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EURUSD

EURUSD is struggling to find a direction at the beginning of a new week. The main currency pair is trading little changed on the day even in spite of a decent beat in German Ifo indices for March. Headline Ifo index jumped from 91.1 to 93.3 (exp. 91.0). This beat was driven mostly by a jump in expectations subindex from 88.5 to 91.2 (exp. 88.3). Nevertheless, EUR stayed fairly muted following the release. A number of ECB speakers scheduled for today may provide some volatility on EUR-related FX pairs later into the day. However, euro and other European assets are expected to get more volatile in the second half of the week as flash CPI data from the Old Continent will be released. German reading on Thursday, 1:00 pm BST and French reading on Friday, 7:45 am BST will be the most closely watched ones. Both are expected to show significant deceleration.

Taking a look at EURUSD chart at H4 interval, we can see that the pair halted the recent drop at the 50-period moving average (green line) near 38.2% retracement of the downward impulse launched at the beginning of February. However, subsequent rebound was halted today at the resistance zone marked with 50% retracement and the pair has struggled to determine direction for the next move since. A failure to break above could lead to a retest of the aforementioned 38.2% retracement in the 1.0710 area. On the other hand, a break above would pave the way for a test of swing levels marked with 61.8 and 78.6% retracements in 1.0830 and 1.0920 areas, respectively.

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Gold

The improvement of market sentiment puts pressure on safe haven assets

The beginning of the final week of March looks much compared to the end of the previous one, when the cost of insuring Deutsche Bank's debt against the risk of default surged to the highest on record on Friday. Today, however, the moods improved, mostly thanks to the final sale of Silicon Valley Bank, which may probably end the topic of instability of the banking sector. Additionally, the FDIC will continue to participate in the takeover of SVB by First Citizens.

In Europe, investors were worried that Deutsche Bank could be another bank which faces serious problems, but it is worth remembering that recent years have brought a significant improvement in the bank's situation. Firstly - Deutsche recorded 10 quarters of profitability, secondly, the CET1 index, which shows the bank's solvency, amounted to 13.4% (although it is still lower than the average for EU countries). On the other hand, the bank's coverage ratio was 142% at the end of 2022, and the net stable funding ratio reached 119%. These data do not suggest that the bank may collapse quickly.
Therefore, the moods are improving significantly - we are observing a solid rise of US yields, which puts pressure on gold. Price pulled back 1.5% below $1950 and approaches the local lows of March 21/22 and 38.2 Fibonacci retracement of the last upward wave.


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AUDUSD

1. US indices finished yesterday's trading mostly higher with tech shares lagging behind. S&P 500 gained 0.16%, Dow Jones moved 0.60% higher and Russell 2000 added 1.08%. Nasdaq dropped 0.47%
2. Indices from Asia-Pacific traded mostly higher today as well. Nikkei gained 0.2%, S&P/ASX 200 traded 1% higher, Kospi added 0.8% and Nifty 50 dropped 0.2%. Indices from China traded mixed
3. DAX futures point to a slightly higher opening of the European cash session today
4. Jose Manuel Campa, chair of European Banking Authority, warned in an interview with Handelsblatt that risk in the financial system remains very high and that increasing interest rates are weighing on financial markets
5. French finance minister Le Maire said that France wants to cut the deficit to 3% of GDP by 2027. French budget deficit stood at 4.7% of GDP and was lower than 5% target set by the government
6. Russia announced that it has carried out anti-ship missile tests in the Sea of Japan in a move that is seen as response to Japanese PM Kishida visiting Ukraine last week
7. Goldman Sachs now estimates probability of US economy falling into recession within the next 12 months at 35%, up from previous 25%
8. Fed's Jefferson said that inflation has been longer lasting and that current policy rate is too high
9. Israeli Prime Minister Benjamin Netanyahu withdrew a judicial reform that spark nationwide protests
10. Australian retail sales increased 0.2% MoM in February (exp. 0.3% MoM)
11. Cryptocurrencies are trading mixed - Bitcoin drops 0.9%, Dogecoin trades 0.6% lower, Ethereum gains 0.3% and Ripple jumps almost 2%
12. Energy commodities trade mixed - oil drops 0.3-0.4% while US natural gas prices climb 0.7%
13. Precious metals trade mostly lower - silver and platinum drop around 0.1% each while palladium trades 0.5% lower. Gold is an outperformer with 0.2% gains
14. AUD and JPY are the best performing major currencies while USD and EUR lag the most

In spite of a miss in Australian retail sales data for February, AUD is one of the best performing G10 currencies today. AUDUSD trades 0.6% higher today and has managed to break above the 200-hour moving average (purple line).

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Oil

Oil is catching a bid this week. Crude prices rallied yesterday with WTI jumping around 5%. The move is being continued this morning, although the scale of gains is not as big as yesterday, at least not yet. Gains are driven by an overall improvement in market sentiment, with concerns over the condition of the banking sector in Europe and the United States slowly fading. Today's move higher may also be supported by comments from the Russian Energy Minister who said that he expects Russian oil and gas production to decline in 2023. However, this can be hardly seen as news as a drop in Russian output has been foreseen as an aftermath of the West imposing sanctions on Russia for its invasion of Ukraine.

Taking a look at WTI chart (OIL.WTI) at D1 interval, we can see that price is attempting to break above the $73.00 resistance zone that served as the lower limit of a previously broken trading range. While price is trading almost 15% above a daily low from March 20, 2023, technical setup is not bullish yet. In order for it to become more bullish, a break above the $81.20 resistance zone would be needed as this is where previous local high, the upper limit of Overbalance structure and previous price reactions can be found.

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GBPUSD

Andrew Bailey, governor of the Bank of England, as well as two other BoE members (Sam Woods and Dave Ramsden) appeared before the Treasury Select Committee today for a hearing on Silicon Valley Bank collapse. Bailey noted that collapse of SVB was the fastest banking failure since Barings Bank failure, which collapsed in 1995 following massive 827 million GBP loss incurred by trader Nick Leeson. However, those two cases cannot be compared as Barings failed due to rogue trader actions while SVB collapsed due to bank run and poor interest rate risk management. Speaking on Credit Suisse, Bailey said that problems of Swiss bank were company-specific and should not be seen as a risk for domestic banks. Overall, Bailey said that does not think that any of the features of recent banking failings (SVB and CS) are causing stress in the UK financial system. He said, however, that we are in a period of heightened tensions in the markets and higher levels of alertness are needed.

Bailey's comments today were in-line with his remarks yesterday, when he noted that UK rate setters are unlikely to be distracted from fighting inflation by troubles of the global banking system. GBP saw some weakness following Bailey's comments today but the move immediately after remarks was barely noticeable. Taking a look at GBPUSD chart at D1 interval, we can see that the pair has reached the resistance zone marked with 50% retracement of the downward move launched in June 2021. Pair attempted to break above it last week but failed and today's attempt also looks to be under question. GBPUSD erased gains from earlier today, painting a long upper wick on D1 interval. However, should we see a break above this zone, the 1.2440 area, marked with local highs from previous months, could be the next target for buyers. On the other hand, failure to break above could see the price pull back towards the support zone marked with 38.2% retracement and 200-session moving average (purple line).

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Binance sued by CFTC - Crypto in retreat

US regulator CFTC is suing cryptocurrency exchange Binance and its founder Changpeng Zhao due to issues related to violation of trading rules and derivatives. The news triggered a sharp sell-off of Binancecoin. Bitcoin also took a hit and dropped below the 28,000 mark. Nevertheless, at the moment Binancecoin is losing less than 2%.


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USD unimpressed by Consumer Confidence data

US Consumer Confidence Index rose to 104.2 from 102.9 in March (revised to 103.4). Today’s reading came in above analysts’ estimates of 101.

1. Present situation index 151.1 vs 153 prior
2. Expectations index 73.0 vs 69.7 prior
3. 1 year inflation 6.3% vs 6.3% prior
4. Jobs hard-to-get 10.3 vs 10.5 prior
5. 14.9% expect their incomes to increase, up from 14.4% last month

Conference Board Confidence index moved higher in March, however inflation expectations still remain high, which is not what FED would like to see.


Simultaneously, Richmond manufacturing index for March was released. The index unexpectedly fell less than expected to -5 from-16 in February, while analysts’ expected -10.0 pointing to a modest improvement in business conditions. Of its three component indexes, shipments saw the largest change (up to 2 in March from -15 in February) and both the employment (-5 vs -7) and new orders (-11 vs -24) indexes improved but remained in negative territory. Firms continued to report easing of supply chain constraints as the indexes for backlogs and lead times remained negative. The average growth rate of prices paid decreased moderately, while the average growth rate of prices received changed little in March. Firms remained pessimistic about local business conditions and the index for future local business conditions edged down slightly.

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EURUSD saw relatively small reaction to today’s data releases. The most popular currency pair continued to trade around 1.0820 level.

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FRA40 pulls back as investors continue to follow the banking turmoil

FRA40 and other major European indices gave back most of early gains in the afternoon amid renewed concerns over the European banking sector. French prosecutors raided five banks including Societe Generale, BNP Paribas and HSBC as part of an investigation into suspected cases of tax fraud and money laundering related to dividend payments. Meanwhile, protests against the pension reform continue and strikes entered a 10th day on Tuesday, with public transport disrupted and deliveries halted. From a technical point of view, the French index pulled back as buyers failed to break above 50 SMA (green line) around 7180 pts. If sellers manage to uphold control, downward move may deepen towards upward trendline or even crucial support zone in the region 6550 pts - 6650 pts, which is marked with lower limit of the 1:1 structure, 200 SMA (red line) and 23.6% Fibonacci retracement of the upward wave launched in March 2020.

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USDCAD


USDCAD finally managed to break below the key short-term support at 1.3655. According to the Overbalance methodology, this may point to a change of the main sentiment to bearish. The level of 1.3655 should be treated as the first line of resistance. In turn, nearest support to watch can be found around 1.3535 and 1.3475 levels.
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AUDUSD

1. US indices finished yesterday's trading slightly lower. S&P 500 dropped 0.16%, Dow Jones moved 0.12% lower and Nasdaq plunged 0.45%. Small-cap Russell 2000 index dropped 0.06%
2. Indices from Asia-Pacific are trading higher today. Nikkei gained 1.1%, S&P/ASX 200 traded 0.2% higher, Kospi traded flat and Nifty 50 gained 0.1%. Indices from China traded 0.1-0.2% higher while Hong Kong's Hang Seng gains over 2%
3. DAX futures point to a slightly higher opening of the European cash session today
4. US Energy Secretary Granholm said that refilling of strategic petroleum reserve may start this year
5. Shinichi Uchida, deputy governor of Bank of Japan, said that if 10-year Japanese yield climbs to 2%, BoJ will experience an unrealized loss of 50 trillion JPY on its bond portfolio (currently 10-year yield sits at 0.3%)
6. United States said that China shouldn't overreact to Taiwan president's visit to the United States. This comes after China warned that meeting between US officials and Taiwan president would be seen as provocation
7. Lee Bokhyun, head of South Korean financial regulator, said that South Korean authorities will consider lifting the short-selling ban this year. Ban was imposed early in the Covid pandemic
8. Australian CPI inflation decelerated from 7.4 to 6.8% YoY in February (exp. 7.4% YoY). Core inflation dropped from 7.6% in January to 6.9% YoY in February
9. API report pointed to a 6.08 million barrel draw in US oil inventories (exp. +0.2 mb)
10. Cryptocurrencies trade higher - Bitcoin gains 1.3%, Ethereum adds 1.1% and Dogecoin jumps 2.4%
11. Energy commodities trade mixed - oil gains slightly while US natural gas prices drop
12. Precious metals pull back amid USD strengthening - gold drops 0.5%, silver trades 0.7% down and platinum dips 0.6%
13. NZD and USD are the best performing major currencies while JPY and AUD lag the most

AUD is pulling back after a lower-than-expected CPI reading for February. AUDUSD failed to break above the 0.6710 resistance zone and is now pulling back towards the 200-hour moving average (purple line).

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CHNCComp - Chart of the Day

HSCEI (CHNComp) was one of the best performing Asian indices during today's Asia-Pacific trading session. The index jumped over 2% today and painted a daily peak at 3-week high. Improved sentiment towards Chinese shares can be reasoned with recent performance of Alibaba (BABA.US) as the index and the stock are highly correlated. According to a Bloomberg report, Alibaba aims to divide the company into 6 different entities with each being responsible for its own financing and decisions like going public. This news triggered an over-14% increase in Alibaba's share price yesterday.

Attached Image (click to enlarge)

Taking a look at CHNComp chart at D1 interval, we can see that while the index managed to climb above the price zone ranging between 6,600 pts mark and 200-session moving average (purple line), it was later halted at 50-session moving average (green line) in the 7,000 pts area. What comes next will be crucial from a technical point of view. An inverse head and shoulders pattern can be spotted building up on the chart - a bullish pattern. However, a pullback towards the aforementioned 6,600 pts area would be needed for the pattern to take shape.

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EURUSD ticks lower after Kazimir remarks

Peter Kazimir, member of the European Central Bank governing council, said that the ECB is closely monitoring the situation in the banking sector and that it is ready to step in to ensure price and financial stability in the euro area. However, his remarks relating to the monetary policy show that ECB is somewhat concerned by the uncertainty caused by recent banking failures in the US and Europe - Kazimir revealed that ECB members agreed not to provide guidance for the May meeting. On the other hand, Kazimir said in the very same speech that he thinks that inflation is too high for too long and that further rate hikes are needed, although possibly at a slower pace, which is a kind of guidance on its own. Speaking about future decisions he said that core inflation developments and trends will be key in determining the next move.

EUR ticked lower during Kazimir's speech but the move was very small and has been completely erased by now. The pair is trying to recover from an overnight drop that was launched after repeated failures to break above the 1.0850 swing area.

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Ripple

Cryptocurrencies are rebounding today despite the still-uncertain news about the conflict between the CFTC and the Binance exchange. Among all the projects, Ripple (XRP) stands out again. Fintech company Ripple will hold a closed-door consultation with the Securities and Exchange Commission (SEC) on March 30. The market took the news of the warring parties meeting in court as a signal of a potential settlement. Bringing it about would be a victory for the entire decentralized finance sector in the States. It would undermine the SEC's decision-making role and reduce the fear of the prospect of restrictions proposed by Gary Gensler.

1. Ripple is cited by many analysts as one of the future foundations of a digital financial infrastructure based on blockchain technology. For example, recently Ripple's blockchain was able to process a $755 million transaction, in 4 seconds, for a fee of tenths of a dollar (0.01 XRP). By the crypto market, the company is seen as a major competitor to the interbank market, which charges high commissions for processing international transfers;
2. Iron Key Capital analysts point to Ripple as a winner in the multi-billion dollar global payments market. In addition to Ripple itself, cryptocurrencies Stellar and Algorand are also gaining today. Both of them, along with Ripple, have been pointed out as being integrated into the new ISO20022 international settlement standard. This system will replace the SWIFT standard in the coming years. Ripple's victory with the SEC is expected by Ark Invest fund manager CathieWood, among others;
3. The next few weeks may bring a 'rally under the event' in the price of Ripple tokens. A similar course of events is characteristic of the crypto market at the same time as it often ends in a sell-off (profit realization, so-called 'fact selling', as the decisive moment is very close. This was the case, among others, with the price of Cardano, which implemented smart contract technology in September 2021, and Ethereum Merge, in the summer of 2022.

The largest holders of Ripple so called 'whales' have increased their buying activity in view of the upcoming SEC decision.
Ripple chart, D1 interval. The price has overcome the key resistance near $0.55, set by previous price reactions. The chart, which resembles a technical saucer formation, may indicate a more permanent reversal of the downward trend.

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US100 gains over 1%

China's tech sector rebound fuels gains on Nasdaq

US100 futures are gaining, as a higher opening in Asia and euphoria on Alibaba shares have improved sentiment around the technology sector. Analysts have been very wary of Chinese tech stocks in recent years, fearing direct government intervention in their business and margins. So far, however, China is positioning itself as a free-market economy, allowing it to compete with the United States. A few months ago, representatives of Chinese authorities at the Davos Economic Forum asserted that, contrary to Western fears, the country does not intend to centralize power and completely subordinate the financial market party. In addition, reports from the Washington Post indicated that President Joe Biden is expected to present new banking regulations. The White House was prompted to create them by the SVB bankruptcy. The Nasdaq is attempting to close the quarter with its best performance since 2020, and after several weeks of turmoil in the banking sector, investors appear 'jaded' by news of the prospect of a crisis. US bank valuations are still far from a meaningful upward correction and Joe Biden has warned that the banking crisis is far from over, against which buyers have shifted from the 'risky' financial sector to the technology market.
Another supportive factor for US equities is the sharply losing VIX index, which is seen by investors as a barometer of market fear. Compiled by the CBOE, the index extends a 1.5-week-long downward impulse.

The US100 index is trying to maintain the bullish momentum initiated 2 weeks ago, and the declining VIX may support the buyers' side even now. However, it is worth watching tomorrow and Friday's session, when we will know many interesting macro readings from the US economy.

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US100

 

1. US indices finished yesterday's trading higher with all major Wall Street indices adding 1% or more. S&P 500 gained 1.42%, Dow Jones moved 1.00% higher and Nasdaq jumped 1.79%. Russell 2000 gained 1.08%
2. Nasdaq gained over 20% off December low and has entered a technical bull market.
3. Indices from Asia-Pacific trade mostly higher. S&P/ASX 200 gained 1%, Kospi added 0.6%, Nift 50 moved 0.8% higher while Nikkei dropped 0.6%
4. Indices from China traded 0.2-0.5% higher
5. DAX futures point to a higher opening of the European cash session today
6. Fed Chair Powell has reportedly told Republican Representatives that Fed expects 1 more rate hike in 2023
7. ECB Schnabel said that banking troubles may have a disinflationary effect. On the other hand, she warned that labour costs indicate possibility of second round inflationary effects
8. Fitch noted that there were 14 sovereign default events since 2020, compared to 19 sovereign default events in whole 2000-2019 period
9. Chinese premier Li Qiang said that his country will strengthen macro policy adjustments and act to boost consumption and investments
10. UK car production increased 13.1% YoY in February as supply chain pressures eased. This was the first monthly increase in output in three months. 81% of all cars produced in UK were exported, with EU being main destination
11. New Zealand's building permits slumped 9% MoM in February. On annual basis drop reached 29.2% YoY
12. Major cryptocurrencies trade mixed - Bitcoin gains 1.2%, Ethereum adds 0.1%, Dogecoin drops 0.7% and Ripple trades 3.6% lower
13. Energy commodities trade mixed - oil gains around 0.3% while US natural gas prices drop 1.7%
14. Precious metals trade mostly higher - silver adds 0.7%, platinum trades 0.8% higher and palladium gains 0.6%. Gold trades flat
15. AUD and JPY are the best performing major currencies while USD and EUR lag the most

Nasdaq-100 (US100) trades around 20% above the December 2022 low and therefore has entered a bull market, at least from a technical point of view. However, for any larger upward move to be delivered, a break above a psychological, mid-term resistance zone in the 13,000 pts area would be required.

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EURUSD

EURUSD will be on watch throughout the day today. This is thanks to releases of inflation data from Europe. Flash CPI reading for March from Spain was already released at 8:00 am BST and it came in even below low expectations - 3.3% YoY vs 3.8% YoY expected (6.0% YoY previously). Such a drop can be attributed to base effects, especially in energy, as oil prices skyrocketed a year ago in the aftermath of Russian invasion of Ukraine and now they are over 30% year-over-year lower. German reading at 1:00 pm BST is also expected to show a noticeable drop - from 8.7% YoY to 7.3% YoY.

Market expectations for ECB rate hikes have dropped and now the market prices in an around-75% chance of a 25 basis point rate hike at a meeting on May 4, 2023. However, a softer CPI readings from Europe may push those expectations even lower and it could serve as a drag for EUR. Nevertheless, it should be noted that CPI data for April will be available when ECB next meets therefore today's reading may have less of an importance for rate setters in Europe at their next meeting.

Taking a look at EURUSD chart at H1 interval, we can see that the pair dropped following Spanish CPI release (orange circle) but has managed to recover all of the losses later on. Pair broke above the 1.0850 resistance zone and is now attempting to take out yesterday's daily highs in the 1.0865 area.

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AUDJPY

1. US indices finished another trading day higher. S&P 500 gained 0.57%, Dow Jones moved 0.43% higher and Nasdaq jumped 0.73%. Russell 2000 was a laggard and dropped 0.18%
2. Indices from Asia-Pacific followed into footsteps of US peers and traded higher. Nikkei and S&P/ASX 200 gained around 0.8% each, Kospi added 0.9% and Nifty 50 traded 1.0%. Indices from China traded up to 0.8% higher
3. DAX futures point to a slightly higher opening of the European cash session today
4. Reuters reports that Japan will set up a panel to discuss possibility of implementing digital yen backed by Bank of Japan
5. Turkey has approved Finland's NATO membership bid, clearing the final hurdle for the Nordic country to join the alliance. Sweden is still waiting for approval from Turkey and Hungary
6. According to Reuters report, OPEC+ JMMC is most likely to recommend leaving output cuts unchanged at a meeting on Monday
7. The Japanese trade and industry ministry announced that it will impose export controls on semiconductor manufacturing equipment. While it was stated that restrictions do not target any specific country, most take it as a step against China
8. Official Chinese manufacturing PMI dropped from 52.6 to 51.9 pts in March (exp. 51.6). Services gauge jumped from 56.3 to 58.2 pts (exp. 55.0)
9. Japanese industrial production increased 4.5% MoM in February (exp. 2.7% MoM)
10. Japanese retail sales increased 1.4% MoM in February (exp. -0.3% MoM)
11. Australian private sector credit increased 0.3% MoM in February (exp. 0.4% MoM)
12. Major cryptocurrencies are trading higher - Bitcoin gains 0.3%, Ethereum and Dogecoin add 0.6% each and Ripple trades 1.4% higher
13. Energy commodities are trading little changed - oil drops around 0.1% while US natural gas prices climb 0.2%
14. Precious metals trade mixed - gold and silver drop while platinum gains slightly
15. NZD and AUD are the best performing major currencies while JPY and CHF lag the most

AUDJPY is trading higher following better than expected readings of official Chinese PMIs for March. A key near-term resistance to watch can be found in the 90.25 area, where the downward trendline and 50-session moving average (green line) can be found.

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DE30

German retail sales data for February was released today at 7:00 am BST. Report was expected to show a 0.5% MoM increase as well as 5.1% YoY drop in retail sales. However, actual data turned out to be much worse than expected with monthly data showing a 1.3% drop and annual data showing 7.0% YoY plunge. DE30 ticked lower following the release while EURUSD saw a minor uptick.

DE30 dipped after miss in German retail sales.

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EURUSD climbs back above 1.09 mark after French CPI beat

French flash CPI data for March was released today at 7:45 am BST. Report, just like reports from other European countries, was expected to show a significant deceleration in year-over-year reading. However, actual data showed a smaller than expected slowdown, just as it was the case with German data yesterday. French CPI slowed from 6.3 to 5.6% YoY in March, while the market expected a slowdown to 5.5% YoY. On a monthly basis, CPI reached 0.8% MoM, above 0.6% MoM expected by the market but below 1.0% MoM print from January.
Market reaction was small - DE30 ticked lower in a knee-jerk move before recovering losses while EURUSD moved higher and climbed back above 1.09 mark.

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Gold

Precious metals are trading a touch lower on the day after erasing earlier gains. Higher-than-expected reading of the French CPI this morning has taken some steam off the precious metals. Gold, as well as silver and platinum, may experience higher volatility following the release of European CPI reading for March (10:00 am BST) and US PCE reading for February (1:30 pm BST).

Taking a look at GOLD at the H1 interval, we can see that bulls attempted to push precious metal's price above the $1,985 resistance zone this morning. However, the attempt turned out to be a failed one and gold started to pull back. Should the ongoing pullback deepen, the first support to watch can be found in the $1,970 area, marked with previous price reactions as well as 50- and 200-hour moving averages. Overall, gold is trading sideways in a triangle pattern and direction of the next big move may be determined by direction of the breakout from this pattern.

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