On H4, the 200-day Moving Average has broken, and Brent quotes are now below it, which means they might develop a downtrend. However, the RSI has already reached the oversold area. As a result, we should expect a breakaway of 4/8 (81.25) upwards and growth of the price to the resistance level of 5/8 (82.81). The scenario can be cancelled by a downwards breakaway of the support at 3/8 (79.69), in which case Brent quotes will continue falling and might reach 2/8 (78.12).
On M15, price growth can additionally be supported by a breakaway of the upper border of the VoltyChannel indicator.
S&P 500
On H4, the S&P 500 index quotes and the RSI are in the oversold area, which points on a possible increase in the price. The quotes are expected to rise above 0/8 (3906.2) and then reach the resistance level of 2/8 (3984.4). The scenario can be cancelled by a downward breakaway of the support at -1/8 (3867.2). In this case, quotes might drop to -2/8 (3828.1).
On M15, a breakaway of the upper border of VoltyChannel will increase the probability of an increase in the price.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
Yesterday, the US stock indices fell sharply, mainly due to falling banking sector shares. Shares of SVB Financial Group (SIVB) fell more than 55% after the bank disclosed a net loss of $1.8 billion and gave a negative outlook for the year on the impact of higher interest rates. SVB Financial Group said it was taking aggressive measures to shore up its balance sheet, including selling shares and liquidating its securities portfolio. The SIVB’s fall has dampened sentiment toward bank stocks, which have been pressured by a deeper inversion of the yield curve, a harbinger of recession. As the stock market closed Thursday, the Dow Jones Index (US30) decreased by 1.66%, and the S&P 500 Index (US500) lost 1.85%. The NASDAQ Technology Index (US100) fell by 2.05%.
Investors remain tense ahead of Friday’s jobs report. The US economy is expected to grow by 200,000 jobs last month, well below January’s 517,000. The unemployment rate is forecast at 3.4%. Yesterday’s weekly labor market data showed that US employers announced 77,770 job cuts in February, down 24% from the 102,943 cuts announced in January. This indicates a resilient labor market. Many fear that a strong Nonfarm Payrolls report could solidify the return of aggressive rate hikes by the Federal Reserve.
On Thursday, President Joe Biden unveiled a $6.9 trillion budget proposal. The proposal, which the Republican-controlled House of Representatives will undoubtedly reject, showed little inclination to compromise. The president’s proposal would increase funding for a number of government programs, increase Medicare solvency, lower prescription drug prices, and reduce the deficit by $3 trillion over the next decade. Biden also proposes adding $77 billion for defense spending.
Stock markets in Europe were mostly down yesterday. Germany’s DAX (DE30) gained 0.01%, France’s CAC 40 (FR40) fell by 0.12%, Spain’s IBEX 35 (ES35) decreased by 0.45%, and Britain’s FTSE 100 (UK100) closed down 0.63%.
The ECB will raise rates by 50 basis points at its March meeting, and analysts expect the central bank to signal the next such move, probably in May. Executive Board spokeswoman Isabel Schnabel recently said that in order to slow the pace of rate hikes, she needs to see the ECB’s monetary policy become restrictive, which should show up in credit markets, labor markets, and various components of aggregate demand. But there is disagreement within the ECB. On the hawkish side, Holzmann argued that the ECB should raise the rate by 50 basis points at all the next four meetings. On the other hand, Visco did not appreciate such comments from his colleagues and said that decisions should be made meeting by meeting in an environment of high uncertainty. But in any scenario, the ECB will remain hawkish until the summer.
On Wednesday, crude oil prices fell for a second straight day, even as oil inventories fell. Inventories fell by 1.694 million barrels last week, the first weekly drop in inventories since December. The rise in the dollar index on the back of the US Federal Reserve’s aggressiveness outweighs the factors of falling inventories and rising demand from China.
Oil prices continued to fall Friday due to fears of more aggressive interest rate hikes by the US Federal Reserve and disappointing data from China. Markets are worried that a potential US recession triggered by tighter monetary conditions could hit oil demand this year. China’s weak economic signals also upset oil markets, as the world’s largest oil importer recorded a drop in oil imports between January and February. Expectations of higher interest rates are strengthening the dollar, putting pressure on commodities priced in the currency, mainly oil. A stronger dollar makes oil more expensive for international buyers, which reduces demand.
Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) jumped 0.63%, China’s FTSE China A50 (CHA50) fell by 0.61%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.63%, India’s NIFTY 50 (IND50) fell by 0.93%, and Australia’s S&P/ASX 200 (AU200) ended the day up by 0.05%.
The Bank of Japan kept interest rates at record lows on Friday and said it would continue the current rate of Yield Curve Control (YCC). The BOJ said in a statement that inflation is likely to slow by mid-2023, thanks to government subsidies on energy prices and easing pressure from high commodity rates. But the Bank of Japan also said that prices would rise again by the end of the year and that growing uncertainty about the economy underscored the need to maintain the adaptive monetary policy. This was the last meeting in the office for Haruhiko Kuroda.
S&P 500 (F) (US500) 3,918.32 −73.69 (−1.85%)
Dow Jones (US30)32,254.86 −543.54 (−1.66%)
DAX (DE40) 15,653.58 +75.19 (+0.01%)
FTSE 100 (UK100) 7,879.98 −49.94 (−0.63%)
USD Index 105.28 −0.38 (−0.36%)
Important events for today:
– Japan BoJ Interest Rate Decision at 05:00 (GMT+2);
– Japan BoJ Rate Statement at 05:00 (GMT+2);
– Japan BoJ Press Conference at 07:00 (GMT+2);
– UK GDP (m/m) at 09:00 (GMT+2);
– UK Industrial Production (m/m) at 09:00 (GMT+2);
– UK Manufacturing Production (m/m) at 09:00 (GMT+2);
– US Nonfarm Payrolls (m/m) at 15:30 (GMT+2);
– US Unemployment Rate (m/m) at 15:30 (GMT+2);
– Canada Unemployment Rate (m/m) at 15:30 (GMT+2).
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
Even as markets brace for the highly-anticipated US jobs report due later today (Friday, March 10th), the prudent investor/trader will already be keeping an eye on what’s to come: Sunday, March 12
US daylight savings time ends
Tuesday, March 14
AUD: Australia February business confidence; March consumer confidence
GBP: UK January unemployment rate, February jobless claims
USD: US February consumer price index (CPI)
Wednesday, March 15
CNH: China February industrial production, retail sales, jobless rate
JPY: Bank of Japan meeting minutes
EUR: Eurozone January industrial production
GBP: UK Chancellor presents Spring Budget
USD: US February retail sales
Thursday, March 16
NZD: New Zealand 4Q GDP
AUD: Australia February unemployment, March inflation expectations
EUR: ECB rate decision
USD: US weekly jobless claims
Friday, March 17
EUR: Eurozone February CPI (final)
USD: US February industrial production, March consumer sentiment
Here are 3 reasons why we’re especially focusing on EURUSD for the coming week:
1) US inflation still stubborn?
The incoming CPI (consumer price index – which measures headline inflation) is set to be the next major risk event (after today’s NFP release) for the US dollar, and by extension, the rest of the FX universe.
This is also arguably the most important datapoint that the US central bank a.k.a. the Fed will take into account ahead of its upcoming policy meeting on 21-22 March.
The February CPI number due Tuesday is forecasted to come in at 6%, which would be:
lower than January’s 6.4%
but still three times higher than the Fed’s inflation target of 2%
A significantly higher-than-6% CPI number implies that the Fed has to send US interest rates much higher to quell still-stubborn inflation. Such an outlook should strengthen the US Dollar which in turn would drag EURUSD lower.
On the other hand, a lower-than-6% CPI suggests that the Fed does not have to be as aggressive as markets fear, which would offer much relief to markets and potentially send EURUSD higher.
2) ECB rate hike
A 50-basis point hike by the European Central Bank (ECB) is all but certain at its Thursday meeting.
Less known is how high the ECB has to ultimately send its benchmark rate to subdue its own inflationary pressures, noting that the Eurozone’s February core CPI (released on March 2nd) came in at a higher-than-expected 5.6% – a new record high!
As things stand, markets forecasting that the ECB’s deposit rate will peak at 4% by the end of 2023, from the current 2.5% ahead of next week’s decision.
That implies a further 150-bps in rate hikes (including next week’s 50-bps hike).
And recall that, generally, the central bank that has more rate hikes in store (relative to the central bank’s peers) tends to see its currency strengthen.
Hence, markets will be more sensitive to what the ECB says about its plans for future adjustments to its benchmark rates:
If the ECB suggests strongly that another 50-bps hike is in store at its early-May rate decision, that should send the EURUSD higher either towards or above its 50-day simple moving average (SMA), depending on where EURUSD ends up after today’s US jobs report.
However, if the ECB strikes a more dovish tone and opens the door for a downshift towards a relatively smaller 25-bps hike for upcoming meetings, that could weigh on EURUSD and potentially drag it below its 100-day SMA and into sub-1.05 domain, depending on where this FX pair ends up by the weekend.
3) EURUSD’s 1-week implied volatility at year-to-date high
The EURUSD’s forecasted volatility over the next one-week period for has reached its highest levels so far in 2023.
The above chart lays bare just how sensitive the world’s most popularly traded FX pair is to the incoming US CPI print and also the ECB decision.
At the time of writing (and before the pivotal US jobs report due later today), Bloomberg’s FX model forecasts a 71% chance that EURUSD will trade within the 1.0411 – 1.0775 range over the upcoming week.
Although EURUSD has been in a downtrend since early February, printing a series of lower lows on the price charts, next week’s events would have major sway over EURUSD’s immediate fate.
Ultimately, EURUSD’s slim month-to-date gain of just 0.1% (at the time of writing) will either evaporate, or be added to, by the upcoming week’s events.
Key levels for EURUSD
RESISTANCE
1.060 region: around 38.2% Fibonacci level from January 2021 – October 2022 drop
21-day SMA
1.069 region: resisted EURUSD bulls on several episodes since mid-December 2023
Even a cooler jobs report on Friday is unlikely to stop the Federal Reserve hiking interest rates further on March 22, warns the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.
The warning from Nigel Green of deVere Group comes as domestic and global financial markets hold their breath for the monthly US jobs report published on Friday 8:30 a.m. ET by the US Bureau of Labor Statistics.
He says: “This jobs report is being closely watched by investors around the world, after January’s gave analysts a massive surprise. It revealed the US economy had added more than half a million jobs and unemployment had fallen to a level not seen in more than five decades.
“All eyes are now on the February jobs data. We expect the US to have added around 225,000 in new jobs last month and the unemployment rate to remain at a 54-year low of 3.4%.
As this represents a cooling of the labor market, will the Fed impose only a quarter-point rate hike on March 22, rather than a half-point one?
“I doubt it,” says the deVere CEO. “Even a cooler jobs report on Friday is unlikely to stop the Federal Reserve hiking interest rates further later this month.
“Fed Chair Jerome Powell has been clear that officials are looking at ‘totality’ of the data. A couple of milder jobs reports won’t cut it for the central bank – especially following January’s bumper gains. A drop of even 100,000 new jobs would not be enough to satisfy the Fed.
“We would need to have several months of weakening employment in order for the Fed to respond by taking its foot off the gas on rates.
“As such, we expect a half-point rate hike on March 22. Markets are set to tumble as a result.”
Whilst inflation remains a major headwind, Nigel Green says that investors should “remain alive to other metrics” in investment decision-making.
When costs are going up, investors should increasingly be looking at a company’s ability to maintain margin, he notes.
“Investors should be paying close attention to margin because it can indicate how well a company is managing costs and competing in its industry.
“It can also impact a corporation’s ability to invest in growth opportunities or pay dividends to shareholders.”
In a recent media note, the deVere chief said that sectors that can maintain margin, despite inflation and interest rate hikes are likely to include healthcare, luxury goods, energy and agriculture.
“A cooler February jobs report is not going to satisfy the Fed hawks, so investors must expect higher for longer rates and may need to rebalance their portfolios as a result.”
About:
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of offices across the world, over 80,000 clients and $12bn under advisement.
On H4, USDCAD has formed a Shooting Star reversal pattern. Currently, the pair may go by the reversal signal in a descending wave. The target of the correction might be 1.3730; later the price might push off this level and continue the uptrend. However, the price may grow to 1.3875 without pulling back to the support.
AUDUSD, “Australian Dollar vs US Dollar”
On H4, AUDUSD has formed a Hammer reversal pattern. Currently, the pair is going by the reversal signal in an ascending wave. The target of the growth is 0.6655. Upon testing the resistance, the quotes might push off it and continue the decline. However, the price may drop to 0.6560 and continue the downtrend without any correction to the resistance.
USDCHF, “US Dollar vs Swiss Franc”
On H4, near the resistance level, USDCHF has formed a Hanging Man reversal pattern. The instrument is now going by the reversal signal in a descending wave. The target of the pullback might be 0.9370. After the test of the support, the price might push off it and continue with the uptrend. However, it may grow directly to 0.9450 without any correction to the support.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
Our dependence on fossil fuels is one of the biggest challenges to overcome in the fight against climate change. But production and consumption of fossil fuels is on the rise, and expected to peak within the next decade.
In this episode of The Conversation Weekly, we speak to two researchers who examine the political challenges of transitioning to a world after oil, and what it means for those states who rely on oil for resources.
Oil is not only used as a fuel, but is integral to everyday life through its applications in plastics, manufacturing processes, fabrics, paints and chemicals. In order to consider alternatives to oil, we need to be aware of the scale of its integration into our lives.
Caleb Wellum is an assistant professor of U.S. history at the University of Toronto Mississauga, Canada.
“I almost hesitate to say this, because this kind of depiction of deep dependence on oil has actually been a strategy of oil companies themselves to say, look, you can’t have a modern world, a modern way of life without oil,” Wellum points out. “So this is not to say it’s inescapable, but it’s to say that the challenges are significant to transitioning to some kind of after-oil.”
Defining that transition can be tricky, because it carries different stakes depending on how it is interpreted: does it mean continuing to extract oil “until the last drop,” or finding alternatives right now?
Wellum notes that the 1970s oil crisis was a significant moment in human history that helped shape our current consumption patterns. There was a debate between environmentalists and economists that signalled a moment at the crossroads for our current relationship with oil.
“I noticed there was a need to transition away from oil. And there was also a free market argument that argued the energy crisis was a sign of bad government policy of governments intervening in markets and making it inefficient,” he said. “Eventually, this market argument won out and there was no energy transition.”
There was a growing awareness of the environmental impact of the extraction and consumption of fossil fuels, and the urgent need to combat climate change to reduce global warming. And recently, governments around the world — including in countries dependent on oil revenues — are committing to finding energy alternatives.
“There’s a focus on spectacular sustainability projects, and by that you see the scale and the size is just enormous. And that’s what spectacle does — it’s supposed to attract a lot of attention because the size range of the project is really quite impressive,” Koch said.
But these ambitious alternative energy projects aren’t all as they seem, she cautions. Koch describes how a solar farm in the desert in Morocco — one of the largest such projects in the world — is facing challenges because of the amount of water required.
A PBS report on the world’s largest solar farm in Morocco.
To transition to a world post-oil, whatever that may look like, requires more than successful and sustainable alternative technologies.
“There are a lot of factors that go into why it is that we’re dependent on oil, but they’re not just about the convenience of the source of energy,” Wellum points out. “It’s about political decisions.”
Listen to the full episode of The Conversation Weekly to find out more.
This episode of The Conversation Weekly was produced and written by Mend Mariwany, who is also the show’s executive producer. Sound design is by Eloise Stevens, and our theme music is by Neeta Sarl.
Analysts and investors struggled to find a reason to be optimistic about stocks yesterday. Still, stock indices remained under pressure Wednesday amid lingering fears of renewed aggressive rate hikes by the Federal Reserve. The latest labor market data showed that private-sector job gains in February exceeded economists’ estimates, increasing the likelihood that the Fed will be forced to accelerate the rate hikes at its March meeting. The probability of a return to raising rates by 50 basis points at the Fed meeting on March 21-22 rose to 80% compared to 71% the day before. As the stock market closed Wednesday, the Dow Jones Index (US30) decreased by 0.18%, while the S&P 500 Index (US500) added 0.14%. The NASDAQ Technology Index (US100) gained 0.40%.
The Bank of Canada left the interest rate unchanged at 4.5%. This was the first pause among major central banks. But the Bank of Canada reiterated its statement that it is willing to keep raising the interest rate if necessary to get back to its 2% target. But analysts believe this is just a formality, and officials have already hit the pause button for the rest of the year.
Stock markets in Europe were mostly up Wednesday. German DAX (DE30) gained 0.46%, French CAC 40 (FR40) shed by 0.20%, Spanish IBEX 35 (ES35) added 0.67%, and British FTSE 100 (UK100) closed yesterday on the plus side by 0.13%.
The increase in short-term rates in the US influenced the prospects of the European Central Bank. The swap market is showing more confidence (85%) in a 50 basis point rate hike in May, which would raise the deposit rate to 3.50%. Nomura raised its forecast for the ECB, predicting that the final rate will reach 4.25% — with changes of 50 basis points in March, May, and June, followed by a final quarter-point increase in July.
On Wednesday, crude oil prices fell for a second straight day, even as oil inventories fell. Inventories fell by 1.694 million barrels last week, the first weekly drop in inventories since December. The rise in the dollar index on the back of the US Federal Reserve’s aggressiveness outweighs the factors of falling inventories and rising demand from China.
Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) jumped by 0.48%, China’s FTSE China A50 (CHA50) fell by 0.80%, Hong Kong’s Hang Seng (HK50) ended the day down by 2.35%, India’s NIFTY 50 (IND50) gained 0.24%, and Australia’s S&P/ASX 200 (AU200) ended the day negative by 0.77%.
Japan’s economy is suffering from slowing demand overseas due to worsening global growth, leading to a record trade deficit and the largest output contraction in eight months in January. Japan reported a record trade deficit for January (~3.2 trillion yen, or ~$23.7 billion). Japan’s gross domestic product (GDP) increased by 0.1% year-over-year in the last quarter against a preliminary estimate of 0.6% growth and well below economists’ average forecast of 0.8% growth. In an effort to boost household purchasing power, the government and the Bank of Japan (BOJ) are urging firms to raise workers’ wages at the annual spring wage talks, which conclude this month.
China’s annualized consumer price index fell from 2.1% to 1%, well below the 1.9% forecast. The factory inflation fell to 1.4% on an annualized basis. The data show that despite a rebound in business activity, China’s economic recovery is still in its infancy as the country struggles to recover from three years of strict COVID-19 restrictions.
S&P 500 (F) (US500) 3,992.01 +5.64 (+0.14%)
Dow Jones (US30)32,798.40 −58.06 (−0.18%)
DAX (DE40) 15,631.87 +72.34 (+0.46%)
FTSE 100 (UK100) 7,929.92 +10.44 (+0.13%)
USD Index 105.69 +0.08 (+0.07%)
Important events for today:
– Japan GDP (q/q) at 01:50 (GMT+2);
– China Consumer Price Index (m/m) at 03:30 (GMT+2);
– China Producer Price Index (m/m) at 03:30 (GMT+2);
– US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
The past few days have been rough for the S&P 500.
It has weakened roughly 1.3% since the start of the week thanks to renewed expectations around the Federal Reserve keeping interest rates higher for longer. The main culprit behind this development was none other than Federal Reserve Chair Jerome Powell who struck a hawkish tone in congressional testimony on Tuesday. According to Powell, interest rates will likely peak at a higher level than previously expected thanks to stronger-than-expected economic data. His aggressive message rate hikes boosted the dollar and rattled equity markets as a 50-bp hike in March was back on the table.
According to Bloomberg, traders are currently pricing in a 68% probability of a 50-basis point rate hike this month.
As the week slowly comes to an end, the S&P 500 is still struggling to nurse the deep wounds inflicted from Tuesday’s selloff with prices trading below the 4000 level. The index is likely to remain shaky as investors remain on the sidelines ahead of the US jobs report on Friday.
In the meantime, bears seem to be gaining momentum on the daily charts with prices trading below the 50-day Simple Moving Average.
However, some support can be found around 3950 – a level entangled between the 100 and 200-day SMA.
On the data front, it may be wise to keep an eye on the US weekly jobless claims published later today. If the official results exceed the forecasted 195,000 figure, that could provide some breathing room for the S&P 500 to fight back ahead of the NFP main course tomorrow. On the political front, US President Biden’s budget request to Congress could trigger some volatility depending on how events play out.
The main risk event and market shaker will be the NFP report on Friday which could determine whether S&P 500 bears continue their reign.
After the blockbuster 517,000 figures back in January, around 225, 000 is projected in February. A number below market expectations could excite equity bulls and cool expectations around the Federal Reserve hiking interest rates by 50-bp this month. Alternatively, a strong report is likely to reinforce rate hike bets – ultimately weighing on the equity space.
Shifting the fundamentals aside, the technicals remain in favour of bears as prices remain in a descending channel.
The SPX500m on the D1 time frame was in an uptrend until a last higher top formed at 4197.1 on 2 February. The bears saw an opportunity and started gathering in numbers.
After the higher top at 4197.1, the price broke through a weekly support then turned resistance level. The momentum change was confirmed by a break of the 15 & 34 Simple Moving Averages as well as the Momentum Oscillator that crashed through the 100 baselines into bearish territory.
A possible critical support level formed when the price reached a weekly support level and a lower bottom was recorded on 2 March at 3921.0. The bulls drove the price higher but their momentum waivered and a lower top formed on 6 March at 4079.6.
If the SPX500 breaks through the critical support level at 3921.0, then three possible price targets can be reached from there. Attaching the Fibonacci tool to the lower bottom near the weekly support level at 3921.0 and dragging it to the resistance level at 4079.6, the following targets can be calculated. The first target may be estimated at 3823.0 (161.8%). The second price target might be expected at 3664.4 (261.8%) if the bears manage to break through another weekly support level. The third and final target might be estimated at 3407.8 (423.6%), which is beyond yet another weekly support level.
If the resistance level at 4079.6 is broken, the current situation must be re-examined.
As long as the bears maintain their overall momentum, the outlook for the SP 500 should remain bearish.
Federal Reserve Chairman Jerome Powell’s testimony has certainly taken on a more hawkish tone compared to his last comments in February. Powell’s words now: “Because recent economic data have been stronger than expected, it suggests that the ultimate level of interest rates is likely to be higher than previously thought”. The probability of a 50 basis point interest rate hike at the March 21-22 Fed meeting jumped to nearly 70% from 24% the day before. In December, the average forecast of Fed officials assumed a target federal funds rate of 5.1%. Still, yesterday’s message from Powell indicates that markets estimate the federal funds rate at 5.4% by the end of the year. That means rates will rise another 100 bps. This hawkish stance has led to a sharp increase in government bond yields and a rise in the dollar index against major currencies.
The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price is trading below the moving averages. The MACD indicator is deeply negative, but there are the first signs of sellers’ weakness. Under such market conditions, traders should expect a slight pullback to the moving averages, as the price is oversold. Buy trades are best considered from the support level of 1.0519 but with intraday confirmation. Sell deals can be considered from the resistance level of 1.0564 or 1.0576, subject to a reversal impulse.
Alternative scenario: if the price breaks down through the resistance level of 1.0656 and fixes above it, the uptrend will likely resume.
News feed for 2023.03.08:
– German Industrial Production (m/m) at 09:00 (GMT+2);
– German Retail Sales (m/m) at 09:00 (GMT+2);
– Eurozone ECB President Lagarde Speaks at 12:00 (GMT+2);
– Eurozone GDP (q/q) at 12:00 (GMT+2);
– US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+2);
– US Trade Balance (m/m) at 15:30 (GMT+2);
– US Fed Chair Jerome Powell Testifies at 17:00 (GMT+2);
– US JOLTs Job Openings (m/m) at 17:00 (GMT+2).
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.2017
Prev Close: 1.1825
% chg. over the last day: -1.62 %
Despite a sense of stability returning to the UK real estate market, despite the conclusion of an important Brexit deal with Northern Ireland, despite an unexpected rise in business activity, the British pound was unable to maintain its upward momentum. After Fed Chairman Jerome Powell reopened the door for a faster interest rate hike yesterday, investors began to return to the dollar, leading to sell-offs in other currencies, such as the euro and the pound sterling.
From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The price has deviated strongly from the moving averages. The MACD indicator is deeply negative, with signs of divergence. Under such market conditions, sell trades are best sought from the resistance level of 1.1928 but with confirmation in the form of a false breakout or reverse reaction. Buy trades are best sought from the support level of 1799, but better with confirmation on intraday time frames.
Alternative scenario: if the price breaks out through the 1.2050 resistance level and fixes above it, the uptrend will likely resume.
There is no news feed for today.
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 135.90
Prev Close: 137.14
% chg. over the last day: +0.91 %
The Bank of Japan faces problems that no other central bank faces. As demand in the country has been declining for decades, the central bank has used stimulative monetary policy for years to restore it. The country’s domestic inflation is now at a 40-year high at 4%, but it’s not much compared to other major economies. Among the world’s leading central banks, the Bank of Japan has not raised interest rates since 2016 while adhering to its “Yield Curve Control” (YCC) policy to keep long-term interest rates low. This involves buying virtually unlimited amounts of Japanese government bonds. The new BoC Governor, Ueda, who is likely to take Kuroda’s place after April 8, will also be constrained by the same circumstances.
Trading recommendations
Support levels: 137.09, 136.42,135.25, 134.04, 133.47,
Resistance levels: 138.15, 138.88
From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The uptrend trend continues, and the price is steadily growing, breaking through the resistance levels one after another. The MACD indicator is positive, and there are signs of overbought. To buy at such heights is not the best idea, so it is better to wait for a small correction. Under such market conditions, it is better to look for buy deals from the support level of 137.09, but only with intraday confirmation. Sell deals can be searched from the 138.15 level, but with additional confirmation in the form of a reverse initiative on the lower time frames.
Alternative scenario: if the price fixes below the 135.25 support level, the downtrend will be resumed with a high probability.
There is no news feed for today.
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.3612
Prev Close: 1.3753
% chg. over the last day: +1.04 %
The OECD’s latest Canadian Economic Survey says that faster growth in living standards will require a stronger business environment to bring Canada’s weak productivity and investment growth in line with the leading economies. The Survey presents updated GDP growth forecasts of 1.3% for 2023 and 1.5% for 2024. The tight monetary policy last year will help reduce inflation to 2% by the end of 2024. Public finances are also expected to strengthen in 2023, helped in part by rising commodity price revenues. The Bank of Canada will also meet today on monetary policy. Economists believe the BoC will not raise rates, but the key question will be whether the BoC will leave the door open for further hikes.
Trading recommendations
Support levels: 1.3711, 1.3664, 1.3645, 1.3515
Resistance levels: 1.3775, 1.3853
From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The triangle pattern is classically triggered in the continuation of the trend. The price impulsively broke through all the levels and rushed upwards. At the moment, the price is trading above the moving averages. The MACD indicator is overbought. Under such market conditions, it is worth looking for buy deals from the support level of 1.3711 or 1.3664, but only with confirmation in the form of reaction on the lower time frames. Sell positions can be searched from the resistance level of 1.3775, but only with a confirmation in the form of a false breakout and short targets.
Alternative scenario: if the price breaks down and consolidates below the support level of 1.3600, the downtrend will likely resume.
News feed for 2023.03.08:
– Canada Trade Balance (m/m) at 15:30 (GMT+2);
– Canada BoC Interest Rate Decision at 17:00 (GMT+2);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
The stock market fell on Tuesday as hawkish remarks from Federal Reserve Chairman Jerome Powell increased the odds that the Fed will return to an aggressive rate hike course. The main talking points from Powell’s speech yesterday were:
The Fed is poised to accelerate rate hikes if economic data comes in strong;
The rate hike is likely to be higher than many expect;
Further rate hikes are appropriate;
Premature easing is undesirable at this point;
It is appropriate to hold the rate at an elevated level for some time.
The likelihood of a 50 basis point interest rate hike at the March 21-22 Fed meeting jumped to nearly 70% from 24% the day before. The hawkish statements pushed Treasury yields higher, with 2-year bond yields exceeding 5% for the first time since 2007. The rise in yields led to a sharp rise in the dollar index and a decline in the major indices. At the close of the stock market on Tuesday, the Dow Jones index (US30) decreased by 0.72%, and the S&P 500 index (US500) lost 1.53%. NASDAQ Technology Index (US100) fell by 1.25%.
The prospect of a US rate hike to 6% is becoming quite real. According to BlackRock Inc. and Schroders Plc, given a robust labor market and sustained inflation, there is a real possibility that the Fed will have to bring the federal funds rate to 6% and then hold it at that level for an extended period of time to slow the economy and bring inflation down to nearly 2%. Swap traders now estimate a full percentage point increase in Fed rates over the next four meetings. The Fed’s rhetoric also risks dampening the outlook for emerging market assets.
The OECD’s latest “Canadian Economic Outlook” says that faster growth in living standards will require a stronger business environment to bring Canada’s weak productivity and investment growth in line with the leading economies. As an open economy, Canada will be vulnerable to any sudden slowdown in global demand and to volatility in commodity and financial markets due to the war in Ukraine in the future. The review presents updated GDP growth forecasts of 1.3% for 2023 and 1.5% for 2024. The tight monetary policy last year will help bring inflation down to 2% by the end of 2024.
Stock markets in Europe were mostly down on Tuesday. Germany’s DAX (DE30) decreased by 0.60%, France’s CAC 40 (FR40) fell by 0.46%, Spain’s IBEX 35 (ES35) decreased by 1.07%, and the British FTSE 100 (UK100) closed yesterday down by 0.13%.
The European Central Bank (ECB) is increasingly concerned about the current level of inflation in the single bloc. There is now talk of an additional ECB interest rate hike of 200 basis points in the coming months to combat persistently high price pressures in the eurozone, raising the central bank rate to 4.5%.
Precious metal prices just collapsed yesterday on the back of Powell’s speech to Congress. Gold and silver are inversely correlated to government bond yields. As monetary policy tightens and interest rates rise, government bond yields go up, which puts downward pressure on gold and silver quotes. For the resumption of the uptrend in gold, it is very important that the US Federal Reserve stops tightening monetary policy.
Asian markets traded yesterday without a single trend. Japan’s Nikkei 225 (JP225) gained 0.25%, China’s FTSE China A50 (CHA50) shed by 1.17%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.33%, India’s NIFTY 50 (IND50) did not trade yesterday, while Australian S&P/ASX 200 (AU200) ended the day up by 0.49% gain.
Major Japanese companies are expected to hold the biggest wage hike in 26 years during next week’s wage negotiations, giving policymakers hope that the country will finally emerge from its deflationary stagnation. This will be crucial for the Bank of Japan (BOJ) as to how soon the bank can end its bond yield control policy under new Governor Kazuo Ueda. It will also be a test of Prime Minister Fumio Kishida’s flagship “new capitalism” policy, which aims to distribute wealth more widely to households by inducing firms to raise wages.
The Reserve Bank of Australia is close to pausing the process of tightening monetary policy. The main takeaway from yesterday’s speech by RBA Governor Lowe was:
We’ve done a lot in a short period of time;
At some point, it will be appropriate to sit still;
If the data before the next board suggests a pause, we will do that;
We will have a completely open mind at board meetings.
S&P 500 (F) (US500) 3,986.37 −62.05 (−1.53%)
Dow Jones (US30)32,856.46 −574.98 (−1.72%)
DAX (DE40) 15,559.53 −94.05 (−0.60%)
FTSE 100 (UK100) 7,919.48 −10.31 (−0.13%)
USD Index 105.61 +1.26 (+1.20%)
Important events for today:
– German Industrial Production (m/m) at 09:00 (GMT+2);
– German Retail Sales (m/m) at 09:00 (GMT+2);
– Eurozone ECB President Lagarde Speaks at 12:00 (GMT+2);
– Eurozone GDP (q/q) at 12:00 (GMT+2);
– US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+2);
– US Trade Balance (m/m) at 15:30 (GMT+2);
– Canada Trade Balance (m/m) at 15:30 (GMT+2);
– US Fed Chair Jerome Powell Testifies at 17:00 (GMT+2);
– US JOLTs Job Openings (m/m) at 17:00 (GMT+2);
– Canada BoC Interest Rate Decision at 17:00 (GMT+2);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
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