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Daily Pivots: (S1) 0.8891; (P) 0.8907; (R1) 0.8917; More...

In the bigger picture, outlook is 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) 1.5949; (P) 1.5991; (R1) 1.6043; More...

A temporary top is formed at 1.6040 in EUR/AUD and intraday bias is turned neutral for consolidations. Downside of retreat should be contained by 1.5826 resistance turned support to bring another rally. Above 1.6040 will resume the larger rally to 61.8% projection of 1.4281 to 1.5976 from 1.5254 at 1.6302.

In the bigger picture, the strong support from 55 week EMA (now at 1.5396) is raising the chance of bullish trend reversal. On break of 1.5976, focus will be 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 form 1.9799 (2020 high) has completed. However, rejection by this cluster resistance will make medium term outlook neutral at best.

Daily Pivots: (S1) 0.9909; (P) 0.9927; (R1) 0.9943; More....

Intraday bias in EUR/CHF remains on the downside as fall from 1.0040 is in progress. Such decline is seen as another falling leg inside the corrective pattern from 1.0095. Deeper fall would be seen back to 0.9844 support. But downside should be contained by 0.9832 to bring rebound. On the upside, above 0.9963 minor resistance will turn bias back to the upside for 1.0040 resistance instead.

In the bigger picture, with 0.9832 support intact, rise from 0.9407 (2022 low) is still expected to continue. Break of 1.0095 and sustained trading above 55 week EMA (now at 1.0021) will be a medium term bullish signal, and bring further rally to 1.0505 cluster resistance (2020 low at 1.0505, 61.8% retracement of 1.1149 to 0.9407 at 1.1484). However, firm break of 0.9832 support will revive medium term bearishness and bring retest of 0.9407 low instead.

Gold struggles as the dollar index trades near a three-month high following Powell’s hawkish testimony. The precious metal has given up all gains from its bounce earlier this month, putting the bulls on the defensive. As the price revisited the bottom at 1807, the RSI’s oversold condition attracted bargain hunters. But buyers must lift multiple hurdles before they could turn sentiment around. 1833 is the first resistance and the selling pressure may increase all the way to 1845. 1785 would be next in case of a bearish breakout.

The Canadian dollar softened as the Bank of Canada left its interest rate unchanged. A convincing break above December’s high (1.3700) would signal the end of the flag-shaped consolidation on the daily chart, bringing most buyers out of their hibernation. A bullish continuation would send the greenback to its five-month high of 1.3980 with 1.3850 as the immediate resistance. On the hourly chart, 1.3740 is the closest support and 1.3630 at the base of the current surge is a key level to keep the momentum going.

The euro dips further over weaker-than-expected eurozone GDP in Q4. On the daily chart, the pair came under pressure on the 30-day SMA (1.0700). A subsequent liquidation below 1.0630 then 1.0550 has invalidated the rebound from the end of February. The pair is hovering above this year’s low and the daily support of 1.0480. A break below this critical floor might trigger a bearish reversal in the weeks to come. As the RSI recovers into the neutral area, short-covering may send the euro to the first resistance at 1.0590.

ECB Governing Council member Francois Villeroy de Galhau said "what is very important is the inflation expectations".

"The peak will come this semester, and then inflation will halve by the end of the year," he added.

The Bank of France head also expect France's inflation to peak in first half of the year.

Markets

US and European interest rate markets diverged further yesterday. German/EU yields didn’t see much spill-over from Tuesday’s sharp post-Powell repositioning in US markets. The German curve inverted further (2-y yield up 2.5 bps, 30-y minus 6.4 bps) in a session deprived of data. US yields initially corrected lower, but fortunes again changed in US dealings. ADP private job growth came in at a solid 242K. Higher than expected JOLTS job openings, laid the groundwork for an intraday reversal in US yields. Fed Chair Powell in his hearing before the House stressed that no decision has been made on the magnitude of the March 22 rate hike as it remains conditional to the totality of incoming data, including tomorrow’s payrolls and next week’s February inflation. This ‘conditionality’ didn’t change markets’ assessment that the bar will be high for the Fed not to return to a 50 bps step. The Beige book, preparing the March 22 Fed meeting, showed (anecdotic) evidence that the US economy held up well at the start of the year. A $32bn 10-y auction only drew mediocre investor interest. In the end, US yields gained 6.2 bps (2-y) to 2.2 bps (30-y). The real 10-y yield also made another step higher (1.66%, +8.5 bps). Still, this hardly had any impact on equities (Dow +0.18%; Nasdaq +0.4%) or the dollar. DXY closed almost unchanged at 105.66. Similar conclusion for EUR/USD (close 1.0545). Given additional interest rate support over the previous two sessions, this is slightly disappointing for USD bulls. EUR/GBP holds a tight range close to, mostly north of 0.89, but finished at the big figure.

Asian equities mostly show modest losses this morning with Japan outperforming. Chinese CPI inflation unexpectedly dropped from 1.9% Y/Y to 1%. PPI factory prices drifted further into negative territory (-1.4% Y/Y). The yuan eases marginally to USD/CNY 6.97. Later today, the eco calendar is very thin with only US jobless claims. ECB governors from today on will abstain from comments on monetary policy ahead of next week’s interest rate decision. We expect mainly technical trading ahead of tomorrow’s US payrolls. Some consolidation on the recent rally in yields is likely, but we see the downside well protected. Regarding the dollar, additional interest rates support apparently isn’t enough to attract strong buying interest as long as equity resilience mitigates safe haven demand. Apparently, a solid payrolls report is needed for EUR/USD to go for a test of the EUR/USD 1.0484/61 support.

News Headlines

The Bank of Canada stood pat in March, keeping the policy rate at 4.50%. It’s the first time that no back-to-back hike occurred since the BoC started the tightening cycle in March last year. The decision was no surprise. In January, the BoC said it expected to keep rates stable after the hike back then, provided the economy evolved broadly in line with its outlook. Employment growth was surprisingly strong but growth in Q4 was slightly weaker than expected. The economic drag will last for several quarters, which should ease pressures in the labour market and moderate wage growth, the BoC said. Taking all the data into account, the central bank sticks to the idea that inflation (currently 5.9% headline, +- 5% core) is on track to hit 3% by the middle of this year. That said, the BoC keeps the option of further hikes on the table if necessary. The Canadian dollar underperformed global peers yesterday. USD/CAD closed above 1.38 for the first time since mid-October. Canadian yields tanked in a knee-jerk reaction before paring losses to some extent. They eventually closed 2.2 to 6.8 bps lower with the front end underperforming.

Poland’s central bank (NBP) stuck to a 6.75% policy rate, the rate applicable since September last year. Polish activity slowed down on the back of weakening consumption. Investment continued to increase though. The labour market remains strong, resulting in low unemployment. Inflation shot up in January to 17.2% y/y. In part due to a VAT reversal but also due to companies still able to pass through higher input costs. That said, the NBP noted that the observed PPI decline together with weakening economic activity and the delivered monetary tightening will support a decline in domestic CPI inflation in coming quarters. This will be a gradual process, with the updated inflation forecast not showing a return to (the upper bound of the) target before 2025. Growth forecasts were marginally lifted across the policy horizon. The Polish zloty traded stoic in the wake of the decision. EUR/PLN closed a little lower, at 4.68, in a move that started earlier..

Daily Pivots: (S1) 1.0521; (P) 1.0548; (R1) 1.0570; More...

Intraday bias in EUR/USD stays on the downside at this point. Fall from 1.1032 is in progress for 38.2% retracement of 0.9534 to 1.1032 at 1.0463. Strong support could be seen there to bring reversal. But break of 1.0693 resistance is needed to indicate short term bottoming first. Meanwhile, sustained break of 1.0463 will carry larger bearish implications.

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, even as a corrective pull back.

Daily Pivots: (S1) 1.1813; (P) 1.1836; (R1) 1.1868; More...

A temporary low is formed at 1.1801 with current recovery and intraday bias in GBP/USD is turned neutral first. Another fall could be seen as long as 1.1914 support turned resistance holds. Below 1.1801 will target 38.2% retracement of 1.0351 to 1.2446 at 1.1646. Firm break there would carry larger bearish implications. Nevertheless, break of 1.1914 will turn bias back to the upside for stronger rebound.

In the bigger picture, break of 1.1840 support argues that a double top pattern (1.2445, 1.2446) was formed after rejection by 55 week EMA (now at 1.2228). Deeper decline should be seen back to 38.2% retracement of 1.0351 to 1.2446 at 1.1646. Sustained break there will raise the chance of trend reversal and target 61.8% retracement at 1.1151.