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Key Highlights

• EUR/USD started a fresh decline below the 1.0820 support zone.
• A key bearish trend line is forming with resistance at 1.0875 on the 4-hour chart.
• Gold prices rallied further above the $2,250 resistance.
• The US ISM Manufacturing Index could increase from 47.8 to 48.4 in March 2024.

EUR/USD Technical Analysis

The Euro started another decline from the 1.0940 zone against the US Dollar. EUR/USD traded below the 1.0920 and 1.0880 levels to move into a bearish zone.

Looking at the 4-hour chart, the pair even settled below the 1.0850 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). Finally, the pair traded below the 1.0820 support.

A low was formed near 1.0767 and the pair is now consolidating losses. On the upside, the pair could face resistance near the 1.0800 level. The first major resistance is now forming near 1.0820.

The main resistance is now forming near 1.0850. There is also a key bearish trend line forming with resistance at 1.0875 on the same chart. A close above the 1.0875 zone could open the doors for more upsides.

The next stop for the bulls might be 1.0940. If not, the pair might continue to decline. Immediate support is near the 1.0775 level.

The next major support is at 1.0750. If there is a downside break below the 1.0750 support, the pair could decline toward the 1.0700 support. Any more losses might send the pair toward the 1.0650 level in the near term.

Looking at Gold, the bulls were able to push the price further higher above the $2,250 resistance zone and there are chances of more gains toward $2,265.

Economic Releases

• US ISM Manufacturing Index for March 2024 – Forecast 48.4, versus 47.8 previous.

China's Caixin PMI Manufacturing rose from 50.9 to 51.1 in March, above expectation of 51.0, marking the highest level in 13 months.

Wang Zhe, Senior Economist at Caixin Insight Group, noted acceleration in both supply and demand within sector with "overseas demand picking up".

Despite the overall improvement, employment continued "contraction. Additionally, "depressed price level worsened".

Full China Caixin PMI manufacturing release here.

Japan's PMI Manufacturing was finalized at 48.2 in March, up from February's 47.2, highest in four months.

Usamah Bhatti of S&P Global Market Intelligence noted that while the sector's performance remained "downbeat," there were emerging signs that the "worst of the weakness had passed". This observation is based on softer reductions observed in both output and new orders inflows.

However, it's important to highlight that the average PMI reading for Q1 stood at 47.8, indicating the weakest quarterly performance since Q3 2020, when it was 46.7.

Inflationary pressures "remained marked" Although the rate of input price inflation has moderated to its weakest in over three years, the challenge of high costs persists. In response to these pressures, selling price inflation has intensified to a three-month high, reflecting manufacturers' efforts to safeguard profit margins by transferring higher expenses onto their customers.

Full Japan PMI manufacturing final release here.

Japan's Q1 quarterly Tankan survey unveils mixed economic sentiment among the nation's large businesses. Service sector expressed their highest levels of optimism in over three decades, contrasting with a slight decline in confidence among manufacturers.

Large manufacturing index dropped from 13 to 11, still surpassing expectation of 10. However, outlook for large manufacturing firms saw modest increase from 8 to 10, slightly below forecasted 11.

On the brighter side, non-manufacturing index climbed from 32 to 34, exceeding expectations of 31 and marking the highest level since 1991. Despite this, non-manufacturing outlook remained steady at 27, falling short of anticipated 30.

Additionally, large all-industry Capex gauge, which measures capital expenditure plans across industries, is projected to grow by 4% in the new fiscal year. This figure, though positive, falls significantly below the anticipated 9.2% growth.

China's official NBS PMI Manufacturing climbed from 49.1 to 50.8 in March, surpassing expectations of 50.1. This uptick not only marks the sector's first expansion in six months but also represents its highest reading in a year

Details showed notable increases in manufacturing production, which leaped from 49.8 to 52.2, and new orders, which surged from 49.0 to 53.0. Furthermore, new export orders rose from 46.3 to 51.3.

PMI Non-Manufacturing also showed positive momentum, climbing from 51.4 to 53.0, slightly above anticipated figure of 51.3. PMI Composite index, which encompasses both manufacturing and non-manufacturing activities, improved from 50.9 to 52.7,

Zhao Qinghe, senior statistician at NBS, attributed the March surge to increased production resumption efforts following Lunar New Year holiday, alongside improvement in market vitality.

ECB Governing Council members Robert Holzmann, in an interview with Austria's Kronen Zeitung, noted the possibility of Europe reducing interest rates ahead of the US, citing the slower economic growth in Europe compared to its transatlantic counterpart.

Holzmann underscored that the timing of such cuts would "depend largely on what wage and price developments look like by June."

Yannis Stournaras, in remarks to Greece's Proto Thema, articulated a more aggressive stance, positing that "cutting rates four times this year, by 25 basis points each, is possible."

This perspective reveals a division within ECB, as Stournaras acknowledged skepticism among some colleagues who advocate for a more cautious approach to rate reductions.

• Gold rising inside weekly impulse wave 3
• Likely to rise to resistance level 2300.00

Gold rising inside the sharp weekly impulse wave 3, which recently broke the resistance trendline of the daily up channel from November.

The breakout of this up channel coincided with the breakout of the key resistance level 2200.00, which stopped the previous impulse wave 1.

Given the strong daily uptrend, Gold can be expected to rise further to the next resistance level 2300.00 (target for the completion of the active impulse wave 3).

Monday, Apr 1, 2024

Tuesday, Apr 2, 2024

Wednesday, Apr 3, 2024

Thursday, Apr 4, 2024

Friday, Apr 5, 2024

Summary

United States: Steady, As She Goes

• This week's economic data largely reinforced existing economic growth patterns. Consumer momentum remains largely intact, inflation continues to inch back down, albeit at a slower pace, and rate-sensitive sectors stayed in a holding pattern.
• Next week: ISM Indices (Mon. & Wed.), Trade Balance (Thu.), Employment (Fri.)

International: Global Central Banks Holding Steady For Now

• This week saw the announcement of monetary policy decisions from both G10 and emerging market economies. Sweden’s Riksbank held its policy rate steady at 4.00% and opened the door for either a May or June rate cut. We maintain our call for an initial June cut for now. The South Africa Reserve Bank held its policy rate steady at 8.25% and offered hawkish-leaning guidance.
• Next week: China PMIs (Sun.), Japan Tankan Survey (Mon.), Eurozone CPI (Wed.)

Interest Rate Watch: Dancing with the Stars: The First of Many Ticks Higher in the Longer-Run Median Dot

• Last week, the median “longer-run” dot moved higher in the FOMC’s latest Summary of Economic Projections (SEP). The increase in the median dot was small (just 6 bps), but the uptick in the median marks the first time it has been above 2.5% since March 2019. We expect the longer-run dot to continue to cautiously drift higher in coming SEP meetings.

Topic of the Week: Economic Costs of the Francis Scott Key Bridge Collapse

• The Francis Scott Key Bridge collapsed early Tuesday morning when a cargo ship leaving the Port of Baltimore collided with one of the bridge's support pillars. How important is the Port of Baltimore to U.S. goods trade?

Full report here.