Sample Category Title

Fed's ongoing battle against inflation was underscored by Boston Fed President Susan Collins, who expressed concerns over the persistently high inflation rates. She stated yesterday, "Inflation remains too high, and recent indicators reinforce my view that there is more work to do, to bring inflation down to the 2% target associated with price stability."

Collins reiterated her belief that Fed can successfully lower inflation without causing a recession, but acknowledged that a rise in unemployment would be necessary to achieve this goal. As Fed prepares for its May meeting, Collins admitted it is too early to predict the appropriate course of action.

She also noted that recent developments may lead banks to adopt a more conservative outlook and tighten lending standards, thus helping to slow the economy and reduce inflationary pressures. "These developments may partially offset the need for additional rate increases," she added in her prepared remarks.

SVB failed in March. Oil was destined to fall as early as February – here's why;

The failures of Silicon Valley Bank, Silvergate Bank and Signature Bank have prompted a lot of discussion about the potential of a domino effect. People are wondering "what's next?"

The financial press is linking just about every downward price move in just about every financial market to the woes in the banking sector.

As a March 15 headline noted (CNBC):

Oil tumbles to lowest level since December 2021 as banking crisis routs markets

At the time that headline published, West Texas Intermediate had fallen around 5% during that trading session.

But, first of all, if you're failing to see an immediate connection between bank failures and crude oil prices, you're not alone. I see no connection, either. What's more, Elliott Wave International was forecasting the price of crude oil to decline well before the bank failures hit the news.

On Feb. 3, the February Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus financial markets, published with this chart and commentary (Elliott wave labels are shown to subscribers):

Crude Oil's trend still looks down... [a strong Elliott wave] decline still seems like the likely path.

During the next month, oil largely traded sideways. Sometimes, Elliott wave analysis requires patience. On March 3, our March Global Market Perspective updated its crude oil analysis with this chart and commentary:

Crude Oil still looks lower. Crude has yet to step into the meat of the [strong Elliott wave decline] we're anticipating, but it still seems like the likely path.

As you probably know, the price of crude oil has moved lower since our March Global Market Perspective published.

As with all financial markets, countertrend moves will inevitably occur. Yet, Elliott wave analysis provides context and a basis for forecasting before the news; without any news.

If you'd like to learn the details of the Elliott wave model, read Frost & Prechter's Elliott Wave Principle: Key to Market Behavior. Here's a quote from this Wall Street classic:

The Wave Principle is governed by man's social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.

Sometimes the market appears to reflect outside conditions and events, but at other times it is entirely detached from what most people assume are causal conditions. The reason is that the market has a law of its own. It is not propelled by the external causality to which one becomes accustomed in the everyday experiences of life. The path of prices is not a product of news. Nor is the market the cyclically rhythmic machine that some declare it to be. Its movement reflects a repetition of forms that is independent both of presumed causal events and of periodicity.

The market's progression unfolds in waves. Waves are patterns of directional movement.

If you want to know what the waves are showing for the energy sector next, we have a rare, free opportunity for you. Now through April 5, use our trader-focused Energy Pro Service -- free.

Learn How to Navigate Oil & Volatile Energies now.

This article was syndicated by Elliott Wave International and was originally published under the headline Crude Oil: Will "Banking Crisis Send Prices Even Lower"? Ha!. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Key insights from the week that was.

Softer updates around the Australian consumer and inflation have strengthened the case for a pause at next week’s April RBA policy meeting. Global market sentiment meanwhile improved over the week as concerns over US and European banks eased.

Australian retail sales posted an as expected gain of 0.2% in February after a turbulent two months. The lift in nominal spending across department stores, clothing and food-related retail more than offset the flat result in household goods and weakness in ‘other retail’ items. Looking through recent volatility, it becomes clear the nominal retail trend is weakening, with sales down 1.5% on a rolling three-month basis. Should this subdued trend persist into March, nominal retail sales in Q1 are likely to be little changed from Q4; and, given the elevated rate of inflation amongst retail components, retail sales volumes are poised to contract materially in the quarter.

Following a 0.4% decline in January, the Monthly CPI Indicator surprised to the downside again in February, a modest 0.2% rise in the month lowering the annual rate of inflation from 7.4% to 6.8%, well below the consensus estimate of 7.2%. Compared to the average monthly increase of 0.9% over the last three months of 2022, a moderation in the pace of inflation has clearly materialised. At this stage, the deceleration in annual inflation between January and February looks to be relatively broad-based, with easing evident across food (6.8% vs. 7.4%); housing (9.9% vs. 10.4%); transportation (5.6% vs. 6.1%) and household contents/services (6.6% vs. 6.8%). The main surprise in the month came from holiday travel which notably fell 14.6% in February after a 7.2% decline in January. Consequently, annual inflation in the broader recreation category has more than halved over the last two months, from 14.4% to 6.4%.

As outlined by Chief Economist Bill Evans, the recent data flow complements earlier updates on the labour market and business confidence, putting forward a strong case for the RBA to pause at the April Board meeting. The RBA will also benefit from the fact that their meeting schedule has largely avoided the intense periods of uncertainty around the banking sector, with global sentiment having steadily improved over the course of this week (see below), allowing the Board to remain focussed on domestic developments. That said, we continue to expect the Q1 CPI release to report uncomfortably high underlying inflation, warranting a final 25bp rate hike at the May Board meeting. Policy should then remain on hold over the remainder of 2023 as inflation continues its gradual descent. 150bps of rate cuts are then expected through 2024 and 2025 to return policy to a near-neutral setting.

Offshore, data was of limited significance this week. In the US, the Dallas and Richmond Fed business surveys remained weak in March, while the trade deficit held wide in February. Another modest decline was also seen in S&P CoreLogic CS 20-city house prices in January (-0.4%), slowing the annual rate of growth from 4.6% to 2.6%. The volume of pending homes sales meanwhile surprised by holding up in February after January’s jump higher (respectively 0.8% and 8.1%); however, versus a year ago, they remain 21% lower. Notably, despite recent market volatility and lingering uncertainty over the banking sector, Conference Board consumer confidence improved slightly in March, remaining well above its lows of 2020-21 and 2022 but also a long way from prior peak levels. Expectations were the driving force in March, offsetting a small decline in current conditions. Arguably this is due to a combination of the robust health of the US labour market and a 10-year yield (and consequently 30-year mortgage rate) off peak levels. Note the main US data release for this week is still to come, with the February PCE data due this evening.

Over the week, FOMC members’ perspective on the outlook is unchanged, their focus remaining on the need for a sustained period of contractionary policy to quell inflation risks. Developments around the banking sector have generally been constructive, with Silicon Valley Bank bought by First Citizens Bank and the market increasingly of the view that, if necessary, authorities will provide further support. Market pricing for the FOMC is split, with a roughly 50% chance of another 25bp hike by the FOMC in May, but then three-to-four 25bp rate cuts priced by January 2024. Recognising the risks with regards to inflation but also the material credit tightening underway, we believe the prudent course for the FOMC is to remain on hold from May 2023 until March 2024 then cut back towards neutral through to mid-2025.

Key Highlights

• USD/JPY started a recovery wave above the 132.20 resistance.
• It broke a major bearish trend line with resistance near 131.20 on the 4-hours chart.
• GBP/USD rallied and traded to a new monthly high above 1.2340.
• EUR/USD is also gaining pace above the 1.0850 resistance zone.

USD/JPY Technical Analysis

The USD/JPY started a decent recovery wave from the 129.65 zone against the Japanese Yen. USD/JPY traded above the 130.50 and 131.20 levels to move into a positive zone.

Looking at the 4-hours chart, the pair cleared a major bearish trend line with resistance near 131.20. The pair even tested the 132.80 resistance zone and traded close to the 100 simple moving average (red, 4-hours).

The first major resistance is near the 133.20 level. The next key resistance is near the 133.50 zone and the 200 simple moving average (green, 4-hours). It is close to the 50% Fib retracement level of the downward move from the 137.91 swing high to 129.63 low.

A clear move above the 133.50 resistance might send the pair towards the 134.50 zone. Any more gains might send the pair towards 135.00.

On the downside, an immediate support is near the 131.80. The next major support is near the 131.20 level, below which there is a risk of a move towards the 130.50 support.

Looking at GBP/USD, the pair gained pace above the 1.2350 resistance and even traded to a new monthly high.

Economic Releases

• UK GDP for Q4 2022 (QoQ) - Forecast 0%, versus 0% previous.
• Euro Zone CPI for March 2023 (YoY, Preliminary) - Forecast +7.1%, versus +8.5% previous.
• Euro Zone CPI for March 2023 (MoM, Preliminary) - Forecast +0.8%, versus +0.8% previous.

• Gold reversed from key support level 1950.00
• Likely to rise to resistance level 2000.00

Gold recently reversed up from the key support level 1950.00 (former strong resistance from January and February).

The upward reversal from the support level 1950.00 forms the 3rd consecutive upward reversal pattern Piercing Line – pointing toward the higher probability of further gains.

Given the clear uptrend Gold can then be expected to rise further toward the next round resistance level 2000.00 – from where the price is likely to correct down.

• GBPUSD broke resistance level 1.22664
• Likely to rise to resistance level 1.2440

GBPUSD rising after the pair broke above the resistance level 1.22664 (top of the previous correction 2 from the middle of February).

The breakout of the resistance level 1.22664 continues the active short-term impulse wave C, which belongs to the intermediate ABC correction (2) from the start of March.

Given the strong uptrend and the widespread dollar sales, GBPUSD currency pair can then be expected to rise further toward the next resistance level 1.2440 (monthly high from December and January and the target price for the completion of the active impulse wave C).

• USDCAD under bearish pressure
• Likely to fall to support level 1.3400

USDCAD currency pair under the bearish pressure after the price broke the key support level 1.3560 (low of the previous correction (iv)) intersecting with the 50% Fibonacci correction of the sharp upward impulse from February.

The breakout of the support level 1.3560 accelerated the active short-term upward impulse wave (c), which belongs to the ABC correction 2 from the start of this month.

USDCAD currency pair can then be expected to fall further toward the next support level 1.3400 (target price for the completion of the active impulse wave (c)).

In line with the other main stock markets, the UK 100 cash index is continuing its recovery from the mid-March banking sector-induced dip. The index touched 7,205 on March 20 and it is now hovering just above the June 2, 2017 high of 7,599. It has entered a range that proved difficult for the bulls to overcome during 2022. The market has excellent memory regarding recent highs and hence UK 100 bulls should prepare for this new battle.

In the meantime, a common theme appears to be arising from the momentum indicators, potentially supporting the bulls' ambitions. The RSI is a tad below the 50-threshold, leaving the door open for another rally. In addition, the stochastic oscillator has managed to remain above its moving average, and it is now staging a bounce higher. This reaction is usually seen as an indication of bullish momentum in the market. The bulls, however, cannot take much encouragement from the Average Directional Movement Index (ADX) as this is dropping aggressively, signaling a weakening trending market.

The bulls would love a break above the 7,689 level set by the January 17, 2020 high, but they have to deal with the 100-day simple moving average (SMA) first. Even higher, the 23.6% Fibonacci retracement of the October 13, 2022 – February 16, 2023 uptrend and the 50-day SMA at the 7,729-7,773 range might trouble them.

On the other hand, should the bears manage to take over the market, they would aim for a retest of the 38.2% Fibonacci retracement at 7,533. The path then becomes trickier as the two heavyweights, the 50% Fibonacci retracement and the 200-day SMA are likely to prove stronger resistance points than currently envisaged by the bears.

To sum up, the UK 100 cash index has quickly recovered from the mid-March shock. But the 7,599-7,689 area would be the true test of the bulls' resolve.

In today's article, we will be performing an interesting analytical experiment - Correlation!

To start, I have chosen a few indices that we will be observing. It's just like we're analyzing the flavors of different ice creams and predicting which ones will sell better based on their ingredients. In this case, the price action is the component we will adopt in order to determine the outcome. So, let's dive into the price action!

UK100

First on my list is UK100, and I'll be working on the Daily timeframe. Here we see price currently at a strong pivot zone acting as a resistance. The 100-Day MA also overlaps with this zone and adds extra confirmation to the possibility of a bearish rejection from the supply zone. The primary target would be the 200-Day MA. You notice the stochastics seems overbought too right? Cheers!

Analysts’ Expectations:

• Direction: Bearish
• Target: 7440.00
• Invalidation: 7708.97

EU50

EU50 has created a classic AMD (Accumulation-Manipulation-Distribution) pattern. There has also been a break of the trendline that would act as the pivot in this case; thus making the current bullish move a mere retracement. There is also the confluence of the 88% Fibonacci retracement level, which leads me to believe that price may seek to return to the lower trendline for support.

Analysts’ Expectations:

• Direction: Bearish
• Target: 4082.5
• Invalidation: 4342.30

DE30

EU50 and DE30 seem to be members of the same book club. Do you see the resemblance in the price action? We have the same AMD pattern, the same Fibonacci retracement level, and the same trendline situation going on. All these simply affirm the likelihood of bearish price action in a short while.

Analysts’ Expectations:

• Direction: Bearish
• Target: 4084.63
• Invalidation: 4337.94

FR40

Alas! The book club has one more member here. The price action on FR40 at this point really needs not much explanation; in fact, you could simply refer to the analysis for EU50 or DE30, and you'd still be on point.

Analysts’ Expectations:

• Direction: Bearish
• Target: 6951.54
• Invalidation: 7426.28

CONCLUSION

The trading of CFDs comes at a risk. Thus, to succeed, you have to manage risks properly. To avoid costly mistakes while you look to trade these opportunities, be sure to do your due diligence and manage your risk appropriately.