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Key Highlights

• GBP/USD is attempting a recovery wave above the 1.2000 resistance zone.
• A major bearish trend line is forming with resistance near 1.2060 on the 4-hours chart.
• EUR/USD recovered above the 1.0680 resistance zone.
• Crude oil price rallied above the $80.00 resistance zone.

GBP/USD Technical Analysis

The British Pound remained well bid above the 1.1920 zone against the US Dollar. GBP/USD formed a base and recently started an upside correction above 1.1980.

Looking at the 4-hours chart, the pair was able to clear the 1.2000 resistance zone. The pair is now testing the 50% Fib retracement level of the downward move from the 1.2143 swing high to 1.1924 low.

The 100 simple moving average (red, 4-hours) is also acting as a resistance near 1.2040. The next major resistance is near the 1.2060 level. There is also a major bearish trend line forming with resistance near 1.2060 on the same chart.

A clear move above the 1.2060 resistance might start a steady increase towards the 1.2120 zone. Any more gains might send the pair towards 1.2180.

On the downside, an immediate support is near the 1.2000 level. The next major support is near the 1.1975 level, below which there is a risk of a move towards the 1.1925 level. Any more losses could open the doors for a drop towards 1.1840.

Looking at crude oil price, there was a strong upward move and the price was able to clear the $80.00 resistance zone.

Economic Releases

• UK Halifax House Price Index for Feb 2023 (MoM) - Forecast +0.4%, versus 0% previous.
• UK Halifax House Price Index for Feb 2023 (3m/YoY) - Forecast +2%, versus +1.9% previous.

Japan's nominal labor cash earnings rose by 0.8% yoy in January, below expectations of 1.9% yoy. The strong growth rate of 4.1% yoy in December was an anomaly due to lump-sum payments, rather than regular wage rises. The level of wage growth is far below the required level needed to maintain a 2% inflation rate, as indicated by outgoing BoJ Governor Haruhiko Kuroda.

Moreover, real cash earnings of workers have declined by -4.1% yoy, indicating that their real wages have fallen the most since 2014. The continuous decline in real wages for ten consecutive months shows that inflation has surpassed earnings.

Later in the week, BoJ is expected to keep its ultra-loose monetary policy unchanged, including the negative short-term interest rate of -0.10% and the 10-year yield cap at 0.50% at Kuroda's final meeting before handing over the reins to Kazuo Ueda. The declining real wages poses a challenge for the incoming governor to achieve the inflation target set by the central bank.

• Natural Gas reversed from round resistance level 3.0000
• Likely to fall to support level 2.224

Natural Gas recently reversed down from the round resistance level 3.0000 (former support from the start of January).

The resistance level 3.0000 was further strengthened by the upper daily Bollinger Band and by the 50% Fibonacci correction of the previous downward impulse from January.

Given the strong multi-month downtrend, Natural Gas can be expected to fall further to the next support level 2.224 (previous monthly low).

• EURUSD reversed from round support level 1.0500
• Likely to rise to resistance level 1.0775

EURUSD currency pair recently reversed up from the round support level 1.05000 (which has been reversing the price from the start of December) coinciding with the lower daily Bollinger Band and the 38.2.% Fibonacci correction of the upward impulse from November.

The upward reversal from the support level 1.05000 stopped the previous minor impulse wave C.

EURUSD currency pair can be expected to rise to the next resistance level 1.0775 (which stopped wave B earlier this month).

This year started with a beautiful bullish price action from the crypto markets. However, the current bearish movement is already causing many investors and traders to panic is interesting. This piece reviews a few trading opportunities I have spotted today in the crypto market. Let's go!

BTCUSD

Here is the daily timeframe chart of Bitcoin. We can see that price has recently broken above the previous high marked by the horizontal arrow. As a result, BTCUSD created a demand area highlighted by the rectangle. This demand zone falls within 88% of the Fibonacci retracement, increasing my bullish sentiment on BTCUSD. The 50-Day moving average trading above the 200-Day MA is also a considerable confluence.

Analysts’ Expectations:

• Direction: Bullish
• Target: $24400
• Invalidation: $21277

ETHUSD

Similar to the arrangement on BTCUSD, the price action on ETHUSD is also setting up a bullish continuation. ETHUSD's bullish sentiment is based on the confluence of the demand zone, the 50 and 100-period moving averages crossing above the 200-MA, and the 88% of the Fibonacci retracement overlapping the demand zone.

• Analysts’ Expectations:
• Direction: Bullish
• Target: $1683
• Invalidation: $1450

LTCUSD

Litecoin is setting up to resume its bullish momentum. The current price action indicates a break of a structure with the demand zone has not yet been mitigated. As a result of the confluence of the demand zone, the 100-Day moving average support, and the 88% Fibonacci retracement are my confluences for this position.

Analysts’ Expectations:

• Direction: Bullish
• Target: $99
• Invalidation: $81.3

XRPUSD

XRPUSD (Ripple) on the Daily timeframe has recently broken out of a wedge pattern. Right below the trendline support of the wedge is a convenient demand zone from the break of structure marked by the horizontal arrow and is yet to be mitigated. As a result, I expect the price to make a run for the demand zone before returning to resume the trend. My confluences are the demand zone and 76% of the Fibonacci retracement zone.

Analysts’ Expectations:

• Direction: Bullish
• Target: 0.44491
• Invalidation: 0.33110

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.

The crude oil sector fights with the news flow, trying to climb higher. A Brent barrel now costs 85.25 USD.

China has changed its forecast for economic growth in the country to 5.0% from 5.5% earlier. This made capital market really unhappy because it had really counted on the demand on energy carriers from China. Last year, the Chinese GDP grew by just 3%. Hence, the decrease in the target for 2023 might be an attempt to place more realistic goals and reach them efficiently. However, at the moment things look bad.

For now, the market has few fundamental reasons for optimism, yet local waves of purchases happen.

On H4, Brent has formed a consolidation range around 83.83. With an escape upwards, a pathway to 87.52 will practically open. After this level is reached, a link of correction to 83.83 might happen, followed by further growth to 87.52. And this is just a half of the wave. After the goal of growth is reached, a decline to 83.83 might follow, and then — growth to 94.80. Technically, this scenario is confirmed by the MACD: its signal line is above zero in the histogram area suggesting growth to new highs.

On H1, the structure of the fifth wave of growth to 85.80 has been completed. Today a consolidation range is forming below it. An escape downwards and a link of correction to 83.83 are not excluded. With an escape upwards, the wave might continue to 87.50. The target is local. After it is reached, a link of decline to 83.83 and growth to 90.00 might follow. Technically, this scenario is confirmed by Stochastic. Its signal line is above 20, aimed strictly upwards.

All eyes will be on Canada’s labour market numbers next Friday after a shockingly strong 150,000 employment gain in January. The Canadian employment count is notoriously volatile. Two years of stop-and-start pandemic lockdowns have probably added to those challenges by making the data more difficult to seasonally adjust. And other labour market data hasn’t been quite as robust. The number of job vacancies (while still very high) has declined and the Bank of Canada’s Q4 2022 Business Outlook Survey hinted at slower hiring plans. Still, January’s employment gains were too large and broadly-based to discount entirely. A 0.3% increase in the preliminary estimate for GDP in the month also pointed to a relatively resilient economic backdrop at the start of 2023 given aggressive earlier BoC interest rate hikes. We look for employment to edge slightly higher in February and for the unemployment rate to tick up to a still very low 5.1%. And we continue to expect unemployment to drift higher over the rest of 2023 as the lagged impact of interest rate hikes flow through to household debt payments and weigh on spending and GDP growth.

The BoC will also be looking closely at signs of resilience in labour markets. It’s expected to leave the overnight rate unchanged at its next policy decision on Wednesday—for the first time since the start of this hiking cycle in March of last year. The BoC committed to a “conditional pause” at its January meeting and data released since then (outside of those surprise January labour market numbers) has not met the relatively high bar needed to suggest a change in course. GDP data has been mixed, with a downside surprise on fourth quarter GDP growth offsetting the surprisingly firm 0.3% tick higher in the advance estimate for January. That left growth in the economy tracking slightly below the BoC’s January forecast.

More important, inflation has shown further signs of moderating. Core inflation as measured by the Bank’s preferred indices (CPI trim and CPI median) continue to show improvement. The breadth of inflation pressure has continued to narrow after peaking last summer. We still think the most likely scenario is that the BoC will not need to hike interest rates further this year. But that call hinges on whether the previous hikes are enough to slow consumer spending and labour market momentum in the months ahead.

Week ahead data watch

Canadian trade balance likely edged back to a surplus in January from a small $0.2 billion deficit in December, largely due to an uptick in the oil prices during that month. Advance estimates indicate motor vehicle production jumped higher in January, which likely buoyed both imports and exports.

U.S. payroll employment is expected to rise 200,000 in February, still strong but down from an upside surprise of 517,000 jobs in January. The unemployment rate is expected to edge up to 3.5%. Job postings have been edging lower but weekly jobless claims are still low, and labour markets remained tight.

Markets

Austrian ECB Governor Holzmann, never shy to drop a juicy quote, solidified his reputation as biggest hawk. He said the central bank should hike rates by 50 bps in March, May, June and July while it should also consider adding PEPP to QT in the fall.  That would bring the deposit rate from 2.5% to as high as 4.5%. Holzmann said rates need to be much higher to constrain economic growth and dampen inflationary pressures. Only at 4% “would we roughly get into the restrictive area”. Having this view, it tells us something about his expectations for (structurally higher) inflation. Holzmann assumes that core inflation won’t weaken significantly in the first half of the year, hence the need for drastic central bank action. Chief economist Lane stuck to the data-dependent approach and said that economic data will guide policy after the March meeting. He did add that current information suggests more is needed. Euro area money markets inch a little closer to a 4% peak policy rate. It also helps explain the relative underperformance of the front-end of the European/German yield curve. Germany’s 2y yield rose several bps on Holzmann’s Handelsblatt interview with momentum gaining as US dealings get going (now +7.5 bps). Current changes on the remainder of the curve vary between +3.5 bps (5y) and -3 bps (30y). US Treasuries ease a few bps ahead of Fed Powell’s appearance before the Senate tomorrow, the House on Wednesday and the payrolls report on Friday. Yields lose up to 2 bps across the curve. Treasuries are well off their intraday highs though. The Euro Stoxx 50 advances 0.4%, testing the previous recovery high at 4316.17. Wall Street opens with modest gains after Friday’s sharp run higher.

In FX space, the three biggest currencies - dollar, euro, yen - prove worthy to each other. Bund underperformance allows the common currency to eke out a gain vs the others though, making it the top performer of the day. EUR/USD moves towards interim resistance at 1.068. The Swiss franc is also doing well today, gaining against every G10 peer but the euro following faster than expected inflation (see headline below). Lagging the pack are the AUD and NZD. Both are probably a bit disappointed by the relatively muted growth target put forward by China. In Central-Europe, the Hungarian forint continues to outperform. EUR/HUF advanced to 380 on Friday but having avoided the (HUF) break lower, the forint is already staging a comeback today (EUR/HUF 377).

News & Views

Inflation in Switzerland in February accelerated by 0.7% M/M to 3.4% Y/Y (0.6% M/M and 3.3% Y/Y in January). Core inflation ticked up from 2.2% Y/Y to 2.4 %. According to the Federal Statistical office, the monthly increase ‘is due to several factors including rising prices for air transport, package holidays and supplementary accommodation. Housing rentals also recorded a price increase, as did petrol. In contrast, prices for heating oil decreased as well as those for new cars and berries’. In this respect, inflation is holding well above the 0%-2.0% target range from the Swiss national Bank (SNB). The January and February inflation readings will also likely cause Q1 inflation to stay above the 3% December SNB forecast. The SNB holds its next policy meeting on March 23. Today’s data suggest another rate hike of at least 50 bps is warranted with the potential for a further step in June. The Swiss franc initially gained from about EUR/CHF 0.996 to test the 0.9925 area, but couldn’t hold on to it (now 0.995).

The Hungarian statistic office reported that the volume of sales in retail in January decreased by 4.5% Y/Y (data adjusted for calendar effects). Sales volumes decreased by 4.8% in specialised and non-specialised food shops, by 1.5% in non-food retailing and by 9.7% in automotive fuel retailing. The volume of mail order and internet retailing accounting for 8.6% of all retail sales fell by 7.6%. The January figure compared to a-4.1% decline in December. The data indicate that persistent elevated inflation (25.7% in January) and a tightening of monetary conditions by the MNB are slowing consumer demand. Still the forint remained well bid today, with EUR/HUF easing from a close near 379 on Friday to currently trade in the 377.25 area. Forint resilience today was probably partly due to Moody’s on Friday giving no review of the Hungarian Credit rating (Baa2). Some market participants feared a rating downgrade or a change in the stable outlook assessment.

It's been a calm start to the week as investors weigh up what China's modest growth target means for the global economy and look ahead to a busy few days.

Safe to say markets were surprised by the decision to target only 5% growth this year while signaling no significant stimulus to turbo-charge the economic recovery. It may well prove to be a wise decision when you consider how well the country has transitioned from zero-Covid to living with it, while policymakers around the world may also be breathing a sigh of relief.

One of the upside risks to inflation this year was a turbo-charged Chinese recovery which would drive up demand for a host of commodities from oil to iron ore and as a result prices. So while we may not get the growth boost, we're probably getting something far more valuable.

It will be interesting to see if this is something that is referenced by central banks over the coming months as they near the end of their tightening cycles and battle what may be proving to be quite stubborn inflation. We may even get a reference to it from Jerome Powell during his testimonies in Congress over the next couple of days.

In reality, these are not the thrilling affairs they are often played up to be. But this time may be different as the Fed is not exactly in anyone's good books after delaying the start of tightening and as a result having to go further in order to get a grip on it. And with the cycle now in such an unclear phase, I'm sure the grilling will be extra intense this time around.

There's no doubt what the main event will likely be this week though. The jobs report on Friday will tell us whether the January data was a blip or something to be more concerned about. No one is expecting a repeat of last month but any indication that the labour market is still red-hot could see a fourth 25 basis point hike be more priced in.

Oil slips on modest Chinese growth target

It's not been a great day for commodities as a whole and that includes oil, which is down a little over 1% on the day. One big upside risk for oil prices this year was a strong, stimulus-driven, rebound in China and it would appear that isn't going to happen. That said, the growth target is probably a minimum aim and one that could easily be surpassed but it does make stimulus less likely.

Oil prices are a little lower on the day but those losses pale in comparison to the rally last week. They're still not too far from the upper end of their range of the last few months, although the news does make a breakout to the upside that much more challenging.

Stalling ahead of Powell's testimony

Gold is edging lower today after a strong rebound last week. The yellow metal is struggling around $1,860 which was always likely to be the first big test above. A move above here could see $1,900 back in focus, although that may well depend on how the two-day testimony in Congress unfolds and, of course, Friday's jobs report. Another red-hot report could see gold quickly lose any bullish momentum and potentially $1,780-$1,800 come under real strain.

Stabilized for now

Bitcoin has managed to stabilize quite quickly after Friday's plunge as traders take stock of the situation at Silvergate Capital. Fears naturally resurfaced following reports late last week and just as it seemed cryptos were moving past the FTX debacle. The question now is how widespread the ripple effects will be and how much it will undermine confidence in the space. Bitcoin had already been struggling to break above $24,500-$25,500 resistance and this has just made it that much harder.