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The week starts very slowly as most Western markets are closed for Easter holiday. The US revealed the latest core PCE print on a Good Friday and the Federal Reserve (Fed) Chair Jerome Powell spoke after the data. The headline figure came in line with the expectations at 2.8%, down from 2.9% printed a month earlier, the monthly figure came in at 0.3% as expected, but the prior month read was revised up to 0.5%. The bad news – for inflation – is that personal spending jumped more than expected in February, but the good news is – for inflation – personal income fell more rapidly than the expectations. Powell said that ‘the fact that the US economy is growing at such a solid pace, the fact that the labour market is still very, very strong, gives them the chance to just be a little more confident about inflation coming down before they take important steps.’

Of course, as the markets were mostly closed at the time the data came out and Powell spoke, we didn’t see much reaction on Friday. We see slight moves this Monday; the US 2-year yield is down to 4.60% at the time of writing, the 10-year yield hovers around 4.20% and the dollar index is steady near a 1.5 month high. Attention will shift to the US jobs data this week. Hopefully for the Fed, the data won’t be too strong to spoil the Fed cut expectations.

The EURUSD kicks off the week under pressure. The yen bulls are nowhere to be found, but the Nikkei index is sharply sold after the Bank of Japan’s (BoJ) Tankan index fell in the Q1 for the first time in a year. The large manufacturers see their business conditions deteriorate moving forward. Still there has been a notable improvement for manufacturers of petroleum and coal in Q1 thanks to recovery in oil prices. The US crude is up by nearly 20% since the beginning of the year on the back of tense geopolitical environment in the Middle East, a restrictive stance from OPEC when it comes to the supply cuts and robust demand expectations due to the lower interest rate bets from the major central banks. For now, the Chinese stimulus measures and an eventual Chinese recovery were not significantly priced in but China represents an important upside risk. The latest Chinese PMI numbers released during the weekend were encouraging. Both the manufacturing and the non-manufacturing PMI showed a faster-than-expected expansion in March. Especially, the non-manufacturing PMI jumped to 53 – the highest since last summer. Still, input prices fell for the first time since last summer on lower material prices to stimulate demand and the property crisis gave no signs of abating, meaning that the enthusiasm regarding the Chinese data should be taken with a pinch of salt. But the weekend data has a positive impact on oil prices on this slow Monday morning, which sees the barrel of oil trading at the highest level since the year started. OPEC meets this week and is expected to make no changes to its supply cut strategy. The cartel is set to extend supply cuts until the end of this quarter. The IEA expects supply deficit in 2024, while they were looking for a supply surplus in their prediction earlier this year. As a result, the upside risks in oil markets prevail and the positive factors should encourage a further rise of US crude to $85pb per barrel.

In equities, the first quarter ended last week with the S&P500 recording its best performance since 2019. The index gained more than 10% in the first three months of the year even though the Fed rate cut expectations went from six cuts for this year with the first that was supposed to happen in March, to only three cuts with the first rate cut supposed to come on June with a bit less than 70% probability attached to it according to the activity on Fed funds futures.

In Turkey, municipal elections of Sunday ended in tears for Erdogan-backed AKP leaders in major cities including Istanbul. Even though the news hint at a potential change – for better - in the future, we won’t see a meaningful change in the immediate aftermath of the municipal elections. The monetary policy will remain unchanged and the USDTRY - which is trading higher in the wake of the latest elections - should continue trending higher at a potentially higher speed as the central bank may put less effort to counter the lira’s depreciation now that the elections are behind.

Key Highlights

• EUR/USD started a fresh decline below the 1.0820 support zone.
• A key bearish trend line is forming with resistance at 1.0875 on the 4-hour chart.
• Gold prices rallied further above the $2,250 resistance.
• The US ISM Manufacturing Index could increase from 47.8 to 48.4 in March 2024.

EUR/USD Technical Analysis

The Euro started another decline from the 1.0940 zone against the US Dollar. EUR/USD traded below the 1.0920 and 1.0880 levels to move into a bearish zone.

Looking at the 4-hour chart, the pair even settled below the 1.0850 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). Finally, the pair traded below the 1.0820 support.

A low was formed near 1.0767 and the pair is now consolidating losses. On the upside, the pair could face resistance near the 1.0800 level. The first major resistance is now forming near 1.0820.

The main resistance is now forming near 1.0850. There is also a key bearish trend line forming with resistance at 1.0875 on the same chart. A close above the 1.0875 zone could open the doors for more upsides.

The next stop for the bulls might be 1.0940. If not, the pair might continue to decline. Immediate support is near the 1.0775 level.

The next major support is at 1.0750. If there is a downside break below the 1.0750 support, the pair could decline toward the 1.0700 support. Any more losses might send the pair toward the 1.0650 level in the near term.

Looking at Gold, the bulls were able to push the price further higher above the $2,250 resistance zone and there are chances of more gains toward $2,265.

Economic Releases

• US ISM Manufacturing Index for March 2024 – Forecast 48.4, versus 47.8 previous.

China's Caixin PMI Manufacturing rose from 50.9 to 51.1 in March, above expectation of 51.0, marking the highest level in 13 months.

Wang Zhe, Senior Economist at Caixin Insight Group, noted acceleration in both supply and demand within sector with "overseas demand picking up".

Despite the overall improvement, employment continued "contraction. Additionally, "depressed price level worsened".

Full China Caixin PMI manufacturing release here.

Japan's PMI Manufacturing was finalized at 48.2 in March, up from February's 47.2, highest in four months.

Usamah Bhatti of S&P Global Market Intelligence noted that while the sector's performance remained "downbeat," there were emerging signs that the "worst of the weakness had passed". This observation is based on softer reductions observed in both output and new orders inflows.

However, it's important to highlight that the average PMI reading for Q1 stood at 47.8, indicating the weakest quarterly performance since Q3 2020, when it was 46.7.

Inflationary pressures "remained marked" Although the rate of input price inflation has moderated to its weakest in over three years, the challenge of high costs persists. In response to these pressures, selling price inflation has intensified to a three-month high, reflecting manufacturers' efforts to safeguard profit margins by transferring higher expenses onto their customers.

Full Japan PMI manufacturing final release here.

Japan's Q1 quarterly Tankan survey unveils mixed economic sentiment among the nation's large businesses. Service sector expressed their highest levels of optimism in over three decades, contrasting with a slight decline in confidence among manufacturers.

Large manufacturing index dropped from 13 to 11, still surpassing expectation of 10. However, outlook for large manufacturing firms saw modest increase from 8 to 10, slightly below forecasted 11.

On the brighter side, non-manufacturing index climbed from 32 to 34, exceeding expectations of 31 and marking the highest level since 1991. Despite this, non-manufacturing outlook remained steady at 27, falling short of anticipated 30.

Additionally, large all-industry Capex gauge, which measures capital expenditure plans across industries, is projected to grow by 4% in the new fiscal year. This figure, though positive, falls significantly below the anticipated 9.2% growth.

China's official NBS PMI Manufacturing climbed from 49.1 to 50.8 in March, surpassing expectations of 50.1. This uptick not only marks the sector's first expansion in six months but also represents its highest reading in a year

Details showed notable increases in manufacturing production, which leaped from 49.8 to 52.2, and new orders, which surged from 49.0 to 53.0. Furthermore, new export orders rose from 46.3 to 51.3.

PMI Non-Manufacturing also showed positive momentum, climbing from 51.4 to 53.0, slightly above anticipated figure of 51.3. PMI Composite index, which encompasses both manufacturing and non-manufacturing activities, improved from 50.9 to 52.7,

Zhao Qinghe, senior statistician at NBS, attributed the March surge to increased production resumption efforts following Lunar New Year holiday, alongside improvement in market vitality.

ECB Governing Council members Robert Holzmann, in an interview with Austria's Kronen Zeitung, noted the possibility of Europe reducing interest rates ahead of the US, citing the slower economic growth in Europe compared to its transatlantic counterpart.

Holzmann underscored that the timing of such cuts would "depend largely on what wage and price developments look like by June."

Yannis Stournaras, in remarks to Greece's Proto Thema, articulated a more aggressive stance, positing that "cutting rates four times this year, by 25 basis points each, is possible."

This perspective reveals a division within ECB, as Stournaras acknowledged skepticism among some colleagues who advocate for a more cautious approach to rate reductions.

• Gold rising inside weekly impulse wave 3
• Likely to rise to resistance level 2300.00

Gold rising inside the sharp weekly impulse wave 3, which recently broke the resistance trendline of the daily up channel from November.

The breakout of this up channel coincided with the breakout of the key resistance level 2200.00, which stopped the previous impulse wave 1.

Given the strong daily uptrend, Gold can be expected to rise further to the next resistance level 2300.00 (target for the completion of the active impulse wave 3).

Monday, Apr 1, 2024

Tuesday, Apr 2, 2024

Wednesday, Apr 3, 2024

Thursday, Apr 4, 2024

Friday, Apr 5, 2024