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BoE Governor Andrew Bailey acknowledged the existence of "some evidence of some tightening credit conditions" during today's parliamentary hearing, addressing concerns surrounding the current financial market turmoil. Despite the tightening, Bailey remains optimistic, stating that "we do not see a critical development in that respect."

The Governor emphasized that the BoE always considers credit conditions when setting monetary policy and expressed confidence in the bank's ability to assess the impact of raising interest rates on the position of the banks themselves.

Deputy Governor Dave Ramsden shared similar sentiments, acknowledging the importance of vigilance regarding the risks higher interest rates might pose to other parts of the economy. He added that the current environment is "volatile and challenging," highlighting the need for careful monitoring and assessment by central bank officials to ensure financial stability and well-informed policy decisions.

Hello Traders, in this article we will analyze how we were able to forecast here at Elliott Wave Forecast the reaction higher in HG_F (Copper Futures). Firstly, copper was trading within a cycle from 01.18.2023 in a pullback phase. Secondly, we had in place the first leg of the cycle including the connector in place. This allows us to be able to project the equal legs area of the market. Within these areas buyers and sellers agree to a reaction of minimum 3 waves. Using our system we are able to enter trades with a defined entry, risk and take profit strategy.

Our members know how to utilize it in their favor.

Having said that let’s go and have a look on how we saw HG_F during 03.14.2023 4 hour update presented to members showing the area:

HG_F 4 hour update 03.14.2023

As we can see we were already within the Y leg lower towards equal legs area of 3.8603 – 3.6283. Specifically it was trading lower within wave (ii) of ((c)) of Y. From there our members knew the area in which they can enter the market if they were looking for a buy entry.

Now let’s fast forwards the time and see the latest 4 hour weekend update from 03.25.2023 which shows where we are:

HG_F 4 Hour weekend update 03.25.2023

As we can see Copper reacted higher from 3.8223 allowing us to create a risk free position already. Moreover, expecting next to pullback in wave ((ii)) before it can resume the rally higher in wave ((iii)). In conclusion, we are expecting Copper to continue to trade higher in the short term cycle.

In this technical blog, we will look at the past performance of the 1-hour Elliott Wave Charts of USDJPY. In which, the decline from 16 March 2023 high ended 5 waves in an impulse sequence and showed a lower low sequence in a higher time frame charts. Therefore, we knew that the structure in USDJPY is incomplete to the downside & should see more weakness. So, we advised members to sell the bounces in 3, 7, or 11 swings at the extreme areas. We will explain the structure & forecast below:

USDJPY 1 Hour Elliott Wave Chart From 3.27.2023

Above is the 1hr Elliott wave Chart from the 03/27/2023 London update. In which, the decline from 16 March unfolded in an impulse sequence & showed a lower sequence where the pair made a short-term bounce in wave 2. The internals of that bounce unfolded as an Elliott wave zigzag correction where wave ((a)) ended at $130.89 high. Then a decline to $130.35 low ended wave ((b)) pullback and started the ((c)) leg higher towards $131.65- $1132.46 equal legs area from where sellers were expected to appear looking for more downside or for a 3 wave reaction lower at least.

USDJPY Latest 1-Hour Elliott Wave Chart From 3.28.2023

This is the Latest 1hr view from the 03/28/2023 Asia update. In which the pair is showing a reaction lower taking place from the equal legs area allowing shorts to get into a risk-free position shortly after taking the position. However, a break below $129.61 low is still needed to confirm the next extension lower & avoid a double correction higher.

Cable edged lower in European trading on Tuesday, after attempts at pivotal barrier at 1.2343 (Mar 23 high) stalled just under the target but keeps overall firm bullish stance.

The latest inflation data and comments from BOE Governor Bailey fuel expectations for further rate hikes, which underpins the pound.

Governor Bailey highlighted that fighting inflation remains the key job for BOE policymakers and recent rising worries about the health of global banking system should not obstruct their primary task.

The latest data showed that soaring food prices pushed inflation in British shops to the highest in nearly two decades, with comments Britain’s Retail Consortium that shop price inflation has yet to peak, adding to growing expectations that the BOE would for for the twelfth consecutive rate hike in May.

This creates positive environment for pound, which is already in near-term uptrend, as bulls challenge 1.2343 pivot, the last obstacle on the way towards key barrier at 1.2447 (peaks of Dec 2022/Jan 2023) which also mark the ceiling of larger range.

Bullish daily studies offer additional support, with potential deeper dips expected to stay above solid support at 1.2185 (daily Tenkan-sen) to keep bulls intact.

Res: 1.2330; 1.2343; 1.2402; 1.2446.
Sup: 1.2270; 1.2217; 1.2185; 1.2154.

The Japanese yen is in positive territory and broke below the 131 line in the Asian session. USD/JPY is trading at 131.17, in Europe, down 0.30% on the day.

BoJ inflation indicator eases

BoJ Core CPI, the preferred inflation gauge of the central bank, dropped to 2.7% in February, down from 3.1% in January and below the estimate of 3.5%. The decline in core inflation wasn’t all that surprising, as last week’s National Core CPI also fell sharply, due to government subsidies for utility bills which took effect in February. The yen’s response has thus been muted to the inflation release.

The Bank of Japan has been very reluctant to tighten policy, and the only moves we’ve seen over the past few months have related to yield curve control, in order to prop up the yen. The BoJ has insisted that high inflation is transient and will fall to 2% later this year as the effect of high commodity prices eases. The Bank has said it would consider tightening if wages move higher, as this would be a sign that inflation is sustainable.

Stay tuned as employees won substantial wage hikes at annual labour talks earlier this month. If wage growth does translate into higher inflation, the BoJ will be under pressure to tighten policy, but the new BoJ Governor, Kazuo Ueda, has not given any indications that he plans to exit accommodative policy anytime soon. BoJ Governor Kuroda spoke earlier today, with a “business as usual” message. Kuroda said that the sustainable infation target had not been met and it was too early to discuss an exit from the Bank’s loose monetary policy.

The Federal Reserve announces its rate decision on Wednesday, and after a roller-coaster ride for market pricing, it’s currently close to a 50/50 toss-up. Will the Fed hike by 25 basis points or will it take a pause for the first time in the current rate-tightening cycle? The Fed was expected to raise rates by 25 bp, but the banking crisis, which has shaken up the financial markets, is a compelling reason for the Fed to stay on the sidelines and let the markets catch their breath.

USD/JPY Technical

• There is resistance at 130.60 and 131.57
• 129.30 and 127.05 are providing support

The JP225 cash index has been on a decent upward move since the March 15 low of 26,457. This short-term rally appears to have halted just above the 27,423- 27,470 range set by the 38.2% Fibonacci retracement level of the March 8, 2022 – August 17, 2022 uptrend and the 50-day simple moving average (SMA). This move appears to have been the least-resistance path for the index, correcting half of the acute downward move recorded in early March.  

At this juncture the momentum indicators are revealing a precarious balance. The RSI is just on the 50-threshold and the stochastic oscillator appears to be moving horizontally, which is atypical for this indicator. In the meantime, the Average Directional Movement Index (ADX) is clearly pointing to a trendless market. It is actually stuck at the lowest level since December 15, 2022, the start of the 10% correction that pushed the JP225 index to the 25,603 low.

If the bulls maintain the market reins, their first target would be at the February 6 high of 27,852. Even higher, the 23.6% Fibonacci retracement at 28,113 could prove tougher to clear, just below the June 9, 2022 high of 28,394.

Should the bears regain market control, they would face the 38.2% Fibonacci retracement level and the 50-day SMA at the 27,423- 27,470 range. Then, the twin 100- and 200-day SMAs at the 27,355-27,366 area could put up a stronger fight. If this range is broken, the path would be clear until at the 50% Fibonacci retracement level of 26,866.

To conclude, the JP225 bulls have been enjoying a nice upleg, but the technical picture appears to be balanced now. 

GBPUSD was stubbornly pushing for a close above the 1.2280 bar during Tuesday’s early European trading hours despite six consecutive failed attempts.

From a technical perspective, the short-term bias remains skewed to the upside as the RSI and the MACD are clearly fluctuating within the bullish area. Yet, the former is maintaining a sideways trajectory, suggesting that some caution is warranted.

If the bulls successfully climb above the 1.2280 wall, which coincides with the 50% Fibonacci retracement of the 2021-2022 downtrend, the next barrier might occur within the 1.2400-1.2445 zone. Another step higher could face some congestion around 1.2550 before speeding up to 1.2665-1.2700. The 1.2800 area could be the next destination.

Alternatively, a flip below the short-term support trendline at 1.2260 may cause a quick decline to 1.2180. Even lower, the 20- and 50-day simple moving averages (SMAs) and the upper boundary of the broken channel could provide a footing to keep the price within the 1.2100 territory. If they fail, the sell-off could intensify towards 1.2040.

In brief, GBPUSD is aiming for a bullish continuation, though only a sustainable move above 1.2280 would boost buying appetite.  

Daily Pivots: (S1) 160.25; (P) 161.05; (R1) 162.46; More...

Intraday bias in GBP/JPY remains neutral for the moment. Risk will stay on the downside as long as 163.32 resistance holds. Fall from 165.99 is seen as part of the whole fall from 172.11. Sustained break of 158.54 will argue that larger decline from 172.11 is resuming through 155.33 low.

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) 141.03; (P) 141.62; (R1) 142.68; More....

Intraday bias in EUR/JPY stays neutral at for the moment. Risk remains on the downside as long as 143.61 resistance holds. Break of 138.81 will affirm the bearish case that fall from 145.55 is a leg inside the whole corrective decline from 148.38. Next target is 137.37 low, and then 135.40 fibonacci level.

In the bigger picture, as long as 55 week EMA (now at 139.58) 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) 0.8771; (P) 0.8793; (R1) 0.8809; More...

Intraday bias in EUR/GBP remains neutral for the moment. Near term outlook is mixed for now. 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.