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The Aussie Dollar started a fresh decline from well above 0.6740 against the US Dollar. The AUD/USD pair declined below the 0.6700 level to move into a bearish zone.

The pair even traded below the 0.6650 level and settled below the 50 hourly simple moving average. A low is formed near 0.6625 and the pair is now consolidating losses. An immediate resistance is near the 0.6655 level and a connecting bearish trend line on the hourly chart.

The next major resistance is near 0.6675 on FXOpen. If there is an upside break above the 0.6675 zone, the pair could rise steadily towards the 0.6700 level in the near term. The next major resistance sits near the 0.6740 level.

An immediate support is near the 0.6625 level. The next key support is near the 0.6600 level. A downside break below the 0.6600 support could lead the pair towards the 0.6565 support.

ECB Governing Council member Pablo Hernandez de Cos has emphasized that the central bank's future monetary policy decisions will be highly dependent on the development of various risk sources, including recent financial market turmoil.

De Cos also noted that the intensity of monetary policy transmission will be taken into account in policy decisions. He observed that the ongoing tensions in financial markets have led to a further tightening of financial conditions, impacting the outlook for economic activity and inflation.

As the ECB prepares for its next meetings, De Cos highlighted that all these factors must be considered.

Reagrading inflation, he wared, "over the medium term, the main risk for inflation comes from a persistent rise in price expectations above our inflation target."

Howveer, "the disinflation process could be accelerated further if the high tensions in financial markets were to be prolonged,"he added.

The British pound is trading quietly on Monday. In the European session, GBP/USD is trading at 122.49, up 0.15%. The pound has looked sharp of late, and last it touched a high of 1.2343, its highest level since late January.

In the UK, there are no tier-1 releases this week, but that doesn’t mean it will be a quiet week for the pound. Investors will be listening closely as BoE Governor Bailey speaks at public engagements today and on Tuesday. The latter should be especially interesting, as Bailey will testify before the Treasury Select Committee about the Silicon Valley collapse.

Bailey to testify on SVB collapse

Bailey has sounded surprisingly optimistic, given that inflation remains in double digits despite the BoE raising rates 11 consecutive times. After the 25-bp rate hike earlier this month, Bailey said that he expected inflation to fall “quite rapidly” in the next few months. On Friday, Bailey said that the prospects for growth were better and there was a “pretty strong likelihood” that the country would avoid a recession this year. I’m not at all sure that lawmakers share the Governor’s optimism, and they will likely grill Bailey on the Bank’s rate policy, which has failed to reign in high inflation.

Sticky inflation is not the only headache that Bailey needs to deal with. The banking crisis has caused stress in the financial markets, and investors remain concerned about the stability of the banking sector. Authorities in Switzerland and the US have acted quickly and decisively, which has helped calm down the markets. President Biden and Treasury Secretary have said that the banking system is safe, and on Friday, the Financial Stability Oversight Council, a group of financial regulators, said that the US banking system remains “sound and resilient”.

The stresses on the banking system are being closely watched by central banks, which are fearful of the contagion spreading as well as a credit crunch, which could slow the economy. ECB President Lagarde said last week that the bank crisis could help lower inflation, and UK lawmakers might ask Bailey if the crisis could dampen inflation in the UK.

GBP/USD Technical

• GBP/USD is testing resistance at 1.2248. The next resistance line is 1.2341
• There is support at 1.2152 and 1.2071

Germany Ifo Business Climate rose form 91.1 to 93.3 in March, above expectation of 92.0. That's also the fifth consecutive rise. Current Assessment index rose from 93.9 to 95.4, above expectation of 94.0. Expectations index rose from 88.4 to 91.2, above expectation of 87.4.

By sector, manufacturing rose from 1.5 to 6.6. Services rose from 1.3 to 8.9. Trade ticked up from -10.6 to -10.0. Construction also improved from -19.0 to -17.9.

Ifo said, the upward development in business climate was "driven primarily by business expectations". "Despite turbulence at some international banks, the German economy is stabilizing," it added.

Full German Ifo release here.

Gold has experienced significant gains since early March mainly due to the turmoil observed in the global banking sector. Even though bullion posted a fresh one-year high of 2,010 in the previous week, it quickly retraced lower and has been moving sideways for the last few daily sessions.

The short-term oscillators currently suggest that bullish near-term forces are subsiding but remain in control. Specifically, the MACD histogram is softening but holds above zero and its red signal line, while the RSI is ticking downwards above its 50-neutral mark.

If the positive momentum fades and the price moves to the downside, the February resistance region of 1,959 could act as immediate support. Diving lower, the price could descend to challenge the recent low of 1,933. Should that barricade fail also, the 1,885 hurdle, which overlaps with the 50-day simple moving average (SMA), might provide downside protection.

Alternatively, should gold resume its short-term advance, the bulls could initially aim at the crucial 2,000 psychological mark. A violation of that region may open the door for the one-year high of 2,010. Failing to stop there, further advances could then cease at the March 2022 high of 2,070 registered after Russia’s invasion of Ukraine.

Overall, gold seems to be stuck in a rangebound pattern after its recent rally came to a halt. Hence, a break above the 2,010 ceiling is needed to revive bulls’ hopes for the continuation of gold’s uptrend.

The Dollar Index was steady in early Monday’s trading, following strong advance last Thu/Fri, sparked by fresh fears about crisis in banking sector, which sent bank shares sharply lower on Friday.

Investors remain concerned despite immediate action by authorities to contain the crisis and assurance that the US banking system was stable.

Growing fears lifted safe-haven dollar and so far offsetting negative impact from Fed’s policy decision last week, which markets saw as dovish.
The US central bank raised interest rates by 0.25% but comments from Chair Powell showed more cautious stance as policymakers try to balance the need for further raising of interest rates due to stubbornly high inflation and threats that this may significantly hurt the economy, exposed to increased stress on banking sector.

Daily technical studies on daily chart show prevailing bearish tone, as negative momentum continues to strengthen and moving averages are still in bearish configuration, though Tuesday’s daily Ichimoku cloud twist continues to attract near-term bulls, with last week’s long-tailed candle and weekly bear-trap under Fibo support at 102.64, generating initial positive signals.

Fresh bulls need to hold above cracked Fibo pivot at 102.55 (23.6% retracement of 105.85/101.53 bear-leg) to keep near-term bulls intact for attack at key 103.12/12 barriers (daily Tenkan-sen / Fibo 38.2% retracement), violation of which would firm the structure for further advance.

Res: 103.12; 103.18; 103.70; 104.20.
Sup: 102.55; 102.14; 101.88; 101.53.

Daily Pivots: (S1) 158.49; (P) 159.67; (R1) 161.07; More...

Intraday bias in GBP/JPY is turned neutral again with current recovery. But risk will stay on the downside as long as 163.32 resistance holds. Fall from 165.99 is seen as part of the whole fall from 172.11. Sustained break of 158.54 will argue that larger decline from 172.11 is resuming through 155.33 low.

In the bigger picture, as long as 38.2% retracement of 123.94 (2020 low) to 172.11 (2022 high) at 153.70 holds, medium term bullishness is retained. That is, larger up trend from 123.94 (2020 low) is still in progress. Break of 172.11 high to resume such up trend is expected at a later stage.

Daily Pivots: (S1) 139.20; (P) 140.53; (R1) 141.99; More....

Intraday bias in EUR/JPY remains neutral first but risk stays on the downside as long as 143.61 resistance holds. Break of 138.81 will affirm the bearish case that fall from 145.55 is a leg inside the whole corrective decline from 148.38. Next target is 137.37 low, and then 135.40 fibonacci level.

In the bigger picture, as long as 55 week EMA (now at 139.58) holds, larger up trend from 114.42 (2020 low) is still in progress for 149.76 long term resistance. However, sustained break of 55 week EMA will bring deeper fall to 38.2% retracement of 114.42 to 148.38 at 135.40. Decisive break there will raise the chance of trend reversal, and target 61.8% retracement at 127.39.

Daily Pivots: (S1) 0.8774; (P) 0.8800; (R1) 0.8824; More...

Intraday bias in EUR/GBP stays neutral at this point and outlook is mixed. On the upside, break of 0.8864 will target 0.8924 resistance first. Firm break there should resume larger rise from 0.8545 through 0.8977 high. However, decisive break of 0.8717 support will resume the decline from 0.8977 instead.

In the bigger picture, outlook remains rather mixed for now, except that price actions from 0.9267 (2022 high) are part of the long term range pattern from 0.9499 (2020 high). With 0.8720 support intact, rise from 0.8545 is in favor to continue through 0.8977. However, firm break of 0.8720 will argue that such rebound has completed, and open up deeper fall through this support level.

Daily Pivots: (S1) 1.6139; (P) 1.6195; (R1) 1.6252; More...

Intraday bias in EUR/AUD stays neutral at this point. Further rally is expected as long as 1.6053 support holds. Decisive break there of 61.8% projection of 1.4281 to 1.5976 from 1.5254 at 1.6302 will resume larger rally from 1.4281 to 1.6389 fibonacci level and then 1.6434 resistance. However, firm break of 1.6053 will indicate rejection by 1.6302 and turn bias back to the downside for 1.5848 support.

In the bigger picture, the strong support from 55 week EMA (now at 1.5404) is raising the chance of bullish trend reversal. Focus is now on 1.6434 cluster resistance (38.2% retracement of 1.9799 to 1.4281 at 1.6389). Sustained break there should confirm that whole down trend from 1.9799 (2020 high) has completed. Further rally should then be seen to 61.8% retracement at 1.7691. However, rejection by this cluster resistance will make medium term outlook neutral at best.