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EUR/USD has broken out to the upside following a lower-than-expected headline inflation reading in the US. While the uptick in core CPI still supports another rate hike by Fed in May, the overall data set raises hopes that the disinflation process is ongoing and perhaps even gathering momentum. This development bolsters the confidence of those betting on a Fed rate cut later this year.

Technically, EUR/USD is expected to face resistance at 1.1032 shortly. A decisive break above this level would resume the overall uptrend from the 2022 low of 0.9534. Next target is the 61.8% retracement of 1.2348 (2021 high) to 0.9534, which stands at 1.1273.

US CPI rose 0.1% mom in March, below expectation of 0.3% mom.  CPI core (all items less food and energy) rose 0.4% mom, matched expectations. Energy index decreased -3.5% mom while food index was unchanged.

Over the last 12 months, CPI slowed from 6.0% yoy to 5.0% yoy, below expectation of 5.2% yoy, marked the lowest level since June 2021. CPI core (all items less food and energy) accelerated from 5.5% yoy to 5.6% yoy, matched expectations. Energy index for down -6.4% yoy while food index rose 8.5% yoy.

Full US CPI release here.

The currency market has moved little over the past week, waiting for significant drivers. The Easter lull is likely to end today, as inflation data and the Fed’s March meeting minutes are expected to be released.

US inflation reports have moved markets more than NFP in recent months and have often been a bellwether for the Dollar in the coming weeks as they have influenced interest rate expectations.

On average, market analysts are forecasting a 0.2% rise in prices for March and a slowdown in annual inflation to 5.1% from 6.0% the previous month and a peak of 9.1% in June last year.

However, economists expect core inflation to rise from 5.5% to 5.6% YoY, reversing the downward trend that has been in place since September.

In our view, a deeper slowdown in headline inflation, as we saw in China earlier this week, cannot be ruled out. Moreover, we should not be surprised if the rate of increase in prices, excluding energy and food, also falls short of expectations. A recovery in supply chains and a slowdown in wage growth are working against inflation.

A weaker-than-expected reading or other reliable signs of waning inflation could unleash a wave of pressure on the Dollar, reducing the chances of another Fed rate hike. Weaker inflation data is also good for demand for equities and commodities, as markets will reinforce expectations that inflation has peaked. The Dollar would then stand a good chance of rallying off this year’s lows.

On the other hand, if prices rise significantly more than expected, this will push the Dollar higher. Technically, the DXY could form a double bottom with lows in early February and April. Equities and commodities could go down.

Gold is currently under pressure but is still above the 2,000 psychological mark and the short-term simple moving averages (SMAs) in the 4-hour chart. The short-term technical oscillators are showing some bearish signs and point to more weakness in the market. The RSI is pointing down above the 50 level and the stochastic is looking overstretched near the 80 level. However, the MACD is still above its trigger and zero lines, confirming the broader bullish outlook.

The next target to the downside is the 20-period SMA at 2,003 ahead of the 50-period SMA at 1,995. At this stage the market would see a retest of the 1,980 support level, which stands near the medium-term uptrend line.

Upside moves are likely to find resistance at a 13-month high of 2,032. There is an important resistance zone around 2,070, taken from the peak in March 2022.

In a nutshell, in the short term, the bullish phase remains in play especially if gold prices continue to trade above the ascending trend line and near the previous peak.

NZDUSD had been steadily gaining ground after finding its feet at the 2023 low of 0.6083 in early March. However, the recovery proved to be short-lived and the price reversed lower, diving beneath its 50-day simple moving average (SMA), while the focus has now shifted towards the 200-day SMA.

The momentum indicators currently suggest that near-term risks are tilted to the downside. Specifically, the stochastic oscillator is declining within the 20-oversold territory, while the RSI has flatlined beneath its 50-neutral mark.

Should bearish pressures intensify and the price cross below its 200-day SMA, 0.6144, which is the 38.2% Fibonacci retracement of the 0.5510-0.6536 upleg, it could act as the first line of defense. If that barricade fails, the spotlight could turn towards the 2023 low of 0.6083. Failing to halt there, the pair could challenge the 50.0% Fibo of 0.6023.

Alternatively, if buyers manage to pause the decline and push the price higher, immediate resistance could be met at the 23.6% Fibo of 0.6296. Piercing through that zone, the pair might ascend towards the recent rejection territory of 0.6378. A break above that region could pave the way for the 2023 peak of 0.6536.

Overall, NZDUSD’s technical picture has deteriorated after its latest rebound encountered strong resistance. Looking forward, the next move could be determined from whether the 200-day SMA manages to hold its ground.

USDCAD is plunging towards the long-term uptrend line that may act as a turning point for traders. The 20- and the 50-day simple moving averages (SMAs) are ready to post a bearish crossover, confirming the recent bearish movement from the 1.3800 psychological mark. The RSI indicator is moving sideways beneath the 50 level, while the MACD is moving below its trigger and zero lines.

Any more losses could drive the market towards the immediate support of 1.3400, which overlaps with the 200-day SMA. If the bears send the price below these key levels, then they may switch the outlook to bearish, meeting the 1.3225-1.3260 support region.

Otherwise, any attempts to the upside may find strong resistance at the short-term SMAs currently at 1.3580 before testing the 1.3640 barrier. Above that, the 1.3800 psychological mark and the medium-term downtrend line around 1.3830 may halt bullish actions.

Summarizing, USDCAD is still standing within a triangle and only an advance above 1.3860 or below 1.3400 may decide the next directional movement.

Market picture

Bitcoin hit a 10-month high above $30,500 on Tuesday. However, two attempts by the bulls to build a sustained rally were not supported by the market. On Wednesday morning, the price dropped below $30K, losing 0.4% over the past 24 hours.

The crypto market has lost more than 1.2% over the same period to $1.22 trillion. Traders are rushing to lock in profits from the recent rally amid concerns about volatility ahead of today’s US inflation figures.

According to CoinShares, investments in cryptocurrencies rose by $57M last week, the third consecutive week of inflows. Bitcoin investments increased by $56M, Ethereum by $0.6M, Uniswap by $0.5M and Polkadot by $0.4M.

Despite the positive investor sentiment, trading volumes for the week were low at $970M. The same trend was seen in the global BTC exchange market, where trading volumes for the week were only 25% of the average since the beginning of the year, Coinshares noted.

News background

The US dollar is heading for an “absolute collapse” that will strongly boost Bitcoin’s growth, said Larry Lepard, founder of Equity Management Associates. In his view, a tight supply of 21 million coins would give BTC a key advantage over gold and play an important role in its “long-term parabolic growth”.

US business magazine Fortune has compiled its first ranking of the top 40 cryptocurrency companies in eight categories – the Crypto 40. In the protocol category, bitcoin gave way to Ethereum.

According to Messari, Cardano outperformed Bitcoin and Ethereum by blockchain transaction volume. However, Cardano lags far behind BTC and ETH in the number of active addresses.

Daily Pivots: (S1) 165.48; (P) 165.84; (R1) 166.49; More...

Intraday bias in GBP/JPY is back on the upside with break of 166.38 resistance. Rise from 155.33 is resuming and further rally should be seen to 69.26 resistance next. On the downside, however, break of 162.75 minor support will mix up the outlook and turn intraday bias to the downside for 158.24 support instead.

In the bigger picture, as long as 38.2% retracement of 123.94 (2020 low) to 172.11 (2022 high) at 153.70 holds, medium term bullishness is retained. That is, larger up trend from 123.94 (2020 low) is still in progress. Break of 172.11 high to resume such up trend is expected at a later stage.

Daily Pivots: (S1) 145.20; (P) 145.58; (R1) 146.29; More....

Intraday bias in EUR/JPY is back on the upside with break of 145.66 resistance. Rise from 137.37 is resuming and further rally should be seen back to retest 148.38 high. Meanwhile, break of 144.99 minor support will mix up the outlook again and turn intraday bias neutral.

In the bigger picture, as long as 55 week EMA (now at 139.78) holds, larger up trend from 114.42 (2020 low) is still in progress for 149.76 long term resistance. However, sustained break of 55 week EMA will bring deeper fall to 38.2% retracement of 114.42 to 148.38 at 135.40. Decisive break there will raise the chance of trend reversal, and target 61.8% retracement at 127.39.

Daily Pivots: (S1) 0.8767; (P) 0.8779; (R1) 0.8794; More...

Intraday bias in EUR/GBP remains neutral as sideway trading continues. On the upside, break of 0.8864 will target 0.8924 resistance first. Firm break there should resume larger rise from 0.8545 through 0.8977 high. However, decisive break of 0.8717 support will resume the decline from 0.8977 instead.

In the bigger picture, outlook remains rather mixed for now, except that price actions from 0.9267 (2022 high) are part of the long term range pattern from 0.9499 (2020 high). With 0.8720 support intact, rise from 0.8545 is in favor to continue through 0.8977. However, firm break of 0.8720 will argue that such rebound has completed, and open up deeper fall through this support level.