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Key Highlights

• Bitcoin price is consolidating gains above the $23,000 support zone.
• BTC broke a major key trend line at $22,200 on the 4-hours chart.
• Gold price climbed higher above the $1,920 resistance zone.
• EUR/USD declined heavily after it faced rejection near the 1.0750 resistance.

Bitcoin Price Technical Analysis

Bitcoin price found support near the $19,500 zone and started a fresh increase. BTC/USD broke the $22,000 resistance zone to move into a positive region.

Looking at the 4-hours chart, the price even cleared a major key trend line at $22,200. It opened the doors for a move above the $24,000 resistance zone, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

The price traded to a new monthly high at $26,510 and recently corrected gains. There was a move below the $25,000 support zone.

On the downside, an initial support sits near the $24,000 level. The main breakdown support sits near the $23,000 zone, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

If there is a downside break and close below $23,000, bitcoin might start another decline in the coming days. In the stated case, it could revisit the $22,000 support or even test $21,200.

On the upside, the price is facing resistance near the $25,300 resistance zone. A close above the $25,300 level may perhaps start another steady increase in the coming sessions.

In the stated case, the price could rise towards the $26,250 level. Any more gains could set the pace for a move towards the $27,000 level.

Economic Releases

• US Initial Jobless Claims - Forecast 205K, versus 211K previous.
• ECB Interest Rate on Deposits - Forecast 3%, versus 2.5% previous.

Total employment: +64.6k from –10.9k (revised from –11.5k); unemployment rate: 3.5% from 3.7% (unrevised 3.7%); participation rate: 66.6% from 66.5% (unrevised 66.5%).

Total employment rose by 64.6k (0.5%) in February 2023, more than reversing the two consecutive monthly declines in January (–10.9k) and December (–16.6k). Accordingly, seasonally adjusted hours worked increased by 3.9% in February, much larger than the increase in employment.

Revisions to the recent history of the series has also seen a slight improvement in the pace of employment growth leading into year-end, and a slightly more muted pace of job declines over the December and January period.

The February print therefore confirms our expectations that the softer pace of jobs growth observed over the December and January period, albeit material, was exacerbated by quirks around holiday seasonality, suggesting that the Australian labour market has begun the year on a firmer footing than what was initially anticipated.

In particular, the January survey reported a larger-than-usual number of people waiting to start a new job, which as a proportion of the labour force, rose from a pre-pandemic average of around 4% to 5.2% in January 2023. The ABS reports that a majority of these people returned to their jobs in February, hence the bounce in employment growth.

Reflective of the fact that many of these individuals were likely not counted as part of the labour force in January – not actively searching for work given they have a job to go to – the participation rate increased by 0.1ppt to 66.6% in February. The employment-to-population ratio also lifted by 0.2ppt to 64.3%, just shy of the 64.5% record high observed in November.

The lift in participation saw the labour force grow by 48.1k, lower than the gain in employment, resulting in the unemployment rate falling to 3.5%, rounded to two decimal points, the decrease (from 3.67% to 3.54%) amounted closer to just 0.1ppt. The underemployment rate also posted a substantial decline, down from 6.2% to 5.8%, which alongside the improvement in unemployment and hours worked, suggests that all of the employment gained was full-time, with some switching from part-time to full-time also evident.

The gains in employment look to have been broadly based across the nation with all major states posting an increase, led by Vic (+0.3%), following SA and WA (+0.2%) then NSW and Qld (+0.1%). The unemployment rate held flat in NSW (3.1%) and Qld (3.8%), declined in Vic (-0.3ppt to 3.7%) and SA (-0.2ppt to 3.8%) and rose in WA (+0.2ppt to 3.9%).

Overall, the February report does suggest that the Australian labour market has begun the year on a firm trend, though we do expect outcomes to soften moving into the second half of the year. We are processing the numbers and working through how they will impact on our current labour market forecasts.

New Zealand's Q4 GDP contracted by -0.6% qoq, missing the expected contraction of 0.2% qoq. The primary industries fell by 1.3%, service industries were down by 0.1%, and goods-producing industries were down by 0.3%.

Although the Finance Minister Grant Robertson acknowledged that the GDP could fluctuate as the country continues to recover from COVID, he also highlighted that the economy is nearly 6.7% larger than pre-pandemic levels, outpacing other countries.

Despite this, the GDP figure is significantly below RBNZ's forecast of 0.7% growth, suggesting that the central bank may not need to be as aggressive with its tightening in the future. As a result, economists are now predicting that the RBNZ will opt for a more modest 25bps rate hike in April instead of the previously expected 50bps.

Full GDP release here.

Credit Suisse's measures to ease investor concerns over potential contagion and a banking crisis have failed to lift market pressures, with the Asian markets remaining under pressure.

The bank announced it would borrow up to CHF50B from the SNB, calling it a "decisive action to pre-emptively strengthen its liquidity." The loan and a repurchase of billions of dollars of Credit Suisse debt aim to manage its liabilities and interest payment expenses.

Earlier, in a joint statement with the Swiss financial market regulator FINMA, the SNB assured the markets that the Credit Suisse had met "strict capital and liquidity requirements" and said, "there are no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the US banking market."

"If necessary, the SNB will provide CS with liquidity," FINMA and SNB said.

Hong Kong HSI gapped down today and is trading down -1.6% at the time of writing. From a technical perspective, the index's decline from 22700.85 is still ongoing, and unless the 55-day EMA (now at 20256.19) is breached, a further decrease is anticipated. Even as a corrective move, this drop could aim for the 100% projection of 22700.85 to 19783.07 from 21005.66 at 18087.88.

Summary

• European banks are in focus today with banking sector stocks under some pressure. In this report, we provide brief and aggregated metrics related to the stability of the Eurozone banking sector.
• The liquidity position of the Eurozone banking sector appears to have improved in recent years, as evidenced by a drop in the loan-to-deposits ratio (LDR). For countries participating in the Single Supervisory Mechanism (SSM), in Q2-2015 the LDR ratio stood at 126.6%, but by Q3-2022 that ratio had fallen to 104.8%, suggesting more of a balance between banks' deposits base and loans extended to customers.
• Eurozone banks in aggregate appear to be adequately capitalized. The broader Tier 1 ratio stood at 15.84% in Q3-2022, down from a peak of 16.67% in Q4-2020. However, capital ratios are well above the levels that prevailed at the time of the global financial crisis.
• From a policy perspective, if European banking sector difficulties were to worsen and have meaningful economic effects, it could curtail the extent of European Central Bank monetary tightening. However, at this stage we would view aggressive and emergency monetary easing from the European Central Bank to stabilize the banking sector as a low probability scenario.

Eurozone Banking Sector Solid, But Softening

After concerns surrounding the U.S. banking sector in recent days, European banks are in focus today with banking sector stocks under pressure. In this report we provide brief and aggregated metrics related to the stability of the Eurozone banking sector.

Overall, the liquidity position of the Eurozone banking sector appears to have improved in recent years, as evidenced by a drop in the loan-to-deposits ratio (LDR). For countries participating in the Single Supervisory Mechanism (SSM), in Q2-2015 the LDR ratio stood at 126.6%, but by Q3-2022 that ratio had fallen to 104.8%, suggesting more of a balance between banks' deposits base and loans extended to customers.

Meanwhile, Eurozone banks in aggregate appear to be adequately capitalized. The Common Equity Tier 1 ratio stood at 14.75% in Q3-2022, down slightly from a peak of 15.56% in Q4-2020. The broader Tier 1 ratio stood at 15.84% in Q3-2022, down from a peak of 16.67% in Q4-2020. While those capital ratios have softened moderately in recent quarters, they remain well above levels prevailing at the time of the global financial crisis. For comparison, the Tier 1 capital ratio stood at 7.96% in Q4-2007.

Considering the liquidity and capital position of the Eurozone banking sector, these dynamics should mitigate the chances of any broad based systemic issues across the Eurozone banking sector. That is not to say, however, that bank lending standards could tighten, and credit growth could slow—developments that could affect the outlook for Eurozone growth and inflation over the medium term. From a policy perspective, if European banking sector difficulties were to worsen and have meaningful economic effects, it could curtail the extent of European Central Bank monetary tightening. However, in our view at this stage we believe aggressive and emergency monetary easing from the European Central Bank to stabilize the banking sector is not that likely.

The collapse of the Silicon Valley Bank (SVB) on Friday brought chaos in the markets, with equity indices and government bond yields around the globe coming under strong pressure. This appeared to be the recipe of an elixir potion for gold, which rebounded strongly from near the $1,810 zone and skyrocketed. Is the metal poised to continue flying and what should its traders watch out for?

SVB collapse spreads panic

Markets were thrown into tailspin last Friday and on Monday this week, after a US lender, the Silicon Valley Bank (SVB), collapsed and spread panic among investors. Even after the prompt response of the Fed and the US Treasury to announce contingency plans, investors continued seeking shelter to safe-haven assets, something that allowed gold to shine again.

Another beneficiary this flight to safety was the US bond market, something that pushed Treasury yields off the cliff as market participants began scaling back their Fed hike bets in a panicked manner. Jitters eased somehow on Tuesday, but that appeared to be just a calm before another storm, which broke today on headlines that Credit’s Suisse’s largest investors, Saudi National Bank, will stop providing the bank with funds for capital. From expecting a terminal rate of around 5.65% after Fed Chair Powell’s remarks before Congress, investors are now split on whether the Fed will proceed with pressing the hike button next week, and more shockingly, they are seeing interest rates ending 2023 below 4% from their current 4.50-4.75% target range.

All eyes on the Fed

Ergo, at next week’s FOMC gathering, investors will be eager to find out, not only whether policymakers will deliver another quarter-point hike or not, but also how officials’ view and forecasts have been affected by the new crisis. That said, with Powell appearing in a hawkish suit just last week, and data just yesterday showing that underlying inflation accelerated in monthly terms during the month of February, it is very hard to envision that the new dot plot will match the market’s implied rate path and signal so many basis points worth of rate cuts. Therefore, the risks surrounding next week’s meeting may be tilted to the upside.

An outcome less dovish than expected could allow Treasury yields to rise, which may result in a retreat in gold, but one that may not be enough to erase all the SVB related gains, especially if the Fed’s projections are not as high as were expected before the turbulence. On top of that, there are more factors that could keep gold bulls in the game.

Chinese and Indian demand also important

One very important factor may be China’s reopening. Traditionally, China has been the world’s largest consumer of gold, with its jewelry demand falling below that of India during 2022 for the first time since 2011. This suggests that there may be ample room for recovery should the engines of the Chinese economy continue to speed up. Jewelry is the largest component of physical demand for the yellow metal, and thus, a strong boost by Chinese consumers could be of major importance. India is the world’s second largest nation in terms of consumption, seeing economic growth of almost 7% in 2022 and nearly 9% the year before. Thus, if economic activity continues to flourish there as well, demand for gold could substantially increase.

Risks seem tilted to the upside

Putting everything together, it may be very difficult to form a convincing long-term view on gold in such a dynamic environment where sentiment is switching from one extreme to the other within a few hours, but it seems that the risks may be skewed to the upside.

From a technical standpoint, gold emerged above Monday’s peak of $1,915 today, a move that may allow the bulls to put the high of February 2 at $1,960 zone on their radar. If they are strong enough to overcome that zone, they may extend their rally towards the psychological round figure of $2,000, also marked by the peak of March 8, 2022.

On the downside, the move signaling that the bears have stolen all the bulls’ swords may be a clear dip below $1,805, which is currently coinciding with the 200-day EMA. Such a move would confirm a lower low on the bigger timeframes and may see scope for declines all the way down to the low of November 23 at $1,725.

That said, for the bigger picture to turn back bearish, the Fed may need to appear nearly as hawkish as the market was expecting it last week, a scenario that may not be that likely considering that the Fed has pledged to assist in stabilizing the banking sector.

New Zealand's GDP fell by 0.6% in the December quarter, and the economy's momentum has slowed by even more than the headline figures suggests

• Quarterly change: -0.6% (last: +1.7%, Westpac f/c: -0.2%, market f/c: -0.2%)
• Annual change: +2.2% (Last +6.4%)
• Annual average change: +2.4% (Last: +2.7%)

The New Zealand economy's strong run through the middle part of 2022 was punctured at the end of the year. GDP fell by 0.6% in the December quarter, weaker than market forecasts of a fall of around 0.2%, and much weaker than the Reserve Bank's assumption of a 0.7% rise.

In fact the result was even softer than the headline number shows. Stats NZ has updated the way that it calculates the seasonal factors - a thorny issue in recent times, as the Covid pandemic and the border closure in particular has thrown off the usual seasonal patterns in activity. Today's result would have been a 1.2% decline using the old seasonal factors (as we did in our forecasts). Or to look at it another way, annual growth of 2.2% is a full percentage point lower than what we expected, and almost 2ppts lower than what the RBNZ was expecting.

The weakness was more broad-based than we expected, with declines in both the goods and services sectors. The biggest drag on activity was in manufacturing, down by 1.9%. Retail and accommodation, transport, and arts and recreation - all sectors that would have benefited from the return of overseas tourists - were also down overall, highlighting the degree of softening in domestic demand.

While the economy is widely expected to slip into recession as higher interest rates bite, we suspect that the December quarter results represent more of an air-pocket in our descent, rather than an earlier and harder than expected landing. Higher-frequency data has actually improved a little in the first two months of this year, and the clean-up from Cyclone Gabrielle will generate extra activity in the coming months that will add to measured GDP.

The crucial thing for the RBNZ, though, is that the starting point for the economy is substantially less stretched than they thought. And that matters for how much of a slowdown is needed to bring inflation back under control.

• USDCHF reversed from support level 0.9075
• Likely to rise to resistance level 0.9425

USDCHF currency pair recently reversed up from the strong support level 0.9075 (which has been repeatedly reversing the price from the middle of January).

The upward reversal from the support level 0.9075 created the daily Japanese candlesticks reversal pattern Morning Star.

USDCHF currency pair can be expected to rise further toward the next resistance level 0.9425 (which stopped the previous intermediate correction (2) with the daily Evening Star earlier this month).

• FTSE 100 index reversed from support level 7335,00
• Likely to rise to resistance level 7500.00

FTSE 100 index today reversed up from the powerful support level 7335,00 (which has been reversing the price from the middle of November) – standing well below the lower daily Bollinger Band.

The upward reversal from the support level 7335,00 stopped the previous sharp downward impulse wave (i) of wave C from the start of this month.

FTSE 100 index can be expected to rise further toward the next resistance level 7500.00 (former minor support which reversed the index earlier this month).