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European shares were painted green on Tuesday even as oil prices extended gains following the unexpected production cuts from OPEC+ on Sunday. However, a sense of caution lingered in the air with US equity futures pointing to a mixed open amid the prospects of higher oil prices fueling fears of higher inflation. In the currency space, the dollar found itself pressured by weak economic data and expectations around the Fed potentially pivoting down the road. Gold struggled for direction while WTI crude ventured towards $81 after surging more than 6% in the previous session.

The next few days promise to be eventful for financial markets thanks to the latest developments concerning OPEC+, with more volatility expected despite the holiday-shortened week. Investors will be presented with key economic data from major economies, speeches by financial heavyweights, and the US jobs report on Friday. The spike in oil prices and renewed fears around rising inflation are likely to spice things up, together with thin liquidity on Friday which could result in whippy price action across the board.

In overnight news, the Reserve Bank of Australia (RBA) left its key interest rate unchanged in April marking its first pause since lifting rates in May 2022. However, the RBA left the door open to future rate hikes in the future to ensure that inflation returned to target. Markets responded by sending the Australian dollar lower across the board.

Are Oil bulls back in town?

Oil prices have certainly kicked off the new quarter on a solid note.

The global commodity extended gains this morning after surging over 6% on Monday following the OPEC+ shock decision to cut production over the weekend. Given how this announcement came just a day after OPEC members indicated that they would keep production policy unchanged, the cartel completely caught markets off-guard. OPEC+ decided to lower oil output by over 1 million barrels per day starting in May as a “precautionary measure” aimed at promoting market stability. Nevertheless, the prospects of higher oil prices in the face of tighter supply could spark fears around rising inflation. In the meantime, WTI has staged a sharp rebound and is currently approaching resistance around $82. A strong breakout and weekly close above this point could open the door toward $90.

All eyes on the NFP report

Friday’s March nonfarm payrolls (NFP) report could play in role in determining whether the Federal Reserve raises interest rates by 25 basis points this month. Expectations are rising over rates reaching their peak with the chances of another 25-basis point move in April currently priced at 67%, according to Fed funds futures. The US economy is projected to have created 240,000 jobs in March with the unemployment rate unchanged at 3.6% and average hourly earnings rising 4.3% year-on-year. A stronger-than-expected report is likely to feed expectations around the Fed cautiously raising interest rates while paying attention to the US banking sector. Alternatively, further signs of a weakening labour markets may fuel speculation around the Fed pausing its rate hikes, before cutting them into the latter part of the year. It will be interesting to see how the Fed reacts to the latest developments concerning OPEC+ and whether this will invite hawks back into the scene.

The dollar has kicked off Q2 on a negative note with the Dollar Index extending losses on Tuesday. Prices remain under pressure with downside momentum potentially taking the DXY towards 101.50 in the short term.

Commodity Spotlight – Gold

Gold struggled for direction Tuesday as oil prices hijacked the spotlight.

It feels like the precious metal could be waiting for a fresh fundamental spark and this could come in the form of the US jobs report on Friday. A stronger-than-expected US jobs report may be bad news for zero-yielding gold, as markets evaluate the possibility of the Fed raising interest rates further. Alternatively, a disappointing NFP report could feed speculation around the Fed pivoting, ultimately supporting gold bulls. Looking at the technical picture, gold has found itself back within a choppy range with support at $1950 and resistance at $2000. Prices are likely to range until a weekly close is achieved above or below the identified support or resistance levels.

Well, well, well, looks like the OPEC Conference had an Extraordinary 183rd Meeting on the 31st of March, and made some changes. They gave the International Energy Agency (IEA) the boot and replaced them with Wood Mackenzie and Rystad Energy as their secondary sources for oil supply and demand data. So, what's the big deal? Well, this move could have some serious ripple effects on the financial markets. Investors and traders will be keeping a close eye on how this change impacts oil prices and how it may affect their portfolios. Time will tell if this move will be a wise one or if it'll backfire. Let's see if this adds up - technically speaking.

USDCAD

The Daily timeframe of USDCAD presents us with some of the usual confirmations; Fibonacci retracement levels, MA support, drop-base-rally demand zone, and a few extras. The confluence of the two trendlines aligning as a support is a major indication of bullish intention, but when you combine that with the 200-Day MA as a support, you literally get an 80% valid trade sentiment. I'm personally keeping my eyes peeled on this one.

Analysts’ Expectations:

• Direction: Bullish
• Target: 1.37100
• Invalidation: 1.32800

EURCAD

EURCAD is currently trading inside a channel and approaching a key resistance from the weekly supply zone. It is important to note how the 50-Day MA fits perfectly with the trendline support and the drop-base-rally demand zone which I apparently didn't notice I'd forgotten to mark until now (but I'm hoping you can see it nonetheless). On this one, I'm voting once again in support of the bulls, with my primary target set at the weekly supply zone as marked.

Analysts’ Expectations:

• Direction: Bullish
• Target: 1.49500
• Invalidation: 1.45100

CADJPY

CADJPY is looking bearish from every angle. First, we have the break of the previous marked low, then the Fibonacci retracement level, and supported by the 100-Day MA, which is another major factor to consider. That's not all though. We also have an elusive AMD (Accumulation-Manipulation-Distribution) pattern.

Analysts’ Expectations:

• Direction: Bearish
• Target: 95.600
• Invalidation: 101.110

NZDCAD

NZDCAD and CADJPY have a few things in common. The sentiment on both pairs, for example, is bearish; then we also have a hidden AMD pattern and a break below the previous low. Considering that price is trading within a channel and has only recently been rejected from the trendline resistance, I believe it is only logical to expect price to swoop down to the trendline support, 200-Day MA, and rally-base-rally demand zone lying just below.

Analysts’ Expectations:

• Direction: Bearish
• Target: 0.82645
• Invalidation: 0.85628

CONCLUSION

The trading of CFDs comes at a risk. Thus, to succeed, you have to manage risks properly. To avoid costly mistakes while you look to trade these opportunities, be sure to do your due diligence and manage your risk appropriately.

The New Zealand dollar is almost unchanged ahead of the Reserve Bank of New Zealand (RBNZ) rate decision on Wednesday (New Zealand time). The US releases JOLTS Job Openings.

NZD/USD is trading quietly at the 0.63 line in the European session.

RBNZ expected to hike by 25 bp

The RBNZ is widely expected to raise rates by 25 basis points, which would bring the benchmark cash rate to 5.0%. Over the past year, the RBNZ has delivered oversize hikes of 50 and even 75 basis points, marking an aggressive rate-tightening cycle in order to contain red-hot inflation. The battle with inflation has been slow, as CPI came in at 7.2% in Q4 2022, unchanged from the third quarter.

The sharp rise in rates and weak global demand have battered the New Zealand economy. GDP declined by 0.6% in Q4 2022, and the cyclone in February will have a negative impact on GDP for Q1. This backdrop supports the RBNZ taking a break from its relentless rate hikes at the upcoming meeting. In February, the RBNZ projected a terminal rate of 5.50%, but with the economy showing signs of strain, the central bank might end the current cycle at 5.25%, especially if inflation heads south. We could even see a rate cut before the end of the year.

In the US, the highlight of the week is nonfarm payrolls on Friday. After a better-than-expected reading of 311,000 in March, the consensus estimate stands at 240,000 which is still decent. The Fed will be looking at nonfarm payrolls as an important factor in its rate decision in May. Currently, the odds of a 25bp increase are at 59% and a pause at 39%, according to the CME Group. This week’s employment releases kick off with JOLTS Job Openings later today. The estimate stands at 10.49 million, following the prior reading of 10.82 million.

NZD/USD Technical

• NZD/USD tested resistance at 0.6310 earlier in the day. Above, there is resistance at 0.6362
• 0.6245 and 0.6127 are providing support

The Australian dollar is in negative territory following the RBA decision to pause rates at 3.60%. The US releases JOLTS Job Openings, which is expected to fall to 10.40 million, following a prior reading of 10.82 million.

In the European session, AUD/USD is trading at 0.6744, down 0.61%.

RBA takes a breather

The streak is over. After raising rates 10 consecutive times, the Reserve Bank of Australia (RBA) has taken a pause, holding the benchmark cash rate at 3.60%. The decision was widely expected by the markets, but the Australian dollar has nevertheless lost ground, as Governor Lowe’s statement was on the dovish side.

Lowe defended the pause by saying that the RBA had raised rates by 350 points since May and there was a lag until the full effect would be felt. As well, there had been a “substantial” slowing in household spending and a slowdown in the Australian economy.

As for the banking crisis, Lowe noted that the Australian banking system was solid, but the crisis was expected to lead to tighter financial conditions which would be an additional headwind for the global economy”. Lowe is being cautious about the banking crisis, reassuring listeners that Australia’s banks are safe but that doesn’t mean there won’t be any fallout.

The markets picked up on nuances in the language of the statement, which read, “some further tightening of monetary policy may well be needed.” The use of “may” replaced “will” in last month’s statement, suggesting a more dovish rate path.

Governor  Lowe did an adequate job of explaining the pause in rates, but inflation remains more than triple the target of 2%, so clearly, the fight against inflation is far from over. Lowe will be hoping that inflation continues to drop before the next meeting on May 2^nd, which would provide support for another pause in rates.

AUD/USD Technical

• There is resistance at 0.6790 and 0.6897
• AUD/USD has support at 0.6678 and 0.6582

BoE Monetary Policy Committee member Silvana Tenreyro, a known dove, remarked in a speech that the data sinve November has evolved most like her downside scenario, noting a sharp decline in high-frequency private-sector regular pay growth.

She explained that with the Bank Rate at 4.25%, the restrictive policy is likely to "drag demand well below its potential, loosening the labour market and pulling down on inflation." As a result, she believes that "inflation is likely to fall well below target."

Tenreyro voted for no change in the Bank Rate in recent months, instead of further tightening, as she believes a looser stance is necessary to achieve the inflation target in the medium term.

She expressed her expectation that the current high level of the Bank Rate "will require an earlier and faster reversal, to avoid a significant inflation undershoot."

Full speech of Silvana Tenreyro here.

Eurozone PPI came in at -0.5% mom, 13.2% yoy in February below expectation of -0.3% mom, 13.2% yoy. For the month, industrial producer prices decreased by -1.6% in the energy sector and by 0.1% for intermediate goods, while prices increased by 0.3% for capital goods, by 0.4% for durable consumer goods and by 0.6% for non-durable consumer goods. Prices in total industry excluding energy increased by 0.2%.

EU PPI stood at -0.6% mom, 14.5% yoy. The largest monthly decreases in industrial producer prices were recorded in Bulgaria (-7.9%), Greece (-3.3%) and Belgium (-3.2%), while the highest increases were observed in Slovakia (+11.5%), Slovenia (+2.7%) and Portugal (+2.5%).

Full Eurozone PPI release here

ECB has released its Consumer Expectations Survey results for February 2023, which demonstrate a continuing moderating inflation expectations and uptick in growth outlook. The results suggest that consumers may be regaining some confidence in the Eurozone's economic recovery prospects.

Median inflation expectations for the coming year dropped from 4.9% in January to 4.6%, compared to 5.0% in December. In addition, expectations for inflation three years ahead also saw a slight decrease, from 2.5% to 2.4%, in contrast to December's 3.0%.

On a positive note, mean economic growth expectations for the next 12 months experienced an improvement. The figure rose from January's 1.2% to -0.9%, a better outcome when compared to December's -1.5%.

Full ECB Consumer Expectations Survey here.

GBPUSD has been experiencing significant swings within a rectangle pattern for the past four months. In the short term, the pair has been in a recovery mode after hitting the bottom of its range and in today's session it managed to surpass the crucial 1.2445 area , which has acted as strong resistance both in December and January.

The momentum indicators currently suggest that near-term risks are tilted to the upside. Specifically, the RSI is climbing above its 50-neutral mark, while the MACD histogram is strengthening above both zero and its red signal line.

If bullish pressures intensify, the price could initially attempt to close above 1.2445, which is the upper boundary of its rectangle pattern. Surpassing that zone, the pair could ascend towards the May 2022 peak of 1.2666. A break above the latter may open the door for the 1.3000 psychological mark.

Alternatively, if the rebound falters and the price moves to the downside, the 1.2270 region could act as the first line of defense. If that barricade fails, the bears could target the 1.2160 support, which lies very close to the 50-day simple moving average (SMA). Further retreats may then cease at the 1.1920 hurdle.

In brief, GBPUSD stormed to a fresh nine-month high after breaking above the crucial 1.2445 zone , which has curbed its upside twice in the past four months. Therefore, a successful close above that area could signal the beginning of a sustained uptrend.

Fresh acceleration higher is probing through pivotal barrier at 1.0930 (Mar 23 spike high) after three-day consolidation and signaling that the euro holds firm tone.

Fresh bulls were sparked by much better than expected German export/import data for February, which boosts optimism about stronger economic growth and underpins near-term action.

The action is supported by positive daily studies which show strengthening bullish momentum and moving averages forming multiple bull-crosses, while daily cloud is thickening and adding to support.

Initial bullish signal in expected on eventual close above Fibo barrier at 1.0910 (76.4% retracement of 1.1032/1.0516) which has so far resisted five attacks, with break of 1.0930 high to confirm and open way towards 1.1000/32 (psychological/2023 high of Feb 2).

Near-term bias is expected to remain with bulls as long as the price stays above rising 10DMA (1.0850), which tracks the action for over two weeks.

Res: 1.0930; 1.1000; 1.1032; 1.1070.
Sup: 1.0882; 1.0850; 1.0800; 1.0774.

The JP225 cash index has been on an aggressive upward path since the March 15 low of 26,457. It managed to break some key levels with relative ease, revealing the underlying strength of this upmove. The bulls will feel a lot better if the index achieves a higher high soon. Until this occurs, the current move could be seen as just a correction and hence a lower low could be on the cards next. Interestingly, the convergence of the simple moving averages (SMAs) is a typical sign that a sizeable move is imminent.

The overall technical picture is overwhelmingly positive for the bulls. The Average Directional Movement Index (ADX) is rushing higher, confirming the presence of a strong bullish trend in JP225. The usually conservative RSI is showing tentative bullish signs, but it is again overshadowed by the stochastic oscillator. This is moving higher, towards its overbought territory in a rather orderly fashion.

If the bulls maintain the market reins, their initial targets would be at the June 9, 2022 high and the Mar 29, 2022 high of 28,394 and 28,649 respectively. Even higher, the August 17, 2022 high of 29,229 appears to be very attractive from the bulls’ standpoint.

Should the bears regain market control, they would face the 23.6% Fibonacci retracement level of the March 8, 2022 – August 17, 2022 uptrend at 28,113 and the February 6 high at 27,852. If they successfully break these levels, a key support area will come next. The 27,370-27,601 range, defined by the 38.2% Fibonacci retracement and the 50-, 100- and 200-day SMAs, will probably put up a stronger fight.

To conclude, the JP225 bulls have been enjoying the rally. They have the support from momentum indicators, but an even stronger move higher is needed to achieve a trend change.