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In the Summary of Opinions of the March 17-18 meeting, BoJ noted, "unlike the United States and the United Kingdom, Japan is not in a situation where the inflation rate will likely exceed the price stability target of 2 percent in a continuous manner." Hence, "it is important for the Bank to continue with monetary easing to support the economic recovery from the pandemic."

Situations surrounding Ukraine have "caused price rises of energy and other items", and this will "push down domestic demand while raising the CPI." Under these circumstances, it is "necessary to improve labor market conditions and provide stronger support for wage increases".

One member warned that "if downward pressure on economic activity and prices increases, the economy may instead be in danger of falling into deflation again. If it becomes difficult to achieve the price stability target, the Bank should act nimbly and without hesitation."

Full Summary of Opinions here.

Japan Finance Minister Shunichi Suzuki said the government is carefully watching the foreign exchange market to avoid "bad yen weakening". He repeated that currency stability was important. While a weak Yen is positive for exporters, it's negative for household on popping up living costs.

Yesterday, BoJ started offering four days of unlimited bond purchases to defend the 0.25% cap of 10-year JGB yield. The first offer drew no bid but JPY 64.5B in JGBs were accepted in the second offer. According to the current guidance, BoJ targets to keep 10-year JGB yield at around 0% with 25bps limit up and down.

DXY:

On the H4 timeframe, prices are on bullish momentum and abiding by our ascending trendline support. We see the potential for a bounce from our 1st support at 98.632 in line with 38.2% Fibonacci retracement towards our 1st resistance at 99.418 in line with 78.6% Fibonacci projection. Prices are trading above our ichimoku cloud support, further supporting our bullish bias.

Areas of consideration:

• H4 time frame, 1st resistance at 99.658
• H4 time frame, 1st support at 98.632

XAU/USD (GOLD):

On the H4, prices are approaching a key pivot. We see the potential for a bounce from our 1st support at 1918.32 which is in line with 127.2% Fibonacci extension towards our 1st resistance at 1963.060 in line with 78.6% Fibonacci Projection and also graphical swing high. Prices are trading below our ichimoku clouds, further supporting our bearish bias.

Areas of consideration:

• 4h 1st support at 1918.32
• 4h 1st resistance at 1963.060

GBP/USD:

On the H4, prices are on bullish momentum. We see the potential for a bounce from our 1st support at 1.30890 which is a graphical overlap and in line with 100% Fibonacci Projection towards our 1st resistance at 1.32232 in line with 61.8% Fibonacci Projection. Ichimoku clouds are showing green clouds, further supporting our bullish bias. Alternatively, breaking the 1st support will call for a further bullish continuation towards our 2nd support at 1.29999 which was a graphical swing low and in line with 161.8% Fibonacci Projection.

Areas of consideration:

• H4 1st resistance at 1.32232
• H4 1st support at 1.30890

USD/CHF:

On the H4, with price moving below our ichimoku cloud, we have a bias that price will drop from 1st resistance at 0.93743 in line with the horizontal pullback resistance and 61.8% Fibonacci retracement to 1st support at 0.93010 in line with the pullback support and 61.8% Fibonacci retracement . Alternatively, price may break 1st resistance and head for 2nd resistance at 0.94232 in line with the 78.6% Fibonacci retracement.

Areas of consideration

• 1st support level at 0.93010
• 1st resistance level at 0.93743

EUR/USD :

On the H4 timeframe, we see the potential for a bullish pressure from our 1st support at 1.09507 in line with 78.6% Fibonacci retracement towards our 1st resistance at 1.10456 in line with 50% Fibonacci retracement. Our bullish bias is supported by the stochastic indicator where price is at support level.

Areas of consideration :

• H4 1st resistance at 1.10456
• H4 1st support at 1.09507

USD/JPY:

On the H4 timeframe, prices are on bullish momentum. We see the potential for further bullish continuation from our 1st support at 121.409 in line with 23.6% Fibonacci retracement and 200% Fibonacci projection towards our 1st resistance at 125.101 which is in line with 61.8% Fibonacci Projection. Prices are trading above our ichimoku clouds, further supporting our bias.

Areas of consideration:

• H4 time frame, 1st resistance at 125.101
• H4 time frame, 1st support at 122.409

AUD/USD:

On the H4 timeframe, we see the potential for a bullish bounce from our 1st support at 0.74412 in line with 23.6% Fibonacci retracement towards our 1st resistance at 0.75399 in line with 138.2% Fibonacci extension. Our bullish bias is supported by price trading below the Ichimoku cloud indicator.

Areas of consideration

• H4 1st resistance at 0.75399
• H4 1st support at 0.74412

NZD/USD:

On the H4 timeframe, we see the potential for a bullish bounce from our 1st support at 0.68742 in line with 50% Fibonacci retracement and 61.8% Fibonacci projection towards our 1st resistance at 0.69886 in line with 138.2% Fibonacci extension. Our bullish bias is supported by price trading below the Ichimoku cloud indicator.

Areas of consideration :

• H4 1st resistance at 0.69886
• H4 1st support at 0.68742

USD/CAD:

On the H4, with price moving below our ichimoku cloud, we have a bias that price will drop from 1st resistance at 1.25638 in line with the horizontal overlap resistance and 23.6% Fibonacci retracement to 1st support at 1.24617 in line with the swing low support . Alternatively, price may break 1st resistance and head for 2nd resistance at 1.26234 in line with the 38.2% Fibonacci retracement.

Areas of consideration:

• H4 time frame, 1st support at 1.24617
• H4 time frame, 1st resistance at 1.25638

OIL:

On the H4, with price expected to bounce off the support of the ichimoku cloud, we have a bias that price will rise to our 1st resistance at 113.70 in line with the 38.2% Fibonacci retracement from our 1st support at 108.49 in line with the horizontal overlap support and 61.8% Fibonacci retracement. Alternatively, price may break 1st support structure and head for 2nd support at 102.64 in line with the horizontal overlap support and 78.6% Fibonacci retracement.

Areas of consideration:

• H4 time frame, 1st resistance of 113.70
• H4 time frame, 1st support of 108.49

Dow Jones Industrial Average:

On the H4, with price expected to reverse off the stochastics level, we have a bias that price will drop from 1st resistance at 35011 in line with the horizontal overlap resistance and 161.8% Fibonacci extension to 1st support at 34073 in line with the pullback support .Alternatively, price may break 1st resistance and head for 2nd resistance at 35808 in line with the 161.8% Fibonacci extension.

Areas of consideration :

• H4 1st support at 34073
• H4 1st resistance at 35011

Key Highlights

• GBP/USD started a fresh decline from the 1.3300 region.
• It traded below a key bullish trend line with support near 1.3185 on the 4-hours chart.
• EUR/USD is struggling below the 1.1050 resistance zone.
• USD/JPY rallied above 124.00 before correcting gains.

GBP/USD Technical Analysis

The British Pound struggled to surpass the 1.3300 resistance zone against the US Dollar. GBP/USD started a fresh decline below the 1.3250 level.

Looking at the 4-hours chart, the pair declined below the 1.3200 support zone and settled below the 200 simple moving average (green, 4-hours). There was a clear move below the 50% Fib retracement level of the upward move from the 1.3000 swing low to 1.3298 high.

It is now trading below the 1.3150 level and the 100 simple moving average (red, 4-hours). An initial support is near the 1.3070 level or the 76.4% Fib retracement level of the upward move from the 1.3000 swing low to 1.3298 high.

The main support is near the 1.3000 level. A downside break below the 1.3000 level might call for a sharp decline. The next major support sits near the 1.2920 level, below which the pair could revisit 1.2800.

On the upside, an immediate resistance is near the 1.3120 level. The main resistance sits near the 1.3150 level and the 100 simple moving average (red, 4-hours). A clear move above the 1.3150 zone could set the pace for a move towards 1.3300.

Looking at EUR/USD, the pair is showing bearish signs below the 1.1050 level and remains at a risk of more downsides.

Economic Releases

• US Housing Price Index for Jan 2022 (MoM) - Forecast +1.4%, versus +1.2% previous.

Bitcoin price has been rallying in the past week, trading comfortably above the $47,000 mark in the current trading session. This recent uptrend is largely attributed to a wave of short position liquidations on cryptocurrency exchanges as transaction volume exceeded $120 billion in the past 24 hours. Moreover, most major altcoins exploded to fresh highs, benefiting from Bitcoin’s significant upside breakout. Is this the start of a bullish cycle for cryptocurrencies even though the dust from the war has not settled yet?

Massive crypto adoption from the banking sector boosts demand

Last week, many renowned financial institutions announced initiatives that promote the use and trading of cryptocurrencies. More specifically, the leading investment bank Goldman Sachs reshaped its homepage to feature cryptocurrencies, the metaverse, and digitalization as the latest and most pioneering market themes. This move attracted a lot of attention from investors and social media users, who pointed out that the bank has come a long way from its original assessment, which was that Bitcoin should not be considered an asset class.

In addition, last Thursday Israel’s largest bank, Leumi, announced that it will become the first Israeli bank to provide cryptocurrency trading to its clients. Considering that Israel does not have a regulatory framework for cryptocurrencies yet, this move indicates the willingness of major banks to accelerate the adoption of cryptos to avoid being left out of a swiftly developing market.

El Salvador president announces the issuance of the first Bitcoin bond

El Salvador is aiming to be the first country to issue a Bitcoin-backed bond to fund the construction of the first “Bitcoin City”. The main plan is to use geothermal power from volcanoes to power Bitcoin mining as well as the city’s infrastructure. This might prove a huge development for the crypto space as miners are being pressured by regulators to adopt more sustainable and environmentally-friendly power sources.

More and more businesses launch cryptocurrency features

South Korean tech behemoth LG Electronics announced in its latest annual general meeting on Thursday that it plans to expand its businesses into the cryptocurrency and blockchain sectors. More specifically, their objectives include the creation of a crypto exchange market and the development of blockchain-based software.

In other news, the non-profit organization Luna Foundation Guard (LFG) invested over $1.1 billion in Bitcoin to ensure the sustainability of Terra's algorithmic stablecoin (UST). Additionally, the firm has committed to accumulate $10 billion worth of Bitcoin for its project reserves, while the firm is claiming to have $3 billion of dry power to spend immediately but it is currently facing some technical issues.

Can Bitcoin’s upside breakout continue?

From a technical perspective, Bitcoin’s price profoundly sliced through the upper boundary of its recent sideways move. Should the bullish pressures persist, the price could encounter significant resistance at the $48,250 region, which overlaps with its 200-day simple moving average.

On the other hand, if investors who had entered the market in its recent bull phase liquidate their positions to limit their losses, the crucial $45,000 mark could now act as a supporting floor for the price.

What is happening?

The Russian president's announcement that countries "unfriendly" to Moscow must pay for gas deliveries with rubles shows that he's willing to use energy as a weapon in the Ukraine war. It puts the West in a tight spot.

With his demand for payments in the Russian currency, Vladimir Putin has dealt a surprise blow to Western countries still using large volumes of Russian gas for their energy needs.

The Russian president stated the measure would apply to 48 countries deemed "hostile" and include the United States, the UK, and all members of the European Union.

Combined with an extremely growing inflation in Europe, this fact might press the euro to the lowest numbers since 2015.

What are the outcomes?

Europe is the number one continent depending on the Russian gas supply. Data from the European Union Agency for the Cooperation of Energy Regulators shows which countries' energy supply would be most in jeopardy in the case of a Russian gas freeze.

Among the continent's major economies Germany imports around half of its gas from Russia, while France only obtains a quarter of its overall supply. Italy would also be one of the most impacted major economies at a 46% reliance.

Some smaller countries in Europe rely exclusively on Russian gas, namely North Macedonia, Bosnia and Herzegovina, and Moldova. Dependence also exceeded 90% of the gas supply in Finland and Latvia.

As we can see, Russian holds the most significant part of the European gas market. That's why the European Union needs to find the right decision in this situation.

There are three possible outcomes:

• The Union accepts Vladimir's Putin offer and makes future gas payments in Russian rubles. In this case, the EUR will struggle due to falling demand. Moreover, payments for Russian gas purchases are usually so large that the amount of rubles needed cannot currently be secured on foreign exchange markets. Western buyers will most likely need to go via the Bank of Russia to make their payments, essentially undercutting sanctions against the Russian central bank.
• The second option for the European Union is to ease sanctions against Russia and find a compromise about natural resources payments. In this case, the energy crisis in Europe might come to an end. However, it is hard to imagine the Union taking such a step in the conditions of the military conflict on the territory of Ukraine.
• The worst possible case in this situation is to decline the offer. In this case, the energy crisis might cost a lot for the European nation. Inflation, which reached its highest levels, will increase rapidly further. Moreover, some important factories might stop producing goods, and as a result, food deficits might occur.

What about the US LNG?

US president Joe Biden called the European Union to refuse the Russian gas and replace it with US LNG (liquid natural gas). However, there are some issues with it.

• The most important thing is the gas receiving terminals. They are completely different for natural gas and LNG. LNG terminals are less productive. Unfortunately, Europe was not very concerned about constructing new LNG terminals, but at the end of 2021, it scheduled some projects for 2027-2030.
• American companies will undoubtedly sell their LNG to Europe (and now in much larger volumes), but at a spot price. The spot market determines the cost of LNG. In the case of Gazprom (natural gas), Europe buys gas under long-term contracts, which at the end of 2021 were 3-4 times cheaper than local spot prices. For this reason, Europe refused to make new agreements in January 2022. Based on this, we might conclude that the United States is going to sell LNG to Europe at high prices. That's why, the American tankers turned around four times and changed direction either to Europe or Asia, as prices were rapidly changing within two weeks. However, if, at the same time, China, Japan, or Korea offer more for an LNG cube, then Europe may be left without energy.

Conclusion

Based on all of the above, unfortunately, Europe has little chance to avoid an energy crisis so far. Rising inflation adds oil to flames. It’s necessary to tighten the monetary policy and reduce the balance sheet in the future. Nowadays, people are going on strike with the topic of rising prices for raw materials, fuel, and fertilizers. However, Gazprom is 100% fulfilling all its obligations under the contracts. What will happen if Gazprom turns off the pipeline for at least a month? A shutdown of factories, unemployment, the introduction of food cards may happen. Alternatively, the European Central Bank will have to print money and increase inflation to 20%-40%.

Technical analysts

EURUSD, monthly chart

Why do we love technical analysis? Because at moments of total uncertainty, it may tell us the only right way.

EURUSD is moving in the symmetrical triangle. At the moment, the price is consolidating above the lower border. The most important support level right now is 1.0800. If buyers manage to hold the pair above it, the price might reverse and increase to 1.1150 and even 1.1450.

On the other hand, a breakout of this support will signal a long bear market for EURUSD, and the pair will decline to 1.0500.

• AUDUSD reversed from resistance level 0.7530
• Likely to fall to support level 0.7430

AUDUSD currency pair recently reversed down from the pivotal resistance level 0.7530 (which has been reversing the price from last October), intersecting with the upper daily Bollinger Band.

The resistance zone near the resistance level 0.7530 was further strengthened by the 61.8% Fibonacci correction of the downward impulse from last year.

AUDUSD can be expected to fall further toward the next support level 0.7430 (top of the previous minor correction (A)).

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Markets

This morning, Asian bond markets were overwhelmed by a new wave of panic selling in the wake of Friday’s steep rise in US yields. In order to reinforce its commitment to decouple from broad policy normalization, the Bank of Japan under its Yield Curve Control framework made two offers to buy an unlimited amount of 10-y bonds to prevent the 10-y yield from exceeding the 25 bpn allowed deviation from the 0.0% target. The Bank will make similar buying offers over the next three days. Still 10-y Japanese yield stayed above the 0.25% level. Selling at longer maturities simply continued with the 30-y + 5.4 bps to regain the 1.0% barrier (1.026%), the highest level in more than six years. Sharply higher yields, including cycle peak levels, were also recorded in the likes of Australia (2-y 1.795%, + 21.5 bpn; 10-y, 2.90%, + 12.5 bpn). It even looked that US Treasuries would fall prey to another round of aggressive selling as markets are growing ever more convinced that bold CB action will be needed to arrest runaway inflation. US 2-y yields at some point gained another 14 bps. The 30/5-y sector even temporarily inverted, as investors feared that aggressive, frontloaded Fed action at some point inevitably will affect growth. However, selling in Asia marked some kind of ST exhaustion move. Pressure on bonds eased during the European morning session and this continued as US traders joined. Except for the 2-year (+ 3.5 bps), US bond yields even decline marginally (2-3 bps 10-y/30-y). German yields 2 & 5-year yields early in the session also touched new cycle peaks, the highest since 2014. The German 10-y yield briefly surpassed interim resistance 0.58%%. However, selling gradually faded, too. Yields currently vary between +1.6 bps (2-y) and minus 2.7 bps (30-y). Still, money markets take into account four 25 bps ECB rate hikes by this time next year. Despite the sharp swings even in the core markets, changes in peripheral spreads versus Germany remain negligeable, with Greece (7 bps) the exception to the rule. European equities weren’t unsettled by the sharp swings on bond markets, with the EuroStoxx gaining 1.50%. Is the strong dollar a help? US indices underperform (S&P unchanged). Some tentative easing was also visible in the oil market (brent $112 b/p). Also the likes of wheat, while still at elevated levels, are easing of the peak levels from earlier this month.

Bond market volatility and a widening interest rate support simply is too striking for USD bulls to ignore. The DXY TW index (99.31) is nearing the YTD top. Policy divergency caused USD/JPY to briefly touch to 125 barrier for the first time since August 2015. However, the reversal on the bond markets finally also provided some relief for the yen (USD/JPY currently 123.75). Gains of the dollar against the euro remain modest (1.0970). Sterling failed to extend Friday’s rebound against the euro. EUR/GBP already traded with an upward bias this morning. Later, BoE’s Bailey justified the change to a softer BoE language at this month’s policy meeting referring to a potential slowdown in growth and demand. EUR/GBP is changing hands in the 0.836 area.

News Headlines

Russian oil exports plummeted more than 25% in the week from March 17 to March 23 to an average of 3.63m barrels in daily shipments, Bloomberg reported based on industry data. The steep drop comes amid explicit embargoes from a handful of countries including the US and UK. A lot of Russia’s traditional customers and refineries are also self-sanctioning. According to Russian Deputy Prime Minister Novak, the country is still able to sell Ural crude at sharp price discounts. Earlier this month, India scooped up several millions barrels of Russian oil at a price around 20% below global benchmark prices, the Wall Street Journal reported today.

The Czech government will sell the first local euro-denominated bond since August, the Finance Ministry’s issuance calendar for April 2022 showed. Its maturity is remarkably short (2y) given the government has shown preference for a long-term refinancing of this year’s €3.4bn euro-denominated redemptions (loans and bonds). The Ministry of Finance seeks to sell a limited 50 to 100mln euros. This compares to the CZK 19bn of domestic notes it intends to offer next month.

EURCHF forms a foothold off the mid-Bollinger band at 1.0220 after the rally from the more than 7-year low of 0.9971 was curbed by the 1.0400 handle, and the 100-day simple moving average (SMA). Nevertheless, the descending SMAs continue to sponsor the bearish outlook in the pair.

The short-term oscillators are transmitting conflicting signals in directional momentum. The MACD, in the negative region, is holding slightly underneath its red trigger line, while the improving RSI is about to test the 50 neutral threshold.

In the negative scenario, sellers could engage an initial support zone from the mid-Bollinger band at 1.0220 until the mid-March low of 1.0182. Diving past this obstacle, the 1.0123 level, which is the 23.6% Fibonacci retracement of the down leg from 1.0611 until the multi-year low of 0.9971, may try to deter the bears from steering the price towards the lower Bollinger band at 1.0052. Meanwhile, should the price eventually sink deeper, the support zone from the more than 7-year trough of 0.9971 until the 1.0000 handle could draw traders’ attention.

If the pair builds more positive traction off the mid-Bollinger band, resistance could originate at the 50-day SMA at 1.0340 prior to the resistance band between the 61.8% Fibo of 1.0368 and the 1.0400 barricade. Overrunning these barriers and the upper Bollinger band, which is marginally overhead at 1.0414, the bulls could meet the 76.4% Fibo at 1.0460. Should buying interest endure, the price may then confront the 1.0549 high before challenging the 1.0577-1.0611 resistance border, moulded by the 200-day SMA and the February high of 1.0611.

Summarizing, EURCHF’s fresh increase in positive forces has yet to dent the predominant bearish outlook in the pair. In order for upside momentum to gain an edge, the price would need to improve beyond the 1.0400 mark.