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UK retail sales volume rose 1.2% mom in February, well above expectation of 0.2% mom. Ex-fuel sales volume rose 1.5% mom, above expectation of 0.1% mom. Nevertheless, in the three months to February, comparing to the prior three month, sales volume declined -0.3%, while ex-fuel sales volume dropped -0.4.

In value term, total sales rose 1.6% mom while ex-fuel sale rose 2.2% mom. In the three months to February, comparing to the prior three months, total sales value rose 0.7% while ex-fuel sales value rose 1.0%.

Full UK retail sales release here.

The US stocks first fell then gained yesterday. The price action was, again, mostly driven by the bank stocks, both because of, and thanks to Janet Yellen’s comments to US lawmakers.

Remember, on Wednesday, US Treasury Secretary Janet Yellen had said that they don’t consider providing "blanket insurance" for banking deposits after the collapse of Silicon Valley Bank (SVB) – causing renewed pressure on banks, especially on the US small regional banks.

Then yesterday, Janet Yellen said that the US regulators are ready to take additional steps to protect deposits if needed.

Her comments helped stocks recover early-session losses.

Likes of JP Morgan, Goldman Sachs and Citi rebounded after the comment. But trading in Asia hints that the stress over banks is not over just yet. HSBC lost more than 3% in Hong Kong, as news that UBS and Credit Suisse were among banks under the scrutiny of the US DoJ for having helped Russian oligarchs to evade sanctions.

If we summarize

The new market game is being played between two camps: ‘the financial stress and how the authorities are dealing or promising to deal with potential renewed turmoil’ camp, and ‘the recession worries’ camp.

While the recession worries are not entirely bad for the stock valuations – at least in the immediate term, as they pull the yields lower, the financial stress is much less welcome, and there is a much stronger consensus among investors that… financial stress is bad.

The US 2-year yield is now headed to the levels, around 3.80%, that were tested when the SVB collapsed.

Whereas Jerome Powell has been quite clear at his post-FOMC speech Wednesday that the Federal Reserve (Fed) will continue its fight against inflation, that there is certainly one more rate hike on the horizon before the Fed pauses and keeps the rates steady.

But in vain, swap traders give no more than a 50-50 chance for another rate hike, activity on Fed funds futures hints that there will probably be no rate hike at the FOMC’s next meeting, with around 67% chance, and the more worryingly, the bets for a 75 to 100bp cut before the year end is being cemented.

Why? Because last year, on March 21st 2022, Jerome Powell had said that ‘there’s good research by staff in the Fed system that really says to look at the short – the first 18 months – of the yield curve. That’s really what has 100% of the explanatory power of the yield curve. It makes sense. Because if it’s inverted, that means the Fed’s going to cut, which means the economy is weak’.

And bingo, the expected 3m T-bill rate in 18 months and the 3m T-bill today is inverted. The only times this happened in the past was the 2000 tech bubble, the 2007/2008 subprime crisis and the Covid pandemic. So either you believe what Jerome Powell says today, or you believe what he said a year ago. But the markets put more weight to what he said a year ago, and bet on a coming recession.

On the data front, the US durable goods orders and the flash PMI data will be closely monitored for further signs of potential weakness after the weekly unemployment claims came in below expectations yet again, and continue to hint that the US jobs market is doing fine despite tens of thousands job cuts, especially in the tech companies.

For now, though, the falling yields, and the banking turmoil, is a boon for the tech stocks. The FAANG stocks are up by more than 13% since 10 days, and Bitcoin gained up to 50%.

Crude oil shortly spiked above the $70 mark, but saw decent resistance at this level given that the financial stress seriously deteriorated global growth prospects, and demand outlook. Plus the weekly stock inventories data showed that the US crude inventories increased by 1.1 mio barrels last week, while analysts were expecting a 1.7 mio barrel decrease. That’s also not excellent news for the bulls, and also explains why the bears are convincingly selling above the $70 mark.

In the FX, the lower yields keep a decent pressure on the US dollar’s shoulders, giving other pairs field to extend gains. The EURUSD extended gains to 1.0930 yesterday, while Cable rose to 1.2343 after the Bank of England (BoE) raised the interest rates by 25bp as expected, adding that there could be further hikes if the bank sees signs of persistent inflation. For now, they probably also see that inflation in the UK is not headed toward the right direction.

In precious metals, gold continues flirting with the $2000 offers, though I still believe that an eventually waning bank stress is a threat of a decent downside correction, which could pull the price of an ounce all the way down to $1900.

Market movers today

Today, focus turns to March flash PMIs from Europe and the US. Activity is expected to moderate in service sector as the boost from pent-up demand continues to fade, while manufacturing momentum is set to continue its recovery in Europe while the US index is expected to take a small hit lower. Data for the indices has been collected mid-month so we are curious to see whether the recent turmoil has affected the respondents' sentiment.

In Sweden, PPI data is usually not a market mover but given the heightened attention to inflation developments due to high and soaring food prices in Sweden it may be interesting to look at the leading food price information that is in the PPI domestic supply prices.

In the US, we will also get preliminary durable goods orders for February.

On the speaker list, we have Fed's Bullard and the ECB's de Cos, Nagel and Centeno.

The 60 second overview

Market recap: US bond yields drifted lower yesterday, a move that has continued in Asian trading. EUR/USD also declined while equity markets are broadly flat from yesterday.

High core CPI out of Japan, PMI improves: Japanese CPI released overnight showed a decline in inflation in March to 3.3% from 4.3% in February in line with expectations. It was partly due to energy subsidies, though, and core inflation increased more than expected to 3.5% y/y (consensus 3.4% y/y) from 3.2% y/y in February. Japanese flash PMI manufacturing for March increased to 48.6 from 47.7, thus showing tentative signs of a bottom.

US emergency lending picked up: The latest weekly data suggests that the use of Fed's new Bank Term Funding Program (BTFP) picked up during its first full week of operation to USD53.7bn (from USD11.9bn during the first three days). That said, the rise was partially compensated by lower use of the discount window, which fell to USD110.2bn (from USD152.9bn). Active use of both Fed's emergency lending facilities suggests that Fed has been able to successfully support banks' liquidity situation, and while total bank reserves declined by USD74bn, they remain near the highest levels since last spring. Yesterday, Yellen also emphasized that regulators are prepared to take further action to protect deposits if needed, even if a broader 'blanket' insurance is off the table.

China urges Europe to support peace talks: China's top diplomat Wang Yi urged European nations to "play their due role" in peace talks and support a ceasefire. More nations are entering the arena of peace talks as Spain's Prime Minister, Pedro Sanchez, announced he would be travelling to Beijing next week to speak to China's President Xi Jinping about the peace proposal, Brazil's President Lula will begin a five-day visit to Beijing on Sunday and French President Emmanuel Macron said he would visit Beijing in early April. The US is against a ceasefire as it would freeze the conflict at current lines and believes the peace proposal is biased towards Russia. Reports of Xi going to talk to Ukraine's President Zelensky soon has not yet been confirmed by either side.

Flurry of central bank meetings yesterday: Bank of England (BoE) hiked the policy rate by 25bp to 4.25% as expected. Although they left little guidance, we have pencilled in another 25bp hike for the May meeting as we do not expect data to weaken enough for the BoE to pause the hiking cycle, see Bank of England Review - Set for another 25bp hike in May, 23 March. Norges Bank (NB) also lifted rates by 25bp to 3.0% as widely expected but the forward guidance was clearly to the more hawkish side of expectations. NB guided towards two additional 25bp hikes in Q2 with emphasis on the next hike coming already at the interim meeting in May. Finally, the Swiss National Bank (SNB) hike rates by 50bp taking the policy rate to 1.5%. The SNB left a hawkish message as they now see inflation as more broad-based and continue to echo that they cannot rule out further increases in the policy rate.

Macro data: US initial jobless claims continue to point to a very tight US labour market as they stayed at a low level this week at 191k, broadly flat from last week's 192k. US new home sales increased for the third month in a row to 640.000 from 633.000 (annualised) and while still at a low level, they add to other evidence that the housing market is bottoming out. Euro consumer confidence yesterday showed a small decline in March from -19.1 to -19.2, breaking a five-month streak of increases. It is still at a quite low level signalling little improvement in private consumption.

Equities: US equities rebounded on Thursday, but came off its highs in a volatile session. Similarly, Europe started at a muted setting but improved at the US opening bell. S&P 500 closed up 0.3% and Nasdaq 1% as growth stocks dominated the show since Fed pivot hopes are alive and kicking in markets. Tech outperformed banks by 3p.p. which traded broadly lower for a second day. Most value sectors underperformed, including energy and real estate. Futures are higher this morning.

Credit: Despite the recovery in AT1 spreads seen this week, spreads are still at wide levels following Credit Suisse's CHF16bn stack being written down to zero, which is having ramifications for extension risk. Yesterday Pbb indicated that it would not be exercising its AT1 call in April and other calls are coming up including notably the EUR1.25bn Unicredit AT1 with call in June. Hence, the AT1 segment may not be out of the woods yet. In contrast, the IG corporate bond market was reopened yesterday with Volkswagen placing a well-subscribed green EUR dual-tranche. CDS indices were slightly wider yesterday with iTraxx Main closing at 95bp (+4bp) and Xover at 488bp (+18bp).

FI: Global bond yields continue to decline as 10Y Bunds fell some 13bp to 2.18%, while 10Y Treasuries ended a very volatile day at 3.43% after having been as high at 3.5% before declining to 3.38%. The curves steepened from the short end as 2Y German govt yield declined 18bp, while 2Y Treasuries fell 10bp. Hence, we are seeing the traditional pattern on the US curve as we get closer to the end of the hiking cycle, where the curve begins to steepen ahead of the first rate cut. Given the high correlation between the US curve and core-EU curves, European yield curves follow the US curve even though we still expect ECB to move to 4%.

FX: JPY and NOK were among the winners in G10 FX space yesterday. The former helped by a further drop in US bond yields and the latter by a hawkish Norges Bank that looks far from done raising interest rates. EUR/USD held above 1.08.

Daily Pivots: (S1) 130.23; (P) 130.94; (R1) 131.57; More...

USD/JPY's fall from 137.90 continues today and edged lower to 130.04. Intraday bias remains on the downside for retesting 127.20 low. Decisive break there will resume larger down trend from 151.93 to 122.61 fibonacci projection level. On the upside, break of 132.99 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, rebound from 127.20 should have completed at 137.90 as a corrective move. The down trend from 151.93 (2022 high) is still in progress. Break of 127.20 will resume this down trend and target 61.8% projection of 151.93 to 127.20 from 137.90 at 122.61. This will now be the favored case as long as 137.90 resistance holds.

Yen is drawing some attention in today's Asian trading session, supported by declining benchmark US and European treasury yields and robust core-core inflation in Japan. Risk-sensitive currencies, such as Sterling and commodity currencies, are under pressure as major Asian indexes trade lower. Dollar is recovering against the Euro but still lags far behind for the week. Market focus will shift to Eurozone and UK PMI data, Canadian retail sales, and US durable goods orders later today.

For the week, Euro is the standout performer thus far, as ECB's tightening could extend longer, while Fed and BoE appear closer to pausing based on this week's meetings. Yen, currently in second place, could potentially overtake Euro if bond rallies continue. Swiss Franc is the third strongest currency, while Australian and New Zealand dollars are the weakest performers this week, trailed by Dollar and Canadian.

Technically, Gold is back pressing 2000 handle after defending 1936.15 support earlier in the week. The real test lies in 61.8% projection of 1614.60 to 1959.47 from 1804.48 at 2017.60. Sustained break there could solidify upside momentum to push Gold through historical high at 2074.84. If realizes, the development could signal more downside in Dollar, in particular against Yen.

In Japan, Nikkei closed down -0.20%. Hong Kong HSI is down -0.77%. China Shanghai SSE is down -0.73%. Singapore Strait Times is down -0.13%. Japan 10-year JGB yield is down -0.016 at 0.290. Overnight, DOW rose 0.23%. S&P 500 rose 0.30%. NASDAQ rose 1.01%. 10-year yield dropped -0.094 to 3.406.

Japan CPI core down sharply to 3.1%, but core-core rose to 40-yr high

Japan's headline CPI in February experienced a sharp slowdown from 4.3% yoy to 3.3% yoy, falling below the expected 4.1% yoy. CPI core (all items excluding food) dropped from 4.2% yoy to 3.1% yoy, meeting expectations. Meanwhile, CPI core-core (all items excluding food and energy) rose from 3.2% yoy to 3.5% yoy, surpassing the anticipated 3.4% yoy.

Despite the steep decline in CPI core from a 41-year high of 4.2% to 3.1%, the figure remains well above the Bank of Japan's (BoJ) 2% target. The core-core reading, closely monitored by the BoJ as an indicator of domestic demand, reached its highest rate since January 1982.

The data suggests that incoming BoJ Governor Kazuo Ueda may need to address a shift from cost-push inflation to demand-driven inflation, which could prove more sustainable.

Japan PMIs: Growth continues with strong services but struggling manufacturing

Japan PMI Manufacturing rose from 47.7 to 48.6 in March, slightly above expectation of 48.2. PMI Manufacturing Output rose from 45.3 to 47.4. PMI Services ticked up from 54.0 to 54.2, the best reading since October 2013. MI Composite improved from 51.1 to 51.9.

Japanese private sector firms experienced growth for the third consecutive month, with the services sector witnessing a notable improvement. Demand conditions strengthened, as government support and the lifting of COVID-19 restrictions in mainland China led to increased activity and new orders.

However, the manufacturing sector continued to face challenges, with output and new orders still contracting, albeit at a slower rate than February. Manufacturers reported ongoing supply chain normalization, as supplier delivery times lengthened at the slowest pace since October 2020.

Australia PMI composite dropped to 48.1, renewed contraction

Australia PMI Manufacturing dropped from 50.5 to 48.7 in March, a 34-month low. PMI Services dropped from 50.7 to 48.2, a 3-month low. PMI Composite dropped from 50.6 to 48.1, a 3-month low. All readings indicated renewed contraction in the private sector following improvements in February.

Looking at some details, the results indicate a continued economic slowdown, with composite output and new orders indexes at their lowest since the 2021 Delta lockdowns. Despite easing labor demand, employment indexes suggest businesses are still looking to expand their workforce in 2023. Price indicators have eased but remain elevated, with Australian inflation peaking in late 2022. Service industry input prices are still high, suggesting potential inflationary pressures in 2023 due to labor costs and energy prices.

As RBA prepares for its April meeting, it faces a tough decision on whether to pause its tightening cycle amid global financial uncertainty, strong employment numbers, and concerns about inflation levels. Some argue that the RBA should raise the cash rate closer to 4% before pausing to observe the economy's performance over the next few months.

Warren Hogan, Chief Economic Advisor at Judo Bank noted: "There is no point pausing for a month before hiking again. The RBA Board need to get the cash rate to a level that they think will buy them the time to observe how the economy unfolds for at least three months, if not longer."

Looking ahead

UK retail sales, PMIs and Eurozone PMIs are the main focus in European session. Later in the day, Canada will release retail sales. US will publish durable goods orders and PMIs.

USD/JPY Daily Outlook

Daily Pivots: (S1) 130.23; (P) 130.94; (R1) 131.57; More...

USD/JPY's fall from 137.90 continues today and edged lower to 130.04. Intraday bias remains on the downside for retesting 127.20 low. Decisive break there will resume larger down trend from 151.93 to 122.61 fibonacci projection level. On the upside, break of 132.99 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, rebound from 127.20 should have completed at 137.90 as a corrective move. The down trend from 151.93 (2022 high) is still in progress. Break of 127.20 will resume this down trend and target 61.8% projection of 151.93 to 127.20 from 137.90 at 122.61. This will now be the favored case as long as 137.90 resistance holds.

Economic Indicators Update

GMT	Ccy	Events	Actual	Forecast	Previous	Revised
22:00	AUD	Manufacturing PMI Mar P	48.7		50.5
22:00	AUD	Services PMI Mar P	48.2		50.7
23:30	JPY	CPI Y/Y Feb	3.30%	4.10%	4.30%
23:30	JPY	CPI ex-Fresh Food Y/Y Feb	3.10%	3.10%	4.20%
23:30	JPY	CPI ex Food & Energy Y/Y Feb	3.50%	3.40%	3.20%
00:01	GBP	GfK Consumer Confidence Mar	-36	-35	-38
00:30	JPY	Manufacturing PMI Mar P	48.6	48.2	47.7
00:30	JPY	Services PMI Mar P		53.8	54
07:00	GBP	Retail Sales M/M Feb		0.20%	0.50%
07:00	GBP	Retail Sales Y/Y Feb		-4.70%	-5.10%
07:00	GBP	Retail Sales ex-Fuel M/M Feb		0.10%	0.40%
07:00	GBP	Retail Sales ex-Fuel Y/Y Feb		-4.70%	-5.30%
08:15	EUR	France Manufacturing PMI Mar P		48.2	47.4
08:15	EUR	France Services PMI Mar P		53	53.1
08:30	EUR	Germany Manufacturing PMI Mar P		47.1	46.3
08:30	EUR	Germany Services PMI Mar P		51.1	50.9
09:00	EUR	Eurozone Manufacturing PMI Mar P		48.9	48.5
09:00	EUR	Eurozone Services PMI Mar P		52.9	52.7
09:30	GBP	Manufacturing PMI Mar P		50	49.3
09:30	GBP	Services PMI Mar P		53.1	53.5
12:30	CAD	Retail Sales M/M Jan		0.70%	0.50%
12:30	CAD	Retail Sales ex Autos M/M Jan		0.60%	-0.60%
12:30	USD	Durable Goods Orders Feb		0.40%	-4.50%
12:30	USD	Durable Goods Orders ex Transportation Feb		0.20%	0.70%
13:45	USD	Manufacturing PMI Mar P			47.3
13:45	USD	Services PMI Mar P			50.6

DXY:

Based on the analysis of the DXY chart, the overall momentum of the chart is currently bullish. In the short term, price could potentially continue its bullish trend towards the 1st resistance level at 102.92.

The 1st support level at 101.52 is a good level of support as it is an overlap support. Additionally, the 2nd support level at 100.83 is a swing low support, making it another good level of support.

On the resistance side, the 1st resistance level at 102.92 is also an overlap resistance, making it a significant level of resistance. There is also an intermediate resistance level at 103.74, which is an overlap resistance and coincides with a 50% Fibonacci retracement level. Another intermediate resistance level can be found at 102.59.

It’s worth noting that the overall momentum of the chart is bullish, suggesting potential for prices to continue rising towards the 1st resistance level. If price were to drop below the 1st support level, the next support level would be the 2nd support at 100.83.

EUR/USD:

Looking at the EUR/USD chart, the overall momentum is currently bearish, indicating that prices may continue to drop in the near term. There is a potential for a bearish continuation towards the 1st support level at 1.0768.

The 1st support level is a strong level of support as it is an overlap support and coincides with a 38.20% Fibonacci retracement level. The 2nd support level at 1.0694 is also an overlap support, making it another strong level of support.

On the resistance side, the 1st resistance level at 1.0925 is an overlap resistance and coincides with a 78.60% Fibonacci retracement level. Additionally, there is an intermediate resistance level at 1.1027, which is a swing high resistance level.

GBP/USD:

The GBP/USD chart currently shows a strong bearish momentum with high confidence. There is a potential for a bearish continuation towards the 1st support at 1.2194, which is a strong overlap support level and has a 23.60% Fibonacci retracement lining up with it. Additionally, the 2nd support at 1.2045 is another good level of support, being an overlap support level and also coinciding with a 38.20% Fibonacci retracement.

On the resistance side, the 1st resistance level at 1.0925 is an overlap resistance and also happens to be at a 127% Fibonacci extension. There is also an intermediate resistance level at 1.2440, which is a swing high resistance and a 161.80% Fibonacci extension.

It’s worth noting that the RSI is displaying bearish divergence versus price, suggesting that a reversal might occur soon. This adds to the bearish bias of the chart and supports the potential for a bearish continuation towards the 1st support level.

USD/CHF:

The USD/CHF chart is showing bullish momentum with potential for further upward movement. The current price is testing the pivot point at 0.9136, which is an overlap support level and also has a 78.60% Fibonacci retracement lining up with it. If the price were to reverse, it could drop to the 1st support level at 0.9071, a multi-swing low support level.

On the resistance side, the 1st resistance level is at 0.9240, which is an overlap resistance level and coincides with a 50% Fibonacci retracement. There is also an intermediate resistance level at 0.9300, which is another overlap resistance level. A further intermediate resistance level is located at 0.9207, which is between the current price and the 1st resistance level and has a 38.20% Fibonacci retracement.

Overall, the bias is bullish, with the potential for a bullish continuation towards the 1st resistance level. If the price were to break above the pivot point, it could push to the 1st resistance level at 0.9240. However, if the price were to break below the pivot point, it could drop to the 1st support level at 0.9071.

USD/JPY:

USD/JPY has a weak momentum with low confidence. The factors contributing to the momentum is that the price is below a major descending trend line, suggesting that bearish momentum is on the cards.

If price were to break off from the 1st support at 130.39, it could potentially drop towards the 2nd support at 128.10. The 1st support level is a good level as it is an overlap support with a 78.60% Fibonacci retracement lining up with it. Meanwhile, the 2nd support level is a multi-swing low support level.

On the resistance side, the 1st resistance level is at 132.81, which is an overlap resistance. There is also an intermediate resistance level at 134.55, which is another overlap resistance.

As the overall momentum is weak with low confidence, it’s difficult to predict whether the price will break above or below these levels. We’ll have to keep a close eye on how the price behaves around these levels to make an informed decision.

In conclusion, USD/JPY has a weak momentum with low confidence. While the 1st support and 1st resistance levels provide good opportunities for traders to enter the market, the overall momentum makes it difficult to predict whether the price will break above or below these levels.

AUD/USD:

The AUD/USD chart is currently displaying a bearish momentum with potential for a continuation towards the 1st support level at 0.6640. This level is a strong overlap support and has a 61.80% Fibonacci retracement lining up with it, making it a reliable support level. In addition, there is a multi-swing low support at 0.6564, which could serve as a second support level if price were to break through the 1st support.

On the resistance side, the 1st resistance level is at 0.6709, which is also an overlap resistance level. The 2nd resistance level at 0.6789 coincides with a 38.20% Fibonacci retracement, making it a strong level of resistance.

It’s important to note that the overall momentum of the chart is bearish, indicating a potential for further downside. A break of the 1st support could trigger a drop towards the 2nd support level, while a break of the 1st resistance could lead to a rise towards the 2nd resistance level.

NZD/USD:

The NZD/USD chart is currently showing a bearish momentum. Price could potentially make a bearish continuation towards the first support level at 0.6174. This support level is a swing low support and could provide a strong level of buying interest. If price were to break through this level, it could drop further towards the second support level at 0.6139, which is an overlap support and has held prices up in the past.

On the resistance side, the first resistance level is at 0.6266. This level is an overlap resistance and has a 38.20% Fibonacci retracement lining up with it. If price were to rise from the current level, it could face selling pressure at this level. If price were to break through this resistance, it could potentially rise towards the second resistance level at 0.6388, which is also an overlap resistance level.

USD/CAD:

The USD/CAD chart is currently showing a bullish momentum, triggered by a break above a descending resistance line. Price could potentially make a bullish break through the first resistance level at 1.3743 and rise towards the second resistance level at 1.3815, which is an overlap resistance level.

On the support side, the first support level is at 1.3645. This level is an overlap support and has a 38.20% Fibonacci retracement lining up with it, which could provide a strong level of buying interest. If price were to break through this level, it could drop further towards the second support level at 1.3569, which is also an overlap support level and has held prices up in the past.

Overall, with the bullish momentum and the potential for a break through the first resistance level, it suggests that prices may continue to rise in the short term. However, it’s worth noting that the support and resistance levels are relatively close to each other

DJ30:

The DJ30 chart is currently showing a bearish momentum, but there is a possibility of a bullish continuation towards the first resistance level. The first support level is at 31547, which is a multi-swing low support level that has held prices up in the past. If the price were to bounce from this support level, it could potentially rise towards the intermediate support level at 32066, which is an overlap support level.

On the resistance side, the first resistance level is at 32317, which is an overlap resistance level that could provide a strong level of selling interest. If the price were to break through this resistance level, it could potentially rise towards the second resistance level at 32635, which is also an overlap resistance level and has a 61.80% Fibonacci retracement lining up with it.

GER30:

The GER30 chart is currently showing bearish momentum and price could potentially make a bearish break off the first support level at 15077 and drop towards the second support level at 14700, which is a multi-swing low support level that has held prices up in the past. The first support level is an overlap support and has a 23.60% Fibonacci retracement lining up with it.

On the resistance side, the first resistance level at 15245 is an overlap resistance level and has a 61.80% Fibonacci retracement lining up with it. If price were to rise from the current level, it could face selling pressure at this level. If price were to break through this resistance, it could potentially rise towards the second resistance level at 15476, which is also an overlap resistance level and has a 78.60% Fibonacci retracement lining up with it.

There is an intermediate resistance at 15174 between where price is currently and the first resistance level. This level could also act as a selling pressure zone if price were to rise towards it.

BTC/USD:

The BTC/USD chart is currently showing a bearish momentum, suggesting that prices may fall further. Price could potentially make a bearish reaction off the first resistance level at 28342 and drop towards the first support level at 26557. This support level is an overlap support and has a 23.60% Fibonacci retracement lining up with it, which could provide a strong level of buying interest. If the price were to break through this level, it could drop further towards the second support level at 25204, which is also an overlap support and has a 38.20% Fibonacci retracement lining up with it.

On the resistance side, the first resistance level is at 28342. This level is a multi-swing high resistance and could provide a strong level of selling pressure. If the price were to break through this resistance, it could potentially rise towards the second resistance level at 31662, which is a swing high resistance.

US500

The US500 chart is currently showing a neutral momentum as it is below a major descending trend line which suggests bearish momentum, while also being above a major ascending trend line indicating further bullish momentum. Price could potentially fluctuate between the first resistance level at 3970 and the first support level at 3926.

The first support level at 3926 is an overlap support and has a 50% Fibonacci retracement lining up with it, making it a strong level of buying interest. If price were to break through this level, it could potentially drop towards the second support level at 3848, which is a multi-swing low support and has held prices up in the past.

On the resistance side, the first resistance level at 3970 is an overlap resistance level. If price were to rise from the current level, it could potentially face selling pressure at this level. If price were to break through this resistance, it could potentially rise towards the second resistance level at 4042, which is also an overlap resistance level.

ETH/USD:

The ETH/USD chart is currently showing a bearish momentum, and price could potentially make a bearish reaction off the first resistance level at 1844.53 and drop towards the first support level at 1719.84. This support level is an overlap support and has a 23.60% Fibonacci retracement lining up with it. If price were to break through this level, it could potentially drop further towards the second support level at 1581.30, which is another overlap support and has a 50% Fibonacci retracement lining up with it.

On the resistance side, the first resistance level is at 1844.53, which is a multi-swing high resistance level. If price were to rise from the current level, it could face selling pressure at this level. If price were to break through this resistance, it could potentially rise towards the second resistance level at 1950.25, which is a swing high resistance level.

WTI/USD:

The WTI chart is currently showing a bearish momentum and price could potentially continue in a bearish direction towards the first support level at 67.02. This support level is an overlap support and could provide a strong level of buying interest. If price were to break through this level, it could drop further towards the second support level at 64.36, which is a swing low support and has held prices up in the past.

On the resistance side, the first resistance level is at 70.38, which is a pullback resistance level and has a 38.20% Fibonacci retracement lining up with it. If price were to rise from the current level, it could face selling pressure at this level. If price were to break through this resistance, it could potentially rise towards the second resistance level at 73.40, which is another pullback resistance level and has a 50% Fibonacci retracement lining up with it.

There is also an intermediate resistance at 69.75 between the current price and the first resistance level, which could provide a minor hurdle for prices to overcome before testing the first resistance.

XAU/USD (GOLD):

The XAU/USD chart is currently showing a bearish momentum. Price could potentially make a bearish reaction off the first resistance level at 2007 and drop towards the first support level at 1957. This support level is an overlap support and has held prices up in the past. If price were to break through this level, it could drop further towards the second support level at 1933, which is also an overlap support level.

On the resistance side, the first resistance level is at 2007. This level is a swing high resistance and has a 127% Fibonacci extension lining up with it. If price were to rise from the current level, it could face selling pressure at this level. There is also an intermediate support level at 1982, which could act as a pullback support if price were to drop from the current level.

Japan's headline CPI in February experienced a sharp slowdown from 4.3% yoy to 3.3% yoy, falling below the expected 4.1% yoy. CPI core (all items excluding food) dropped from 4.2% yoy to 3.1% yoy, meeting expectations. Meanwhile, CPI core-core (all items excluding food and energy) rose from 3.2% yoy to 3.5% yoy, surpassing the anticipated 3.4% yoy.

Despite the steep decline in CPI core from a 41-year high of 4.2% to 3.1%, the figure remains well above the Bank of Japan's (BoJ) 2% target. The core-core reading, closely monitored by the BoJ as an indicator of domestic demand, reached its highest rate since January 1982.

The data suggests that incoming BoJ Governor Kazuo Ueda may need to address a shift from cost-push inflation to demand-driven inflation, which could prove more sustainable.

Japan PMI Manufacturing rose from 47.7 to 48.6 in March, slightly above expectation of 48.2. PMI Manufacturing Output rose from 45.3 to 47.4. PMI Services ticked up from 54.0 to 54.2, the best reading since October 2013. PMI Composite improved from 51.1 to 51.9.

Japanese private sector firms experienced growth for the third consecutive month, with the services sector witnessing a notable improvement. Demand conditions strengthened, as government support and the lifting of COVID-19 restrictions in mainland China led to increased activity and new orders.

However, the manufacturing sector continued to face challenges, with output and new orders still contracting, albeit at a slower rate than February. Manufacturers reported ongoing supply chain normalization, as supplier delivery times lengthened at the slowest pace since October 2020.

Full Japan PMI release here.

Australia PMI Manufacturing dropped from 50.5 to 48.7 in March, a 34-month low. PMI Services dropped from 50.7 to 48.2, a 3-month low. PMI Composite dropped from 50.6 to 48.1, a 3-month low. All readings indicated renewed contraction in the private sector following improvements in February.

Looking at some details, the results indicate a continued economic slowdown, with composite output and new orders indexes at their lowest since the 2021 Delta lockdowns. Despite easing labor demand, employment indexes suggest businesses are still looking to expand their workforce in 2023. Price indicators have eased but remain elevated, with Australian inflation peaking in late 2022. Service industry input prices are still high, suggesting potential inflationary pressures in 2023 due to labor costs and energy prices.

As the Reserve Bank of Australia (RBA) prepares for its April meeting, it faces a tough decision on whether to pause its tightening cycle amid global financial uncertainty, strong employment numbers, and concerns about inflation levels. Some argue that the RBA should raise the cash rate closer to 4% before pausing to observe the economy's performance over the next few months.

Warren Hogan, Chief Economic Advisor at Judo Bank noted: "There is no point pausing for a month before hiking again. The RBA Board need to get the cash rate to a level that they think will buy them the time to observe how the economy unfolds for at least three months, if not longer."

Full Australia PMI release here.

Key insights from the week that was.

The FOMC and Bank of England both delivered 25bp rate hikes at their March meeting, bringing their respective tightening cycles to an end – in our view. The RBA’s policy tightening is also near its end, with one final 25bp move to occur in May.

The March RBA meeting minutes gave a detailed assessment of only one policy option, their decision to hike by 25bps. Though discussion of a pause at the March meeting was not evident, the Board “agreed to reconsider the case for a pause at the following meeting, recognising that pausing would allow for additional time to reassess the outlook for the economy”. It was also interesting to see the Board’s in depth assessment of market pricing, particularly as their commitment to considering a pause in April pre-dated current developments in the global banking sector, which have seen market pricing flip from hikes to cuts offshore and in Australia.

As discussed by Chief Economist Bill Evans in a video update midweek, the minutes support our view of a pause from the RBA in April; however, we do not believe this will mark the end of the tightening cycle. By May, we expect the Board will be presented with a strong Q1 CPI report and an updated set of economic forecasts that justify one final 25bp rate hike, raising the cash rate from 3.60% to a peak of 3.85% in order to fully ensure that inflation risks are contained. Developments thereafter will be centred on the abrupt slowing of growth and easing inflation over the second half of 2023, warranting the RBA remain on hold over the rest of the year to assess before easing in 2024, with 150bps of rate cuts through to mid-2025. For an in-depth summary and state-by-state breakdown of the growth outlook, see the latest edition of Westpac’s Coast-to-Coast.

Before moving on, a quick note on Australian manufacturing. The latest ACCI-Westpac Business Survey reported that manufacturing conditions, after having stalled flat in Q4 2022, posted a modest improvement in Q1 2023. That said, the overall tone of the survey is still downbeat, with expectations for future activity moderating amid broadening headwinds for the sector. Most notably, Australian manufacturers are facing acute cost pressures – a net 70% reporting an increase in input prices in the period – as surging energy costs continue to impact, resulting in margin squeeze and a loss of competitiveness. With regards to production, not only is labour still being cited as a major limiting factor, but evidence is also beginning to emerge that manufacturers are facing pressures in sourcing financing.

Turning to the US, at their March meeting, the FOMC kept the immediate focus on the fight against inflation by hiking 25bps to a mid-point of 4.875% while also recognising the tightening of financial conditions to come as a result of this month’s Silicon Valley Bank and Signature Bank failures. While uncertain in time and scale, the inclusion of “Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation” makes clear the Committee’s expectation that the cost to the economy from this crisis of confidence in US regional banks will prove significant. The FOMC could certainly justify hiking once more in May to a peak of 5.125%. However, given the risks around financial conditions and confidence, holding off to assess would be the prudent course, particularly given policy is already contractionary and forward indicators for inflation and the labour market were pointing down ahead of this shock. Accordingly, we confirm our view that the federal funds rate has now peaked for this cycle.

Against market expectations of 3-4 cuts by January 2024, we also confirm our view that the federal funds rate is likely to remain on hold through the remainder of 2023, with a clear need to guard against inflation risks over the period. It is only once inflation is back near target that the FOMC will be confident to cut and, at that time, we believe they will do so aggressively, by 200bps in 2024 and a further 75bp in 2025, back to 2.125% -- a broadly neutral policy level. In assessing the risks to this view, it is important to emphasise as Chair Powell did in the press conference, that there are now multiple financial condition dynamics to assess in real time, each with its own timeline and risk profile. Even as rates are cut in 2024, a tighter regulatory focus on regional banks with less than $250bn in assets will likely continue to constrain lending and consequently investment and employment. It is only after the regulatory regime is reset and confidence fully restored that easier policy will bring growth back above trend on a sustainable basis. This is unlikely before late-2024, at the earliest.

Over in the UK, the Bank of England (BoE) also delivered a 25bp hike, albeit with two members voting instead for no change. In the communications from the meeting, there was little concern over the recent upside surprise for inflation which came as a result of core goods inflation, primary clothing and footwear “which tend to be volatile”. Services inflation meanwhile had proven to be marginally weaker than forecast in February, and the MPC anticipate that Q2 2023 will see a significant deceleration to a rate lower than forecast in February given falls in wholesale energy prices and a three-month extension of the Government’s Energy Price Guarantee from April. It is notable that this confidence in the outlook for inflation comes despite the economy continuing to outperform expectations and the Government giving additional modest support to the economy in the Spring Budget.

Like in the US, another 25bp hike could certainly be justified by the BoE in coming months, though it would come with the risk of a swift reversal. To us, the prudent course for the BoE is instead to remain on hold, providing stability and confidence while the already-contractionary stance of policy and global uncertainty works to cool inflation pressures. Albeit with one more hike to go, on our expectations, the ECB clearly finds itself in a similar position. This week, it was constructive to see ECB speakers much more conscious of the broad array of risks they face for the remainder of 2023 and into 2024.