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Daily Pivots: (S1) 1.1744; (P) 1.1905; (R1) 1.1987; More...

GBP/USD's fall from 1.3446 resumed by break through 1.1914 support and intraday bias is back on the downside. Deeper decline would be seen to 38.2% retracement of 1.0351 to 1.2446 at 1.1646. Strong support might be seen there to rebound. But break of 1.1914 support turned resistance is needed to sign temporary bottoming first. Meanwhile, firm break of 1.1645 would carry larger bearish implications.

In the bigger picture, break of 1.1840 support argues that a double top pattern (1.2445, 1.2446) was formed after rejection by 55 week EMA (now at 1.2228). Deeper decline should be seen back to 38.2% retracement of 1.0351 to 1.2446 at 1.1646. Sustained break there will raise the chance of trend reversal and target 61.8% retracement at 1.1151.

Daily Pivots: (S1) 0.9329; (P) 0.9378; (R1) 0.9469; More...

Intraday bias in USD/CHF is back on the upside with current strong rebound. Break of 0.9439 will resume the rise from 0.9058 for 38.2% retracement of 1.0146 to 0.9058 at 0.9474. Decisive break there will carry larger bullish implications. On the downside, break of 0.9284 will turn bias back to the downside for retesting 0.9058 low instead.

In the bigger picture, decline from 1.0146 is seen as part of a long term sideway pattern. As long as 38.2% retracement of 1.0146 to 0.9058 at 0.9474 holds, another fall is in favor through 0.9058. However, sustained trading above 0.9474 will indicate that the medium term trend has reversed, and open up further rally to 61.8% retracement at 0.9730 and above.

Market movers today

In the US, markets will pay close attention to the JOLTs job openings, which have been a good leading indicator for wage growth.

German industrial production figures for January are on the agenda. Factory orders showed a small rebound at the start of the year, but truck toll mileage and electricity consumption point to downside risks.

The final euro area Q4 22 GDP figures could see a small downward revision from the earlier estimate of 0.1% q/q, due to a deeper contraction in Germany.

ECB's Lagarde and Riksbank Deputy Governor Breman will be on the wires.

Bank of Canada is widely expected to leave policy rates unchanged at today's monetary policy meeting leaving the key policy rate at 4.5%. Bank of Canada was one of the first central banks to initiate the post pandemic hiking cycle and has also been among the very first to signal a pause. Markets will not least look for signs that Bank of Canada could reinitiate hikes amid a continued strong labour market and other central banks sending hawkish signals as of late.

The 60 second overview

Powell shakes up markets: Fed chair Powell managed to shake up markets at yesterday's Senate testimony. Powell not only indicated a higher eventual peak in policy rates amid the economy faring better-than-expected but he also signalled a willingness to re-accelerate the hiking pace back to 50bp increments should data warrant this.

Notably, Powell highlighted that there is "little sign of disinflation thus far in the category of core services excluding houses" which illustrates that the Fed is concerned with respect to underlying inflationary pressures. Powell also indicated the need for a softer labour market and that although wage growth has eased slightly in recent months it remains uncomfortably high relative to productivity trend growth and the 2% inflation target.

Markets reacted strongly with US FI selling off aggressively. Markets are now leaning more towards a 50bp March hike than the 25bp hike deemed a done deal not many weeks back. With the Fed's silent period beginning on Saturday the next couple of sessions' US releases will be unusually important for the short-end of the USD curve as this could pivot Fed one way or the other. While Friday's nonfarm payrolls naturally marks the highlight we stress the JOLTS job openings data later today and tomorrow's initial jobless claims could also prove unusually important. During the Fed's silent period we get US CPI (14 March) which naturally also holds the importance to shift market pricing in either way.

Markets now price a policy rate peak around 5.60% in September later this year. The slope between the 10Y and 2Y US Treasury yield has now inverted beyond -100bp which is the most since 1981 highlighting the sharp recession signal that bond markets continue to send.

Markets. Price action from yesterday has generally extended into the overnight Asia session with most notably US yields continuing to move higher. Most major equity indices and G10 equity futures are trading in red territory this morning while the USD has gained further. Amid the rise in global yields USD/JPY has moved sharply higher and is now trading at the highest levels since December just two days ahead of the eagerly awaited Bank of Japan meeting.

FI: It was a volatile day in rates markets amid inflation expectations collapse in the Eurozone and a hawkish Powell.

FX: The USD strengthened sharply and across the board on the back of the hawkish Powell testimony with EUR/USD moving closer to 1.05 and USD/JPY toward 138. SEK and NOK continue to underperform and USD/SEK soared all the way back to year highs at 10.75.

Credit: Tuesday saw some profit taking in the overall corporate bond market after solid performance in recent days. iTraxx Main widened 1bp to 75bp while iTraxx X-over widened 8bp to 393bp. The primary market remains busy with several companies looking to issue new bonds amid high investor demand.

Nordic macro

Riksbank's Breman speaks about the economy and monetary policy at 08.45 CET. Given the recent high core inflation in the Euro zone, hawkish ECB comments and signals about accelerating Swedish food inflation we expect her to emphasize the need for additional forceful hikes at the upcoming meetings (i.e. 50 bps and 25 bps) in April and June to combat rising Swedish core inflation.

Maklarstatistik releases country-wide residential property price data for February. It should show a modest stabilization as seen in other data.

Investors got a double shot of hawkishness from Federal Reserve (Fed) Chair Jerome Powell’s semi-annual testimony before the US Senate yesterday.

This time, Powell left no place for doubt. He clearly said that nothing about the data suggests to him that they have tightened too much, and that ‘if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes’.

I repeat, ‘increase the PACE of rate hikes’.

That means that if the US jobs data remains strong, and inflation won’t cool down, the Fed will throw the slower-but-higher-rate-hikes strategy out of the window, and they will just hike by decent chunks.

And the level of rates will ‘likely be higher than previously anticipated’; it will be higher than 5.1%.

The message went through

Activity on Fed funds futures now assesses 73% chance for a 50bp hike for the March FOMC meeting, up from around 30% before the speech. Pricing also suggests 100bp hike in the next four meetings. And swap markets price in a peak Fed rate of 5.6%. That was around 4.90% at the start of the year.

Chaos

Powell’s comments wreaked havoc across the US treasury and equity markets and the US dollar. The US 2-year yield spiked past the 5% mark. The 10-year yield spiked to 4%. The gap between the 2 and 10-year yield hit a full percentage point for the first time since 1981.

The widening yield gap means that the pricing of further rate hikes is well in play, yet the rate hike expectations increase the odds that the US economy could come down sharply. That’s why the 4% mark on the 10-year is less enthusiastic about further upside.

In equities, the S&P500 had to give to the bears and fell 1.53% to below the 4000 mark and the 50-DMA.

To be true, the reaction could’ve been worse, but the selloff may not stop here.

Data, data, data

The next few data points will be very important in cementing the expectation of a 50bp hike at the March 21-22 FOMC meeting.

Today, the ADP report and job openings data. JOLTS data would better soften this month, after last month’s booming figure of 11 mio.

On Friday, February jobs report will be released. We’d better see an easing here as well after last month’s blowout half-a-million NFP read.

Finally, the latest CPI update is due next Tuesday. And again, it’d better head sufficiently lower after last month’s disinflation disillusion.

If the fresh data doesn’t go where the Fed wants to see them, bigger rate hikes will be on the menu, and hope of soft-landing and easy disinflation could fade away.

And with all the hawks in the air, the US dollar went straight up yesterday and there is no reason to bet on a softer US dollar for the next couple of days. The dollar will likely consolidate and extend gains against most majors.

The EURUSD tanked to the 100-DMA, which stands a few pips above the 1.05 mark, and the major 38.2% Fibonacci retracement on September to February rally, around the 1.0473 level, is just about to get tested, and could be broken depending on the strength of the USD bullishness. It’s true that we were expecting the rate hikes in the US to gently end in Q1 and the rate hikes in the Eurozone to continue. But the new turn of things suggests that the Fed is not done hiking yet, so the euro can barely strengthen its back if the USD bulls remain in charge of the market.

The Reserve Bank of Australia (RBA) head Philip Lowe said, just a day after the 25bp hike, that they are approaching a point where a pause in tightening is needed. The combination of a hawkish shift in Fed’s language and the dovish hike from the RBA cost dearly to the Aussie. The AUDUSD dropped two figures yesterday and is now around the 65 cents mark. At this point, even the Chinese reopening will hardly make up for the negative pressure.

In Canada, the Bank of Canada is preparing to do nothing at today’s monetary policy meeting. But Canadian policymakers could make some careful tweaks to the statement to leave the door open for further action, if needed. The cup and handle formation on the dollar-CAD hints that the move could extend to 1.40 mark, if the BoC fails to show a bit of teeth.

Daily Pivots: (S1) 136.07; (P) 136.63; (R1) 137.72; More...

USD/JPY's rally resumed to breaking through 137.09 resistance. The strong break of 136.64 fibonacci level also carries larger bullish implication. Intraday bias is back on the upside. Current rally would now target next fibonacci level at 142.48. On the downside, break of 135.35 support is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, the break of 38.2% retracement of 151.93 to 127.20 at 136.64 suggests that whole down trend from 151.93 has completed at 127.20 already. Tentatively, rise from 127.20 is seen as the second leg the medium term pattern from 151.93. Further rally is expected to 61.8% retracement at 142.48. This will now remain the favored case as long as 55 day EMA (now at 134.10) holds.

In a surprising turn of events, the clear and direct hawkish message delivered by Fed Chair Jerome Powell has sent Dollar soaring and stocks tumbling overnight. The greenback maintained its solid gains during Asian session, and all eyes are now on Friday's non-farm payroll report to see what the next move will be.

While Canadian dollar remains mixed, awaiting BoC's statement today, it is widely expected that the central bank will stand pat. Australian dollar has had a rough week and continues to be the worst performer, although the sell-off appears to be slowing down a bit.

On the other hand, Yen's decline could potentially intensify, given the outlook against other major currencies. Investors are eagerly awaiting further developments in these volatile currency markets.

Technically, if Dollar is to extend gains for the rest of the week, question is on which currency would be the biggest victim. EUR/JPY would be a pair to watch as it's staying near term bullish in range. Break of 145.55 resistance will resume the whole rise from 137.37. That would add more fuel to USD/JPY's rally.

In Asia, Nikkei closed up 0.48%. Hong Kong HSI is down -2.24%. China Shanghai SSE is down -0.15%. Singapore Strait Times is down -0.57%. Overnight, DOW dropped -1.72%. S&P 500 dropped -1.53%. NASDAQ dropped -1.25%. 10-year yield dropped -0.008 to 3.975.

Markets raise bets on 50bps Fed hike, a look at DOW and DXY

The markets were rocked by the "clear-cut" hawkish remarks by Fed Chair Jerome Powell overnight. In short, "he indicated that ultimate level of interests is "likely to be higher than previously anticipated". Fed is also "prepared to increase the pace of rate hikes". He also warned against "prematurely loosening policy. More here.

As a result, Fed fund futures are now pricing in 73% chance of a 50bps rate hike to 5.00-5.25% on March 22, comparing to just 31% a day ago.

The stock markets were sold off deeper, with DOW losing -1.72% or -574.98 pts to close at 32856.46. Technically, it isn't the end of the world for DOW... yet, as it's staying in familiar range despite the selloff The rejection of 55 day EMA is a bearish sign though.

So, near term focus is now back on 38.2% retracement of 28660.94 to 34712.28 at 32400.66. As long as this level holds, DOW is just in a sideway consolidation pattern.

However, sustained break there will suggest bearish reversal and at least bring deeper fall to 61.8% retracement at 30972.55.

Dollar index closed sharply higher on expectation of more aggressive Fed and risk aversion The support from 55 day EMA is a near term bullish sign. But DXY will still need to overcome 38.2% retracement of 114.77 to 100.82 at 106.14 to confirm underlying momentum.

Rejection by 106.14 will keep the rise from 100.82 as a corrective move and maintains medium term bearishness for another fall through 100.82 at a later stage. However, sustained break of 106.14 will indicate trend reversal and bring stronger rally to 109.44, and possibly above.

RBA Lowe: Further tightening required, but closer to a pause

RBA Governor Philip Lowe said in a speech that further rate hike is still necessary. But the central bank is now closer to the point of a pause.

The board's judgment remained that "further tightening of monetary policy is likely to be required to bring inflation back to target within a reasonable timeframe", Lowe said.

"Inflation is still too high and while it looks to be on a declining path it is likely to remain higher than target for a few years," he added. "If we don't get inflation down fairly soon, the end result will be even higher interest rates and more unemployment.

Meanwhile, " with monetary policy now in restrictive territory, we are closer to the point where it will be appropriate to pause interest rate increases to allow more time to assess the state of the economy," he noted.

"At what point it will be appropriate to pause will be determined by the data and our assessment of the outlook".

SNB Jordan: Monetary policy is still too loose

Swiss National Bank Chairman Thomas Jordan, stated that the current monetary policy is too loose to bring inflation back to price stability in the medium term, and further tightening cannot be ruled out. The comment came after recent data showed that consumer inflation reaccelerated to 3.4% in February, staying well above SNB's 0-2% target.

"The SNB's monetary policy is still too loose to return inflation back to price stability in the medium term," Jordan yesterday at Zurich University. "We cannot exclude that we have to tighten further."

"The SNB has to act to reach price stability in the medium term again," he said. "The barren Swiss labor market can lead to second- and third-round effects happening more easily."

Meanwhile Jordan also pointed out that the central bank has more than one option, as "we can raise rates, but also sell foreign currency — and we have sold foreign currency in the past."

SNB will meet on March 23 to decide on monetary policy.

BoC to stand pat, CAD/JPY staying bullish in range

BoC is widely expected to stand pat today, and keep the benchmark overnight rate unchanged at 4.50%. Governor Tiff Macklem has explicitly indicated that in inflation comes down as predicted, there is no need to raise interest rates further. But of course, he's prepared to act if that doesn't happen as expected. For now, markets are pricing in around 80% chance of another hike within this year. But it's too early for BoC to shift its evidence for now.

Some previews on BoC:

• Bank of Canada to Set Tightening Campaign on Hold
• Bank of Canada Preview: At Interest Rates Peak?
• Canadian jobs report, Bank of Canada decision back in the spotlight

Canadian Dollar's performance this week is not too bad, as it's just down against the strong Dollar, Euro and Swiss Franc. For example, CAD/JPY is just holding in range below 100.85 temporary top, with the shallow retreat contained above 99.02 support, as well as 55 day EMA. Further rally remains in favor.

Firm break of 38.2% retracement of 110.87 to 94.61 at 110.82 will argue that the down trend from 110.87 to 94.61 is reversal. That would bring stronger rally to 61.8% retracement at 104.65. (USD/JPY has taken out equivalent level of 38.2% retracement of 151.93 to 127.20 at 136.64 already).

Elsewhere

Germany industrial production, retail sales, Italy retail sales, Eurozone GDP and employment final will be released in European session.

Later in the day, US will release ADP employment and trade balance. Fed chair Jerome Powell will have the second day of testimony. Fed will also publish Beige Book report. Canada will release trade balance before BoC rate decision.

USD/JPY Daily Outlook

Daily Pivots: (S1) 136.07; (P) 136.63; (R1) 137.72; More...

USD/JPY's rally resumed to breaking through 137.09 resistance. The strong break of 136.64 fibonacci level also carries larger bullish implication. Intraday bias is back on the upside. Current rally would now target next fibonacci level at 142.48. On the downside, break of 135.35 support is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, the break of 38.2% retracement of 151.93 to 127.20 at 136.64 suggests that whole down trend from 151.93 has completed at 127.20 already. Tentatively, rise from 127.20 is seen as the second leg the medium term pattern from 151.93. Further rally is expected to 61.8% retracement at 142.48. This will now remain the favored case as long as 55 day EMA (now at 134.10) holds.

Economic Indicators Update

BoC is widely expected to stand pat today, and keep the benchmark overnight rate unchanged at 4.50%. Governor Tiff Macklem has explicitly indicated that in inflation comes down as predicted, there is no need to raise interest rates further. But of course, he's prepared to act if that doesn't happen as expected. For now, markets are pricing in around 80% chance of another hike within this year. But it's too early for BoC to shift its evidence for now.

Some previews on BoC:

• Bank of Canada to Set Tightening Campaign on Hold
• Bank of Canada Preview: At Interest Rates Peak?
• Canadian jobs report, Bank of Canada decision back in the spotlight

Canadian Dollar's performance this week is not too bad, as it's just down against the strong Dollar, Euro and Swiss Franc. For example, CAD/JPY is just holding in range below 100.85 temporary top, with the shallow retreat contained above 99.02 support, as well as 55 day EMA. Further rally remains in favor.

Firm break of 38.2% retracement of 110.87 to 94.61 at 110.82 will argue that the down trend from 110.87 to 94.61 is reversal. That would bring stronger rally to 61.8% retracement at 104.65. (USD/JPY has taken out equivalent level of 38.2% retracement of 151.93 to 127.20 at 136.64 already).

DXY:

Price is at the 1st resistance area of 105.82, which is an overlap resistance. If the price were to reverse from this level, it could potentially drop to our 1st support at 103.80, which has the 38.2% Fibonacci retracement. The next support level is at 102.79, which is an overlap support that lines up with the 61.8% Fibonacci retracement.

In terms of resistance, if the price were to break the 1st resistance, it could push up to 107.730, which is an overlap resistance. Please note that there might be a bearish divergence in H4.

EUR/USD:

Price has reversed from a major resistance at 1.0697, which is a multiple swing high resistance. The price could come down to the 1st support at 1.0485, which is the recent swing low support. Currently, the price is at the intermediate support level of 1.0535.

If the price breaks the 1st resistance, it could rise to the 2nd resistance at 1.0783, which is a key overlap resistance that lines up with the 50% Fibonacci retracement.

GBP/USD:

Price is respecting a descending resistance line, pushing prices down towards our 1st support at 1.1764, which is an overlap support. It’s worth noting that the price is also experiencing bearish momentum from the Ichimoku cloud, which could add to the conviction we have that the price will be pushed lower.

Regarding resistance levels, our 1st resistance is at 1.1918, which is an overlap resistance, and the 2nd resistance level is at 1.2144.

USD/CHF:

Price is currently at the 1st resistance level of 0.9436, which is strong resistance, as we have seen multiple touches on this level in the past. If the price were to break from this level, it could push up to the 2nd resistance at 0.9545.

Regarding support levels, if the price were to reverse from the 1st resistance, we could see it drop to the 1st support at 0.9337. The 2nd support level is at 0.9283, which lines up with the 50% Fibonacci retracement.

USD/JPY:

The price has reversed from our 1st support level at 135.39, and it is now approaching the 1st resistance level at 138.04, which is an overlap resistance. If the price were to break from this level, it could push up to our 2nd resistance level at 139.64.

Regarding support levels, the next support level is at 134.46, which is a strong overlap support.

AUD/USD:

The price is experiencing strong bearish momentum from a long-term descending resistance line. Along with that, we can see the bearish Ichimoku cloud pushing prices further down. The 1st support that needs to be broken is at 0.6535, which is an overlap support. If the price were to break from this level, the next key support level would be at 0.6379, which is another overlap support.

Regarding resistance levels, the 1st resistance is at 0.6640, and the 2nd resistance is at 0.6696.

NZD/USD:

We are currently seeing a strong bearish momentum in the price, and the bearish Ichimoku cloud is pushing prices further down. The price could come down to the 1st support level at 0.6017, and if the price were to break from that level, it could drop down to the 2nd support level at 0.5863, which is another overlap support.

Regarding resistance levels, the 1st resistance is at 0.6131, which is an overlap resistance, and the 2nd resistance is at 0.6276.

USD/CAD:

The price is approaching the 1st resistance level at 1.3805, which is the recent swing high. If the price were to break from this level, it could push up to the 2nd resistance level at 1.3849.

Regarding support levels, the 1st support level is at 1.3699, and the 2nd support level is at 1.3519, which is an overlap support.

DJ30:

The price has reversed from the 1st resistance level at 33484, and it is currently dropping towards the 1st support level at 32583. If the price were to break this level, the next support level is at 32083, which the price has multiple touches in the past.

Regarding resistance levels, if the price were to break from the 1st resistance level, the next resistance level is at 33839, which is an overlap resistance.

GER30:

The price has reversed from the major swing high resistance level at 15657, and the 2nd resistance level is at 15851. We could see the price drop to the 1st support level at 15234, and the 2nd support level is at 14969, which is another overlap support.

BTC/USD:

Price is in a descending channel and seeing our 1st resistance at 22910 which is a Fibonacci retracement and a pullback resistance. If price reverses from this level, we could see the bearish momentum take prices lower to 21367 which is an overlap support.

It’s worth noting that price has finally broken a long term ascending support-turned-resistance line which suggests that we might be seeing a longer term shift to bearish momentum.

US500

The price has reversed from a major overlap resistance at 4073, which also lines up with the 61.8% Fibonacci retracement. We could see it drop to the 1st support level at 3917, which is the recent swing low. Please take note of the intermediate support level at 3945.

If the price were to break from the 1st resistance level, the next resistance level is at 4159.

ETH/USD:

Price is in a bearish descending channel with our 1st resistance at 1591 and the 1st support really near at 1549. Price is currently being squeezed between these 2 levels and a break of either should either see prices with recent multi-swing high resistance at 1679 or recent swing low support at 1462.

WTI/USD:

The price is currently in the 1st support area at 77.48, which has the 50% Fibonacci retracement. If the price were to reverse from this level, it could push up to the 1st resistance level at 80.81, which is the recent swing high. However, if the price were to break from this level, the 2nd resistance level would be at 82.63.

Regarding support levels, the support level is at 76.47, which lines up with the 61.8% Fibonacci retracement.

XAU/USD (GOLD):

The price is approaching our 1st support level at 1804, which is an overlap support. If the price were to break from this level, we could see it drop back down to the 2nd support level at 1785, which is a major overlap support.

Regarding resistance levels, our 1st resistance level is at 1824, which is an overlap resistance, and the 2nd resistance level is at 1864, which is an overlap resistance that lines up with the 38.2% Fibonacci retracement.

The markets were rocked by the "clear-cut" hawkish remarks by Fed Chair Jerome Powell overnight. In short, "he indicated that ultimate level of interests is "likely to be higher than previously anticipated". Fed is also "prepared to increase the pace of rate hikes". He also warned against "prematurely loosening policy. More here.

As a result, Fed fund futures are now pricing in 73% chance of a 50bps rate hike to 5.00-5.25% on March 22, comparing to just 31% a day ago.

The stock markets were sold off deeper, with DOW losing -1.72% or -574.98 pts to close at 32856.46. Technically, it isn't the end of the world for DOW... yet, as it's staying in familiar range despite the selloff The rejection of 55 day EMA is a bearish sign though.

So, near term focus is now back on 38.2% retracement of 28660.94 to 34712.28 at 32400.66. As long as this level holds, DOW is just in a sideway consolidation pattern.

However, sustained break there will suggest bearish reversal and at least bring deeper fall to 61.8% retracement at 30972.55.

Dollar index closed sharply higher on expectation of more aggressive Fed and risk aversion The support from 55 day EMA is a near term bullish sign. But DXY will still need to overcome 38.2% retracement of 114.77 to 100.82 at 106.14 to confirm underlying momentum.

Rejection by 106.14 will keep the rise from 100.82 as a corrective move and maintains medium term bearishness for another fall through 100.82 at a later stage. However, sustained break of 106.14 will indicate trend reversal and bring stronger rally to 109.44, and possibly above.

RBA Governor Philip Lowe said in a speech that further rate hike is still necessary. But the central bank is now closer to the point of a pause.

The board's judgment remained that "further tightening of monetary policy is likely to be required to bring inflation back to target within a reasonable timeframe", Lowe said.

"Inflation is still too high and while it looks to be on a declining path it is likely to remain higher than target for a few years," he added. "If we don't get inflation down fairly soon, the end result will be even higher interest rates and more unemployment.

Meanwhile, " with monetary policy now in restrictive territory, we are closer to the point where it will be appropriate to pause interest rate increases to allow more time to assess the state of the economy," he noted.

"At what point it will be appropriate to pause will be determined by the data and our assessment of the outlook".

Full speech here.