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Gold was sharply up in early US trading on Tuesday, breaking through psychological $2000 level and hitting the highest since March 2022.

Fresh rally was sparked by weaker than expected US data which added to uncertainty and prompted traders from dollar into safety of the yellow metal

Today’s advance signals that extended consolidation under $2000 is likely over and the price is entering fresh bullish phase after a two-week pause.

Strong rise ($2025 peak reached so far and price holding there) adds to expectations that the latest break higher will be verified by close above broken $2000 level, which will generate bullish signal and unmask key targets at $2070 (Mar 2022 high) and $2074 (gold’s record high, posted on Aug 2020).

Overall environment is favorable for gold and improving, as the global economy remains fragile, weighed by persisting pressure from high energy prices, stubbornly high inflation, rising interest rates and continuous political and geopolitical tensions, which threaten to escalate.

Investors also sell dollar on growing speculations that the Fed may end its tightening cycle sooner than initially estimated, which also makes the greenback less attractive and adds support to gold.

Res: 2025; 2037; 2055; 2070
Sup: 2009; 2000; 1978; 1966

Cable extends step ascend into second straight day, extending broader uptrend above former tops (1.2447) and hit new multi-month high on probe through 1.2500 barrier, for the first time since June 2022.

Pound benefited from fresh weakness of the US dollar, as growing optimism continues to fuel risk appetite.

Markets also keep a high percentage of expectations that the Bank of England would deliver a 12th consecutive rate hike in its May policy meeting, although some calmer tones about possibility that the central bank may need to start cutting rates earlier than expect, but this was so far seen as a speculation and had no impact on pound’s near-term performance.

Technical studies keep firm bullish tone on daily chart and continue to support fresh advance, which looks for close above 1.2447 (former tops of Dec 14 / Jan 23) to generate initial signal of bullish continuation.

Additional positive signal has been generated on bullish engulfing pattern on monthly chart, after the action in past four months repeatedly failed to register close below 1.20 level, adding to significance of the support.

Also, fresh rally signaled an end of four-month consolidation and extension of an uptrend from 1.0348 (Sep 26 low), bringing in focus targets at 1.2665 (May 2022 double top); 1.2759 (Fibo 61.8% of 1.4249/1.0348 downtrend) and 1.2791 (100WMA).

Broken barriers at 1.2447 reverted to solid support, which guards rising 10DMA (1.2335), where dips should be contained.

Res: 1.2600; 1.2665; 1.2694; 1.2759
Sup: 1.2500; 1.2447; 1.2335; 1.2290

BoE Chief Economist Huw Pill, in a speech, highlighted the importance of delivering enough monetary tightening to "see the job through" and return inflation to target levels on a sustainable basis. He acknowledged the significant policy lag in monetary policy transmission but maintained that a cautious approach was still required.

Pill noted that while headline inflation is set to decline substantially during the year due to base effects and falling energy prices, it's crucial to remain vigilant regarding domestically generated inflation. He stated, "caution is still needed in assessing inflation prospects on account of the potential persistence of domestically generated inflation."

Full speech of BoE Huw Pill here.

ECB Governing Council member Gabriel Makhlouf emphasized the need for vigilance regarding the lagging effects of monetary policy on growth and inflation.

He said today, "We must remain alert to the longer lags in the transmission of monetary policy to growth and inflation." He highlighted the importance of evaluating the impact of past monetary policy decisions on the economy when determining further action.

Makhlouf also stressed that the ECB "must remain steadfast and ready to act as required" to ensure that inflation returns to its target level over the medium-term.

He added that interest rates must be maintained at a restrictive level to dampen demand, implying a continued cautious approach by the ECB in managing inflation expectations and economic growth.

Markets

With few important data releases, today was supposed to be a transitory trading session after yesterday’s (very disappointing) US manufacturing ISM and ahead of the key US Services ISM and labour market data later this week. However an empty calendar doesn’t by definition mean investors abstaining from further finetuning positions. After yesterday’s weak ISM, one could have expected investors to give some more consideration to lower growth rather than to inflation risks. However, this wasn’t really the case. In technical trading, US yields are gaining 5/8 bps across the curve. The US 2-y still struggles to hold above the 4% psychological barrier (4.02%). The 10-y yield (3.48%) maintains some breathing space above the key 3.40/3.32% key support area. On this side of the Atlantic, German yields show a similar pattern, rising between 6 bps (2-y) and 8.5 bps (10/30-y). In a broader perspective, core bond yields are building some kind of sideways pattern at lower levels compared to the peak levels reached early March. This ‘relative loosing’ combined with receding event risk, continues to support equities. The Eurostoxx 50 today jumped above the early March YTD top and even nears the end 2021 multi-year peak. US indices also open little changed. Interesting to see the (equity) market reaction in case of stronger than expected US data later this week. In this respect, already keep an eye at JOLTS job openings, to be released after finishing this report. Oil maintains yesterday’s jump higher (Brent $85.5/b).

For USD trading, today’s session really marked some kind of interlude with mostly range trading between the established barriers. DXY hovers near the 102 big figure. EUR/USD tried a first ‘real’ attack on the 1.0930 resistance, but the test was rejected, even despite a constructive global risk sentiment (currently 1.089). USD/JPY gains a few ticks (132.9), but also didn’t break any technically relevant level. Of late, sterling was an area of remarkable calm, both in risk-on and risk-off episodes. This pattern was quite abruptly overthrown today. EUR/GBP nosedived from the 0.878 area to currently change hands near 0.873. The key 0.8720 support is within reach. To be honest, we didn’t see the exact trigger. The move occurred when headlines from BoE’s Tenreyro hit the screens. However, she firmly held to her well-known highly dovish stance as she raised the case for ‘an earlier and faster reversal’ of the current hiking cycle to prevent inflation to drop below 2% later in the BoE’s policy horizon. It didn’t stop the sterling ‘break-out’. Markets are maybe repositioning for a more positive (less negative) UK growth outlook. However, we’re convinced that this will change the BoE’s (dovish) reaction function anytime soon.

News Headlines

The ECB published results of its February Consumer Expectations Survey. Median expectations for inflation over the next 12 months continued to decline, moving down from 4.9% in January to 4.6%. Expectations for inflation three years ahead edged down from 2.5% to 2.4%. Consumers expected their nominal income to grow by 1.2% over the next 12 months, down from 1.3% in January. Expectations for nominal spending growth over the next 12 months rose slightly to 3.9%, from 3.8% in January. Economic growth expectations for the next 12 months continued to increase, rising to -0.9% from -1.2% in January 2023. Expectations for the unemployment rate 12 months ahead declined to 11.5%, compared with 11.6% in January. Consumers expected growth in the price of their home over the next 12 months to increase slightly to 2.6%, compared with 2.5% in January. Expectations for mortgage interest rates 12 months ahead rose slightly to 5%.

Swedish housing starts in apartments and single-house families are expected to half this year to 25.5k, according to the nation’s construction federation. The new forecast in its bi-annual report compares to 38.5k put forward last fall. Housing construction has not been this low in a decade. Rising interest rates are the main reason with the federation expecting the Riksbank to raise policy rates even further to 4%, compared to currently 3%. The grim situation also affects employment in the construction industry. The number of employed people is estimated to decrease by 21k between 2022 and 2024. Overall, Swedish GDP is forecast to decrease by 1.6% in 2023 - to reverse to an increase of 1.2% in 2024. The Swedish krone holds near historically low levels around EUR/SEK 11.30. The 2019 top of 11.43 is final resistance ahead of the 2009 top at 11.79

In this technical blog, we will look at the past performance of the 4-hour Elliott Wave Charts of GBPCAD. In which, the rally from the 10 February 2023 low unfolded as an impulse sequence and showed a higher high sequence with a bullish sequence stamp. Therefore, we knew that the structure in GBPCAD is incomplete to the upside & should see more upside to complete the impulse sequence. So, we advised members not to sell the pair & buy the dips in 3, 7, or 11 swings at the blue box areas. We will explain the structure & forecast below:

GBPCAD 4-Hour Elliott Wave Chart From 4.02.2023

Here’s the 4hr Elliott wave Chart from the 4/02/2022 Weekend update. In which, the rally to 1.6866 high ended 5 waves from the 2/10/2023 low in wave (1) & made a pullback in wave (2). The internals of that pullback unfolded as Elliott wave double three correction where wave W ended at 1.6676 low. Then a bounce to 1.6792 high ended wave X & started the next leg lower in wave Y towards 1.6602-1.6483 blue box area. From there, buyers were expected to appear looking for new highs ideally or for a 3 wave bounce minimum.

GBPCAD 4-Hour Latest Elliott Wave Chart From 4.03.2023

This is the latest 4hr Elliott wave Chart from the 4/03/2023 update. In which the pair is showing a reaction higher taking place, right after ending the double correction within the blue box area. Allowed members to create a risk-free position shortly after taking the long position at the blue box area.

Daily Pivots: (S1) 131.83; (P) 132.79; (R1) 133.38; More...

USD/JPY is staying in consolidation from 133.74 and intraday bias remains neutral. Overall, rise from 129.62 is seen as the third leg of the corrective pattern from 127.20. Sustained break of 55 day EMA (now at 133.34) will target 137.90 resistance. On the downside, break of 131.75 minor support will turn bias to the downside for 129.62 first. Break there will bring retest of 127.20 low.

In the bigger picture, corrective pattern from 127.20 might be extending. But after all, down trend from 151.93 is expected to resume at a later stage. Break of 127.20 will resume this down trend and target 61.8% projection of 151.93 to 127.20 from 137.90 at 122.61. This will now be the favored case as long as 137.90 resistance holds.

Daily Pivots: (S1) 0.9097; (P) 0.9146; (R1) 0.9177; More...

USD/CHF is still extending the corrective pattern from 0.9058 and intraday bias stays neutral. Another rise cannot be ruled out. But upside should be limited by 0.9474 fibonacci level. On the downside, firm break of 0.9058 will resume larger down trend from 1.1046.

In the bigger picture, fall from 1.1046 (2022 high) should still be in progress with 38.2% retracement of 1.0146 to 0.9058 at 0.9474 intact. Prior rejection by 55 week EMA was a medium term bearish sign. Break of 0.9058 will resume such decline towards 0.8756 support (2021 low). But overall, this fall is still as a leg in the long term range pattern from 1.0342 (2016 high). So, downside should be contained by 0.8756 to bring reversal.

Daily Pivots: (S1) 1.0822; (P) 1.0869; (R1) 1.0951; More...

Intraday bias in EUR/USD remains mildly on the upside. Current rise from 1.0515 should target a test on high first. Decisive break there will resume larger up trend from 0.9534 to 1.1273 fibonacci level next. On the downside, break of 1.0787 support will turn bias back to the downside for 1.0711 support instead.

In the bigger picture, rise from 0.9534 (2022 low) is in progress with 38.2% retracement of 0.9534 to 1.1032 at 1.0460 intact. The strong support from 55 week EMA (now at 1.0625) was also a medium term bullish sign. Next target is 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273. Sustained break there will solidify the case of bullish trend reversal and target 1.2348 resistance next (2021 high).