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Daily Pivots: (S1) 1.3628; (P) 1.3688; (R1) 1.3723; More....

Intraday bias in USD/CAD stays neutral as range trading continues. Further rally is expected with 1.3650 support intact. On the upside, break of 1.3860 will resume the rally from 1.3261 to retest 1.3976 high. However, firm break of 1.3650 will mix up the near term outlook and bring deeper pullback to 55 day EMA (now at 1.3566) first.

In the bigger picture, the up trend from 1.2005 (2021 low) is still in progress. Break of 1.3976 will confirm resumption and target 61.8% projection of 1.2401 to 1.3976 from 1.3261 at 1.4234. Firm break there will pave the way to long term resistance zone at 1.4667/89 (2016, 2020 highs). On the downside, break of 1.3261 support is needed to confirm medium term topping. Otherwise, outlook will remain bullish even in case of deep pull back.

Daily Pivots: (S1) 0.6679; (P) 0.6705; (R1) 0.6743; More...

Intraday bias in AUD/USD remains neutral for the moment. On the upside, another rise through 0.6729 should confirm short term bottoming at 0.6563, just ahead of 0.6546 fibonacci level. Intraday bias will be back on the upside for 55 day EMA (now at 0.6778). Sustained break there will pave the way back to retest 0.7156 high. On the downside, however, sustained break of 0.6546 will carry larger bearish implication and target 0.6169 low.

In the bigger picture, rise from 0.6169 (2022 low) has completed at 0.7156, after rejection by 55 month EMA (now at 0.7158). Deeper decline would then be see back to 61.8% retracement of 0.6169 to 0.7156 at 0.6546, even as a corrective fall. Sustained break there will raise the chance of long term down trend resumption through 0.6169 low.

Daily Pivots: (S1) 130.35; (P) 131.50; (R1) 132.46; More...

USD/JPY's fall from 137.90 is in progress and intraday bias stays on the downside. Sustained trading below 61.8% retracement of 127.20 to 137.90 at 131.28 will pave the way to retest 127.20 low next. On the upside, above 133.81 minor resistance will turn intraday bias neutral and bring some consolidations first.

In the bigger picture, rebound from 127.20 should have completed at 137.90 as a corrective move, with strong break of 55 day EMA. The down trend from 151.93 (2022 high) is not over yet. 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) 0.9251; (P) 0.9281; (R1) 0.9323; More...

Intraday bias in USD/CHF remains neutral and outlook is unchanged. Corrective pattern from 0.9058 low should still be in progress with rise from 0.9070 as the third leg. Above 0.9339 will target 0.9439 resistance and possibly above. But overall, outlook will stay bearish as long as 0.9474 fibonacci level holds, and another decline through 0.9058 is expected at a later stage.

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. 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, such 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) 1.2202; (P) 1.2244; (R1) 1.2320; More...

Intraday bias in GBP/USD remains on the upside for retesting 1.2445/6 resistance zone. As noted before, corrective pattern from 1.2445 could have completed with three waves to 1.1801 already. Firm break of 1.2445/6 will resume larger rise from 1.0351, and target 1.2759 fibonacci level. For now, outlook will stay cautiously bullish as long as 1.2009 support holds, in case of retreat.

In the bigger picture, price action from 1.2445 are seen as a corrective pattern to rise from 1.0351 medium term bottom (2022 low). Resumption is expected as a later stage and firm break of 1.2446 will target 61.8% retracement of 1.4248 (2021 high) to 1.0351 at 1.2759. This will remain the favored case as long as 38.2% retracement of 1.0351 to 1.2445 at 1.1645 holds.

Daily Pivots: (S1) 1.0660; (P) 1.0696; (R1) 1.0759; More...

EUR/USD is holding inside range of 1.0515/0759 and intraday bias remains neutral. Focus stays on 1.0759 resistance. Firm break there will argue that corrective fall from 1.1032 has completed at 1.0515, ahead of 38.2% retracement of 0.9534 to 1.1032 at 1.0258. Intraday bias will be turned back to the upside for retesting 1.1032 high. Nevertheless, sustained break of 1.0258 will turn near term outlook bearish for 61.8% retracement at 1.0106.

In the bigger picture, as long as 1.0482 support holds, rise from 0.9534 (2022 low) should continue to 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273. However, sustained break of 1.0482 will bring deeper fall to 61.8% retracement of 0.9534 to 1.1032 at 1.0106, with risk of breaking through 0.9534 eventually.

Australian Dollar is declining broadly as RBA minutes hinted at the possibility of a pause during their next meeting. Meanwhile, Yen has managed to hold on to the some gains it made earlier this week and appears poised for further rallying, particularly against commodity-based currencies.

Both Euro and Sterling have maintained their strength after being bought against Swiss Franc. However, their momentum seems to have slowed down a bit. Dollar is on the path to recovery from previous losses but all would depend on tomorrow's FOMC rate decision. Canadian Dollar remains in a mixed state as market participants eagerly await the release of the Canada CPI data.

Elsewhere in the markets, the banking crisis seems to have reached a point of stabilization at last, with hope that this trend will continue. Asian stock markets are making a comeback, taking cues from the rebound in US markets. Benchmark treasury yields in both the US and Europe have also bounced back, signaling a halt in the flow of funds towards safe-haven assets.

Gold, after spiking higher yesterday, is currently in a consolidation phase. However, it remains poised to potentially break through the 2000 mark again in the near future.

In Asia, at the time of writing, Hong Kong HSI is up 0.33%. China Shanghai SSE is up 0.15%. Singapore Strait Times is up 1.31%. Japan is on holiday. Overnight, DOW rose 1.20%. S&P 500 rose 0.89%. NASDAQ rose 0.39%. 10-year yield rose 0.086 to 3.481.

RBA Minutes: To reconsider a pause at next meeting

The minutes of RBA's meeting on March 7 indicate that the central bank is considering a more cautious approach in tightening monetary policy, as uncertainty surrounding the economic outlook persists. The RBA members observed that "further tightening of monetary policy would likely be required to ensure that inflation returns to target." However, they also noted the restrictive nature of current monetary policy and the economic uncertainty, stating that "it would be appropriate at some point to hold the cash rate steady."

During the meeting, RBA members agreed to "reconsider the case for a pause at the following meeting, recognizing that pausing would allow additional time to reassess the outlook for the economy." The decision on when to pause will be determined by incoming data and the board's assessment of the economic situation.

The RBA acknowledges that "the outlook for consumption remained a key source of uncertainty." The central bank will closely monitor upcoming data releases on employment, inflation, retail trade, and business surveys, as well as developments in the global economy, to inform their decision-making.

GBP/AUD resuming rally after dovish RBA minutes

Australian Dollar trades mildly lower after RBA minutes indicated the possibility of a pause in tightening at next meeting. On the other hand, Sterling (and Euro too) is supported by funds flow from Swiss Franc. But there are some uncertainties for the Pound ahead with UK CPI and BoE rate decisions scheduled later in the week.

Technically, GBP/AUD is resuming the near term rise by breaking last week's high at 1.8316. At the same time, rise from 1.7218 is likely resuming the whole up trend from 1.5925. Near term outlook will stay bullish as long as 1.8074 support holds, even in case of retreat. Next target is 61.8% projection of 1.5925 to 1.8272 from 1.7218 at 1.8668. Nevertheless, break of 1.8074 support will delay the bullish case and bring some consolidations before another rally attempt.

CAD/JPY ready for down trend resumption as Canada CPI looms

Today, Canada's consumer inflation data takes center stage as markets anticipate a slowdown in headline inflation from 5.9% yoy to 5.4% yoy in February. If this decrease materializes, it would mark the lowest inflation reading in over a year. BoC's preferred core inflation metrics, the trimmed and median CPI, are also projected to decelerate from 5.1% yoy to 4.8% yoy and from 5.0% yoy to 4.8% yoy, respectively.

BoC became the first major central bank to pause its tightening cycle last Wednesday, following eight consecutive rate hikes totaling 425 basis points. Market participants are still expecting one more rate increase this year, but these odds could dwindle if inflation continues to decline.

CAD/JPY is closely watching the 94.61 support level after a recent drop. A decisive break below this threshold would rekindle the broader downtrend from the 110.87 high and aim for a 61.8% projection of 110.87 to 94.61 from 100.85 at 90.80. However, if the cross breaks above 97.53 resistance, it could delay the bearish scenario and extend the corrective pattern from 94.61 with another upswing.

Looking ahead

Germany ZEW economic sentiment will be the man focus in European session. UK will release public sector net borrowing. Swiss will publish trade balance. Later in the day, Canada CPI will take center stage while US will release existing home sales.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.0660; (P) 1.0696; (R1) 1.0759; More...

EUR/USD is holding inside range of 1.0515/0759 and intraday bias remains neutral. Focus stays on 1.0759 resistance. Firm break there will argue that corrective fall from 1.1032 has completed at 1.0515, ahead of 38.2% retracement of 0.9534 to 1.1032 at 1.0258. Intraday bias will be turned back to the upside for retesting 1.1032 high. Nevertheless, sustained break of 1.0258 will turn near term outlook bearish for 61.8% retracement at 1.0106.

In the bigger picture, as long as 1.0482 support holds, rise from 0.9534 (2022 low) should continue to 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273. However, sustained break of 1.0482 will bring deeper fall to 61.8% retracement of 0.9534 to 1.1032 at 1.0106, with risk of breaking through 0.9534 eventually.

Economic Indicators Update

The Minutes emphasise a high degree of uncertainty; do not take into account the global banking disruptions; and point to a pause in April.

The Minutes of the Reserve Bank Board meeting on March 7 highlight that unlike recent meetings when several policy options were considered the March meeting only considered the case for 25 basis point increase – the resulting decision.

However the Minutes note that “Members agreed to reconsider the case for a pause at the following meeting, recognizing that pausing would allow additional time to reassess the outlook for the economy.”

This decision is despite the Board meeting (March 7) occurring before the Regulators took control of Silicon Valley Bank on March 10.

There is considerable discussion of market pricing in the Minutes. “Market pricing implied a 25 basis point increase in the cash rate at the March meeting and suggested that the cash rate would peak at around 4 ¼ % in the second half of 2023,” – with the market response to the global disruptions to the financial sector this pricing has fallen to below 3.6%; that is no further rate hikes with the possibility of rate cuts.

Similarly on international markets the Minutes refer to, “Market participants’ expectations of the path of policy rates in advanced economies had shifted up since the previous meeting.” Now, market pricing for the FOMC is predicting a series of rate cuts over the course of 2023.

Clearly the Board takes market pricing into account. At the time of the Board meeting market pricing supported the view that, in the case of the RBA, nearly 75 more basis points of tightening were likely to follow the March meeting. Now that pricing has fallen away completely.

The discussion on the outlook for policy as dictated by the data highlights the Board’s current uncertainty.

It makes the strong case for the increase at the March meeting while emphasizing uncertainty going forward.

In assessing the recent softening in the data – national output growth; wages growth; monthly inflation – the Board noted “it would be prudent not to place too much weight on one period’s data” …. But “it was appropriate to take some signal from the consistent pattern across recent data releases.”

There are other examples in the Minutes where the Board highlights its uncertainty through its mixed interpretation of the data: “monetary policy was in restrictive territory and that the economic outlook was uncertain”; “members noted that it was not yet possible to determine how these various considerations would balance out.”

But the key point remains clear, “core inflation remains too high ….. the staff’s most recent forecasts were for inflation to return to the 2-3% target only by mid–2025.”

We expect that the case for a pause in April is supported in these Minutes – particularly given the unusual commitment to consider a pause and subsequent developments in market pricing and global financial markets.

However, the overriding challenge of returning inflation to the target will remain the dominant theme at the May meeting when, we expect, the Board will be confronted with a refreshed set of forecasts (benefitting from the March quarter Inflation Report), which will still highlight that inflation will not be at target until mid-2025 – requiring a final 25 basis point increase.

Conclusion

Westpac has been forecasting a pause at the April meeting – the strong emphasis on uncertainty in the March Minutes; the unusual commitment to consider a pause in April; and developments in market pricing and global financial markets all support that view.

But the Minutes continue to make a strong case for the need to reign in the “too high” inflation. This challenge is likely to be just as apparent at the May meeting, when much more information will be available on the inflation challenge, requiring a “final” 25 basis point tightening.

Key Highlights

• GBP/USD started a fresh increase above the 1.2120 resistance.
• A connecting bullish trend line is forming with support near 1.2180 on the 4-hours chart.
• Gold price corrected lower after it failed to test the $2,000 mark.
• EUR/USD jumped above the 1.0650 and 1.0680 resistance levels.

GBP/USD Technical Analysis

The British Pound started a steady increase above the 1.2000 resistance against the US Dollar. GBP/USD cleared the key 1.2120 zone to enter a positive region.

Looking at the 4-hours chart, the pair was able to settle above the 1.2150 resistance zone, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

The upward move was such that the pair even cleared the 1.2200 resistance zone. On the upside, an immediate resistance is near the 1.2280 level. The next major resistance is near the 1.2320.

A clear move above the 1.2320 resistance might send GBP/USD towards the 1.2400 zone. Any more gains might send the pair towards 1.2450. The next major resistance might be 1.2500.

On the downside, an immediate support is near the 1.2200. There is also a connecting bullish trend line forming with support near 1.2180 on the same chart. The next major support is near the 1.2140 level, below which there is a risk of a move towards the 1.2080 level.

Looking at gold price, there was a strong move towards the $2,000 zone before the bears took a stand and initiated a downside correction.

Economic Releases

• German ZEW Business Economic Sentiment Index for March 2023 – Forecast 16.4, versus 28.1 previous.
• Canadian Consumer Price Index for Feb 2023 (MoM) – Forecast +0.6%, versus +0.5% previous.
• Canadian Consumer Price Index for Feb 2023 (YoY) – Forecast +5.4%, versus +5.9% previous.

Today, Canada's consumer inflation data takes center stage as markets anticipate a slowdown in headline inflation from 5.9% yoy to 5.4% yoy in February. If this decrease materializes, it would mark the lowest inflation reading in over a year. BoC's preferred core inflation metrics, the trimmed and median CPI, are also projected to decelerate from 5.1% yoy to 4.8% yoy and from 5.0% yoy to 4.8% yoy, respectively.

BoC became the first major central bank to pause its tightening cycle last Wednesday, following eight consecutive rate hikes totaling 425 basis points. Market participants are still expecting one more rate increase this year, but these odds could dwindle if inflation continues to decline.

CAD/JPY is closely watching the 94.61 support level after a recent drop. A decisive break below this threshold would rekindle the broader downtrend from the 110.87 high and aim for a 61.8% projection of 110.87 to 94.61 from 100.85 at 90.80. However, if the cross breaks above 97.53 resistance, it could delay the bearish scenario and extend the corrective pattern from 94.61 with another upswing.