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Canada CPI accelerated sharply form 5.1% yoy to 5.7% yoy in February, above expectation of 5.5% yoy. That's the largest gain since August 1991, and it's the second consecutive month where headline inflation exceeded 5% level. Excluding gasoline, CPI rose 4.7% yoy up from January's 4.3% yoy, fastest since its introduction in 1999. On a monthly basis, CPI rose 1.0% mom in February, largest monthly increase since February 2013.

CPI common rose from 2.3% yoy to 2.6% yoy, above expectation of 2.4% yoy. CPI median rose from 3.3% yoy to 3.5% yoy, matched expectations. CPI trimmed rose from 4.0% yoy to 4.3% yoy, above expectation of 4.2% yoy.

Full release here.

US retail sales rose 0.3% mom to USD 658.1B in February, below expectation of 0.6% mom. Ex-auto sales rose 0.2% mom, below expectation of 0.9% mom. Ex-gasoline sales dropped -0.2% mom. Ex-auto, ex-gasoline sales dropped -0.4% mom.

Total sales for December 2021 through February 2022 period were up 16.0% from the same period a year ago.

Full release here.

ECB Governing Council member Joachim Nagel told German newspaper Handelsblatt, "I don't expect stagflation at the moment, even though the fallout of the war will boost inflation rates and weaken economic growth." He added that there are currently "no signs" of a wage-price spiral.

He said ECB's current approach of tapering asset purchases while being non-committal on rate hike was a "good and balanced" approach. He said, ""I consider it very important that we don't pre-commit in times of high uncertainty, but stay flexible."

The JP 225 index continues its downtrend move, recording successive lower lows and lower highs as negative momentum lingers. Moreover, the index is currently trading well below its 50- and 200-day simple moving averages (SMAs), reinforcing the overall bearish outlook.

Despite the bearish outlook, short-term oscillators are reflecting a positive bias as the RSI is increasing despite being below its 50 neutral mark. Also, although the MACD is below zero, it has recently crossed above its red signal line, which indicates that the negative momentum in the price might be fading.

The bulls seem to have resurfaced over the last few trading sessions. Should they manage to push the price above the January low at 26,015, buyers could then eye the region which includes the 50-day SMA and the 26,970 barrier. Crossing above the latter could send the price towards the consecutive hurdles of 27,370 and 27,880.

However, if the bears regain control the first line of defence could be found at the 24,300 level. A break below this point could intensify selling pressures, opening the door towards the September 2020 support at 23,470, before sellers target the October 2020 low at 22,850.

In brief, despite the fact that the index’s bias seems to be improving, the overall outlook remains bearish amid successive lower highs. For sentiment to change, buyers would need to break above the 50-day SMA currently at 26,920.

Gold prices are moving sideways after the aggressive selling interest from the 19-month peak of 2,070.40, returning back near the 1,900 mark. The RSI indicator is flattening around the oversold region, while the MACD is still developing with weak momentum in the negative area. In trend indicators, the 20- and 40-period simple moving averages (SMAs) posted a bearish crossover in the near-term.

Should the market extend losses, support could be met between the 200-period SMA at 1,890 and the 1,883 barrier. A significant leg below this area could sent prices towards the 1,844 hurdle.

On the flip side, if the pair bounces up, immediate resistance could be met at the 20-period SMA currently at 1,947 ahead of the 1,960 level. Above these lines, the 40-period SMA at 1,975 and the 2,010 key level may act as tuning points.

In the bigger picture, the price is bullish as long as it holds above the 200-period SMA. In case it violates this line, bears could take the upper hand. 

The USDJPY holds firm tone on approach to target at 118.66 (Dec 2016) although bulls slowed after strong rally last Fri/Mon, but Tuesday’s long-tailed daily candle suggests that strong bullish stance remains intact.

The dollar was lifted by expectations for Fed rate hike at today’s end of two-day policy meeting and also by safe-haven buying on uncertainty over the war in Ukraine..

Overbought daily studies warn of consolidation/correction before larger bulls resume, though the action will directly depend on Fed’s verdict.

Hawkish stance with 0.25% (possibly 0.5%) hike and signals of steady rate increases in coming months, would lift the dollar further.

Break of 118.66 pivot would expose Fibo barrier at 119.50 (76.4% of 125.84/98.99) and psychological 120.00 resistance.

Caution on more dovish comments from the US policymakers, as the central bank now faces strong concerns about the impact of the war in addition to the soaring inflation, that would deflate the greenback, in possible ‘buy the rumor – sell the fact’ scenario.

Initial supports lay at 117.70/50, while extension below 117 would harm bulls and signal deeper pullback.

Res: 118.45; 118.66; 119.00; 119.50.
Sup: 118.17; 117.70; 117.50; 116.90.

Gold loses another 1% on Tuesday, pulling back to $1933 and settling around $1920 on Wednesday morning. About one week ago, quotes were soaring towards $2070, but they have been in a steady downward trend since then. The short-term charts clearly show the even pressure crystallising since March 10th.

It may seem illogical that the gold price is down, pending reliable signs of military de-escalation. Rampant inflation should also contribute to the demand for Gold as protection against capital depreciation.

The answer to this question seems to be sought in the altered gold supply balance. Likely, the Bank of Russia is now actively selling Gold from its reserves, both domestically and using the remaining means to do so abroad.

In the short term, this creates an impressive market overhang, despite data confirming that exchange-traded funds have built up their holdings in the metal to a record.

If the current trend develops, the price of Gold could deflate into the $1850-1870 area, where it was before Russian troops entered Ukraine.

That said, buying Gold remains a prudent long-term strategy. Geopolitical instability forms the risks of a slowdown in the economy, which will deter the Fed and other major central banks from tightening policy. A 25-point rate hike is expected from the Fed this week, although the markets gave more than a 60% chance of a 50-point hike at once in the first weeks of the year. In the meantime, the current and expected price situation has only worsened, accelerating the actual depreciation of assets.

Looking ahead to the next few months, a very supportive environment remains for gold prices up to around $2,500. The marginal forecasts of a new round of gold growth are also becoming more evident, echoing the dynamic of the 1970s, as the energy and food markets are now in a very similar position. If this holds true, the price could soar several times in the next several years.

NZDUSD has generated positive traction off the 50-day simple moving average (SMA), which is bordering the tentative uptrend line pulled from the 16-month low of 0.6528. The longer-term 100- and 200-day SMAs are defending the broader bearish trend in the pair, while the flattened slope of the 50-day SMA, is hinting that the latest up wave remains active.

The Ichimoku lines are indicating a pause in bullish forces, while the short-term oscillators are transmitting mixed signals in directional momentum. The MACD is implying some easing in positive drive as it glides slightly beneath its red trigger line. Meanwhile, both the upward pointing RSI and the fresh bullish charge of the stochastic oscillator are promoting additional hikes in the pair.

If renewed positive impetus off the supporting 50-day SMA intensifies, preliminary resistance could emanate from the falling 100-day SMA at 0.6805 and the adjacent red Tenkan-sen line at 0.6826. Moving higher, the bulls may struggle to overpower the fortified 0.6875-0.6924 resistance section. However, if this boundary fails to keep buyers at bay, the 0.6978 inside swing low could come under fire before the bulls pursue the 0.7051-0.7080 resistance border and the 0.7100 handle overhead.

On the other hand, if the 100-day SMA at 0.6805 curbs additional gains in the pair, sellers could encounter a tough support zone existing between the 50-day SMA at 0.6725 and the Ichimoku cloud’s upper surface at 0.6709, which is overlapped by a tentative uptrend line drawn from the 0.6528 trough. The price journey downwards is a congested one and even if the bears successfully dive below the cloud, they will need to also breach the adjoining support area between the 0.6665 and 0.6629 lows for negative developments to gain an advantage. A deeper price retracement that overruns the 0.6590 barrier too could shift traders’ focus towards the 0.6487-0.6528 support base that extends back to mid-July 2020.

Summarizing, NZDUSD may preserve its positive tone should the price persist above the 50-day SMA, the diagonal support and the Ichimoku cloud. Piloting above the 0.6875-0.6924 resistance obstacle could reinforce the bullish bearing of the pair, while a retreat below the 0.6629 low could hint that negative pressures are ramping up again.

The Euro remains bid in European trading on Wednesday and cracks 1.10 barrier, where the action faced strong headwinds past two days.

Hopes for a breakthrough in peace talks between Russia and Ukraine keep slight risk mode in play, however, all eyes are on today’s Fed policy decision, with markets fully pricing for a first interest rate raise in three years.

The central bank is widely expected to increase interest rates by 0.25%, but there are chances for 0.5% hike, in attempt to tackle soaring inflation.

The dollar is expected to benefit from rate hike, however, traders will be focusing on signals about Fed’s next steps and strength of that message would give more hints about greenback’s short-term direction.

Daily studies are in bearish setup and warn about limited recovery before larger bears resume, with failure to clear 1.10 pivot to keep the downside under pressure and risk test of first pivot at 1.0900 (Mar 14 trough) and expose key level at 1.0803 (Mar 7 low), loss of which would signal bearish continuation.

Conversely, break of 1.10 would ease immediate downside risk, but bulls need to register a clear break of cracked Fibo barrier at 1.1069 (38.2% of 1.1494/1.0806) and extension above recovery top at 1.1121 (Mar 10 spike high) to signal reversal.

Res: 1.1000; 1.1020; 1.1043; 1.1069.
Sup: 1.0950; 1.0900; 1.0848; 1.0806.

A notable correction to the downside has captured Gold’s price in the most recent daily sessions. At the moment, Gold is trading below the $2000 round level, after performing a swift run to the new 2022 high price in the past week. The large swing for Gold’s price seems to imply a drastic change in economic developments around the world and this report aims at bringing these factors to light. Leaving aside the fundamental updates presented in this outlook, our Gold report can also be used as a guidance to trading through our technical analysis, which will point out important levels and possible trends.

The fact that Gold has made a substantial correction to lower grounds, can be attributed to several reasons. First Gold’s price rushed to a new 2022 high on the 8th of March as sanctions against Russia where announced. In this case the risk on sentiment which sometimes fuels Gold’s price may have been removed. It is also possible that Gold may have been undertaken by a technical correction, as traders that joined the bullish side of Gold early in March, may have booked significant profits allowing them to lock in the gains. Furthermore, in the past sessions the U.S. 10-year Treasury yields rose above 2.10% a sign which maybe considered bearish for Gold prices. Another bearish sign for Gold could be its adverse relationship to the US dollar. In the previous report we noted the correlation between Gold and the USD may have been positive but as the greenback stabilized higher in the past days, Gold prices dropped confirming the competitive nature is back on track. In addition, Gold could be in a positive correlation with Oil prices at this time, as Oil is trading notably lower compared to last week.

In the current week, Gold traders are in the favorable position to have an exciting economic calendar to work with. The events are spread throughout the next days and may create substantial volatility for Gold’s price. Starting on the 16th of March, during the early US session, we get the US February Retail Sales rate while later the same day, we expect the key economic event of the week which is the FOMC meeting. This event is of great importance for the Gold market as the central bank is expected to announce a rate hike of 25 basis points. On a side note, FFF currently imply a probability of 91% for a 25-basis points rate hike, while the remaining 9% is in favor of a 50-basis points rate hike. In this case the actual outcome of the meeting could create different price reaction. Even though a 25-basis points rate hike may have already been priced in by the market, in our view, a 50-basis points rate hike could create an extraordinary volatile session for the markets. This will be the first time the Fed will hike rates since December 2018. The event will take place during the mid US session and will consist of the Economic Projections, the FOMC Statement and the FOMC Interest Rate decision. 30 minutes after the release we will also get the FOMC press conference with Chairman Jerome Powell’s speech where he will also be replying to questions. This event has the potential of moving Gold prices abruptly and traders may have to approach the market with caution as risks could be elevated. On the 17th of March we get from the US the weekly Initial Jobless Claims, the February Housing Starts Number the February Industrial Production rate and the March Philly Fed Business Index. Finally, on the 18th of March, we get the US Existing Home Sales for February.

Moreover, traders are also considering action carried out by other major central banks in the world. At this point it could be useful to note the fact that BOE is expected to impose a rate hike on the 17th of March. Additionally, during the past week the ECB announced a faster than expected reduction of its Asset purchase programme (APP). These actions could be signaling a post pandemic economic transitioning period for some of the major economies of the world and some of Gold’s recent price action may have been a result of these changes.

On a separate note, Gold traders continue to monitor developments of Russia’s war in Ukraine. Even though no signs of progress to cease fire have been made, Gold’s price has returned to lower grounds and may not reflect the fact that Russia’s military operations seem to have intensified recently.

Technical Analysis

XAU/USD H4

Gold’s downward trendline has intensified in the most recent four-hour sessions and the trend is highlighted with the yellow descending line on our chart. At the moment Gold is trading at 1925 which is exactly in the middle of our range between the (R1) 1950 resistance and the (S1) 1900 support. Yet if the downward movement persists, the (S1) 1900 could be engaged and tested. In this scenario, traders may turn their attention to even lower ground picturing the (S2) 1881 line which was approached briefly in the last days of February. At the end the (S3) 1852 is noted as our final support. In the opposite scenario if Gold regains upward momentum, we may see the (R1) 1950 line being targeted. Higher the (R2) 1975 level which has been the February high level is imminent while even higher the (R3) 2000 line may act as a barometer for the bullish trend. For this analysis we have selected to insert also the (R4) 2051 which is also the 2022 high reached in the past week. Currently, Gold remains in a downward trendline yet if the price action continues to move withing the (R2) and (S1) range we may see a sideways motion forming. The RSI indicator is currently testing the 30 level giving the notion for a bearish sentiment.