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Daily Pivots: (S1) 0.8876; (P) 0.8901; (R1) 0.8944; More...

Intraday bias in EUR/GBP remains on the upside at this point. Correction from 0.8977 should have completed with three waves down to 0.8754. Further rally should be seen to retest 0.8977 high next. Firm break there will resume the whole rally from 0.8545. On the downside, break of 0.8825 support will dampen this bullish view again and turn bias neutral.

In the bigger picture, outlook is 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.

Daily Pivots: (S1) 1.5898; (P) 1.5970; (R1) 1.6097; More...

Intraday bias in EUR/AUD stays on the upside at this point. Rise from 1.4281 is resuming and should target 61.8% projection of 1.4281 to 1.5976 from 1.5254 at 1.6302. On the downside, below 1.5882 minor support will turn intraday bias neutral and bring consolidations first, before staging another rise.

In the bigger picture, the strong support from 55 week EMA (now at 1.5396) is raising the chance of bullish trend reversal. On break of 1.5976, focus will be on 1.6434 cluster resistance (38.2% retracement of 1.9799 to 1.4281 at 1.6389). Sustained break there should confirm that whole down trend form 1.9799 (2020 high) has completed. However, rejection by this cluster resistance will make medium term outlook neutral at best.

Daily Pivots: (S1) 0.9921; (P) 0.9943; (R1) 0.9960; More....

Intraday bias in EUR/CHF stays on the downside and outlook is unchanged. Fall from 1.0040 is seen as another falling leg inside the corrective pattern from 1.0095. Deeper decline would be seen back to 0.9844 support. But downside should be contained by 0.9832 to bring rebound. On the upside, above 0.9986 minor resistance will turn bias back to the upside for 1.0040 resistance instead.

In the bigger picture, with 0.9832 support intact, rise from 0.9407 (2022 low) is still expected to continue. Break of 1.0095 and sustained trading above 55 week EMA (now at 1.0021) will be a medium term bullish signal, and bring further rally to 1.0505 cluster resistance (2020 low at 1.0505, 61.8% retracement of 1.1149 to 0.9407 at 1.1484). However, firm break of 0.9832 support will revive medium term bearishness and bring retest of 0.9407 low instead.

Equities tumbled after Powell’s hawkish comments turned markets risk-off. On the daily chart, the FTSE 100 has remained upbeat while grinding along the 30-day SMA, a sign that the bulls are still eager to keep the ride going. Buying pressure has been building up after the price secured a foothold over 7850, but the latest fall below 7895 dented the short-term mood. 7850 is a key level to keep the week-long bounce intact as its breach could trigger a broader sell-off towards the daily support of 7710. 7960 is the closest resistance.

The Australian dollar slid after the RBA signalled it was near the conclusion of its tightening cycle. The pair pierced December’s lows around 0.6650 and opened the door for a liquidation towards 0.6500. In the medium-term, the correction could threaten the rebound from last October and turn it into a reversal. As the RSI dipped into oversold territory, profit-taking may trigger a limited bounce. 0.6650 has become a resistance and 0.6770 at the top of the recent consolidation may see more bears selling into strength.

The US dollar popped after Fed Chair Jerome Powell hinted at a return to larger rate increases. On the daily chart, after pulling back from its three-month high at 0.9440, the greenback found support over the 20-day SMA (0.9290), which coincides with the base of a previous bullish breakout. A bullish RSI divergence in this demand zone carries weight and the surge confirms the recovery. A break above 0.9400 puts the peak of 0.9440 under pressure and may resume the rally from early February. 0.9350 is now a fresh support.

Markets

At the hearing before the Senate Banking Committee, Fed Chair Powell repeated that inflation in the core goods sector has fallen while housing services prices are also decelerating. Still, there is little sign of disinflation in core services excluding housing. Wages also remain above what is consistent with 2% inflation. As recent data were stronger than expected, the Fed Chair now guides that the ultimate level of interest rates is likely to be higher than previously anticipated. In addition, if data were to indicate that faster tightening is warranted, the Fed is prepared to increase the pace of rate hikes. Translating this into a concrete policy strategy/outlook: the March Fed dots probably will show that an important part of the FOMC advocates a final policy rate in the 5.5%/6% corridor and the Fed is likely to revert to a 50 bps hike in March, unless Friday’s payrolls and next week’s February CPI inflation would show an outsized downside surprise. The market reaction was a textbook one. The US yield curve inverted further with the 2-y jumping 12.8 bps, settling north of 5%. The 30-y declined 2.1 bps. Markets now see a 2 in 3 chance of a 50 bps step this month. Contrary to what was the sometimes the case of late, the real yield (10-y) this time jumped more than 10 bps while inflation expectations declined almost equally. This also didn’t pass unnoticed in other markets. US equities lost up to 1.72% (Dow). Cyclical commodities (oil, copper) also nosedived (Brent $83.3/b). The dollar profited from generous additional (real) interest rate support. DXY left the low 104 area, surpassed first resistance at 105.35 to close almost exactly at the 105.63 YTD top. EUR/USD (close 1.0546) finished only a whisker away from the 1.0533 February low. Smaller currencies (AUD, NZD, SEK, NOK) suffered substantial losses. CE currencies (HUF, CZK, PLN) again showed quite resilient. Sterling underperformed the euro as BoE’s Mann ‘warned’ on the risk of a further sterling depreciation. EUR/GBP regained the 0.89 handle. German yields lost between 0.4 bps (2-y) and 5.7 bps (10-y) but still have some catching up to do this morning.

Asian markets (ex-Japan) join yesterday’s risk-off positioning on WS. US (ST) yields are continuing their march higher (2-y + 5 bps) and so does the dollar (DXY 105.75; EUR/USD 1.0535; USD/JPY 137.67). Later today, the calendar is modestly interesting. A solid US ADP labour market report and persistently high JOLTS job openings already might further cement the case for a 50 bps Fed hike in March with further upside pressure at the short end of the curve. From a credibility point of view, it also raises the odds to continue hiking by 50 bps in May. The US Treasury today sells $42 bn of 10-y bonds. Even as the curve inverts further, the US 10-y yield tries to regain the 4% handle with the ST top at 4.09% the last barrier before a return to the 4.33% cycle top. Also keep an eye at the Fed Beige Book preparing the March 22 meeting. The dollar now is again in the driver’s seat. EUR/USD breaking below 1.0533, opens the way to the 1.0484/1.0461 area (YTD low/38 retracement Sept/Febr. rally).

News and views

The European Commission will publish its fiscal guidance for 2024 today. The plan is to return to the one-size-fitsall debt reduction rules that were suspended following the pandemic and the Russian invasion, an official familiar with the matter said. However, EU member states want the rules changed to better reflect the challenges of high public debt and the need for investment. Until a negotiated solution is reached later this year, the Commission is likely to propose that, for now, governments set their own targets for the next three years. The key premise is ensuring that the public debt ratio is on a downward path or that it remains at a prudent level and that the deficit is below 3% of GDP over the medium term.

One of the two MPC members that joined the Czech National Bank in mid-February, Kubicek, in his first interview said having rates at 7% should be enough to bring down inflation. He did say it was conditional on the absence of new shocks, including fundamental wage acceleration or crown weakening. Kubicek also favours keeping the rates at 7% for longer rather than follow the CNB’s model which proposes to lift rates to 8% and then reduce them towards 5%. Inflation hit 17.5% y/y in January, around a three-decade high. Helping the fight against inflation is the strong CZK. Although having retreated a little bit over the past few days, it is still trading at the strongest levels in 15 years (EUR/CZK 23.56 currently).

Daily Pivots: (S1) 0.6527; (P) 0.6637; (R1) 0.6694; More...

Intraday bias in AUD/USD remains on the downside at this point. Fall from 0.7159 should target 161.8% projection of of 0.6854 to 0.7028 from 0.6854 at 0.6539. Some support could be seen there to bring recovery. Above 0.6694 resistance will turn bias back to the upside for recovery. However, sustained break of 0.6539 will pave the way back towards 0.6169 low.

In the bigger picture, rise from 0.6169 (2022 low) has completed at 0.7156, after rejection by 55 month EMA (now at 0.7164). Deeper decline would then be see back to 61.8% retracement of 0.6169 to 0.7156 at 0.6546, even as a corrective fall. Sustained break there will raise the chance of long term down trend resumption through 0.6169 low.

Daily Pivots: (S1) 1.3649; (P) 1.3705; (R1) 1.3810; More....

intraday bias in USD/CAD remains on the upside for retesting 1.3976 high. Firm break there will resume larger up trend and target 1.4234 projection level. On the downside, break of 1.3664 minor support will turn intraday bias neutral first. But retreat should be contained above 1.3554 support to bring another rally.

In the bigger picture, outlook stays bullish with 1.3222 cluster support (38.2% retracement of 1.2005 to 1.3976 at 1.3223) intact. Break of 1.3976 resistance will resume larger up trend from 1.2005 (2021 low) to 61.8% projection of 1.2401 to 1.3976 from 1.3261 at 1.4234.

Daily Pivots: (S1) 1.0498; (P) 1.0597; (R1) 1.0647; More...

EUR/USD's decline from 1.1032 resumed by breaking 1.0532 support. Intraday bias is back on the downside for 38.2% retracement of 0.9534 to 1.1032 at 1.0463. Strong support could be seen there to bring reversal. But break of 1.0693 resistance is needed to indicate short term bottoming first. Meanwhile, sustained break of 1.0463 will carry larger bearish implications.

In the bigger picture, as long as 1.0482 support holds, rise from 0.9534 (2022 low) should continue to 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273. However, sustained break of 1.0482 will bring deeper fall to 61.8% retracement of 0.9534 to 1.1032 at 1.0106, even as a corrective pull back.