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Following BoE's decision to raise interest rates by 25bps to 4.25%, Governor Andrew Bailey expressed uncertainty about whether this would be the peak for rates.

Talking to broadcasters, Bailey said, "We don't know whether it's going to be the peak," adding that "We've seen signs of inflation really peaking now. But of course it's far too high... We need to see it starting to come down progressively and get back to target."

In a separate video, Bailey explained the rationale behind the rate hike, stating, "Inflation is still too high, but we continue to expect it to fall sharply from the middle of this year. Raising interest rates is the best way we have of making sure that happens."

He also emphasized that "low and stable inflation is the foundation of a healthy economy," and that raising rates is the "best tool" for bringing inflation back under control.

https://twitter.com/bankofengland/status/1638901303228370945

As expected, the Federal Reserve hiked the key US interest rate by 25 basis points for the second straight time during its two-day meeting ending March 22. The unanimous decision of the FOMC came amid major central banks' commitment to fighting inflation while maintaining economic growth. The decision coincides with turmoil in banking stocks due to the Credit Suisse and SVB crises. What is the technical outlook to all these? Please continue reading below.

US Dollar

The US Dollar (DXY) on the Daily timeframe has arrived at the Demand zone with an initial reaction away from the zone. However, I expect that price will return to the area before we see the major bullish impulse play out; the reason for this is the obvious gap created by the drop. Based on this analysis, a stronger Dollar would mean a bearish move on most major pairs.

Analysts’ Expectations:

• Direction: Bullish
• Target: 103.870
• Invalidation: 100.700

EURUSD

EURUSD is my favorite setup from today's analysis. Here we see the price reacting to the 76% Fibonacci retracement level and a supply zone overlapping the area. There is also a trendline pivot, which acts as resistance in this case. Despite the Moving Average alignments, I believe this setup will do quite well based on the correlation with the US Dollar's analysis.

Analysts’ Expectations:

• Direction: Bearish
• Target: 1.07495
• Invalidation: 1.10300

GBPUSD

GBPUSD is currently trading within a channel and has reached the resistance trendline of the channel. The same area also has the confluences from the 88% Fibonacci retracement zone and the rally-base-drop supply zone. 1.21650 is my initial target for this trade.

Analysts’ Expectations:

• Direction: Bearish
• Target: 1.21650
• Invalidation: 1.24000

XAUUSD - Weekly Timeframe

Similar to EURUSD, we're seeing a reaction of price to the 88% of the Fibonacci retracement and a retest of trendline resistance. There is also a note-worthy rally-base-drop supply zone and a gap around the $1873 area. These are my confluences in favor of a bearish trade from this area.

Analysts’ Expectations:

• Direction: Bearish
• Target: $1873
• Invalidation: $2061

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.

Gold keeps firm tone on Thursday and rose further, in extension on Wednesday’s post-Fed 1.5% rally.

The metal shined after dovish shift from the US policymakers deflated dollar, while growing uncertainty over the simmering crisis in banking sectors and estimations of its negative impact, additionally boosted gold’s safe-haven appeal.

Wednesday’s strong bounce left the double-bottom at $1935/$1934, just above significant support at $1933 (Fibo 38.2% of $1809/$2009 / rising 10DMA) pointing to a healthy correction and shifting near-term focus higher.

Overall bullish daily techs support the action, but evident weakening of bullish momentum warns possible headwinds at key $2000 resistance zone (psychological / 2023 high at $2009), which may keep the price in extended range.

However, near-term bulls are expected to hold grip as long as the price action stays above strong $1993 support, with persisting uncertainty to keep fueling demand.

Bullish scenario requires firm break of $2000/$2009 barriers to open way for retest of record highs at $2070/$2074 (Mar 2022 / Aug 2020 peaks, respectively).

The metal is on track for strong monthly gains in March (the biggest monthly rally since July 2020) which adds to bullish outlook and favors scenario of prolonged consolidation preceding fresh acceleration higher.

Only loss of $1993 support would weaken near-term structure and risk deeper pullback on signs of false break above $2000, which would also signal a bull-trap.

Res: 1985; 2000; 2009; 2018
Sup: 1959; 1933; 1918; 1909

The dollar index remains firmly in red for the sixth straight day and hit new seven-week low in early Thursday, after Fed’s decision further soured the sentiment.

The US central bank raised interest rates by 25 basis points to 4.75% / 5.00% range, as widely expected, but toned down its expectations for monetary policy, in the light of the latest crisis in banking sector.

Shift in Fed’s rhetoric by dropping a promise of ongoing increases, in a continuous fight with high inflation, by softer tones which consider the significance of potential negative impact if banking sector crisis deepens, added pressure on the dollar.

Although Fed officials pointed that some additional policy firming may be needed, with one more 25 basis points hike by the end of the year, this signals turn from the recent hawkish stance, hinting that tightening cycle is likely near its end, as the Fed kept its projection for the terminal rate at 5.1% unchanged.

Technical studies on daily chart show strong negative momentum and moving averages in full bearish configuration and forming a number of bear-crosses.

Fresh acceleration lower broke below the last Fibo support at 101.88 (76.4% retracement of 100.66/105.85 rally) and also emerged below ascending weekly Ichimoku cloud, with weekly close below the cloud to add to negative signals.

Key support at 100.66 (2023 low, posted of Feb 2) comes in focus, with minor obstacles at 101.36/25 (3/18 Feb lows) seen en-route.

However, oversold conditions suggest that bears may take a breather, with upticks expected to offer better selling opportunities.
Significant resistances at 102.65/83 (broken Fibo 61.8% / daily cloud base) should cap upticks to keep larger bears intact.

Res: 102.07; 102.65; 102.83; 103.12
Sup: 101.53; 101.25; 100.66; 100.00

Daily Pivots: (S1) 1.0772; (P) 1.0842; (R1) 1.0926; More...

Intraday bias in EUR/USD remains on the upside and further rally should be seen to retest 1.1032 high. Decisive break there will resume whole up trend from 0.9534 and target 1.1273 fibonacci level next. On the downside, below 1.0787 minor support will turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, rise from 0.9534 (2022 low) is in progress with 38.2% retracement of 0.9534 to 1.1032 at 1.0460 intact. The strong support from 55 week EMA (now at 1.0623) was also a medium term bullish sign. Next target is 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273. Sustained break there will solidity the case of bullish trend reversal and target 1.2348 resistance next (2021 high).

Daily Pivots: (S1) 0.9132; (P) 0.9189; (R1) 0.9230; More...

Intraday bias in USD/CHF stays on the downside for retesting 0.9058 low first. Decisive break there will resume larger down trend from 1.1046. On the upside, above 0.9244 minor resistance will turn intraday bias neutral again. Overall outlook will stay bearish as long as 0.9474 fibonacci level holds.

In the bigger picture, fall from 1.1046 (2022 high) should still be in progress with 38.2% retracement of 1.0146 to 0.9058 at 0.9474 intact. Prior rejection by 55 week EMA was a medium term bearish sign. Break of 0.9058 will resume such decline towards 0.8756 support (2021 low). But overall, such fall is still as a leg in the long term range pattern from 1.0342 (2016 high). So, downside should be contained by 0.8756 to bring reversal.

Daily Pivots: (S1) 130.69; (P) 131.84; (R1) 132.68; More...

Intraday bias in USD/JPY stays mildly on the downside for the moment as fall from 137.90 is in progress. Sustained trading below 61.8% retracement of 127.20 to 137.90 at 131.28 will pave the way to retest 127.20 low next. On the upside, however, break of 132.99 resistance will suggest short term bottoming and turn bias back to the upside for stronger rebound.

In the bigger picture, rebound from 127.20 should have completed at 137.90 as a corrective move, with strong break of 55 day EMA. The down trend from 151.93 (2022 high) is not over yet. 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.

Daily Pivots: (S1) 1.2207; (P) 1.2271; (R1) 1.2333; More...

Intraday bias in GBP/USD stays on the upside despite current retreat. Rise from 1.1801 is in progress for retesting 1.2445/6 resistance zone. Decisive break there will resume larger rise from 1.0351, and target 1.2759 fibonacci level. On the downside, break of 1.2177 minor support will argue that corrective pattern from 1.2445 is extending with another falling leg, and turn bias to the downside for 1.2009 support instead.

In the bigger picture, price action from 1.2445 are seen as a corrective pattern to rise from 1.0351 medium term bottom (2022 low). Resumption of the rally from 1.0351 is expected and break of 1.2446 will target 61.8% retracement of 1.4248 (2021 high) to 1.0351 at 1.2759. This will remain the favored case as long as 38.2% retracement of 1.0351 to 1.2445 at 1.1645 holds.

Market's response to the rate hikes by SNB and BoE has been relatively muted. Following today's rate decisions, SNB signaled the possibility of further tightening, while BoE remains open to either a hike or a pause in the future. Dollar is currently the day's worst performer, followed by Swiss Franc and Japanese Yen, with commodity currencies showing the most strength. Despite this, a risk-on environment isn't clearly reflected in European stocks and US futures.

Regarding the week's performance, Dollar has been the weakest currency so far, primarily due to yesterday's selloff in response to the less hawkish Fed. Commodity currencies are the next weakest, outpaced by their European counterparts. Euro leads as the strongest currency, trailed by Pound and Swiss Franc, while the Japanese Yen presents a mixed performance.

Technically, EUR/CAD's up trend from 1.2867 resumed today and it's on track to 61.8% projection of 1.3270 to 1.4640 from 1.4236 at 1.5083. Nevertheless, break of 1.4737 minor support will bring some consolidations first, before staging another rally. The next move might depend on tomorrow's Eurozone PMIs.

In Europe, at the time of writing, FTSE is down -0.76%. DAX is down -0.31%. CAC is down -0.26%. Germany 10-year yield is down -0.0485 at 2.281. Earlier in Asia, Nikkei dropped -0.17%. Hong Kong HSI rose 2.34%. China Shanghai SSE rose 0.64%. Singapore Strait Times dropped -0.06%. Japan 10-year JGB yield dropped -0.0283 to 0.306.

US initial jobless claims ticked down to 191k

US initial jobless claims dropped -1k to 191k in the week ending March 18, better than expectation of 195k. Four-week moving average of initial claims dropped -250 to 196.25k.

Continuing claims rose 14k to 1694k in the week ending March 11. Four-week moving average of continuing claims rose 8.5k to 1684k.

BoE hikes 25bps, door open for further tightening or pause

BoE raised its Bank Rate by 25 basis points to 4.25% as expected, with a 7-2 vote by the Monetary Policy Committee. MPC members Swati Dhingra and Silvana Tenreyro voted against the rate hike, opting for no change, while no member voted for a larger increase.

The central bank left the possibility of further rate hikes open, stating, "if there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required." Simultaneously, it also means the door is open for a pause in the rate hike cycle too.

BoE acknowledged that CPI inflation "increased unexpectedly in the latest release" but maintained that it is "likely to fall sharply over the rest of the year." The central bank emphasized that the degree to which domestic inflationary pressures ease will depend on the economy's evolution, including the impact of the significant Bank Rate increases so far.

SNB hikes 50bps, signals more tightening possible

SNB raises its policy rate by 50bps to 1.50% as widely expected. The central bank indicated the openness to further tightening while inflation forecasts are raised due to stronger second-round effects and increased overseas inflationary pressure.

The central bank said the rate hike is for "countering the renewed increase in inflationary pressure". It also noted in the statement, "it cannot be ruled out that additional rises in the SNB policy rate will be necessary to ensure price stability over the medium term." It also remains "willing to be active in the foreign exchange market" with focus on "selling foreign currency" for some quarters.

The bank's conditional inflation forecast assumes an interest rate of 1.5% over the horizon. Average inflation estimates for 2023 and 2024 were raised from 2.4% to 2.6% and from 1.8% to 2.0%, respectively. Inflation is projected to average 2.0% in 2025, a new forecast.

SNB statement highlighted that "stronger second-round effects and the fact that inflationary pressure from abroad has increased again mean that, despite the raising of the SNB policy rate, the new forecast is higher through to mid-2025 than in December."

The central bank anticipates a modest GDP growth of around 1% for the year, citing subdued foreign demand and the dampening effect of inflation on purchasing power.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2207; (P) 1.2271; (R1) 1.2333; More...

Intraday bias in GBP/USD stays on the upside despite current retreat. Rise from 1.1801 is in progress for retesting 1.2445/6 resistance zone. Decisive break there will resume larger rise from 1.0351, and target 1.2759 fibonacci level. On the downside, break of 1.2177 minor support will argue that corrective pattern from 1.2445 is extending with another falling leg, and turn bias to the downside for 1.2009 support instead.

In the bigger picture, price action from 1.2445 are seen as a corrective pattern to rise from 1.0351 medium term bottom (2022 low). Resumption of the rally from 1.0351 is expected and break of 1.2446 will target 61.8% retracement of 1.4248 (2021 high) to 1.0351 at 1.2759. This will remain the favored case as long as 38.2% retracement of 1.0351 to 1.2445 at 1.1645 holds.

Economic Indicators Update

US initial jobless claims dropped -1k to 191k in the week ending March 18, better than expectation of 195k. Four-week moving average of initial claims dropped -250 to 196.25k.

Continuing claims rose 14k to 1694k in the week ending March 11. Four-week moving average of continuing claims rose 8.5k to 1684k.

Full release here.