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BoE MPC member Catherine Mann cast doubts on the financial market's anticipation of interest rate cuts in the near term, asserting that such expectations might be overly ambitious.

Speaking to Bloomberg TV, Mann directly addressed the discrepancy, stating, "They're pricing in too many cuts — that would be my personal view — and so in some sense, I don't have to cut because the market already is."

Mann further elaborated on the unique economic conditions within the UK that challenge the notion of an early rate cut, especially in comparison with the US and Eurozone.

She explained that "wage dynamics in the UK are stronger and more persistent than the wage dynamics in either the United States or the euro area. Underlying services dynamics are also stickier more persistent than either the US or the euro area."

Thus, "it's hard to argue that the BOE would be ahead of the other two regions, particularly the United States," Mann added.

• EURCHF looks strongly bullish this year
• Technical oscillators confirm upside tendency

EURCHF has added almost 6% since the beginning of the year, recording a new eight-month high of 0.9786. The pair is creating a steep upward tendency with no notable bearish corrections so far in 2024. The RSI indicator is standing in the overbought region and is still pointing north, while the MACD is extending its positive momentum above its trigger and zero lines.

More aggressive advances could lead the pair towards the previous high of 0.9786 ahead of the peak from June 2023 at 0.9840. If buying interest persists, then the market could touch the April 2023 resistance at 0.9880.

In the case of a negative scenario, the attention could shift to the downside, creating a bearish retracement towards the 0.9685 support. Breaking the uptrend line too, the price could then meet the 0.9630 mark and the 200-day simple moving average (SMA) around 0.9560.

All in all, EURCHF is strongly bullish in the short-term timeframe after the rebounds off 0.9253 and 0.9305 and only a tumble beneath the 200-day SMA may change the outlook to a neutral one. 

Hello fellow traders. In this technical article we’re going to take a look at the Elliott Wave charts charts of Ethereum ETHUSD published in members area of the website. As our members know ETHUSD has recently made pull back that has unfolded as Elliott Wave Double Three Pattern. It made clear 7 swings from the March 11th peak and completed correction right at the Equal Legs zone( Blue Box Area) . In further text we’re going to explain the Elliott Wave pattern and forecast

Before we take a look at the real market example, let’s explain Elliott Wave Double Three pattern.

Elliott Wave Double Three Pattern

Double three is the common pattern in the market , also known as 7 swing structure. It’s a reliable pattern which is giving us good trading entries with clearly defined invalidation levels.
The picture below presents what Elliott Wave Double Three pattern looks like. It has (W),(X),(Y) labeling and 3,3,3 inner structure, which means all of these 3 legs are corrective sequences. Each (W) and (Y) are made of 3 swings , they’re having A,B,C structure in lower degree, or alternatively they can have W,X,Y labeling.

ETHUSD H1 Update 03.18.2024

ETHUSD is doing correction that is unfolding as a 7 swings pattern. Pull back has WXY red labeling. First leg W red shows clear 3 waves ((a))((b))(c)) black, after which we got 3 waves bounce in X red connector. Consequently we assume that pull back is unfolding as Double Three pattern, when we expect to see 3 waves in Y red as well. The structure is still incomplete at the moment. ETHUSD is showing lower low sequences from the March 11th peak. We expect to see another leg down toward extreme area: 3313.34-3011.56 ( buying zone). Once Ethereum reaches proposed extreme zone, we expect the crypto to make a rally toward new highs or in 3 waves bounce alternatively.

ETHUSD H1 Update 03.26.2024

Ethereum found buyers as expected. It made decent rally from the Blue Box. Bounce already reached 50 fibs against the X red connector which confirms cycle from the peak is done. Consequently, any long positions from the equal legs area are risk free by now and we have taken partial profits. We call wave (4) completed at the 3059.65low. Once ETHUSD make a break of March 11th peak, it will confirm next leg up is in progress.

This morning, news about inflation in Japan was published. It did not bring any surprises — inflation in Japan is gradually weakening as expected. Core CPI in annual terms: actual = 2.3%, forecast = 2.5%, a month ago = 2.6%, a year ago = 3.0%.

We also note that the official position is aimed at preventing further weakening of the yen, as the USD/JPY price has risen more than 7% since the beginning of 2024 — very close to a 32-year high. Thus, Japanese Deputy Finance Minister for Economic Affairs Masato Kanda yesterday warned that the current weakening of the yen does not correspond to fundamental indicators and is clearly caused by speculation. He concluded that the authorities would take appropriate measures against excessive fluctuations.

However, neither verbal interventions nor the publication of Japanese Core CPI values led to strong fluctuations in the USD/JPY market. Why so?

From a fundamental analysis point of view, market participants are keeping their focus on the publication of Core PCE Price Index values in the US, as well as the Fed Chairman's speech — both events are scheduled for Friday (at 15:30 and 18:30 GMT+3, respectively).

From a technical analysis point of view, the market stabilization is quite natural, since the USD/JPY price today is near the median line of the ascending channel (shown in blue), which describes the trajectory of 2024. The market seems to be cooling down after the RSI indicated it was overbought on March 20th.

It is the events of Friday that can bring the market out of the current equilibrium state (despite the fact that Friday is a day off in many countries, volatility can be high).

In case of bearish activity, the USD/JPY price may be supported by a zone consisting of:

→ the lower line of the border of the ascending channel;

→ psychological level of 150 yen per US dollar;

→ support from a local minimum of about 150.30 yen per US dollar.

If the market goes out of balance towards the upper boundary of the channel, market sentiment will likely be influenced by expectations of the Bank of Japan's reaction to an excessively weak yen — and this may not only be verbal interventions.

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Cable remains constructive in early Tuesday’s trading, after it was lifted by better than expected UK data on Monday and fading expectations for BOE rate cut in May.

Fresh recovery was also underpinned by a double downside rejection at 200DMA (1.2591) on Fri/Mon however, bearishly aligned daily studies (momentum indicator is in the negative territory and 10/20/55 DMA’s in bearish setup) keep in play risk of potential recovery stall.

Daily close above 10DMA (1.2637) and top of thin daily cloud (1.2663) is seen as a minimum requirement to maintain bullish bias, with lift above 1.2700 zone (Fibo 38.2% of 1.2893/1.2575 bear-leg / 20DMA) to strengthen near-term structure for further recovery.

Res: 1.2663; 1.2700; 1.2734; 1.2772.
Sup: 1.2637; 1.2591; 1.2575; 1.2518.

The USD/JPY pair stabilised around 151.35 by Tuesday, not far from its recent peaks, as the weakness of the Japanese yen has prompted verbal interventions from Japanese authorities.

Japan's Finance Minister, Shunichi Suzuki, mentioned that measures to normalise the yen are quite likely. He cited excessive volatility as increasing uncertainty for the country's trading partners and creating adverse conditions for business operations.

Monetary policy official Masato Kanda remarked that the yen's current weakness does not reflect fundamental factors, labelling recent depreciation waves as speculative. Kanda stated that authorities are closely monitoring currency movements and feel the need to "keep a finger on the pulse" of the market. Japan is ready to respond to yen volatility appropriately, though decisions are yet to be made.

The yen's decline gained momentum last week when the Bank of Japan raised its interest rate for the first time in 17 years, ending eight years of negative interest rates. The capital market was prepared for this move, as the BoJ had meticulously laid the groundwork for such a step.

The Bank of Japan intends to maintain an accommodative monetary policy for an extended period, which acts against the yen's value.

Technical analysis of USD/JPY

On the H4 chart of USD/JPY, a growth wave to 151.85 has been completed. This target is local and estimated. The market is currently forming a consolidation range below this level. With a downward breakout from this range, a correction to 149.12 is possible, after which a new growth wave to 152.70 is anticipated. The MACD oscillator supports this scenario, with its signal line directed downwards towards the zero line.

On the H1 chart of USD/JPY, a narrow consolidation range has formed around 151.31. A downward breakout and continuation of the correction to 150.75 are expected. Breaking through this level would open potential towards reaching 149.20, followed by an increase to 151.85. The Stochastic oscillator confirms this scenario, with its signal line below 80 and preparing for a decline to 20.

• The surprise rate cut by SNB has reinforced the bearish momentum of CHF/JPY.
• CHF has weakened across the board against the G-10 currencies; it is the weakest against the EUR.
• Watch the 169.00 key short-term resistance on CHF/JPY with key support coming in at 166.55.

The CHF/JPY cross-pair has remained soft as it failed to surpass its 50-day moving average at around 170.00. The previous minor rally from the 11 Mar 2024 low of 167.08 was rejected at the 50-day moving average on 21 March 2024 and reversed sharply to the downside thereafter with a loss of -296 pips/-1.73% in the past three sessions as it printed an intraday low of 167.83 today, 26 March at this time of the writing.

Prior CHF strength has dissipated across the board

Fig 1: 1-month rolling performances of G-10 CHF crosses as of 26 Mar 2024 (Source: TradingView, click to enlarge chart)

This recent bout of sharp downside reversal of the CHF/JPY has been attributed more to the CHF side of the equation as the Swiss National Bank (SNB) surprised market participants last Thursday, 21 March with a rate cut of 25 basis points (bps) to 1.5% on its key policy rate, its first cut in nine years, and ahead of the US Federal Reserve, Bank of England (BoE), and European Central Bank (ECB).

One of the push factors for enacting an earlier rate cut by SNB is the persistent strength of the franc that could erode the competitiveness of Swiss goods and services which in turn put a dent on economic growth prospects in Switzerland.

The CHF has weakened across the board against other major G-10 currencies and not surprisingly, the CHF is the weakest against the EUR with a loss of -2.5% based on a one-month rolling performance basis with the CHF/JPY coming in fifth position in the pecking order of CHF’s weakness (see Fig 1).

CHF/JPY is looking vulnerable to a major bearish breakdown

Fig 2: CHF/JPY major & medium-term trends as of 26 Mar 2024 (Source: TradingView, click to enlarge chart)

Fig 3: CHF/JPY short-term trend as of 26 Mar 2024 (Source: TradingView, click to enlarge chart)

In the lens of technical analysis, the major uptrend of CHF/JPY in place since the 13 January 2023 low of 137.44 has shown signs of bullish exhaustion. Firstly, it has traced out a bearish “Ascending Wedge” configuration from the 3 October 2023 low where such configuration/chart pattern typically appears at the end of a significant uptrend phase (see Fig 2).

Secondly, medium-term upside momentum has turned lacklustre as depicted by the observations seen in the daily RSI momentum indicator where it has flashed out a persistent bearish divergence condition since 10 January 2024.

Thirdly, the final straw came after the CHF/JPY broke below its 20-day moving on last Thursday, 21 March ex-post SNB.

In the short-term as depicted in its hourly chart, the latest price actions of the CHF/JPY have transformed into a minor downtrend phase after today’s bearish breakdown below its minor ascending trendline from the 11 March 2024 minor low.

If the 169.00 key short-term pivotal resistance (also the 20-day moving average) is not surpassed to the upside, the CHF/JPY may continue to display further weakness to expose the 167.10 near-term support and its key support at 166.55 (the 200-day moving average & lower boundary of the “Ascending Wedge”).

A daily close below 166.55 increases the odds of a major bearish breakdown scenario for the CHF/JPY that is likely to trigger the start of a potential major multi-month downtrend phase.

Conversely, a clearance above 169.00 negates the bearish tone for a choppy minor corrective rebound for the next intermediate resistances to come in at 170.00/20 and 170.70 (medium descending trendline from 22 February 2024 high).

• GBPUSD finds support at uptrend line
• But short-term outlook remains neutral
• MACD and RSI are mixed

GBPUSD rebounded off the 200-day simple moving average (SMA), which coincides with the 1.2595 support level and the medium-term ascending trend line. The market has still been developing within a consolidation area since November 21, despite the break to the upside that it had on March 8, which seems to be a failed signal.

Technically, the MACD oscillator is moving beneath its trigger and zero lines; however, the RSI is pointing upwards in the bearish territory.

If the market continues to the upside, it could find immediate resistance at the 50-day SMA at 1.2680 ahead of the 20-day SMA at 1.2730. Surpassing these lines, the upper boundary of the channel may halt bullish actions at 1.2820.

On the flip side, a successful dive below the uptrend line and the 200-day SMA, then the market may switch to a bearish one, hitting the 1.2495-1.2520 support region. Even lower, the 1.2370 barricade could be the next level to look for.

In a nutshell, GBPUSD returns back to a neutral phase after the climb towards the six-month peak of 1.2892 and to endorse the bullish outlook again, traders need to wait for a climb beyond the aforementioned level.

In a modest uptick, Germany's GfK Consumer Sentiment Index for April has slightly improved to -27.4 from March's -28.8, marginally above expectation of -27.8. March's data revealed an improvement in economic expectations and income outlooks, with the former rising to -3.1 from -6.4 and the latter to -1.5 from -4.8. However, the willingness to make purchases marginally declined from -15.0 to -15.3, and the propensity to save saw a notable drop from 17.4 to 12.4.

Rolf Bürkl, consumer expert at NIM, characterized the recovery in consumer sentiment as "slow and very sluggish." He pointed to the fundamental pillars of real income growth and a stable job market as underpinning factors that could potentially catalyze a swift rebound in consumer sentiment.

However, the prevailing atmosphere of uncertainty and a discernible lack of future optimism among consumers is holding sentiment back. This sentiment, according to Bürkl, is stifled by the ongoing array of crises, manifesting in a pronounced reluctance to make purchases despite objectively favorable economic conditions.

"In a nutshell: The poor sentiment is overshadowing the facts," Bürkl noted.

Full German Gfk consumer sentiment release here.

Markets

In a more or less synchronic, technically inspired move US, EMU and UK bond markets reversed most of Friday’s rally. Eco data were few and mostly second tier. Marginally softer-than-expected US new homes sales (-0,3% M/M) had little impact on trading. Fed speakers covered the full spectrum of intra-FOMC views. Fed’s Goolsbee supports the median view of three rate cuts, but wants to see more progress with especially housing inflation puzzling the outlook. Fed’s Cook also advocated a cautious approach as the disinflation process has become more uneven. Fed’s Bostic reiterated his view that, if the economy develops as expected, the Fed can be patient with only one rate cut penciled in for this year. US yields rebounded between 3.6 bps (2-y) and 5.7 bps (10-y). A $66bn 2-y US Note auction was solid. German yields rebounded between 5.8 bps (2-y) and 3.2 bps (30-y). Even so, markets still see > 80% chance of a first rate cut in June. ECB’s Lane in this respect said he’s confident that the wage normalization process is on track. ECB’s Panetta (BoI) sees inflation quickly cooling to 2%, allowing for a possible rate cut. The rebound in yields had no unequivocal impact on other markets. Equities showed a mixed picture (S&P 500 -0.31%, Eurostoxx + 0.27%). Oil remains well bid (Brent $86.8/b). The rise in yields didn’t help the dollar. DXY lost modest ground (close 104.22). EUR/USD rebounded to close at 1.0837. The rebound of the yen, even against a soft dollar remains limited despite high profile verbal interventions from Vice Fin Min Kanda. EUR/GBP was blocked in a tight intraday trading range (close little changed at 0.8575).

Asian equities this morning show no clear trend as investors take a cautious approach toward the end of the quarter. The PBOC again strengthened the fixing of the yuan, resulting in a further improvement of the off-shore yuan while the on-shore currency is trading marginally softer (USD/CNY 7.2194). Later today, the US Philly Fed Non-Manufacturing Survey, durable goods orders, house price data and consumer confidence (Conf. Board) will be published. Durable goods orders are notoriously volatile. Shipments are expected to ease after a strong reading last month. Higher than expected house prices might keep housing-related inflation in focus. US consumer confidence is expected to stabilize (107 from 106.7). We don’t expect today’s releases to be a ‘game-changer’. Bond market sentiment remains a bit diffuse after last week’s ‘mixed Fed guidance’. Yesterday’s rebound suggests that there is little room for markets to further position for an early/aggressive Fed easing cycle. If so, the downside in the dollar should stay well protected. Also keep an eye at the policy decision of the Hungarian central Bank (MNB). After the recent decline of the forint, the MNB will probably scale back the one-off February pace of a 100 bps cut. Most market participants expect 75 bps easing, but 50 bps might also be on the table.

News & Views

The US’ independent budgetary watchdog warned for a Liz Truss-style market shock if the government fails to address the matter of ballooning federal debt. Swagel, director of the CBO, referred to the gilt and pound collapse in September 2022 when former PM Truss announced sweeping tax cuts funded by more debt. It eventually led to her resignation after being in office for only 45 days. Swagel said the US was not there yet but risks are rising. His comments came a day after the CBO issued new longer-term economic projections, which showed debt levels rising to 166% of GDP in 2054. But in 5 years already, the US debt-to-GDP ratio would exceed the WWII high of 116%. The US is expected to run deficits of about 6% over the next 10 years before increasing further on higher net interest outlays. These forecasts are based on the scheduled expiry of Trump’s 2017 tax cuts in 2025. Some calculations estimate the cost at $5tn for making these permanent.

The French 2023 deficit turned out bigger than the government expected in a setback for president Macron’s ambition to address the country’s fiscal challenges. Official figures issued this morning showed the shortage expanding from 4.8% in 2022 to 5.5% last year. The Élysée had penciled in a marginal uptick to 4.9%. Growth in tax revenues slowed sharply amid economic stagnation while spending eased only slightly. Debt-to-GDP dropped from 111.9% at the end of 2022 to 110.6%.