Multi-Currency Fundamental Macroeconomic Update | 3.14.23US stock futures declined on Wednesday by about 0.1% after the previous day's market rally, in which all three major indexes finished higher. Dow rose by 1.06%, S&P 500 jumped by 1.65%, and the Nasdaq Composite rallied by 2.14%. The banking sector staged a comeback rally as investors shrugged off fears of a systemic risk. Investors look forward to retail sales and producer price index data on Wednesday, as well as earnings reports from Adobe, Five Below and Oatly, among others. Inflation slowed to 6% in February of 2023, in line with market forecasts, the lowest since September 2021, and compared to 6.4% in January. The Bank of England is expected to increase rates by another 25 basis points this month, marking the 11th consecutive rate hike. The British pound remained above its over three-month low of $1.18 touched on March 8th, holding around $1.21, its strongest level since February 21st. Investors await British finance minister Hunt's new budget due Wednesday.
The growth in pay in Britain eased in the three months to January. Total pay grew by an annual 5.7%, slowing from 6.0% in the previous period, while pay excluding bonuses rose by 6.5%, down from 6.7%. The offshore yuan appreciated past 6.9 per dollar, recovering further from two-month lows on positive signs for policy continuity. The current central bank governor and finance and commerce ministers are set to keep their posts, which boosted the currency. China's inflation rate fell to a one-year low in February, and producer prices also declined for the fifth straight month in February. The People's Bank of China left its key lending rates unchanged for the sixth straight meeting, as widely expected.
In regular trading on Tuesday, the Dow gained 1.06%, the S&P 500 jumped 1.65% and the Nasdaq Composite rallied 2.14%, with all 11 S&P sectors finishing higher led by communication services, technology and financials. Investors were betting that the worst of the fallout from the collapse of Silicon Valley Bank and Signature Bank had passed. The market also digested data showing US annual inflation slowed further to 6% in February, in line with expectations. Investors now look ahead to retail sales and producer price index data on Wednesday, as well as earnings reports from Adobe, Five Below and Oatly, among others. The annual inflation rate in the US slowed to 6% in February of 2023, the lowest since September of 2021, in line with market forecasts, and compared to 6.4% in January. Food prices grew at a slower rate (9.5% vs 10.1%) while the cost of used cars and trucks continued to decline (-13.6% vs -11.6%). Also, costs slowed sharply for energy (5.2% vs 8.7%) and fuel oil (9.2% vs 27.7%) with gasoline prices falling 2% after a 1.5% rise in January. On the other hand, prices rose faster for electricity (12.9% vs 11.9%) and shelter (8.1% vs 7.9%). Core inflation which strips out the cost of food and energy edged lower to 5.5% from 5.6%. Compared to the previous month, the CPI rose 0.4%, following a prior 0.5% gain and also matching forecasts. The core rate, however, edged higher to 0.5% from 0.4%, compared to forecasts of 0.4%. Inflation in the US remains three times above the Fed's target of 2%. source: U.S. Bureau of Labor Statistics The euro extended gains to trade above $1.07, hovering around its strongest level since February 14th, and up from a two-month low of $1.05 touched on March 8th. Global markets were hit by concerns over the US financial system despite US authorities' latest efforts to limit the fallout from the collapse of SVB , raising the chances that the Federal Reserve might take a more cautious approach and deliver a 25 basis point hike at the March meeting, instead of a 50 basis point hike previously expected. Meanwhile, investors await the European Central Bank's policy statement due on Thursday, with policymakers expected to raise interest rates by another 50 bps . Still, the bloc's central bank might adopt a more dovish tone due to the ongoing risks to financial stability. The dollar index traded around 103.5 on Wednesday, hovering near its weakest levels in a month as investors reassessed the outlook for Federal Reserve monetary policy in light of the recent turmoil in the US banking sector and the latest US inflation report. The greenback came under heavy selling pressure this week as the collapse of Silicon Valley Bank and Signature Bank fueled speculations that the Fed could pause its tightening campaign to avoid further risks to the financial system. Fresh data also showed that the annual inflation rate in the US slowed further to 6% in February, the lowest since September 2021, in line with expectations.
Money markets are now pricing an 80% chance of a 25 basis point rate hike from the Fed next week, lower than the half-percentage point increase expected a week ago. The British pound held above $1.21, hovering around its strongest level since February 21st and remaining above an over three-month low of $1.18 touched on March 8th. Investors dumped the dollar on hopes the Federal Reserve might take less aggressive approach on monetary policy going forward after the collapse of Silicon Valley Bank put into question the strength of the US banking system. Elsewhere, the Bank of England is seen increasing rates by a further 25 bps this month, an 11th consecutive rate hike, before ending the current tightening cycle. On the data front, growth in pay in Britain, which the UK central bank is watching closely as it weighs up when to pause its run of interest rate hikes, eased in the three months to January. Total pay grew by an annual 5.7%, slowing from 6.0% in the previous period, while pay excluding bonuses rose by 6.5%, down from 6.7%. Investors now await British finance minister Hunt's new budget due Wednesday.
The offshore yuan appreciated past 6.9 per dollar, recovering further from two-month lows on positive signs for policy continuity, with the current central bank governor and finance and commerce ministers set to keep their posts. The yuan also gained as the collapse of Silicon Valley Bank prompted US regulators to protect depositors and financial institutions, giving rise to speculations that the US Federal Reserve could take a less aggressive approach to policy tightening to avoid further risks to the financial system. Meanwhile, latest data showed that China’s inflation rate fell to a one-year low in February, bolstering bets that the central bank would maintain an accommodative stance. Producer prices also declined for the fifth straight month in February. Last month, the People's Bank of China left its key lending rates unchanged for the sixth straight meeting, as widely expected. The Swiss franc strengthened past 0.92 per USD, approaching the 18-month high of 0.9 touched on February 1st as fears surrounding the US financial sector pressured the dollar and erased expectations of sharp rate increases by the Federal Reserve . On the other hand, the hawkish outlook for the Swiss National Bank supported the local currency as policymakers continued to flag risks of elevated inflation due to the second-round effects of high energy prices. Domestic inflation jumped to 3.4% in February, well above the SNB's forecasts of 3% and market expectations of 3.1%, adding to bets that the central body will continue its rate-hiking path next week. Additionally, recent data showed that foreign exchange reserves at the SNB fell to CHF 770.6 billion in February, the lowest since 2019, suggesting the SNB was intervening in currency markets to support the franc. The Indian rupee depreciated past 82.25 per USD from the one-month high of 81.7 touched on March 3rd, weakening despite the sharp retreat in the DXY as strong import demand weighed on the local currency. The volatility of the greenback suggested that Indian investors also exited their short dollar positions, increasing selling pressure on the rupee. Still, concerns about higher inflation strengthened hawkish bets for the Reserve Bank of India. Retail prices rose by 6.44% annually in February, above expectations of 6.35%, and marking it the second month inflation surpassed the central bank’s upper target of 6%. Economists project the lender to raise its key rate by 25bps in the upcoming April meeting, prolonging the effort to curb elevated retail prices and erasing previous expectations that Indian borrowing costs could peak by the first quarter of 2023.
The British pound held above $1.21, hovering around its strongest level since February 21st and remaining above an over three-month low of $1.18 touched on March 8th. Investors dumped the dollar on hopes the Federal Reserve might take less aggressive approach on monetary policy going forward after the collapse of Silicon Valley Bank put into question the strength of the US banking system. Elsewhere, the Bank of England is seen increasing rates by a further 25 bps this month, an 11th consecutive rate hike, before ending the current tightening cycle. On the data front, growth in pay in Britain, which the UK central bank is watching closely as it weighs up when to pause its run of interest rate hikes, eased in the three months to January. Total pay grew by an annual 5.7%, slowing from 6.0% in the previous period, while pay excluding bonuses rose by 6.5%, down from 6.7%. Investors now await British finance minister Hunt's new budget due Wednesday. The Turkish lira held at a record low of 18.9 per USD after the central bank of Turkey resumed rate cuts. The TCMB cut its main interest rate by 50bps to 8.5% in its February meeting, matching market expectations. It was the first rate decrease since November, aiming to further loosen financial conditions and stimulate the recovery of supply chains after the earthquake hit the country. The central bank has cut its key rate by 10.5 percentage points since September 2021, triggering a crisis for the lira, soaring inflation , and a largely unbalanced current account. Inflation in Turkey soared to 86% in October before easing back to 58% in January, as the lira plunged 55% since the start of the bank's loosening cycle and compounded surging energy costs that Turkey must import. The TCMB also extended anti-dollarization strategies to support the currency.
The Russian ruble was steady at around 75 per USD in March, hovering close to its lowest since April 2022 amid limited foreign currency inflows to the national economy. Sanctions and embargos on the country's energy exports compounded the impact of lower international energy prices, reducing turnover for Russia's vital revenue source and limiting demand for the local currency. Data from the Finance Ministry showed that oil and gas revenues sank by 46.4% from the prior year. Lower energy sales hurt the ruble despite intervention by the CBR , which has been selling an average of RUB 8.9 billion worth of foreign currency per day since January to offset depressed capital inflows. Meanwhile, until April 6th, the Finance Ministry will be selling RUB 120 billion in foreign currency, as increased demand from China and India is expected to boost energy shipments. The Brazilian real was changing hands around $5.15, a dramatic reversal from an eight-month peak of $4.95 touched on February 2nd, as stronger-than-expected US economic data fanned concerns about an aggressive Federal Reserve , thus spurring demand for the dollar. However, the downside move has been limited by speculation that the Bank of Brazil would hold interest rates higher for longer. Officials kept the benchmark Selic at 13.75% for the fourth straight meeting in February, as projected, but struck a somewhat hawkish tone due to worries over rising inflation expectations. Policymakers and investors have been concerned about Brazil's fiscal policy since President Lula da Silva took office earlier this year. Lula has constantly hinted at the need to boost social programs and loosen inflation targets.
Yen
EUR/NZD Fundamental + Technical Macroeconomic Update | 3.14.23The Euro continued its upward momentum, trading above $1.07 and approaching its highest level since February 14th. This is in contrast to the two-month low of $1.05 it reached on March 8th, which was due to concerns about the US financial system following the collapse of SVB. Despite US authorities' efforts to limit the damage, investors are concerned that the Federal Reserve may adopt a more cautious approach and only deliver a 25 basis point hike at the March meeting, instead of the previously expected 50 basis point hike. This is because of the potential risk to global growth caused by the turmoil in the US banking sector. Investors are also awaiting the European Central Bank's policy statement on Thursday. Although the bank is expected to raise interest rates by another 50 basis points, there are concerns that it may adopt a more dovish tone due to ongoing risks to financial stability.
The S&P/ASX 200 Index rebounded from over two-month lows, rising 0.8% to above 7,060 on Wednesday. The gains were led by technology and banking stocks, following a similar trend on Wall Street, as investors felt that the worst of the fallout from the collapse of Silicon Valley Bank and Signature Bank had passed. The US inflation report, which came in line with expectations, also calmed the market’s nerves, and investors are now betting on a smaller interest rate hike by the Federal Reserve next week. Although Australian consumer sentiment remained at historic lows in March due to concerns about inflation, interest rates, and the broader economy, business sentiment dropped to a three-month low in February.
The Hang Seng Index soared by 346 points or 1.8% to 19,594 on Wednesday, recovering from a 2.3% plunge the day before. This plunge had seen the index hit its lowest in more than three months. Investors are optimistic that China's economic activity will strengthen after official data showed that industrial output, retail sales, and fixed-asset investment all grew during the first two months of the year. The People's Bank of China added more liquidity than expected while holding a key lending rate, adding to the positive sentiment.
WTI crude futures rose above $72 per barrel, rebounding from three-month lows, as OPEC raised its forecast for Chinese oil demand growth in 2023. This is in light of the country’s exit from the zero-Covid policy. However, OPEC left its outlook for global demand unchanged, citing potential downside risks for global growth. The group said that it would stick to production cuts agreed in October until the end of the year, according to Saudi Arabia energy minister Prince Abdulaziz bin Salman. The US oil benchmark, however, remains down more than 5% this week due to the turmoil in the US banking sector, and the prospect of another interest rate hike from the Federal Reserve next week continues to weigh on sentiment. Investors are now looking ahead to the IEA’s monthly report and official data on US crude inventories on Wednesday.
Soybean prices eased below $15 per bushel, moving further away from a seven-month high of $15.55 hit on February 13th. This is because of the expectation that supply will remain strong, boosted by large crops in Brazil. The country's soybean production is estimated to reach a historical 153 million metric tons (MMT) in 2022/23, unchanged from last month, and higher by 24 mmt (18 percent) from last season’s drought-affected crop. Meanwhile, concerns over Argentina's supplies will continue, as the country's soybean harvest forecasts have been cut several times over the past months after the South American nation fell into the grip of its worst drought in over 60 years. The USDA has slashed its projection for Argentine production to 33 million tons, down 20% from its February estimate and marking the smallest crop since 2009. Crush is also expected to hit the lowest level in over a decade. The Hang Seng soared 346 points or 1.8% to 19,594 around midday on Wednesday, mostly recovering from a plunge of 2.3% the day before that saw the index hit its lowest in more than 3-months, amid signs that China's economic activity strengthened during the first two months of the year, with official data showing that industrial output, retail sales, and fixed-asset investment all grew. Meantime, the PBoC today added more liquidity than expected while holding a key lending rate unchanged and stepping up financing support for private small firms. An upbeat session on Wall Street overnight also boosted sentiment, with traders trying to shake off bank woes in the US, while speculation grew that the Federal Reserve may go for a smaller rate hike when it meets next week. All sectors supported the upturn, with financials, tech, and consumers all gaining over 1%. Innovent Biologics climbed 9.8%, followed by Giant Biogene Hlds. (9.3%), Orient Express Intl. (8.4%), and Longfor Group (4.2%).
USD/JPY Fundamental + Technical Macroeconomic Update | 3.14.23The Japanese yen strengthened to 133 per dollar, reaching its highest levels in almost a month. This was due to the US regulators stepping in to protect depositors and financial institutions following the collapse of Silicon Valley Bank, causing speculation that the US Federal Reserve may take a less aggressive approach to policy tightening to avoid further risks to the financial system. Meanwhile, the Bank of Japan, under Governor Haruhiko Kuroda’s final policy meeting before retirement, maintained its ultra-low interest rates at its March meeting. Japanese policymakers made no indication of ending the bank’s yield curve control, preferring to hold off on big policy changes until Kuroda’s successor, Kazuo Ueda, steps in as head in April. The dollar index traded around 103.5 on Wednesday, nearing its weakest levels in a month. The recent turmoil in the US banking sector and the latest US inflation report caused investors to reassess the outlook for Federal Reserve monetary policy. Fresh data showed that the annual inflation rate in the US slowed further to 6% in February, in line with expectations. This led to money markets pricing an 80% chance of a 25 basis point rate hike from the Fed next week, lower than the half-percentage point increase expected a week ago. In the stock market, the Nikkei 225 Index rose 0.2% to above 27,250 while the broader Topix Index gained 0.7% to 1,960 on Wednesday, with banking stocks leading the rebound. The collapse of Silicon Valley Bank and Signature Bank had caused concern, but investors were hopeful that the worst of the fallout had passed. Financial stocks led the advance, with gains from Mitsubishi UFJ (4.3%), Sumitomo Mitsui (2.6%) and Mizuho Financial (2.4%). Minutes from the Bank of Japan’s January meeting showed that members reiterated the need to maintain ultra-easy policies, stating that it will take time to achieve the 2% inflation target in a sustainable and stable manner. Overall, there was optimism in the market, with investors betting on a smaller interest rate hike by the Federal Reserve next week.
UJI did acknowledge that it was risky but still within our plan and not destroy us. We take it and we press forward and we wait further.
UJI've entered these and they are HIGHLY RISKY⚠️⚠️⚠️⚠️⚠️ but I will adjust SL because of how they are playing out and the market movement. We in a pullback of a downward trend and it's reason why I've taken it.
USD/JPY pulls back into resistance for potential swing trade The US dollar has continued to face selling pressure following the collapse of Silicon Valley Bank, as traders bet that the Fed may pause their tightening cycle at next month's meeting. Whilst Fed fund futures imply a 60.5% chance of a 25bp hike (or 39.5% odds of a pause), this is quite a sudden chance considering the curve suggested ~80% chance of a 50bp hike last week.
US inflation data is released in ~14 hours and is likely to be a closely watched report, as a soft print could increase odds of a pause, weigh on the dollar and send USD/JPY lower. Yet a hot inflation print likely cements a 25bp hike and sees the dollar coup some of its losses.
Purely on a technical front, USD/JPY looks appealing for a bearish sewing trade. It has an established downtrend on the 1-hour chart, and prices have retraced higher into a resistance zone including the monthly pivot point and weekly S1 pivot. A rising wedge / bear flag is also forming, which generally breaks out in the direction of the underlying trend. A weak inflation report could likely help.
The bias is bearish beneath the recent cycle highs and for a move down to 132.
NZDJPY: Pullback From Key Level 🇳🇿🇯🇵
NZDJPY formed a cute double bottom pattern on a solid support on 1H time frame.
Its neckline has just been broken.
I expect a pullback to 83.24
GBP/JPY Buy setup 460 pipsCheck the video to get understanding on my view on GJ this week
Follow and comment below for other breakdowns
EJ Yearly ChartHello Traders!
BoJ (Bank of Japan) has not raised rates since 2016.
The current rate is negative.
ECB (European Central Bank) has recently raised rates over the years.
The current rate is positive.
It is reflected in the price action. Central bank traders want the best ROI (rate of return).
CADJPY: Classic Trend-Following Setup 🇨🇦🇯🇵
CADJPY broke and closed below a support line of a bearish flag pattern.
Taking into consideration, that the pair is trading in a bearish trend,
that violation may trigger a sell off.
I expect a bearish continuation to 97.05 / 96.1
❤️Please, support my work with like, thank you!❤️
USDJPY Outlook 10th March 2023The Bank of Japan (BoJ) released an unchanged monetary policy statement, with no surprises from Governor Kuroda at his last policy meeting.
As the monetary policy statement was unchanged, this disappointed the market slightly, resulting in the significant weakening of the Japanese Yen.
The USDJPY spiked up from the 136 price area, breaking above the 23.60% Fibonacci retracement level at 136.40 to reach the 137 round number resistance and 61.8% Fibonacci retracement level following the release of the news.
Although the price retraced lower, the USDJPY could continue trading higher toward the 137 resistance level and beyond that, the next key resistance level is at 138.
USDJPYHi
USDJPY has been examined in different dimensions:
1- Strong supply and demand levels that I identify with my own indicator and system.
2- The structure of recently formed waves
3- Current market momentum
4- The structure of classical and price patterns
In this idea, I identified the direction of the market in different ways and in the second step, I analyzed the potential of continuation or reversal. Usually, paying attention to the trend and strength of the trend can greatly increase the accuracy of the analysis.
In general, I tried to describe the continuation of the movement in the simplest possible way in the diagram.
⚠️ Disclaimer:
USDJPY Outlook 9th March 2023Although the USDJPY traded significantly higher following the bullish news from the US Federal Reserve, with the price reaching the 138-round number resistance level, it has since retraced significantly to the downside and is trading below the 137-round number level.
With the short term bearish trendline indicating downward pressure, look for the USDJPY to continue trading lower to retest the 136.40 (and 61.8% Fibonacci retracement level), similar to the price action overnight.
However, watchout for significant price volatility tomorrow with the Bank of Japan (BoJ) due to release its monetary policy decision (and it is also Governor Kuroda's last meeting).
While it is unlikely that any changes will be made to the monetary policy, the market is anticipating the potential of a surprise since it is Kuroda's last meeting.
If he adjusts/removes limits on the JGB yield, the Yen could strengthen significantly, with the next key support level for the USDJPY at 135.26.
Get ready to be long Gold and short JPYThe chart of Gold expressed in Japanese Yen has remained in a very tight weekly closing price range of 7% for almost a year. The boundaries are clear as an ascending triangle. This is a trade I will lean into hard by buying Gold and either selling Yen futures or buying USDJPY spot in approximately equal USD values. JCB will continue to inject money into the system. The Yen is likely to becoming the garbage can currency of the world. By buying Gold and selling Yen I become USD neutral in the trade.
USDJPY Outlook 7th March 2023Yesterday, the USDJPY traded down to retest the support level of 135.35, but failed to break lower. This move to test and reject the support level was similar to the price action on the 1st of March.
As the USDJPY consolidates along the 136 price level and 38.20% Fibonacci Retracement level, look for breakout potential on the USDJPY.
A recovery in strength on the DXY could see the USDJPY climb higher toward the 137 round number resistance level, with the 61.8% Fibonacci Retracement level possibly forming a strong intermediate resistance level.
Alternatively, if the DXY continues with the current downtrend and weakens further, look for the USDJPY to trade below the 135.80 price level to signal a possible retest of the 135.35 support level again.
GBPJPY Potential Forecast | 6th March 2023Fundamental Backdrop
1. GBP inflation continues to remain elevated at 10.1% for the month of January.
2. BOE continues to take a hawkish stance and most recently raised rates by 50bps to 4.0% in its February meeting.
3. Inflation would need to make a marked fall for the BOE to revise its hawkish stance in the market.
4. BOJ continues to maintain its key short-term i/r at -0.1%, signifying the dovish stance in the market.
5. This wide interest rate differential continues to play a pivotal role in the appreciation of pound over the yen.
Technical Confluences
1. Price is currently flirting the H4 support level at 162.8.
2. Price has also retraced past the 50% in the fibonacci retracement.
3. Price is also resting on the Ichimoku cloud on the H4 timeframe and this serves as a dynamic support zone for price to continue higher as well.
Idea
Looking for long positions on the GBPJPY for price to head up to tap into the HTF resistance at 166.04.
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USDJPY Outlook 6th March 2023The USDJPY reversed strongly from the 137 round number resistance level, trading lower through the session on Friday, ending the week at the 135.80 price area.
This move lower, as we know was due to the weakness in the DXY, hence, if the weakness continues, the USDJPY could continue trading lower, down to retest the 135.35 key support level.
The USDJPY could see significant volatility this week, given that the JGB 10yr yield had recently breached the 0.5% ceiling and the BoJ monetary policy statement is due to be released (and it is Kuroda's last meeting as Governor).
If the price breaks below the immediate support level, the USDJPY could see significant downside potential, with the next key support level at the round number level of 134.
USD/JPY -4/3/2023-• Pair broke above descending channel
• Entered correction mode and stalled at 38.2%
• Rising wedge in play, a bearish pattern reinforcing the downside scenario
• Breaking below rising wedge support takes us back to yearly lows around 127 followed by the projected target at 125
CADJPY: Nice 5:1 SpottedSpotted a nice move here, we've broken through and retested resistance (now support), whilst respecting the long term dynamic trendline on the daily.
I'm going to get involved with this 5:1 opportunity.
I don't expect JPY to be weak for too much longer so I'll be watching this one closely!
USDJPY Outlook 3rd March 2023Overnight, the USDJPY climbed steadily to the upside, reaching the recent high and round number resistance level of 137.
However, the price failed to break the resistance level, retracing lower down to the current level of 136.61.
While further upside could be expected especially if the DXY continues to strengthen, watch out for significant volatility on the Japanese Yen with the recent news that the Japanese bond yields have again risen above the 0.5% ceiling previously set by the BoJ.
On 20th December 2022, when the BoJ increased flexibility by increasing the bond yield ceiling, the USDJPY spiked from the 137.17 level down to 133.50 within the hour.
In the meantime, look for the USDJPY to consolidate along the current price level (supported by the 23.6% Fibonacci retracement level) before trading higher again with the 138 key resistance level a target level.
Cheeky long for USD/JPYUSD/JPY is grinding higher on the daily chart, although it seems wary of the 200-day MA overhead. But at the same time, it looks as though it at least wants to test it (and is sat near the daily R1 pivot).
Prices have pulled back on the 1-hour chart in a corrective fashion, and the corrective lows found support at the 50-hour EMA and a previous swing high. Prices are also trying to hold above the daily pivot points.
- The bias is for an upside break due to the underlying trend, and that is something a strong ISM services report later today could help with.
- The initial target is 137, ahead of the daily R1 / 200-day MA,
- The bias remains bullish above 137.40
GJWe are cruising nicely, which doesn't mean we should be cocky and irresponsible. Move SL into profit, some profit is better than no profit. My SL is very close to current market price because I don't like holding trades over night and tomorrow is NFP so I do not trade it.
