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Daily Pivots: (S1) 0.8312; (P) 0.8336; (R1) 0.8353; More...

Intraday bias in EUR/GBP remains neutral and outlook is unchanged. On the downside, break of 0.8294 will argue that rebound from 0.8201 has completed at 0.8511, and revive near term bearishness. Intraday bias will be back on the downside for retesting 0.8201 low. On the upside, however, break of 0.8511 will reaffirm that 0.8201 is a medium term bottom, and target 0.8697 medium term fibonacci level next.

In the bigger picture, a medium term bottom should be in place at 0.8201, on bullish convergence condition in daily and weekly MACD. Rise from there could either be a correction to the down trend from 0.9499 (2020 high), or a medium term up trend itself. In either case, further rise should be seen to 38.2% retracement of 0.9499 to 0.8201 at 0.8697. Sustained break there will target 61.8% retracement at 0.9003. This will remain the favored case as long as 0.8294 support holds.

Daily Pivots: (S1) 1.4446; (P) 1.4567; (R1) 1.4648; More...

Intraday bias in EUR/AUD remains neutral and outlook stays bearish with 1.4940 resistance intact. On the downside, break of 1.4318 will resume larger down trend to 1.3624 long term support next. On the upside, however, firm break of 1.4940 will indicate short term bottoming and turn bias back to the upside for 1.5327 resistance instead.

In the bigger picture, fall from 1.9799 is seen as a long term impulsive move. Next target is 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623, which is close to 1.3624 long term support (2017 low). Some support could be seen there to bring interim rebound. But overall, break of 1.5354 support turned resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of recovery.

DXY:

Price is approaching major resistance at the 100.49 area which is in line with a 161.8 Fibonacci extension and a -27% Fibonacci expansion. It is worth noting that there is a strong bearish divergence here with RSI suggesting that a possible bearish reversal might occur. Intermediate support is at 100.00 big fig which was a previous major resistance-turned-support. If this intermediate support is broken, then the next key support level is at 99.37 which is a pullback support level.

Areas of consideration:

• H4 time frame, 1st resistance at 100.49
• H4 time frame, intermediate support at 100.00 big figure
• H4 time frame, 1st support at 99.37

XAU/USD (GOLD):

Price is in-between two major levels, the resistance at 1976 which has a strong Fibonacci confluence and the support at 1956 which is a pullback support level that lines up with the 23.6% Fibonacci retracement. If price breaks out of the 1st resistance, the next key resistance is at 2016 which happens to line up with the 161.8 Fibonacci extension too. If price breaks the 1st support level, the next key support would be down at 1893 which is a swing low support where price bounced from multiple times.

Areas of consideration:

• H4 time frame, 1st Resistance at 1976.7
• H4 time frame, 2nd Resistance at 2016
• H4 time frame, 1st Support at 1956
• H4 time frame, 2nd Support at 1893

GBP/USD:

On the H4 timeframe, we expect to see a potential for bearish dip from 1st resistance level of 1.30497 in line with 61.8% Fibonacci projection towards the 2nd support level of 1.29005 in line with Fibonacci confluence (61.8% Fibonacci projection, 127.2% Fibonacci extension and -61.8% fibonacci expansion). Alternatively, price might potentially bounce from our 1st support level of 1.30009 in line with 138.2% Fibonacci extension and -27.2% Fibonacci expansion towards the 2nd resistance level of 1.31574 in line with a graphical overlap resistance. We have a neutral bias as we are waiting for price confirmation.

Areas of consideration:

• H4 1st resistance at 1.30497
• H4 2nd resistance at 1.31574
• H4 1st support at 1.30009
• H4 2nd support at 1.29005

USD/CHF:

On the H4, prices are on bearish momentum. We see the potential for bearish dip from our 1st resistance at 0.93377 in line with 61.8% FIbonacci retracement towards our 1st support at 0.92883 which is in line with 50% Fibonacci retracement and 61.8% Fibonacci projection. Our bearish bias is supported by the stochastic indicator where price is trading at resistance level.

Areas of consideration

• 1st support level at 0.92883
• 1st resistance level at 0.93377
• 2nd resistance level at 0.93760

EUR/USD :

On the H4 timeframe, price is near a key pivot. We see the potential for a bullish bounce from our 1st support level of 1.08070 in line with 161.8% Fibonacci extension towards our 1st resistance level of 1.09381 in line with a graphical pullback resistance. Our bullish bias is supported by the stochastic indicator whereby price is trading at support level.

Areas of consideration :

• H4 1st resistance at 1.09381
• H4 1st support at 1.08070
• H4 2nd support at 1.06413

USD/JPY:

Price is testing major resistance at 125.85 which happens to be the all-time-high since 2015. There is both a 127% Fibonacci extension and a strong bearish divergence vs RSI that is at that level, suggesting that there could be a possible bearish reversal. We can see an ascending support line that is squeezing prices against the 1st resistance along with the 1st support area at 125.07 which also lines up with a 23% Fibonacci retracement. If price breaks the ascending support and 1st support area, we could see prices drop towards the 2nd support at 123.45.

Areas of consideration:

• H4 time frame, 1st resistance at 125.85
• H4 time frame, 1st support at 125.07
• H4 time frame, 2nd support at 123.45

AUD/USD:

On the H4 timeframe, we see the potential for a bullish continuation from our 1st support level at 0.74272 in line with 50% Fibonacci retracement towards our 1st resistance level at 0.75338 in line with 50% Fibonacci retracement and 61.8% Fibonacci projection. Our bullish bias is supported by the stochastic indicator where price is trading at support level.

Areas of consideration

• H4 1st resistance at 0.75338
• H4 1st support at 0.74272
• H4 2nd support at 0.73633

NZD/USD:

On the H4, we expect to see a potential for a bullish continuation from our 1st support of 0.68001 in line with the 78.6% fibonacci retracement and 161.8% Fibonacci extension towards our 1st resistance level at 0.69853 in line with the 78.6% Fibonacci retracement and 61.8% Fibonacci projection. Our bullish bias is supported by the stochastic indicator where price is at support level.

Areas of consideration:

• H4 time frame, 1st support at 0.68001
• H4 time frame, 2nd support at 0.67308
• H4 time frame, 1st resistance at 0.69853

USD/CAD:

Price is seeing a 1st support level at 1.2564 which is an overlap support area along with a 38.2% Fibonacci retracement. Prices have crossed the Ichimoku cloud suggesting that there might be a resumption of some bullish momentum to take it up to the 1st resistance level at 1.2692 which is a pullback resistance that lines up with the 61.8% Fibonacci retracement.

Areas of consideration:

• H4 time frame, 1st resistance at 1.2692
• H4 time frame, 1st support at 1.2564

OIL:

Oil has broken out of a descending resistance-turned-support along with a resistance-turned-support level at 98.24, suggesting that there might be a potential bullish recovery towards 1st resistance at 105.17 which is a swing high resistance along with a major 50% Fibonacci retracement level. If price breaks below the 1st support, the next key support level is at 93.53 which has seen prices bounce off twice in the past.

Areas of consideration:

• H4 time frame, 1st resistance of 105.17
• H4 time frame, 1st support of 98.24
• H4 time frame, 2nd support at 93.53

Dow Jones Industrial Average:

Price is seeing an overlap support level at 34174 which also lines up with the 38.2% Fibonacci retracement. The Ichimoku cloud is above prices and there is a descending resistance line that is also pushing it down and squeezing it against the 1st support level. If prices break the 1st support level, the next key support level is at the 33436 area which is a pullback support along with a major 61.8% Fibonacci retracement.

Areas of consideration :

• H4 time frame, 1st resistance at 34960
• H4 time frame, 1st support at 34174
• H4 time frame, 2nd support at 33436

Daily Pivots: (S1) 1.0074; (P) 1.0115; (R1) 1.0141; More....

Intraday bias in EUR/CHF remains on the downside as fall from 1.0400 is extending. As noted before, rebound from 0.9970 could have completed already. Deeper fall is now expected to retest 0.9970 low. Decisive break there will resume larger down trend. On the upside, however, break of 1.0204 minor resistance will turn bias back to the upside for 1.0400 resistance instead.

In the bigger picture, long term down trend from 1.2004 (2018 high) is still in progress. Next target is 100% projection of 1.2004 to 1.0505 to 1.1149 at 0.9650. In any case, sustained break of 1.0505 support turned resistance (2020 low) is needed to be the first sign of medium term bottoming. Otherwise, outlook will remain bearish.

The forex markets trade in tight range in Asian session today. New Zealand Dollar got little support from the RBNZ 50bps rate hike. It's actually trading as the weakest one for the day at the time of writing. As for the week, Swiss Franc is currently the strongest, with help from buying against Euro. Dollar is following as next strongest and then Aussie. On the other hand, Yen is the worst performing as it's recovery remains very weak. Canadian Dollar is also soft, awaiting BoC rate decision.

Technically, USD/JPY's retreat is rather shallow so far. Another test on 125.85 long term resistance could be seen today. Clearing of this resistance could prompt accelerated decline in Yen. In that case, EUR/JPY and GBP/JPY could be pushed through 137.50 and 164.61 resistance respectively, even though European majors are soft.

In Asia, at the time of writing, Nikkei is up 1.89%. Hong Kong HSI is up 0.16% China Shanghai SSE is down -0.44%. Singapore Strait Times is up 0.64%. Japan 10-year JGB yield is down -0.0011 at 0.243. Overnight, DOW dropped -0.26%. S&P 500 dropped -0.34%. NASDAQ dropped -0.30%. 10-year yield dropped 0.055 to 2.725.

RBNZ hikes by 50bps to 1.50%, path of least regret

RBNZ raises Official Cash Rate by 50bps to 1.50%, larger than expectation of a 25bps hike. That's also the biggest rate increase in 22 years.

It said in the statement that "moving the OCR to a more neutral stance sooner will reduce the risks of rising inflation expectations.  A larger move now also provides more policy flexibility ahead in light of the highly uncertain global economic environment."

Also, "the Committee agreed that their policy 'path of least regret' is to increase the OCR by more now, rather than later, to head off rising inflation expectations and minimise any unnecessary volatility in output, interest rates, and the exchange rate in the future."

NZD/USD gets not much support from RBNZ hike

NZD/USD just receive very brief lift from larger than expected RBNZ rate hike. It struggles to break through 4 hour 55 EMA firmly and risk is mildly on the downside. Break of 0.6805 temporary low will resume the fall from 0.7033 to 0.6728 support. Sustained break there will argue that whole rebound from 0.6728 has completed at 0.7033, and bring retest of 0.6528 low.

More importantly, break of 0.6728 support should also confirm rejection by trend line resistance, which in turn suggests that the choppy decline from 0.7463 is still in progress for another fall through 0.6528 low.

Australia Westpac consumer sentiment dropped to 95.8, on interest rate, inflation and war

Australia Westpac consumer sentiment index dropped -0.9% to 95.8 in April, down from March's 96.6. That's the lowest level since September 2020. Westpac said "concerns around interest rates and inflation were starting to weigh on confidence... compounded by Russia's invasion of Ukraine, an associated spike in petrol prices, and severe weather events."

Westpac expects RBA to raise interest rate at June meeting, after reviewing data releases "over coming months". Once the tightening cycle starts, Westpac expects a series of rate hikes in most months in 2022, with a pause in September. Further rate hikes can be expected in first half of 2023 and the cash rate would peak at around 2% by June next year.

Fed Barkin: Best short-term policy path is rapid to neutral

Richmond Fed President Thomas Barkin said yesterday, "the best short-term path for us is to move rapidly to the neutral range and then test whether pandemic-era inflation pressures are easing, and how persistent inflation has become. If necessary, we can move further."

He added that the actions to combat inflation doesn't "necessarily require a hard landing." In fact, "it might help avoid one by convincing individuals and firms that the Fed is committed to our target, thereby cementing inflation expectations."

Barkin also said that the Fed needs to be "crystal clear that a growing economy requires stable prices, and that we will remain committed to addressing inflationary gusts."

BoC to hike 50bps, a look at EUR/CAD

BoC is widely expected to raise interest rate by 50bps to 1.00% today, to curb inflation which was already at a 30-year high. That would be the first half a percentage point hike since May 2000. The tightening cycle will continue for sure, with some expecting to overnight rate hit 2.50% level by the end of the year. Another point to note is BoC would probably start the plan to unwind its balance sheet, and the pace will be closely watched.

Here are some previews:

• BOC Preview: How Much Will the BOC Hike?
• Will the Bank of Canada Opt for a 50-bps Rate Hike at its April Meeting?
• Bank of Canada to Hike Rates for Second Straight Meeting

Canadian Dollar is one of the stronger ones for the month, but rally stalled, following the pull back in oil prices. EUR/CAD's recovery from 1.3586 temporary low might have completed at 1.3763, after failing to sustain above 4 hour 55 EMA. 1.3586 low will be back in focus today. Break there will extend larger down trend to 161.8% projection of 1.5096 to 1.4162 from 1.4633 at 1.3122. Meanwhile, break of 1.3763 will extend the recovery. But near term outlook will stay bearish as long as 1.3977 resistance holds.

Elsewhere

Inflation data will be the focuses today too. UK will release CPI and PPI. US will release PPI.

EUR/CHF Daily Outlook

Daily Pivots: (S1) 1.0074; (P) 1.0115; (R1) 1.0141; More....

Intraday bias in EUR/CHF remains on the downside as fall from 1.0400 is extending. As noted before, rebound from 0.9970 could have completed already. Deeper fall is now expected to retest 0.9970 low. Decisive break there will resume larger down trend. On the upside, however, break of 1.0204 minor resistance will turn bias back to the upside for 1.0400 resistance instead.

In the bigger picture, long term down trend from 1.2004 (2018 high) is still in progress. Next target is 100% projection of 1.2004 to 1.0505 to 1.1149 at 0.9650. In any case, sustained break of 1.0505 support turned resistance (2020 low) is needed to be the first sign of medium term bottoming. Otherwise, outlook will remain bearish.

Economic Indicators Update

BoC is widely expected to raise interest rate by 50bps to 1.00% today, to curb inflation which was already at a 30-year high. That would be the first half a percentage point hike since May 2000. The tightening cycle will continue for sure, with some expecting to overnight rate hit 2.50% level by the end of the year. Another point to note is BoC would probably start the plan to unwind its balance sheet, and the pace will be closely watched.

Here are some previews:

• BOC Preview: How Much Will the BOC Hike?
• Will the Bank of Canada Opt for a 50-bps Rate Hike at its April Meeting?
• Bank of Canada to Hike Rates for Second Straight Meeting

Canadian Dollar is one of the stronger ones for the month, but rally stalled, following the pull back in oil prices. EUR/CAD's recovery from 1.3586 temporary low might have completed at 1.3763, after failing to sustain above 4 hour 55 EMA. 1.3586 low will be back in focus today. Break there will extend larger down trend to 161.8% projection of 1.5096 to 1.4162 from 1.4633 at 1.3122. Meanwhile, break of 1.3763 will extend the recovery. But near term outlook will stay bearish as long as 1.3977 resistance holds.

NZD/USD just receive very brief lift from larger than expected RBNZ rate hike. It struggles to break through 4 hour 55 EMA firmly and risk is mildly on the downside. Break of 0.6805 temporary low will resume the fall from 0.7033 to 0.6728 support. Sustained break there will argue that whole rebound from 0.6728 has completed at 0.7033, and bring retest of 0.6528 low.

More importantly, break of 0.6728 support should also confirm rejection by trend line resistance, which in turn suggests that the choppy decline from 0.7463 is still in progress for another fall through 0.6528 low.

RBNZ raises Official Cash Rate by 50bps to 1.50%, larger than expectation of a 25bps hike. That's also the biggest rate increase in 22 years.

It said in the statement that "moving the OCR to a more neutral stance sooner will reduce the risks of rising inflation expectations.  A larger move now also provides more policy flexibility ahead in light of the highly uncertain global economic environment."

Also, "the Committee agreed that their policy 'path of least regret' is to increase the OCR by more now, rather than later, to head off rising inflation expectations and minimise any unnecessary volatility in output, interest rates, and the exchange rate in the future."

Full statement here.

The Monetary Policy Committee today increased the Official Cash Rate (OCR) to 1.50 percent. The Committee agreed it is appropriate to continue to tighten monetary conditions at pace to best maintain price stability and support maximum sustainable employment.

The Committee remained comfortable with the outlook for the OCR as outlined in their February Monetary Policy Statement. They agreed that moving the OCR to a more neutral stance sooner will reduce the risks of rising inflation expectations. A larger move now also provides more policy flexibility ahead in light of the highly uncertain global economic environment.

The level of global economic activity continues to generate rising inflation pressures, exacerbated by ongoing supply disruptions in large part driven by COVID-19. The Russian invasion of Ukraine has significantly added to these supply disruptions, causing prices to spike in internationally traded commodities and energy.

However, the pace of global economic activity continues to slow. There is an elevated level of uncertainty created by the persistent impacts of COVID-19, and clear signals that monetary and broader financial conditions will tighten over the course of 2022. Added to this is the high level of geopolitical tension and related economic sanctions on Russia.

In New Zealand, underlying strength remains in the economy, supported by sound balance sheets, continued fiscal support, and strong export earnings. There has been some economic disruption due to the outbreak of Omicron. However, the high vaccination rates across New Zealand are assisting to reduce this disruption.

Heightened global economic uncertainty and inflation are dampening consumer confidence. The rise in mortgage interest rates – amongst other factors – have acted to reduce mortgage demand and house prices. However, economic capacity pressures remain, with a broad range of indicators highlighting domestic capacity constraints and ongoing inflation pressures. Employment is above its maximum sustainable level and labour shortages are impacting many businesses.

The Reserve Bank's core inflation measures are at or above 3 percent. Inflationary pressure is being further accentuated by current high imported energy and commodity prices, which are lifting headline CPI inflation. The Committee will remain focused on ensuring that current high consumer price inflation does not become embedded into longer-term inflation expectations.

Summary Record of Meeting

The Monetary Policy Committee discussed developments affecting the outlook for monetary policy.

It was noted that global consumer price inflation is high, well above most central banks' targets. This general inflation pressure is due to the recent recovery in global demand running up against severe supply shortages and trade disruption. The economic disruption caused by COVID-19 has been exacerbated by rising energy and food prices resulting from the Russian invasion of Ukraine.

The Committee noted that global economic growth is slowing, given supply constraints, consumer price pressures cutting into real incomes, and heightened geopolitical tensions causing investment uncertainty. Central banks globally are also tightening, or looking to tighten, their monetary policy stances over 2022, in an effort to constrain consumer price inflation expectations consistent with their policy targets.

Members observed that financial conditions have tightened in New Zealand, with higher interest rates, a stronger New Zealand dollar exchange rate, and lower asset prices.

It was noted that mortgage interest rates have risen broadly consistent with the outlook for the Official Cash Rate (OCR) in the Reserve Bank's February Monetary Policy Statement. The Committee noted that the higher New Zealand dollar against trading-partner currencies has assisted to partly offset higher import prices for local consumers.

In discussing the underlying influences on higher domestic inflation, the Committee agreed that both international and domestic factors were important.

Headline inflation is rising largely as a result of disrupted supply chains and higher world commodity prices. These higher commodity prices are increasing both imported inflation and also the incomes of some New Zealand exporters. Domestic demand pressures, relative to supply capacity, are also pushing New Zealand's core inflation above the Bank's 1 to 3 percent target range.

Capacity pressures are apparent across a wide range of domestic indicators. In particular labour shortages remain heightened, impinging on domestic economic output. Nominal wages are rising in response to these shortages, as would be expected. However, the increasing cost of living is putting pressure on household budgets. Consumer confidence has been declining as domestic price pressures are outpacing nominal household income growth.

The Committee discussed the outlook for labour supply with the reopening of New Zealand's international border underway. Members agreed that while the medium-term outlook is for ongoing net inward migration, as is the historical norm, this level would take some time to rebuild. Near-term indicators highlight that New Zealanders are currently leaving in larger numbers than visitors are arriving, as the border is opened in stages. The Committee noted that net immigration is assumed to increase only slowly, eventually leading to a gradual easing in skill shortages.

House prices have fallen from their recent high levels. The Committee viewed this as a sign that house prices are moving towards a more sustainable level. Home building intentions remain at record levels, which will assist this adjustment. However, construction activity faces challenges, including access to land, rising building costs, ongoing supply chain bottlenecks, and limited access to labour. The construction sector is operating around peak capacity.

Members noted that inflation is above target and employment is above its maximum sustainable level. As such, the Committee confirmed that further increases in the OCR are needed in order to meet their mandate.

The Committee discussed the pace and extent to which the OCR needs to rise in order to meet their inflation and employment mandate.

Members noted that annual consumer price inflation is expected to peak around 7 percent in the first half of 2022. The risk of more persistent high inflation expectations has increased. The Committee agreed that their policy 'path of least regret' is to increase the OCR by more now, rather than later, to head off rising inflation expectations and minimise any unnecessary volatility in output, interest rates, and the exchange rate in the future. The Committee agreed to a 50 basis point rise in the OCR, consistent with this least regrets analysis.

The Committee noted that the OCR is stimulatory at its current level. Members agreed that a larger rise in the OCR now is consistent with the forward path for interest rates outlined in their February Statement. Members also agreed that this 'stitch in time' approach is consistent with near-term financial market pricing.

On Wednesday 13 April, the Committee reached a consensus to increase the OCR to 1.50 percent.

Australia Westpac consumer sentiment index dropped -0.9% to 95.8 in April, down from March's 96.6. That's the lowest level since September 2020. Westpac said "concerns around interest rates and inflation were starting to weigh on confidence... compounded by Russia's invasion of Ukraine, an associated spike in petrol prices, and severe weather events."

Westpac expects RBA to raise interest rate at June meeting, after reviewing data releases "over coming months". Once the tightening cycle starts, Westpac expects a series of rate hikes in most months in 2022, with a pause in September. Further rate hikes can be expected in first half of 2023 and the cash rate would peak at around 2% by June next year.

Full release here.