aim for the early April lows surrounding 81.75 before challenging the aforementioned horizontal support around 81.50. Also acting as a downside filter is the late January swing low around 81.35.

In a case where USD/INR bears keep the reins past 81.35, the odds of witnessing a slump toward the yearly low marked in January around 80.88 will be in focus.

Overall, USD/INR remains on the bull’s radar unless breaking 81.35. However, the pair’s road to the north appears long and bumpy.

USD/INR: Four-hour chart

Trend: Further upside expected

• EUR/USD picks up bids to refresh intraday high, snaps two-day downtrend amid sluggish session.
• US Treasury bond yields, Dollar Index struggle to defend latest recovery ahead of active economic calendar.
• Hawkish Fed bets, ECB policymakers’ indecision keep Euro bulls hopeful.
• Eurozone, German ZEW sentiment data, US housing numbers to direct intraday moves.

EUR/USD renews its intraday high around 1.0940 while licking its wounds amid early Tuesday morning in Europe. In doing so, the Euro pair prints the first daily gains in three by recovering from the lowest levels in a week.

The Euro pair’s latest rebound could be linked to the US Dollar’s retreat while tracking the US Treasury bond yields. Also likely to challenge the EUR/USD bulls is the consolidation ahead of today’s key Eurozone and German ZEW sentiment figures for April.

That said, the US Dollar Index (DXY) retreats to 102.00 as the 10-year and two-year Treasury bond yields snap a three-day uptrend with mild losses around 3.60% and 4.18% by the press time.

Also likely to have lured the EUR/USD pair buyers are the recent chatters that the European Central Bank (ECB) is almost certain to announce a 0.25% rate hike in May, even as policymakers appear divided between the 25 basis points (bps) and 50 bps move. On Monday, ECB policymaker Martins Kazaks said, “The central bank has the option of 25 basis points (bps) or 50 bps move in May.”

It’s worth noting that the latest cautious mood ahead of the US debt ceiling plan, up for publishing on Wednesday, also challenges the US Dollar bulls as the policymakers are divided about the details ahead of the June deadline. Over the weekend, President Christine Lagarde said that she has “huge confidence” the US will not allow the country to default on its debt.

Recently, the upbeat US data propelled the market’s bets on the 0.25% Fed rate hike in May, as well as cut the odds of a rate reduction from the US central bank sometime in late 2023. The same contrast with the ECB policymakers’ indecision and firmer yields to favor the US Dollar.

Amid these plays, S&P 500 Futures remain indecisive even as Wall Street closed with mild gains.

Moving on, Eurozone and Germany’s ZEW Survey data for April will precede the US Housing Starts and Building Permits for March to direct intraday EUR/USD moves. However, major attention will be given to the risk catalysts and central bank talks for clear directions.

Technical analysis

EUR/USD rebounds from a one-month-old ascending support line, around 1.0925 by the press time, but the 10-DMA level surrounding 1.0940 restricts the immediate upside of the Euro pair.

• WTI crude oil clings to mild gains while paring the biggest daily loss in a month.
• China data adds strength to the corrective bounce in Oil price.
• Bearish MACD signals, 50-SMA challenges buyers but further downside needs validation from previous resistance line from January.

WTI crude oil stays defensive around the lowest level in one week, near $81.05 during early Tuesday. In doing so, the black gold struggles to cheer China’s upbeat data while consolidating the previous day’s heavy loss, the biggest in one month.

As per the latest economic updates from China’s National Bureau of Statistics (NBS), the first quarter (Q1) Gross Domestic Product (GDP) grows 2.2% QoQ versus the 2.2% expected and 0.0% prior. Further, Retail Sales growth jumps 10.9% YoY in March versus 7.4% expected and 3.5% prior whereas Industrial Production eased below 4.0% expected growth figures to 3.9%, versus 2.4% previous readings.

Apart from the mostly upbeat China data, nearly oversold RSI (14) line also allows the black gold to grind higher, recently approaching the 50-SMA hurdle of around $81.40.

It’s worth noting, however, that the bearish MACD signals and a two-week-old horizontal resistance area around $81.60-80, could challenge the commodity’s further upside. Following that, the recent multi-day high marked in the last week, around $83.40 will be in focus.

On the contrary, WTI’s further downside can aim for the $80.00 round figure ahead of challenging previous resistance line from late January, now support close to $79.20.

Should the quote remains bearish past $79.20, an upward-sloping support line from March 20, near $77.30, acts as the last defense of the WTI bulls.

WTI: Four-hour chart

Trend: Limited downside expected

• Gold price is probing the $2,000 near a 61.8% Fibonacci retracement.
• Gold price bears are on the prowl at key resistance. 

Gold price remains in the key support area in Asia with the bulls probing the bearish commitments at the psychological $2,000/oz level. XAU/USD has moved up from a low of $1,993.41 to score a high of $1,999.41 so far.

The theme driving the markets on a low calendar week stays with the sentiment surrounding the Federal Reserve and questions over whether the central bank is on the brink of pausing or not. On Friday, the US Dollar was boosted by hawkish rhetoric from Federal Reserve´s Governor Christopher Waller. The top central banker said that despite a year of aggressive rate increases, the Fed "hasn't made much progress" in returning inflation to their 2% target and argued that rates still need to go up.

There were some bullish components in the latest US Retail Sales and Consumer spending for the past quarter was solid also. The April survey of business activity in New York State was rising for the first time in five months also. ´´New orders jumped by a record 46.8pts in the month to 25.1, a one-year high. The shipments gauge also surged more than 37pts. Prices received rose 0.8 to 23.7pts indicating mild inflationary pressure. Delivery times and the average workweek both increased,´´ analysts at ANZ Bank explained. 

The combination of hawkish rhetoric and the recent data is making greenback-bullion less attractive for overseas buyers, while benchmark Treasury yields climbed to a more than two-week high. Fed funds futures are showing that the expectations that the Fed will start cutting rates later this year have been pushed back to November from September, with a smaller cut now anticipated also. 

Looking ahead, investors will focus on US flash PMIs for April and any further comments from Fed officials before they enter into a blackout period from April 22 ahead of the Fed's May 2-3 meeting. In this regard, analysts at TD Securities said the S&P PMIs for early April will offer a first comprehensive look at the state of the US economy post-banking turmoil. ´´Note that the March data was not clearly impacted by banking jitters, but perhaps it was too soon to be reflected: both the mfg and services PMIs registered their third consecutive increase then, with the latter advancing further into expansion territory.´´

Gold technical analysis

Despite the bid, technically, the bears are in the market while below the trendline support that is currently acting as a counter-trendline:

There is a bullish correction in the making but bears are lurking at this juncture, guarding $2,000 near a 61.8% Fibonacci retracement of the prior 4-hour bearish sell-off.

• USD/JPY prods two-day uptrend as it eases from multi-day high.
• Fears that Japan’s fiscal policy, recent bond buying challenge BoJ’s ultra-loose monetary policy check Yen pair buyers.
• Hawkish Fed bets, upbeat US data favor yields, US Dollar despite latest pullback in prices.
• Second-tier US data, risk catalysts eyed for clear directions.

USD/JPY bulls struggle to keep the reins during a three-day winning streak amid early Tuesday. While portraying the same, the Yen pair eases from an intraday high, as well as the highest levels since March 15, to 134.50 at the latest.

The latest chatters surrounding the Bank of Japan’s (BoJ) easy money policy seem to weigh on the Yen pair as the decision-makers try to defend the current policy amid challenges from bond buying and fiscal moves.

That said, new Bank of Japan (BoJ) Governor Kazuo Ueda said that BoJ bond purchases are not aimed at monetizing government debt while adding, “Interest rates are determined by various factors.”

Before BoJ’s Ueda, the newly appoint BoJ Deputy Governor Shinichi Uchida also tried to defend the current monetary policy as he said, “Fiscal constraints won't undermine the ability to carry out monetary policy.”

Elsewhere, the market’s anxiety ahead of the key US PMIs and Japan inflation numbers, as well as due to mixed updates from China, also weighs on the USD/JPY price. While portraying the mood, S&P 500 Futures remain indecisive even as Wall Street closed with mild gains whereas Japan’s Nikkei 225 rises 0.67% intraday to 28,705 at the latest.

On the other hand, recently upbeat US data fuels the market’s bets on the 0.25% Fed rate hike in May, as well as cut the odds of a rate reduction from the US central bank sometime in late 2023. The same could be linked to the recently firmer US Treasury bond yields, before the latest retreat. That said, the US 10-year and two-year Treasury bond yields snap a three-day uptrend with mild losses around 3.60% and 4.18% by the press time.

Not only the data and the yields but Fed talks also favored the hawkish Fed bets and the USD/JPY buyers previously. That said, the NY Empire State Manufacturing Index jumped to 10.8 for April while snapping the four-month downtrend, as well as marking the highest level since July last year. Further, the US National Association of Home Builders (NAHB) housing market index also rose for the fourth consecutive month in April to 45, versus 44 expected and prior reading. Following the data, Richmond Fed President Thomas Barkin said on Monday that he wants to see more evidence of inflation settling back to target. The policymaker also added that he feels reassured by what he is seeing in the banking sector.

Moving on, USD/JPY traders may witness further volatility as the economic calendar gets active. Though, Fed bets and yields are the key to follow for clear directions.

Technical analysis

USD/JPY pair’s successful trading above the 200-day Exponential Moving Average (EMA), around 133.70 by the press time, allows the Yen pair buyers to remain hopeful despite the recent struggle.

Following the release of the key economic data from China, the country’s National Bureau of Statistics (NBS) released a statement, via Reuters, expressing their outlook on the economy.

Key quotes

Related reads

• China data dump: GDP beat by 0.5% vs expectations, Retail Sales, big beat 10.6% vs 7.4%
• USD/CNH shows wild moves after upbeat China’s GDP and Retail Sales data

• NZD/USD initially refreshed intraday high before retreating of late.
• China Q1 GDP matches market forecasts, Retail Sales and Industrial Production also improve in March.
• Hawkish Fed bets, cautious mood ahead of New Zealand Q1 CPI prod Kiwi pair buyers.

NZD/USD seesaws around 0.6180, recently easing from an intraday high, as bulls remain unconvinced despite upbeat China data during early Friday. The reason could be linked to the hawkish Fed bets and cautious mood ahead of Zealand Q1 Consumer Price Index (CPI).

China’s Q1 GDP grows 2.2% QoQ versus the 2.2% expected and 0.0% prior. Further, Retail Sales growth jumps 10.9% YoY in March versus 7.4% expected and 3.5% prior whereas Industrial Production eased below 4.0% expected growth figures to 3.9%, versus 2.4% previous readings.

Also read: Breaking: China data dump: GDP beat by 0.5% vs expectations, Retail Sales, big beat 10.6% vs 7.4%

On the other hand, recently firmer US data propel the market’s bets on the 0.25% Fed rate hike in May, as well as cut the odds of a rate reduction from the US central bank sometime in late 2023. Not only the data but Fed talks and upbeat yields also favored the hawkish Fed bets and favored the US Dollar, which in turn weighs on the NZD/USD prices.

It should be noted that the Reserve Bank of New Zealand (RBNZ) surprised markets with a 0.50% rate hike in its latest monetary policy meeting, which in turn escalates the importance of this week’s NZ CPI, expected to rise to 2.0% QoQ versus 1.4% prior.

That said, mixed concerns surrounding the US-China tussles over Taiwan and the doubts about recession also prod the NZD/USD buyers of late.

While portraying the mood, S&P 500 Futures remain directionless whereas Australia’s ASX 200 prints a 0.30% intraday loss by the press time.

Moving on, the US Housing Starts and Building Permits for March will be important to watch for intraday directions. However, major attention will be given to New Zealand’s quarterly CPI, up for publishing on Thursday, as well as Friday’s US PMIs for April.

Technical analysis

A daily closing below the 200-DMA, around 0.6160 by the press time, becomes necessary for the NZD/USD bear’s conviction.

New Bank of Japan (BoJ) Governor Kazuo Ueda said in the Japanese parliament on Tuesday, “the BoJ buying govt debt as part of monetary policy.”

Additional quotes

“BoJ bond purchases not aimed at monetizing govt debt.”

“Interest rates are determined by various factors.”

Market reaction

USD/JPY was last seen trading near 134.50, modestly flat on the day.

• USD/CHF has gyrated in a wide range after the release of upbeat China’s GDP data.
• China’s robust retail demand shows that the economy will come out of the disinflationary process.
• S&P500 futures are showing topsy-turvy moves ahead of US banks’ earnings report.

The USD/CNH pair has shown a wild gyration after the release of upbeat China’s Gross Domestic Product (GDP) data. China’s GDP has expanded by 2.2% in the first quarter of CY2023 as expected by the market participants. On an annual basis, China’s growth rate data has soared to 4.5% vs. the expectations of 4.0% and the former release of 2.9%.

A significant jump in Chinese GDP figures indicates that the economy is capitalizing on monetary support provided by the government and the People’s Bank of China (PBoC). However, the growth rate is not consistent with the anticipation made for the whole year, which is around 5%.

March Retail Sales jumped dramatically to 10.6% while the street was anticipating acceleration by 7.4%. This indicates that robust demand from households would allow firms to hike the prices of goods and services at factory gates and eventually will take the economy out of the disinflationary process.

Later this week, PBoC’s interest rate decision will be keenly watched. Last week, the PBoC promised of providing further monetary support to step up retail demand. Chinese inflation is continuously declining for the past few months despite the reopening of the economy after lockdown curbs.

Meanwhile, S&P500 futures are showing topsy-turvy moves as major United States banks are going to report their earnings ahead. Investors are worried that the impact of banking turmoil, seen in March, could dampen other banks’ asset performance. The US Dollar Index (DXY) is continuously performing sideways around 102.10

New Bank of Japan (BoJ) Deputy Governor Shinichi Uchida said on Tuesday, “fiscal constraints won't undermine ability to carry out monetary policy.”

“Central banks will not default,” Uchida added.

more to come ...

• AUD/USD initially refreshed intraday high before recently easing from the top.
• RBA Minutes fail to convince market players of policymakers’ hawkish capacity.
• China data dump portrays solid economic transition of Australia’s biggest customer.
• Sluggish markets, hawkish Fed bets exert additional downside pressure on AUD/USD price.

AUD/USD pares the first daily gains in three around 0.6710, after an initial jump to 0.6720, as strong China growth data joins RBA Minutes-led optimism during early Tuesday.

That said, China’s Q1 GDP grows 2.2% QoQ versus 2.2% expected and 0.0% prior. Further, Retail Sales growth jumps 10.9% YoY in March versus 7.4% expected and 3.5% prior whereas Industrial Production eased below 4.0% expected growth figures to 3.9%, versus 2.4% previous readings.

Earlier in the day, the latest Reserve Bank of Australia (RBA) Monetary Policy Meeting Minutes appear slightly hawkish as it said that the board considered a rate hike at the April meeting, before deciding to pause.

Also read: RBA minutes: Australia's central bank actively considered April rate hike before deciding on pause

Apart from the China Q1 GDP and RBA Minutes, the hawkish Fed bets seem to also play a role in directing short-term AUD/USD moves.

That said, Monday’s upbeat US data followed Friday’s upbeat consumer-centric statistics and propelled the market’s bets on the 0.25% Fed rate hike in May, as well as cut the odds of a rate reduction from the US central bank sometime in late 2023. Not only the data but Fed talks and upbeat yields also favored the hawkish Fed bets and favored the US Dollar, which in turn weighed on the AUD/USD prices.

On Monday, the NY Empire State Manufacturing Index jumped to 10.8 for April while snapping the four-month downtrend, as well marking the highest level since July last year. Further, the US National Association of Home Builders (NAHB) housing market index also rose for the fourth consecutive month in April to 45, versus 44 expected and prior reading. Following the data, Richmond Fed President Thomas Barkin said on Monday that he wants to see more evidence of inflation settling back to target. The policymaker also added that he feels reassured by what he is seeing in the banking sector.

Amid these plays, S&P 500 Futures remain directionless while Australia’s ASX 200 prints a 0.30% intraday loss by the press time.

Having witnessed the initial market reaction to the RBA Minutes, AUD/USD traders await China’s Q1 GDP, expected 2.2% QoQ versus 0.0% prior, for fresh impulse. Should the Chinese growth numbers fail to match the market’s high expectations, the Aussie pair may print further losses. Following that, the US Housing Starts and Building Permits for March will join Fed talks to entertain the traders.

Technical analysis

Although the 21-SMA and 200-SMA, respectively near 0.6730 and 0.6685, restrict the AUD/USDD pair’s immediate moves, bearish MACD signals and a steady RSI (14) line hint at the continuation of the pair’s downward trajectory.

China released a series of red data on Tuesday as follows:

Gross Domestic Product (GDP)

• Chinese GDP (YoY) Q1: 4.5% (expected 4.0%; previous 2.9%).

Industrial Production 

• Chinese Industrial Production (YoY) Mar: 3.9% (expected 4.4%; previous 2.4%).

Retail Sales

• Chinese Retail Sales (YoY) Mar: 10.6% (exp 7.5%; previous 3.5%).
• Retail Sales YTD (YoY) Mar: 5.8% (exp 3.7%; previous 3.5%).

AUD/USD update

AUD/USD has rallied on two accounts, one being the Reserve Bank of Australia minutes and then the Chinese data dump. 

The 4-hour chart sees the price testing the sideways channel´s highs near 0.6720 but with being on the backside of the prior bullish trend, bulls have a lot of work to do to take back control. 

About the data

The Gross Domestic Product (GDP) released by the National Bureau of Statistics of China studies the gross value of all goods and services produced by China. The indicator presents the pace at which the Chinese economy is growing or decreasing. As the Chinese economy has influence on the global economy, this economic event would have an impact on the Forex market. Generally speaking, a high reading is seen as positive (or bullish) for the CNY, while a low reading is seen as negative (or Bearish).

Industrial output is released by the National Bureau of Statistics of China. It shows the volume of production of Chinese Industries such as factories and manufacturing facilities. A surge in output is regarded as inflationary which would prompt the People’s Bank of China would tighten monetary policy and fiscal policy risk. Generally speaking, if high industrial production growth comes out, this may generate a positive sentiment (or bullish) for the CNY, whereas a low reading is seen as negative (or Bearish) for the CNY.

The Retail Sales report released by the National Bureau of Statistics of China measures the total receipts of the retailed consumer goods. It reflects the total consumer goods that the various industries supply to the households and social groups through various channels. It is an important indicator to study the changes in the Chinese retail market and reflecting the degree of economic prosperity. In general, A high reading is seen as positive (or bullish) CNY, while a low reading is seen as negative (or bearish) for the CNY.

• AUD/JPY has surpassed the critical resistance of 90.30 post the release of RBA minutes.
• RBA paused the policy-tightening spell to allow time to gather more information.
• The BoJ has anticipated inflation in a range of 1.6-1.9% for CY2025.

The AUD/JPY pair has scaled above the critical resistance of 90.30 strongly after the release of the Reserve Bank of Australia (RBA) minutes. The RBA minutes convey that policymakers had considered the decision of hiking rates further actively. However, the decision to maintain THE status-quo was taken later to allow time to gather more information.

Citing Australia’s banking system as resilient, RBA policymakers thought that the Board’s future cash rate decisions would depend on developments in the global economy, trends in household spending, and the outlook for inflation and the labor market.

Going forward, investors will keep an eye on China’s Gross Domestic Product (GDP) data. According to the estimates, the Chinese economy has expanded by 2.2% vs. a stagnant performance shown in the last quarter of CY2022. On an annual basis, the economy is expanded by 4.0% against the 2.9% growth rate recorded earlier. It is worth noting that Australia is the leading trading partner of China and higher Chinese GDP data would support the Australian Dollar.

Later this week, the announcement of the interest rate decision by the People’s Bank of China (PBoC) will be of key importance. Last week, the PBoC promised of providing further monetary support to step up retail demand. Chinese inflation is continuously declining for the past few months despite the reopening of the economy after lockdown curbs.

On the Japanese Yen front, the Bank of Japan is considering a projection for consumer prices for the 2025 fiscal year to rise 1.6-1.9% in a move seen to keep market players from betting on the central bank to head to exit from stimulus, quoted by Jiji news, reported by Reuters. This has also postponed the chances of an exit from expansionary monetary policy as the concept cannot be entertained till Japanese inflation sustain confidently above 2%.

• AUD/NZD picks up bids to reverse the early losses on RBA Minutes.
• RBA Minutes appear slightly hawkish while justifying the pause in rate hike trajectory.
• China Q1 GDP, risk catalysts and New Zealand’s quarterly inflation data are the key for clear directions.

AUD/NZD cheers upbeat statements from the latest Reserve Bank of Australia (RBA) Monetary Policy Meeting Minutes during early Tuesday, picking up bids to refresh intraday high near 1.0850 at the latest. In doing so, the exotic pair reverses the initial losses, the first in the seven days, to rejoin the bullish run.

The latest RBA Minutes appear hawkish as it said that the board considered a rate hike at the April meeting, before deciding to pause.

Also read: RBA minutes: Australia's central bank actively considered April rate hike before deciding on pause

Apart from the RBA Minutes, the cautious optimism in the market, head of the key China data and amid receding fears of recession, also underpin the AUD/NZD pair’s latest run-up. That said, the recent comments from the International Monetary Fund (IMF) about China’s economic growth seems to underpin the AUD/NZD run-up.

“In its latest World Economic Outlook, the IMF forecasts that China’s economic growth contribution will be nearly double that of India and the US. India is forecast to deliver 12.9% of global growth while the US is forecast to deliver 11.3% of the growth,” per analysts at ANZ.

While portraying the mood, S&P 500 Futures remain directionless while Australia’s ASX 200 prints a 0.30% intraday loss by the press time.

That said, the initial market reaction to the RBA Minutes appears impressive. However, the AUD/NZD pair traders should rely on the China Q1 GDP, expected 2.2% QoQ versus 0.0% prior, for clear directions. Above all, Thursday’s New Zealand Q1 Consumer Price Index (CPI), expected to rise to 2.0% QoQ versus 1.4% prior, will be crucial for the exotic pair traders to watch for clear directions.

Technical analysis

The MACD indicator flashes bullish MACD signals whereas the RSI (14) line grinds higher past the 50 level, not overbought, which in turn suggests further advances of the AUD/NZD pair unless it drops below a fortnight-old ascending support line, close to 1.0770 by the press time.

Also read: AUD/NZD Price Analysis: Retreats below 1.0860-70 key hurdle ahead of RBA Minutes, China Q1 GDP

Reuters reports that the minutes of the Reserve Bank of Australia's (RBA) April 4 policy meeting released on Tuesday showed the decision not to hike was a close call, as a surprise surge in migration and pay rises for public workers added to the case for more action.

´´In the end, members felt it was best to hold for now and assess the impact of the steep 350 basis points of tightening already delivered which was clearly helping to cool consumer demand.´´

"Members agreed there was a stronger case to pause at this meeting and reassess the need for further tightening at future meetings," the minutes showed.

´´The Board was keen to see data on inflation, employment, consumption and business conditions in April, along with the RBA staff's updated economic forecasts before deciding whether to change the 3.6% cash rate at the May meeting.´´

´´RBA Governor Philip Lowe has since emphasized that the pause did not imply the increases were over and it might tighten further should inflation and consumer demand stay hot.´´

´´The Board also noted the domestic banking system was strong enough to withstand recent stress in global financial markets and was not a handbrake on policy.´´

AUD/USD update

AUD/USD has popped a couple of structure levels on the minutes and is making tracks in the 0.67s.

In recent trade today, the People’s Bank of China (PBOC) set the yuan at 6.8814 vs. the estimate of 6.8828.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day's closing level and quotations taken from the inter-bank dealer.

• EUR/USD is showing a sideways move around 1.0926 following the footprints of the USD Index.
• ECB policymakers are divided over the scale of the interest rate hike to be announced in May.
• The major currency pair has dropped below the upward-sloping trendline plotted from 1.0714.

The EUR/USD pair is displaying topsy-turvy moves in a narrow range around 1.0926 in the Asian session. The major currency pair is struggling to find a direction following the footprints of the sideways US Dollar Index (DXY).

S&P500 futures are showing nominal losses in Asia as investors are worried about the upcoming quarterly result season, portraying a minor decline in the risk appetite of the market participants. Investors are worried about any holes in banking quarterly reports after the collapse of United States regional banks.

The Euro has got inside the woods as European Central Bank (ECB) policymakers are divided over the pace of the policy-tightening spell to be adopted in May’s monetary policy meeting. ECB policymaker Martins Kazaks said on Monday, the central bank has the option of 25 basis points (bps) or 50 bps move in May.

On a two-hour scale, EUR/USD witnessed a steep fall after failing to sustain above the 161.8% Fibonacci Extension (placed from April 04 high at 1.0973 to April 10 low at 1.0837) at 1.1057. The major currency pair has dropped below the upward-sloping trendline plotted from March 24 low at 1.0714.

The 20-period Exponential Moving Average (EMA) at 1.0962 is acting as a barrier for the Euro bulls.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, advocating more weakness ahead.

A decisive break below April 12 low at 1.0915 will drag the asset towards April 10 low at 1.0837 and April 03 low at 1.0788.

On the flip side, a break above the psychological resistance of 1.1000 will drive the asset to a fresh annual high at 1.1068, followed by the round-level resistance at 1.1100.

EUR/USD two-hour chart

• Natural Gas price remains sidelined at the highest levels in a month after rising for the last two consecutive days.
• Cautious markets ahead of the key data, lack of major news prod XNG/USD traders.
• US debt ceiling plan, China Q1 GDP and the US PMI are crucial for short-term Natural Gas Price directions.

Natural Gas (XNG/USD) treads water around $2.43 as bulls run out of steam amid early Tuesday, after a two-day uptrend. In doing so, the energy instrument seesaws around the highest levels in a month amid cautious markets ahead of the key China first quarter (Q1) Gross Domestic Product (GDP).

The XNG/USD’s recent run-up could be linked to the risk-on mood, as well as hopes of more energy demand. With this, the energy instrument fails to justify the latest US Dollar recovery amid hawkish Fed bets and upbeat US data.

That said, a waiver of Democratic City’s Natural Gas ban renews hopes of more XNG/USD demand. “A federal appeals court ruled unanimously Monday that a natural gas ban proposed by the City of Berkeley, California, would illegally circumvent federal law,” said Fox News. On the same line, hopes of China’s gradual recovery and receding fears of recession underpin the hopes of more Natural Gas demand.

However, the US Dollar strength prods the XNG/USD bulls as the US Dollar Index (DXY) stretched Friday’s rebound from a one-year low on Monday as upbeat US data and hawkish Fed talks joined the increasing odds of another Fed rate hike in May, as well as a reduction in the market’s bets suggesting a rate cut in later 2023. The same could be true for the US Treasury bond yields as the US 10-year and two-year bod coupons printed three-day uptrend to 3.60% and 4.20% respectively.

Talking about the data, the NY Empire State Manufacturing Index jumped to 10.8 for April while snapping the four-month downtrend, as well as marking the highest level since July last year. Further, the US National Association of Home Builders (NAHB) housing market index also rose for the fourth consecutive month in April to 45, versus 44 expected and prior reading. Also fueling the DXY were comments from the Fed officials as Richmond Fed President Thomas Barkin said on Monday that he wants to see more evidence of inflation settling back to target. The policymaker also added that he feels reassured by what he is seeing in the banking sector.

Furthermore, recent optimism on Wall Street and easing fears of global recession also allow the Natural Gas price to remain firmer. However, fears of warmer weather in the West and an unimpressive holiday season challenge the XNG/USD bulls.

Moving on, China’s Q1 GDP, expected 2.2% QoQ versus 0.0% prior, can offer immediate directions to the Natural Gas price ahead of the US PMIs and weekly gas inventory data from the US Energy Information Administration (EIA).

Technical analysis

While two-month-old horizontal support puts a floor under the Natural Gas price near $2.13, the XNG/USD recovery needs validation from a downward-sloping resistance line from January 12, near $2.63, to convince buyers. That said, the recently firmer oscillators and repeated bounces off the stated horizontal support keep buyers hopeful.

Stephen Joseph Scalise who serves as the House Majority Leader and representative for Louisiana's 1st congressional district has stated that the Grand Old Party, (GOP) debt ceiling plan is coming tomorrow. 

Meanwhile, Speaker Kevin McCarthy on Monday previewed what he hopes House Republicans can pass in the next few weeks to raise the debt ceiling during a speech at the New York Stock Exchange.

“So here is our plan: In the coming weeks, the House will vote on the bill to lift the debt ceiling into the next year, save taxpayers trillions of dollars, make us less dependent on China, curb our inflation, all without touching social security and Medicare,” CNN Business reported him telling a crowd of traders and analysts on the sixth floor of the exchange.

US Dollar update

The US Dollar index, DXY, rose on Monday on further data that has bolstered expectations the Federal Reserve will raise interest rates in May.

The DXY index is making tracks from support and is now on the backside of the prior micro trendline. This leaves a bullish bias while above 101.50 with eyes on 102.80/50.

Early Tuesday morning in Asia, at 01:30 GMT, the Reserve Bank of Australia (RBA) will release the minutes of the latest monetary policy meeting held in March.

The Australian central bank surprised markets by pausing its 10-time rate hike trajectory in the last monetary policy meeting. However, the policymakers have been trying to convince markets that they can renew the rate lift cycle, which in turn makes today’s RBA Meeting Minutes more important for the AUD/USD pair traders.

Apart from the RBA Minutes, China’s first quarter (Q1) Gross Domestic Product (GDP), expected 2.2% QoQ versus 0.0% prior, will also entertain the AUD/USD pair traders due to Canberra’s trading ties with Beijing. The data is up for release at 02:00 AM GMT and is scheduled to be joined by China Retail Sales and Industrial Production for March.

Ahead of the China data, Analysts at the Australia and New Zealand Banking Group (ANZ) said, “Any weakness in key economic data, including fixed asset investment and industrial production in China will weigh on sentiment.”

How could the minutes affect AUD/USD?

AUD/USD portrays the market’s pre-event anxiety as it makes rounds to 0.6700 after declining in the last two consecutive days. The Aussie pair previously took clues from the broad US Dollar gains, as well as geopolitical fears emanating from China. Adding strength to the Aussie pair’s bearish bias is the latest Reserve Bank of Australia’s (RBA) pause in the rate hike trajectory.

That said, the Aussie pair’s further downside hinges on how the RBA Minutes manage to justify its latest stop to the rate hike trajectory. Should the Aussie central bank can convince markets of its ability to renew rate lifts, the AUD/USD pair consolidate the recent losses. However, the moves are likely to remain inconclusive unless China’s Q1 GDP supports the bulls. Otherwise, the broadly dovish bias surrounding the RBA and fears of China’s gradual recovery may exert downside pressure on the Aussie pair price.

Technically, Bearish MACD signals and a steady RSI (14) line hint at the continuation of the AUD/USD pair’s downward trajectory. However, the 21-SMA and 200-SMA, respectively near 0.6730 and 0.6685, restrict the Aussie pair’s immediate moves ahead of the key catalysts.

Key Notes

AUD/USD Forecast: Points to consolidation around 0.6700 if the Dollar permits

AUD/USD Price Analysis: Struggles between 21 and 200 SMAs as RBA Minutes, China Q1 GDP loom

About the RBA minutes

The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.

• NZD/USD is aiming to shore up its recovery above 0.6186 amid a minor correction in the USD Index.
• As per the consensus, the Chinese economy has expanded by 2.2% after a stagnant performance.
• NZ inflation is becoming stubborn further despite higher rates by the RBNZ.

The NZD/USD pair is gathering strength for extending its recovery above 0.6186 in the Asian session. The Kiwi asset recovered firmly after dropping to near 0.6160 as the US Dollar Index (DXY) went through a gradual correction. The New Zealand Dollar is expected to remain on the tenterhooks as investors are awaiting the release of China’s Gross Domestic Product (GDP) (Q1) data.

S&P500 futures are showing a subdued performance in the Tokyo session as investors are worried about corporate profits to be reported ahead. Tech-giant Google was dumped by investors amid reports that South Korea's Samsung Electronics was considering replacing Google with Microsoft-owned Bing as the default search engine on its devices.

The US Dollar Index (DXY) is displaying a rangebound performance around 102.10 after a nominal correction. The USD Index is expected to resume its upside journey as investors are anticipating a continuation of the policy-tightening spell by the Federal Reserve (Fed).

As per the consensus, the Chinese economy has expanded by 2.2% vs. a stagnant performance. On an annual basis, the economy is expanded by 4.0% against the 2.9% growth rate recorded earlier. It is worth noting that New Zealand is one of the leading trading partners of China and higher Chinese GDP data would support the New Zealand Dollar.

Later this week, New Zealand’s quarterly inflation data will be keenly watched. According to the consensus, NZ inflationary pressures have accelerated by 2.0% in the quarter, higher than the former pace of 1.4%. Annual NZ inflation data has scaled to 7.5% from the former release of 7.2%. Households in the NZ economy are expected to go through a lot of pain as NZ inflation is becoming stubborn further despite higher rates by the Reserve Bank of New Zealand (RBNZ).

• GBP/USD treads water after two-day downtrend, sidelined of late.
• UK Employment Change for March, ILO Unemployment Rate for three months to February will be crucial for fresh impulse.
• Broad US Dollar rebound joins downbeat forecasts for British job data to weigh on Cable price.
• Risk catalysts, Fed, BoE talks also eyed for clear directions.

GBP/USD remains sidelined around 1.2380 amid early Tuesday’s sluggish session, snapping a two-day downtrend ahead of the key UK jobs report. Even so, the latest hawkish concerns surrounding the Federal Reserve (Fed), versus likely downbeat job figures from Britain, keeps the bears hopeful.

On Monday, the US Dollar Index (DXY) stretched Friday’s rebound from a one-year low as upbeat US data and hawkish Fed talks joined the increasing odds of another Fed rate hike in May, as well as a reduction in the market’s bets suggesting a rate cut in later 2023. The same could be true for the US Treasury bond yields as the US 10-year and two-year bod coupons printed three-day uptrend to 3.60% and 4.20% respectively.

Talking about the data, the NY Empire State Manufacturing Index jumped to 10.8 for April while snapping the four-month downtrend, as well as marking the highest level since July last year. Further, the US National Association of Home Builders (NAHB) housing market index also rose for the fourth consecutive month in April to 45, versus 44 expected and prior reading. Elsewhere, Richmond Fed President Thomas Barkin said on Monday that he wants to see more evidence of inflation settling back to target. The policymaker also added that he feels reassured by what he is seeing in the banking sector.

At home, British politics are in play as UK PM Rishi Sunak is accused of a lack of childcare declaration as he is up for an awkward dinner with Boris Johnson and Liz Truss. Furthermore, the latest warning from the UK’s top security Chief propels geopolitical fears and challenges the GBP/USD bulls. “Lindy Cameron, head of the National Cyber Security Centre (NCSC), will say that the UK and its allies cannot afford complacency over the ‘dramatic rise of China as a technology superpower,’” reported The Times.

Moving on, UK’s headline Claimant Count Change for March is expected to deteriorate further with -11.8K versus -11.2K prior whereas the ILO Unemployment Rate for three months to February may remain unchanged at 3.7%. However, a likely easing in the average earnings including and excluding bonuses for three months to February could join the anticipated increase in persons applying for unemployment claims to weigh on the GBP/USD prices. On the other hand, the US Housing Starts and Building Permits for March could join the central bankers’ comments to direct intraday moves of the Cable pair.

Technical analysis

A clear downside break of an upward-sloping support line from March 24, now immediate resistance near 1.2435, joins bearish MACD signals to lure the GBP/USD bears ahead of the key UK statistics. However, the 21-DMA challenges the pair sellers around 1.2375 of late.

• USD/JPY daily chart is testing through a prior resistance. 
• Bulls are in control but need to commit to any pullback on the front side of the micro trendline. 

As per the prior technical analysis, USD/JPY Price Analysis: Bulls depend on a lifeline at daily trendline support, we have seen the bulls take hold of the lifeline from trendline support and the bias remains significantly bullish for the week ahead. 

USD/JPY prior analysis

It was stated that ´´the bulls will need to commit, however, to the trendline support and preferably to above 132.50/70 for prospects of a breakout above 134.00.´´

USD/JPY update

The bulls picked up the discount and the market subsequently rallied, reaching very close to a -272% Fibonacci retracement of the correction´s range:

With the bulls still in control, there are prospects of a continuation toward the greyed price imbalance area in the 135s:

However, it would be reasonable to expect a correction, and the support area as illustrated above could be tested in the coming sessions, or even as far as the trendline support into the depths of the 133s. A break of trendline support would be troublesome, however:

The above chart illustrates a theoretical bearish schematic. 

• AUD/USD remains indecisive after falling in the last two consecutive days.
• 21-SMA, 200-SMA restrict immediate trading moves ahead of a broad channel formation.
• Bearish MACD signals, steady RSI suggests conditions of slower grind towards the south.

AUD/USD portrays pre-data anxiety as it seesaws around the 0.6700 round figure, between the 21-SMA and 200-SMA, ahead of the Monetary Policy Meeting Minutes from the Reserve Bank of Australia (RBA) and China’s first quarter (Q1) Gross Domestic Product (GDP) data. Even so, the Aussie pair remains on the bear’s radar during early Tuesday, after declining in the last two consecutive days.

Also read: AUD/USD Forecast: Points to consolidation around 0.6700 if the Dollar permits

Bearish MACD signals and a steady RSI (14) line hint at the continuation of the AUD/USD pair’s downward trajectory. However, the 21-SMA and 200-SMA, respectively near 0.6730 and 0.6685, restrict the Aussie pair’s immediate moves ahead of the key catalysts.

Should the AUD/USD pair crosses the aforementioned SMA region, a wider trading range comprising an upward-sloping resistance line from March, between 0.6800 and 0.6630, becomes the key for the pair traders to watch for clear directions.

In a case where the downbeat data and dovish RBA Minutes direct the Aussie pair past 0.6630, the odds of witnessing the AUD/USD pair’s fall towards the previous monthly low of around 0.6565 can’t be ruled out.

Overall, AUD/USD remains on the back foot despite the latest inaction. However, a clear break of 0.6630 becomes necessary to confirm the bearish trend.

AUD/USD: Four-hour chart

Trend: Further downside expected

• Gold price has attempted a recovery and has scaled to near $1,994.60 amid a mild correction in the USD Index.
• It would not be justified considering Gold’s recovery move as a reversal as bets for one more rate hike from the Fed is extremely solid.
• Fed’s Beige Book will provide cues about the current economic situation of 12 Fed districts.

Gold price (XAU/USD) has shown a recovery move after printing an eight-day low of $1,981.02 on late Monday. The precious metal has rebounded to near $1,996.00 after a mild correction in the US Dollar Index (DXY). It would not be justified considering the recovery move as a reversal as bets for one more rate hike from the Federal Reserve (Fed) are extremely solid.

S&P500 futures are choppy in early trade after a bullish Monday. US equities are ignoring China-Taiwan tensions, portraying a risk-on mood. Reports showed that Taiwan will purchase up to 400 land-launched harpoon missiles to repel a potential Chinese invasion, completing a deal approved by Congress in 2020.

The US Dollar Index (DXY) is juggling above 102.00 after a mild correction. The upside bias has not faded yet as Federal Reserve (Fed) policymakers are not convinced of easing inflationary pressures. and CEO of the Federal Reserve Bank of Richmond Thomas Barkin said in the late New York session that he wants to see more evidence of inflation settling back to target.

This week, the release of Fed’s Beige Book will be keenly observed. The report will provide cues about the current economic situation of 12 Fed districts. Also, it will provide a true picture of retail demand and employment levels on a regional basis.

Gold technical analysis

Gold price is hovering near the lower portion of the Rising Channel chart pattern formed on a two-hour scale. The precious metal dropped sharply after failing to test the critical resistance of $2,050.00 but has found an intermediate cushion near the Rising Channel edge. The 20-period Exponential Moving Average (EMA) at $2,005.60 is acting as a barricade for the Gold bulls.

The Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, indicating activation of bearish momentum.

Gold two-hour chart

• USD/CHF fades recovery from the lowest levels since January 2021.
• US Dollar bulls take a breather after cheering upbeat US data, yields.
• Traders await more clues to extend latest US Dollar rebound.
• China GDP, risk catalysts and second-tier US data can entertain Swiss Franc pair buyers.

USD/CHF struggles to extend a two-day rebound from a multi-month low as it makes rounds to 0.8990-85 during early Tuesday. In doing so, the Swiss Franc (CHF) pair portrays the market’s inaction amid a cautious mood ahead of the key data from China, mainly important because of the latest recession talks.

Even so, the USD/CHF buyers remain hopeful amid the latest recovery in the US Dollar, mainly because of the firmer US Treasury bond yields and the hawkish Fed bets. That said, the US Dollar Index (DXY) stretched Friday’s rebound from a one-year low on Monday as upbeat US data and hawkish Fed talks joined the increasing odds of another Fed rate hike in May, as well as a reduction in the market’s bets suggesting a rate cut in later 2023. The same could be true for the US Treasury bond yields as the US 10-year and two-year bod coupons printed three-day uptrend to 3.60% and 4.20% respectively.

Talking about the data, the NY Empire State Manufacturing Index jumped to 10.8 for April while snapping the four-month downtrend, as well as marking the highest level since July last year. Further, the US National Association of Home Builders (NAHB) housing market index also rose for the fourth consecutive month in April to 45, versus 44 expected and prior reading.

On the other hand, Richmond Fed President Thomas Barkin said on Monday that he wants to see more evidence of inflation settling back to target. The policymaker also added that he feels reassured by what he is seeing in the banking sector.

Amid these plays, Wall Street closed positive but failed to challenge the US Dollar bulls amid hopes of further recovery and expectations that the US will be able to overcome the debt ceiling tension, expiring in June.

Moving on, the US Housing Starts and Building Permits for March will be important to watch for intraday directions. More importantly, talks of China’s faster economic recovery will be at the test as the Dragon Nation is up for releasing the first quarter (Q1) Gross Domestic Product (GDP) data and the same will be eyed closely for determining the market sentiment, which in turn affects the USD/CHF pair prices.

Technical analysis

Although the RSI and MACD conditions are in favor of the USD/CHF pair’s further recovery, a three-week-old resistance line and a descending trend line from early March, respectively near 0.9010 and 0.9055, challenge the short-term buyers.

• AUD/NZD eases around six-week high, prints the first daily loss in seven.
• RSI, MACD conditions remain support to pair buyers but pre-data anxiety prods upside momentum.
• Convergence of 200-day EMA, 38.2% Fibonacci retracement level guards immediate upside ahead of multi-month-old descending resistance line.

AUD/NZD bulls take a breather at the highest levels in six weeks as traders await the Monetary Policy Meeting Minutes from the Reserve Bank of Australia (RBA), as well as China’s first quarter (Q1) Gross Domestic Product (GDP) data, during early Tuesday. With this, the exotic pair prints mild losses around 1.0835 by the press time while snapping a six-day uptrend.

It’s worth noting that the quote’s latest pullback fails to gain support from the oscillators as the MACD indicator flashes bullish MACD signals whereas the RSI (14) line grinds higher past the 50 level, not overbought.

Hence, the latest retreat in the AUD/NZD price appears the pre-data anxiety.

That said, a convergence of the 200-day Exponential Moving Average (EMA) and 38.2% Fibonacci retracement level of the pair’s September-December 2022 downside, near 1.0860-70, appears a tough nut to crack for the bulls.

Following that, a downward-sloping resistance line from the last September, close to 1.0930, could act as the last defense of the AUD/NZD bears.

Meanwhile, pullback moves remain elusive unless staying beyond a fortnight-old ascending support line, close to 1.0770 by the press time.

In a case where AUD/NZD remains bearish past 1.0770, the 23.6% Fibonacci retracement level near 1.0710 and multiple lows marked in March around 1.0670-60 can entertain the sellers before directing them to the monthly low of 1.0588.

AUD/NZD: Daily chart

Trend: Further upside expected

• AUD/JPY is holding its auction above 90.00 ahead of RBA minutes and China GDP data.
• Quick softening of Australia’s inflation must have provided the luxury of keeping rates steady at 3.60% to RBA.
• Support for the continuation of ultra-loose monetary policy by BoJ has impacted the Japanese Yen.

The AUD/JPY pair is making efforts in keeping its auction above the round-level resistance of 90.00 in the early Tokyo session. The risk barometer is expected to remain in action amid the release of the Reserve Bank of Australia (RBA) minutes.

Considering the sideways cues from the AUD/USD pair, AUD/JPY is showing a similar action.

The release of the RBA minutes will provide a detailed explanation behind the unchanged interest rate decision taken in April’s monetary policy meeting. Apart from that, cues about interest rate guidance will be keenly watched.

It is highly likely that the quick softening of Australia’s inflation must have provided the luxury of keeping rates steady at 3.60% to RBA Governor Philip Lowe. Investors should be aware of the fact that Australia’s monthly Consumer Price Index (CPI) has dropped to 6.8% from the peak of 8.4% recorded in December.

Also, RBA Lowe cited that the Australian economy is on track for a slowdown and inflationary pressures will keep on declining swiftly.

Apart from the RBA minutes, China’s Gross Domestic Product (GDP) data will be keenly watched. The street is anticipation a growth rate of 2.2% vs. a flat performance showed in the last quarter of CY2022. Annual consensus shows the economy has expanded by 4.0% against a 2.9% growth rate. Investors should note that Australia is the leading trading partner of China and higher Chinese GDP will also support the Australian Dollar.

On the Tokyo front, support for the continuation of ultra-loose monetary policy by Bank of Japan (BoJ) Governor Kazuo Ueda has impacted the Japanese Yen dramatically.

• US Dollar Index defends two-day rebound from one-year low, grinds higher of late.
• Upbeat US manufacturing, housing data joined hawkish Fed talks to underpin DXY run-up.
• Firmer US Treasury bond yields also allow US Dollar Index to remain sturdy ahead of the key US PMIs.
• Second-tier US housing data, Fedspeak may entertain intraday DXY traders.

US Dollar Index (DXY) grinds higher past 102.00, mildly bid near 102.10 by the press time of the mid-Asian session on Tuesday, as it defends the previous week’s recovery from the lowest levels in one year. In doing so, the US Dollar’s gauge versus the six major currencies remains downbeat for the third consecutive day amid hawkish Fed bets and upbeat US Treasury bond yields.

While tracing upbeat US Treasury bond yields and rising calls for the hawkish Fed move, the latest US data gains major attention. That said, the NY Empire State Manufacturing Index jumped to 10.8 for April while snapping the four-month downtrend, as well as marking the highest level since July last year. Further, the US National Association of Home Builders (NAHB) housing market index also rose for the fourth consecutive month in April to 45, versus 44 expected and prior reading.

Apart from the data, the Fed talks also allow the DXY to remain firmer as Richmond Fed President Thomas Barkin said on Monday that he wants to see more evidence of inflation settling back to target. The policymaker also added that he feels reassured by what he is seeing in the banking sector.

With the aforementioned data and Fed talks, the odds of witnessing another Fed rate hike in May, as well as a reduction in the market’s bets suggest a rate cut in the late 2023 increase. The same could be true for the US Treasury bond yields as the US 10-year and two-year bond coupons printed a three-day uptrend to 3.60% and 4.20% respectively.

It’s worth noting, however, that Wall Street closed on the positive side and hence may join the risk-on mood to prod the US Dollar bulls ahead of this week’s key US PMIs, up for publishing on Friday. Ahead of that, the US Housing Starts and Building Permits for March will also be important to watch. Elsewhere, talks of China’s faster economic recovery will be at the test as the Dragon Nation is up for releasing the first quarter (Q1) Gross Domestic Product (GDP) data and will be eyed closely for determining the market sentiment, which in turn affects the DXY.

Technical analysis

A daily closing beyond a one-month-old descending resistance line, around 102.45 by the press time, becomes necessary for the US Dollar Index bull’s conviction.