09 Mar

S&P 500 Bears To Continue Their Reign?

By ForexTime

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.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Financial News Stock Market News
08 Mar

The Analytical Overview of the Main Currency Pairs on 2023.03.08

By JustMarkets

The EUR/USD currency pair

Technical indicators of the currency pair:
  • Prev Open: 1.0675
  • Prev Close: 1.0548
  • % chg. over the last day: -1.20 %

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.

Trading recommendations
  • Support levels: 1.0519, 1.0482
  • Resistance levels: 1.0564, 1.0576, 1.0621, 1.0656, 1.0704, 1.0804, 1.0906

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.

EUR/USD
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.

Trading recommendations
  • Support levels: 1.1799, 1.1603
  • Resistance levels: 1.1929, 1.1956, 1.1993, 1.2086, 1.2147

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.

GBP/USD
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.

USD/JPY
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.

USD/CAD
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);
  • – Canada BoC Rate Statement at 17:00 (GMT+2);
  • – US Crude Oil Reserves (w/w) at 17:30 (GMT+2).

By JustMarkets

 

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.

Financial News Forex and Currency News
08 Mar

The US Federal Reserve is back on an aggressive rate hike course. RBA plans to take a pause

By JustMarkets

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);
  • – Canada BoC Rate Statement at 17:00 (GMT+2);
  • – US Crude Oil Reserves (w/w) at 17:30 (GMT+2).

By JustMarkets

 

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.

Economics & Fundamentals Financial News
08 Mar

NQ100m close to forming “golden cross”. What’s next?

By ForexTime

But such a bullish technical signal may be well and truly lost amid the onslaught of macro events that are set to dictate how global financial markets fare the rest of this month.

 

What is a “golden cross”?

A golden cross is when the asset’s 50-day simple moving average (SMA) crosses above its 200-day SMA.

Such an event indicates that this asset’s prices have been climbing of late, enough to be higher than its longer-term average.

At the time of writing, the gap between those two widely-followed technical indicators now stand at less than 10 points on the NQ100m.

When it happens, the “golden cross” typically sends a “bullish” signal to traders, suggesting there could be more gains in store.

NOTE: The NQ100m is based on the benchmark Nasdaq 100 index, which tracks the overall performance of US tech stocks such as Apple, Amazon, and Alphabet.

 

How has NQ100m performed after forming a “golden cross” on the daily charts?

Here’s a look back at the previous two episodes:

  • 22 May 2020: NQ100m went on to climb by 76.2% (after “golden cross”) to post its highest-ever close on December 27, 2021 – the current record high.
  • 2 April 2019: NQ100m rose by 29.6% on its way to a pre-pandemic high in February 2020, before lockdowns worldwide and the fear factor that coursed through global financial markets then sent the NQ100m plummeting below its 200-day SMA.

In both instances, after a “golden cross” on the daily charts, the NQ100m then duly surged to fresh record highs!

What’s next after a “golden cross”?

If such a bullish technical event does happen for the NQ100m, equity bulls (those hoping stocks will move higher) will be looking to eventually revisit this past Monday’s (March 6th, 2023) intraday high of 12471.4.

 

However, it’s different this time (or so goes the market cliché)!

From a macro fundamental perspective, the Nasdaq 100 finds itself in a completely market environment compared to the situation surrounding prior “golden crosses” back in 2019 and 2020.

And here’s the biggest difference:

The US Federal Reserve (central bank) has been aggressively raising interest rates since 2022 in order to try and cool down inflation that’s raging at its highest levels in decades!

The ongoing Fed rate hikes are in stark contrast to the:

  • April 2019 episode: prior Fed rate hikes coming into 2019 had resulted in US rates peaking at 2.5% (only about half of today’s rates of 4.75%) and the Fed would eventually start cutting interest rates later that year.
  • May 2020: US interest rates were at a record low of near 0%, to help cushion the economic impact from Covid-19.

 

Recall that, tech stocks generally do not like the prospects of interest rates moving higher.

This is because:

  1. Higher interest rates translate into higher repayments on loans.
  2. And many tech companies rely on borrowed money to grow. And they’ve enjoyed plenty of cheap (near-zero interest rates) money over the past decade.
  3. Hence, with more money now needed to repay borrowings, that’s less money that the company can use to grow its business, or to be kept as profits.
  4. Shareholders and investors would rather see those profits sooner rather than later. Hence, they are less willing to buy stocks in tech companies while US interest rates move higher.

    Result = the Nasdaq 100 is still about 26% lower from its all-time high posted back in November 2021.

Hence, as stated at the top of this article, be mindful that any bullish technical signals emanating from any immediate “golden cross” may be lost amidst the incoming macro events.

 

What could move the NQ100m this month?

  • March 10th: US nonfarm payrolls (NFP) report a.k.a. jobs data
  • March 14th: US consumer price index (CPI) a.k.a. inflation data
  • March 22nd: Fed rate decision

 

If markets are shown higher-than-expected readings for the US jobs/inflation data in the days ahead, and/or if the Fed triggers a larger-than-25 basis point hike later this month …

such events should drag the Nasdaq 100 lower as market fears are revived that US interest rates will have to move even higher beyond current forecasts of 5.6%.

 

In the above scenario, expect NQ100m bears (those hoping prices will fall) to test support around the 11,923 mark.

This is a significant support region, because:

  • That’s where we find the 23.6% Fibonacci level from its November 2021-October 2022 drop
  • This is also around where the 200-day and 50-day SMAs are converging.

This confluence of technical indicators could form a strong support region for the NQ100m, barring an utter capitulation in risk sentiment.

 

Ultimately, global financial markets (including the NQ100m) are set to remain primarily driven by the shifting expectations surrounding how high the Fed will have to eventually send US interest rates.

Markets can only have greater confidence about the next bull run for the NQ100m once traders and investors can get used to the eventual peak for US interest rates, with hopes that the Fed can also start thinking about lowering rates once more.

Until then, the fear of even-higher US interest rates is likely to limit gains for the NQ100m.

 

READ MORE: (26 January 2023) SP500m close to forming “golden cross”. What’s next?

(After forming a “golden cross” the SP500m went on to hit all upside levels cited in the article.)

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Financial News Stock Market News
07 Mar

Fed’s Powell warns of higher rates, investors urged not to forget other metrics

By George Prior

Federal Reserve Chair Jerome Powell’s high-stakes appearance before Congress should act as a reminder to investors to consider other metrics besides inflation and interest rates, says the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The observation from deVere Group’s Nigel Green follows the US central bank chief telling lawmakers on Tuesday that it will likely raise interest rates more than expected amid strong economic data and that it is prepared to move more aggressively if the “totality” of fresh reports suggests stronger measures are needed to tame inflation.

In a hearing before the Senate Banking Committee, Mr Powell said: “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated… If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”

Following the hearing, Nigel Green noted: “Investors were looking for clues from Powell as to whether he favours another 25-basis point rate increase at the next Federal Open Market Committee meeting, or if he might consider a heftier 50-basis point increase.

“The Fed chair was perhaps more hawkish than many analysts had expected, and stocks tumbled after he warned that interest rates could remain higher for longer.”

He continues: “Despite the hawkish tone, when in the decision-making process, I remind investors that even though there’s still a way to go, we’re likely closer than we have been to getting back to the central bank’s target and would urge them to focus more on earnings and margin than on inflation and interest rate news.

“If you’re serious about building wealth, you should be looking at sectors and companies that can maintain margin despite inflation and interest rate hikes.

“Margin is an often overlooked yet important metric for investors to consider when evaluating investment opportunities. It can provide insight into the company’s profitability, efficiency, and competitive advantages, and can impact investor sentiment and stock prices.”

In this environment of higher rates for longer than had previously been anticipated, some companies are going to find it difficult to maintain margin and, as we have recently seen, are failing to report earnings as had been expected.

“In other words, if costs are going up firms can’t maintain margin, so that company is unlikely to be a good investment until things change,” noted the deVere CEO in a recent media note.

He identified four key sectors that he expects to be resilient in this current environment.

“We’re looking at sectors that can maintain margin, despite inflation and interest rate hikes. These include healthcare, luxury goods, energy and agriculture.

“Healthcare is a robust sector as people will always need to stay healthy – this has come into focus more than ever since the pandemic. Also, despite wider market volatility, there’s strong earnings potential due to ageing populations and other demographic changes. Plus, healthcare is becoming increasingly tech-driven, which offers fresh opportunities.”

He went on to say: “Luxury goods can maintain margin due to the inherent aspirational ‘elite and exclusive’ aspect of the sector.

“We’ll look at energy because there’s a shortage of energy in the world right now.

“Agriculture is another one as populations in emerging markets around the world are eating more meat. As they eat more meat, there needs to be more grain produced.”

As ever, it’s critical that investors ensure their portfolios are suitably diversified across asset classes, sectors, currencies and regions so as to make the most of the considerable opportunities that will inevitably present themselves.

Following Powell’s appearance on Capitol Hill on Tuesday, Nigel Green concludes: “Of course, investors shouldn’t dismiss the Fed’s signals about future rate hikes, but they must also consider other investment metrics too, in particular, margin.”

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 more than 70 offices across the world, over 80,000 clients and $12bn under advisement

Bonds Economics & Fundamentals Opinions
07 Mar

Aussie gravitates deeper down. Overview for 07.03.2023

By RoboForex.com

The Australian dollar in pair with the US dollar lost balance and dropped. The current quote is 0.6707.

At the meeting that closed today, the Reserve Bank of Australia lifted the interest rate by just 25 base points to 3.6% per annum. This decision went in line with the forecasts.

This is the tenth increase in the interest rate in a row. By market expectations, the RBA will lift the rate once again in Q2 and then will make a pause in tightening the monetary policy.

The regulator supposes that inflation in Australia has reached its peak. According to the RBA, the monetary policy should remain tight to bring the CPI back to its target values, which is the range between 2 and 3%.

The Australian economy is slowing down, and the RBA has mentioned it several times. Moreover, a drop in consumption of households is noticeable because the monetary conditions are becoming tighter. The employment sector also proves deficient. At the same time, the growth of wages is speeding up, answering the lack of workforce.

The CB is watching the wage-price spiral and still states certain risks in this area.

AUD dropped, reacting to the view of the RBA.

Article By RoboForex.com

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.

Financial News Forex and Currency News
07 Mar

The RBA raised the interest rate by 0.25%. The ECB is set for a rate hike above the 4% level

By JustMarkets

The US Treasury yields rose yesterday ahead of Powell’s speech to Congress, which could give clues as to the US Federal Reserve’s future monetary policy. Investors and funds are starting to hedge and close their trades after the good rally in the last days of last week. At the close of the stock market on Monday, the Dow Jones (US30) increased by 0.12%, and the S&P 500 (US500) added 0.07%. The NASDAQ Technology Index (US100) decreased by 0.11%.

The US Federal Reserve Chairman Jerome Powell will address Congress today to present the central bank’s semiannual monetary policy report. He will address the Senate on Tuesday and the House of Representatives on Wednesday. His comments will be scrutinized for hints about whether a broader rate hike is being considered this month after recent data pointing to solid inflation. Powell’s hawkish bias could trigger a sell-off in the stock market in favor of the dollar index as a defensive asset. Conversely, any hint from Powell that the US Fed is abandoning its hawkish stance could cause Treasury yields to fall further, pushing the dollar index down and the stock indices up.

Shares of Apple (AAPL) jumped about 2% after Goldman Sachs issued a “buy” recommendation on the stock, citing the tech giant’s strong position in services. Meanwhile, shares of Tesla (TSLA) fell more than 2% after the electric-car maker cut prices in the US for the second time this year to boost demand. Tesla also suffered from Morgan Stanley ruling out the electric carmaker as a “better choice” in favor of Ferrari. Morgan Stanley raised its target Ferrari NV (RACE) price to $310 a share.

Stock markets in Europe were mostly up Monday. Germany’s DAX (DE30) added 0.48%, France’s CAC 40 (FR40) gained 0.34%, Spain’s IBEX 35 (ES35) jumped by 0.49%, Britain’s FTSE 100 (UK100) closed yesterday down by 0.22%.

The European Central Bank should raise interest rates by 50 basis points at each of the next four meetings as inflation remains resilient, said Robert Holzmann, head of the Austrian central bank. Holzmann is considered the ECB’s most hawkish spokesman. The four steps advocated by Holzmann would raise the deposit rate to 4.5%, well above the current projected rate of 4%. Holzmann also urged the ECB to accelerate the reduction of the bank’s balance sheet by stopping full reinvestment in its Pandemic Emergency Purchase Program (PEPP). All debt maturing in the PEPP scheme must now be fully reinvested in the market until 2024.

Asian markets were also mostly up yesterday. Japan’s Nikkei 225 (JP225) jumped by 1.11%, China’s FTSE China A50 (CHA50) fell by 0.80%, Hong Kong’s Hang Seng (HK50) ended the day up 0.17%, India’s NIFTY 50 (IND50) added 0.67%, and Australia’s S&P/ASX 200 (AU200) ended the positive by 0.62%.

China set its GDP growth target for this year at about 5%, lower than last year’s target of about 5.5%. Last week’s stronger-than-expected data on activity in China’s manufacturing and service sectors point to an economic recovery. Given that China is Australia’s largest export market, any improvement in China’s growth outlook could improve Australia’s growth prospects.

The Reserve Bank of Australia raised its benchmark interest rate by 25 basis points. The rate rose from 3.35% to 3.6%. The monetary policy statement indicates that the RBA is leaving the door open for further increases. The move was expected as inflation rose to its highest level in three decades last quarter, and there are still no signs of inflationary pressures easing.

The Bank of Japan has set the discount rate at 0.10% and remains in control of the yield curve (YCC), targeting a range of 0.50% near zero for Japanese government bonds (JGBs) for up to 10 years. The 10-year JGB trades steadily near the upper bound of 0.50%, forcing the BoJ to intervene frequently. Incoming Bank of Japan (BoJ) Governor Kazuo Ueda clarified last week that he would take the same stance as outgoing Governor Haruhiko Kuroda. The BoJ will meet this week, where current governor Haruhiko Kuroda will speak for the last time in office.

S&P 500 (F) (US500) 4,048.42 +2.78 (+0.069%)

Dow Jones (US30)33,431.44 +40.47 (+0.12%)

DAX (DE40) 15,653.58 +75.19 (+0.48%)

FTSE 100 (UK100) 7,929.79 −17.32 (−0.22%)

USD Index 104.53 −0.50 (−0.48%)

Important events for today:
  • – Australia Retail Sales (m/m) at 02:30 (GMT+2);
  • – China Trade Balance (m/m) at 05:00 (GMT+2);
  • – Australia RBA Interest Rate Decision (m/m) at 05:30 (GMT+2);
  • – Australia RBA Rate Statement (m/m) at 05:30 (GMT+2);
  • – Switzerland Unemployment Rate (m/m) at 08:45 (GMT+2);
  • – US Fed Chair Jerome Powell Testifies at 17:00 (GMT+2);
  • – Switzerland SNB Chairman Jordan speaks at 20:30 (GMT+2);
  • – Australia RBA Gov Lowe speaks at 23:55 (GMT+2).

By JustMarkets

 

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.

Economics & Fundamentals Financial News
07 Mar

Volatile Week Ahead As Risk Events Eyed

By ForexTime 

The next few days could be wild and incredibly volatile for financial markets thanks to key central banks meetings, a semi-annual Congress appearance from Jerome Powell, and the latest US jobs data.

Asian shares edged higher on Tuesday morning following the mixed cues from Wall Street overnight as investors geared up for this week’s key risk events and economic releases. US and European futures seem to be pointing to a mixed open, with all attention directed towards commentary from Fed Chair Jerome Powell later today. In the FX space, the dollar remained subdued offering more space for G10 currencies to retaliate. Gold remains shaky this morning, and could be exposed to more pain if Powell strikes a hawkish tone later today.

In other news, the Reserve Bank of Australia hiked interest rates to the highest level in over 10 years. As expected, the central bank announced a 25-basis point hike, taking the cash rate to 3.6%. However, the RBA signaled a pause in its tightening cycle which triggered a selloff in the aussie. Taking a quick look at the technical picture, the AUDUSD remains under pressure on the daily charts with prices pressing against the 0.6700 support level. A solid bearish breakout beyond this level may open a path toward 0.6600.

Big week for USD as Powell and NFP eyed

It has been a choppy affair for the dollar over the past few days due to the absence of a fresh fundamental spark. But upcoming events could inject fresh life into the currency and set the tone for March.

Later today, Fed Chair Powell provides his semi-annual report to the Senate Banking Committee. Any hints around the Fed veering away from 25bp hikes in future meetings have the potential to move markets. The central bank head will address the House Financial Services Committee on Wednesday and is expected to reiterate a similar message. If Powell sounds hawkish, this could essentially revive dollar strength and rate hike bets. Alternatively, a dovish-sounding Powell may temper expectations around rates staying higher for longer, resulting in dollar weakness.

Before the main course and potential market shaker on Friday in the form of the NFP jobs data, investors will be served appetisers in the form of the ADP’s monthly report and the weekly initial jobless claims. Market sentiment could receive a slight boost if these reports exceed forecasts.

All eyes will be on the US jobs report at the end of the week, which is expected to show that the US added 215,00 jobs in February compared to the blowout 517,000 seen in January. Ultimately, another robust jobs report may reinforce expectations around the Fed holding rates higher for longer, in turn supporting dollar bulls. If the NFP report disappoints, this may raise questions about the dollar’s renewed strength, especially if rate hike bets cool.

Commodity spotlight – Gold

After bagging its best week since mid-January, gold has kicked off the new week on a shaky note.

The next few days promise to be eventful for the precious metal as investors brace for Powell’s Testimony and US economic data including the highly anticipated NFP. Price action suggests that gold bulls could be back in town. However, the risk events over the next few days may determine whether the current momentum results in a more pronounced bullish reversal or simply a dead cat bounce. A hawkish-sounding Powell coupled with another strong jobs report could spell nothing but trouble for gold. Alternatively, a cautious Powell and disappointing jobs report could keep the party going for gold bugs.

Taking a quick look at the technical picture, a strong daily close above the 50-day SMA around $1870 could encourage a move toward $1880 and $1900, respectively. Sustained weakness could open a path back towards $1845, $1825, and $1800.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Economics & Fundamentals Financial News
06 Mar

Brent Keeps Trying to Grow

By RoboForex Analytical Department

The crude oil sector fights with the news flow, trying to climb higher. A Brent barrel now costs 85.25 USD.

China has changed its forecast for economic growth in the country to 5.0% from 5.5% earlier. This made capital market really unhappy because it had really counted on the demand on energy carriers from China. Last year, the Chinese GDP grew by just 3%. Hence, the decrease in the target for 2023 might be an attempt to place more realistic goals and reach them efficiently. However, at the moment things look bad.

For now, the market has few fundamental reasons for optimism, yet local waves of purchases happen.

On H4, Brent has formed a consolidation range around 83.83. With an escape upwards, a pathway to 87.52 will practically open. After this level is reached, a link of correction to 83.83 might happen, followed by further growth to 87.52. And this is just a half of the wave. After the goal of growth is reached, a decline to 83.83 might follow, and then — growth to 94.80. Technically, this scenario is confirmed by the MACD: its signal line is above zero in the histogram area suggesting growth to new highs.

On H1, the structure of the fifth wave of growth to 85.80 has been completed. Today a consolidation range is forming below it. An escape downwards and a link of correction to 83.83 are not excluded. With an escape upwards, the wave might continue to 87.50. The target is local. After it is reached, a link of decline to 83.83 and growth to 90.00 might follow. Technically, this scenario is confirmed by Stochastic. Its signal line is above 20, aimed strictly upwards.

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Energy Financial News
06 Mar

US race for digital dollar fuels case for Bitcoin

By George Prior

With the US government’s work on a potential digital dollar accelerating, meaning a digital greenback could soon be a reality in the US, the case for Bitcoin becomes “significantly stronger.”

This assessment from Nigel Green, CEO and founder of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations, comes as Nellie Liang, the US Treasury Department’s undersecretary for domestic finance, noted that the federal government will start meetings in the “coming months” on a Central Bank Digital Currency (CBDC).

Speaking last week in a speech for the Atlantic Council, Ms Liang said that US officials are “actively evaluating whether a CBDC is in the national interest,” and highlighted some of the potential benefits of a Federal Reserve-backed digital currency, noting it “could help preserve the dollar’s global role” and possibly reduce frictions in cross-border transactions.

Nigel Green observes: “This is the clearest sign yet that a digital US dollar could soon become a reality, pending Congressional approval.

“With the world’s largest economy now ramping up efforts, the global race to CBDCs is now intensifying.

“It’s estimated that more than 80% of central banks around the world are considering launching a central bank digital currency or have already done so. It appears that the US is now determined not to be left behind and is accelerating the project.

“It seems to have become a critical matter of global leadership, as China is the most economically powerful country to lead CBDC implementation.”

Proponents of CBDCs say digital payments can be processed faster than traditional cash or check payments, reducing transaction times and increasing the speed of commerce.

In addition, transaction costs could be cheaper to process than traditional cash or check payments, potentially reducing costs for businesses and consumers. A digital system could provide greater access to financial services for people who may not have access to traditional banking services.

“Whilst CBDCs might have many advantages, including convenience, efficiency and transparency, what they do not have is privacy,” says Nigel Green.

“In effect, the digital dollar is Big Brother-style surveillance technology.

“These state-backed, programmable digital currencies will provide governments greater oversight of citizens’ transactions in real-time, potentially leading to the collection of sensitive personal information.

“This could include information about individuals’ spending habits, income, and other financial activities. This has raised concerns about the potential for government abuse of this information, such as the use of financial data to monitor and control individuals’ behaviour.
“It’s an extra lever of control that they’ve never had before.”
This, says the deVere Group CEO, is why Bitcoin and cryptocurrencies, will become increasingly attractive.

“Why? Because they still have all the plusses of being digital, – speed, efficiency and convenience – but they are fundamentally different as they run on an open, immutable blockchain.

“They are global, decentralized – with no one authority able to control – borderless, tamper-proof and censorship-resistant.”

Despite the US Treasury appearing to prepare for the launch of a digital dollar, there are a growing number of voices in opposition.

Representative Tom Emmer has introduced legislation in the House of Representatives that could limit the Federal Reserve from issuing a central bank digital currency, or CBDC.

Last month, Emmer affirmed that he had introduced the “CBDC Anti-Surveillance State Act” in order to protect Americans’ right to financial privacy.

According to the lawmaker, the bill would prevent the Fed from issuing a digital dollar “directly to anyone,” bar the central bank from implementing monetary policy based on a CBDC, and require transparency for initiatives related to a digital dollar.

“Any digital version of the dollar must uphold our American values of privacy, individual sovereignty, and free market competitiveness,” he said. “Anything less opens the door to the development of a dangerous surveillance tool.”

Nigel Green concludes: “The US joining the CBDC race more fully underscores that digital is inevitably the future of money .

“It’s increasingly clear that in the not-too-distant future, we will have a multi-faceted system of currencies, including fiat, CBDCs, and crypto.

“Whilst there are pros and cons to all, for many people programmable, trackable CBDCs will be unattractive due to the privacy and government monitoring concerns.

“What’s urgently needed is sensible, informed public conversation.”

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 more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

Cryptocurrencies Financial News
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