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Key Highlights

• GBP/USD is struggling to clear the 1.3150 resistance zone.
• A crucial bearish trend line is forming with resistance near 1.3120 on the 4-hours chart.
• EUR/USD is still trading in a bearish zone below 1.0920.
• Gold price extended gains, and oil price could gain pace above $110.

GBP/USD Technical Analysis

The British Pound started another decline after it failed to clear 1.3150 against the US Dollar. GBP/USD traded below the 1.3100 level to move into a negative zone.

Looking at the 4-hours chart, the pair even traded below the 1.3050 level. There was a move below the 50% Fib retracement level of the upward move from the 1.2972 swing low to 1.3147 high.

It settled well below the 200 simple moving average (green, 4-hours), and the 100 simple moving average (red, 4-hours). There is also a crucial bearish trend line forming with resistance near 1.3120 on the same chart.

The next major resistance is near the 1.3150 level, above which it could start a steady increase. A clear move above the 1.3150 level could push GBP/USD above 1.3200.

The next major resistance is seen near the 1.3250 level. An initial support on the downside is near the 1.3000 level. The next major support is near the 1.2980 level. A downside break below the 1.2980 support level might accelerate losses.

The next major support is near the 1.2950 level. Any more losses may perhaps open the doors for a move towards the 1.2820 level.

Looking at EUR/USD, the pair extended decline towards the 1.0750 and is currently consolidating losses below key hurdles.

Economic Releases

• US Housing Starts for March 2022 (MoM) – Forecast 1.738M, versus 1.769M previous.
• US Building Permits for March 2022 (MoM) – Forecast 1.820M, versus 1.865M previous.

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Spot gold rose nearly 1% on Monday, climbing to the highest in over one month and pressuring key barriers at $2000/$2001 (psychological / Fibo 61.8% of $2070/$1890 correction).

Growing concerns about surging inflation and economic impact from the war in Ukraine, prompted investors into safety, as the yellow metal is a safe-haven asset and also used as a hedge against inflation.

Fresh acceleration higher emerges after a brief pause on Friday, with break of $1980 (50% retracement) confirming a higher base at $1890 zone (lows of the pullback from $2070 peak (2022 peak, posted in March).

Metal’s price is expected to rise further on flow of negative news, as the conflict in Ukraine has so far showed no signs of easing that further darkens global economic outlook and continue to boost risk aversion.

Technical studies on daily chart show rising positive momentum, with the action being supported by thickening daily cloud and Tenkan-sen / Kijun-sen bull-cross, however, bulls are expected to feel a headwinds from $2000 zone and likely to consolidate before resuming.

Dips should be contained by the top of daily Ichimoku cloud ($1958) to keep bulls intact, with eventual break of $2000 pivot to expose targets at $2027 (Fibo 76.4%) and $2058 (March 9 high), which guard key obstacles at $2070/$2074 (2022/2020 record highs).

Res: 2000; 2001; 2009; 2020
Sup: 1980; 1966; 1958; 1952

The euro is down slightly on Monday, as EUR/USD trades at the key 1.0800 line in North America. With German and French markets closed for Easter Monday, it’s likely to be a quiet day for the euro.

Euro struggling at 2-year low

The euro continues to lose ground, and last week EUR/USD tested a multi-decade support line at 1.0800. If the euro closes below this level, it would be a significantly bearish signal, with 1.06 the next major support level. April has been rough for the euro, which has lost 2.34%. There is plenty not to like about the euro right now, with the Ukraine war casting its shadow on Western Europe and last week’s ECB meeting which disappointed investors.

At the meeting, the central bank essentially gave the market more of the same, maintaining monetary policy and confirming its plan to wind up bond purchases in the third quarter. ECB President Lagarde didn’t provide any hints about hiking rates and moving towards normalisation. What investors see is an ECB that is hesitant to provide any guidance, perhaps wanting to wait for additional economic data. In response, the markets lowered the likelihood of a July rate to 50% and sent the euro lower.

With the Fed in a hawkish mood and the markets expecting a super-size rate hike of 0.50% in May, US Treasury yields are moving higher. Earlier today, the 10-year yield hit 2.87% earlier on Monday, a 3-year high. A further widening of the Euro/US rate differential will push the euro even lower.

The Fed is scrambling to fend off spiralling inflation, which hit 8.5% in March, a 40-year high. With investors looking for clues about how tight the Fed plans to go, comments from senior Fed officials will be carefully scrutinized and could be market-movers. Later today, Fed President James Bullard, one of the most hawkish FOMC members who favours aggressive action from the central bank, will deliver public remarks, and the markets will be all ears.

EUR/USD Technical

• 1.0836 is a weak resistance line. Above there is resistance at 1.0913
• There is support at 1.0738 and 1.0661

Gas prices on the NYMEX are adding for the 11th trading session of the last 12, renewing their highs since October 2008.

US gas exchange prices have risen by a third since the beginning of the month and more than doubled since the beginning of the year in response to a surge in demand in Europe and rising oil prices. Companies in Europe and Asia are set to cut their purchases of Russian energy as fast as possible, pushing prices up.

While the fundamentals are tilting toward later growth, technical analysis increasingly points to overbought conditions, so the likelihood of an imminent correction.

In the monthly candlestick chart, the RSI is entering overbought territory (>70), which it has done only six times in the past 20 years. In all cases, prices declined sharply in the following month, or we even saw a fundamental long-term reversal. Thus, it is likely that we could see a bear attack by the end of this month.

On the daily charts, the RSI has risen to 88. The last time it was higher was in 2018 briefly, which was also near price peaks.

The price frenzy was also fuelled by news of falling oil and gas stocks. However, seasonality is strong in gas, and inventories reach their lowest just in the first days of April. We saw a rise last week, marking the first signs of a trend reversal.

However, in the longer term, the current gas price situation lays the foundations for a new gas renaissance in the USA, and it should lead to a recovery in production rather than a price hike.

EUR/USD is still looking rather weak. On Monday 18 April, the major currency pair is trading at 1.0799, but investors aren’t too active due to the Easter holidays in the Catholic countries.

Last Thursday, EUR/USD dropped to its 2-year lows at 1.0757 amid global risk aversion. Another factor that failed the European Currency is the ECB’s unreadiness to tighten its monetary policy. In contrast to other global central banks, the ECB is obviously losing due to its unwillingness to fight the boosting CPI using available monetary tools.

At the same time, market players are preparing for the US Fed May meeting where the regulator is expected to raise the benchmark interest rate by at least 50 basis points as a response to the inflation upsurge.

In the H4 chart, EUR/USD continues to fall towards 1.0735. Later, the market may correct to test 1.0828 from below and then form one more descending wave with the target at 1.0727. From the technical point of view, this scenario is confirmed by MACD Oscillator: its signal line is moving below 0 and may continue falling to update the lows.

As we can see in the H1 chart, after completing the correction at 1.0828, EUR/USD is expected to resume falling towards 1.0736 and then start a new correction to return to 1.0828. Later, the market may resume trading downwards with the short-term target at 1.0727. From the technical point of view, this idea is confirmed by the Stochastic Oscillator: after reaching 20, its signal line may resume moving towards 50 and then start a new decline to return to 20.

The US 500 stock index (cash) has been inching lower after peaking at 4,638 in mid-March, generating a clear structure of lower highs and lower lows. Although the price decline has currently paused at the lower Bollinger band, the technical picture seems to be deteriorating for the index.

The momentum indicators suggest that selling interest has intensified. The MACD histogram has dipped below both zero and its red signal line, while the RSI is hovering beneath its 50-neutral threshold.

In the negative scenario, bearish actions could send the price to test the 4,330 barrier. Further downside moves could then cease at the January low of 4,220 before the price descends towards the 4,140 region, which rejected price declines twice in March. A violation of the latter could pave the way for the 17-month low of 4,106.

Alternatively, should buyers re-emerge and regain the upper hand, the 50-day simple moving average (SMA), currently at 4,410, could be the initial resistance point for the index. If the price crosses above this region, the bulls may target the 4,470 obstacle before the March high of 4,638 appears on the radar. Conquering this barricade, the spotlight could turn to the 4,750 hurdle.

Overall, the resumption of the US 500 index’s recent decline appears to be the most likely scenario as near-term risks are tilted to the downside. For the bearish tone to alter, the price needs to jump above the 4,638 ceiling.

The Australian dollar remains under pressure, as AUD/USD is in negative territory at the start of the week, trading at 0.7367 in Europe. The currency has eked out just one winning daily session in the past eight and is trading at 4-week lows.

Fed, China weighing on Aussie

The Australian dollar can’t seem to buy a break, as the currency fell on Friday and is down today, even with Australian markets closed for Easter Friday and Monday. The main drivers behind the Aussie’s slide are the Fed’s hawkish stance and growth concerns over China.

The Federal Reserve started its rate-tightening cycle with a 0.25% hike in March but there are growing expectations that the Fed will implement one or more oversize hikes of 0.50% in order to contain red-hot inflation. For the May meeting, CME’s FedWatch has pegged the probability of a 0.50% rate increase at 91%. This has powered US Treasury yields higher, with the 10-year yield rising to 2.87% earlier on Monday, a 3-year high. The US dollar has followed suit, putting more pressure on the Australian currency.

In China, GDP for Q1 rose 4.8%, beating the consensus of 4.50%. Still, this is much slower growth than we’re used to seeing from the Asian giant. The economy has been dampened by the battered property sector, and harsh Covid regulations. Chinese regulators have promised relief for the property market, but with developers continuing to miss their bond payments, we’re unlikely to see much improvement.

China’s zero-policy for Covid has made the headlines due to the hardships residents are encountering in Shanghai, but in truth there are hundreds of millions of people in full or partial lockdown. The resulting downturn in economic activity could well have a global effect, with the disruption to supply chains. China is Australia’s largest trading partner, and the Australian dollar is sensitive to economic developments in China.

AUD/USD Technical

• AUD/USD faces resistance at 0.7427 and 0.7462
• There is weak support at 0.7359. Close by, there is support at 0.7324

The Easter holiday in Europe and a lack of scheduled publications in the US ensure a quiet trading session this Monday. Only a batch of data from China provides some volatility.

Chinese stocks were under moderate pressure on Monday, and the Chinese renminbi has changed little since the start of the day. Investors are concerned that the People’s Bank of China did not ease its monetary policy on Friday or Monday, as many expected. In addition, retail activity is declining – a worrying signal of the impact of lockdowns.

According to the released statistics package, the economy added 1.3% in the first quarter and is 4.8% higher than a year ago. This data is noticeably better than forecasts which expected 0.6% and 4.2%, respectively.

Industrial production added 5% in March compared to the same month a year earlier, better than the 4.0% expected. However, the 3.5% y/y drop in retail sales in response to last month’s tight lockdowns caught our attention more. To a large extent, they persisted or even intensified in some regions in the first half of April.

At the same time, the resilience of the Chinese renminbi cannot be overlooked. In no small measure, its ability to withstand a strengthening dollar is due to its tighter monetary policy. China seems to be paying more attention to the dynamics of the currency and economic indicators, disregarding the stock market’s weakness.

Key equity indices – China A50, Hang Seng, China H-shar – are now below pre-pandemic levels, in stark contrast to the 8.5% rise in the Chinese yuan against the dollar near the bottom of the last six and a half years. The ability of the renminbi to withstand a rising dollar environment is a demonstration of the strength of the Chinese currency.

Should the dollar trend reverse and retreat from its highs, we could see a serious yuan rally from the current 6.38 with a potential renewal of the 2018 USDCNH lows at 6.25 or even 2015 when the pair traded below 6.20.

Bitcoin declined by 5.7%, ending the week at around $40,300. Ethereum lost 6.6%, while other leading altcoins in the top 10 fell from 2.9% (Binance Coin) to 17% (Terra). The exception was XRP (+0.8%).

Monday began with a further 3.3% drawdown in bitcoin to $38.9K, which had fallen below its support line since January. The signal for a break of the mild upward trend would be a consolidation below the $38K levels. If the bulls capitulate, the first cryptocurrency could be pushed into the $32-35K range without much resistance. A consolidation scenario below $30K would require an absolute disaster in the financial markets. We have seen steady and impressive demand from long-term buyers as we have fallen into this area.

The total capitalisation of the crypto market, according to CoinMarketCap, fell by 7.3% over the week to $1.81 trillion. The Bitcoin Dominance Index fell by 0.5% to 40.75% over the same period.

The cryptocurrency fear and greed index lost 4 points to 24 by Monday, returning to “extreme fear” territory after two days of consolidation in “fear”.

Bitcoin declined for the second week in a row under negative stock market performance. Last week’s noticeable decline in BTC occurred on Monday amid a significant drawdown in US stock indices.

Executives of the world’s largest crypto exchanges told CNBC that they have recently noticed signs of a “crypto thaw” regarding governments’ changing attitude towards cryptocurrencies.

Portugal’s central bank has granted the country’s first crypto-asset license to a bank. Bison Bank became the first bank in Portugal to offer large customers cryptocurrency storage and trading services.

Cardano founder Hoskinson suggested that Musk join forces to create a decentralised social network if Twitter does not come under the Tesla founder’s control. Vlad Tenev, Robinhood’s CEO, said DOGE would become the most used cryptocurrency for Internet payments. However, to do so, developers must improve transaction processing speed.