Sample Category Title

Daily Pivots: (S1) 0.9390; (P) 0.9414; (R1) 0.9440; More...

USD/CHF retreated after failing to break through 0.9439 resistance and intraday bias is turned neutral first. On the upside, break of 0.9439 will resume the rise from 0.9058 for 38.2% retracement of 1.0146 to 0.9058 at 0.9474. Decisive break there will carry larger bullish implications. On the downside, break of 0.9284 will turn bias back to the downside for retesting 0.9058 low instead.

In the bigger picture, decline from 1.0146 is seen as part of a long term sideway pattern. As long as 38.2% retracement of 1.0146 to 0.9058 at 0.9474 holds, another fall is in favor through 0.9058. However, sustained trading above 0.9474 will indicate that the medium term trend has reversed, and open up further rally to 61.8% retracement at 0.9730 and above.

Daily Pivots: (S1) 136.59; (P) 137.25; (R1) 138.02; More...

Intraday bias in USD/JPY is turned neutral with current retreat and some consolidations could be seen first. But further rally is expected as long as 135.35 support holds. Break of 137.90 will resume the rally from 127.20 to next fibonacci level at 142.48. However, break of 135.35 will bring deeper pull back to 55 day EMA (now at 134.30).

In the bigger picture, the break of 38.2% retracement of 151.93 to 127.20 at 136.64 suggests that whole down trend from 151.93 has completed at 127.20 already. Tentatively, rise from 127.20 is seen as the second leg the medium term pattern from 151.93. Further rally is expected to 61.8% retracement at 142.48. This will now remain the favored case as long as 55 day EMA (now at 134.10) holds.

Daily Pivots: (S1) 0.6562; (P) 0.6595; (R1) 0.6623; More...

Intraday bias in AUD/USD is turned neutral first as it recovered ahead of 161.8% projection of of 0.6854 to 0.7028 from 0.6854 at 0.6539, with 4 hour MACD crossed above signal line. On the upside, break of 0.6694 support turned resistance will indicate short term bottoming, and turn bias back to the upside for rebound to 55 day EMA (now at 0.6825). On the downside, however, sustained break of 0.6539 will pave the way to retest 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 0.7164). 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.

Bulls in European equities didn’t’ really get washed out by the Federal Reserve (Fed) hawks; the DAX index closed higher at the wake of Powell’s first day of testimony before the Senate – which went badly hawkish on the other side of the Atlantic.

The better-than-expected jump in January industrial production in Germany may have helped send the DAX higher on Wednesday, along with a further decline in the German 10-year yield from the March peak levels.

But beyond Germany, the GDP growth in the Eurozone was null in Q4, and slowed more than expected on a yearly basis, and the European Central Bank 8ECB) won’t move a finger to boost economy because all the European policymakers want is… to abate inflation.

And the expectation is that, not only that the ECB will hike by 50bp at this month’s meeting, but there will be 150bp hike from now till summer.

The ECB hawks fueled the European yields to fresh highs since the Eurozone’s debt crisis– which is fundamentally not good news for equity traders.

And the euro is losing ground against the US dollar, as the hawks on the other side of the Atlantic Ocean look very threatening.

Even though a softer euro could be good for some businesses as a cheaper euro boosts sales abroad, it is obviously bad for abating inflation; it makes the cost of energy and raw materials more expensive for European businesses and boosts inflation. And rising inflation means higher rate hikes, and prospects of slower economy.

As a consequence, the European stocks should be more worried faced with a sinking euro and rising yields.

No decision yet

Fed Chair Jerome Powell’s second day of testimony was as hawkish as the first one, with one little exception.

Powell added a very small tweak to his Tuesday language, and said that the data will determine whether the Fed would increase the pace of the interest rate hikes, BUT that ‘no decision has been made on this’ yet.

If Powell’s intention was to cool down the 50bp hike bets yesterday, it didn’t go according to the plan. That probability went above 80% yesterday, as both the ADP report and the JOLTS data came in hotter-than-expected. The ADP printed 242K new private job additions in February versus 200K expected by analysts, while job openings in the US eased from last month’s peak, but not as much as expected.

In other words, the jobs data was again too strong to soften the Fed hawks’ hand.

The US 2-year yield extended its advance above the 5% mark, the 10-year yield hovered around the 4% level. The widening gap between the 2 and the 10-year yield boosts recession odds.

Note that the 4% mark for the US10-year yield has become a line in the sand that bond investors don’t want to breach.

The S&P500 swung between small gains and small losses yesterday, as the strong jobs data didn’t let much space for funded gains, but Powell’s ‘indecision’ about the next rate hike helped the S&P500 eke out a small gain to the end of the session.

In the FX, the US dollar index extended gains above the 100-DMA. Catch your breath before Friday!

Today, investors will mostly spend the session digesting Powell’s hawkish testimony, the major shift in US rate expectations, and the strong jobs data. They will also watch the US weekly jobless claims and pray that the February NFP print doesn’t surprise to the upside as did the ADP report.

As such, we could see some relief, and correction after two difficult days for risk assets, but investors will likely refrain from opening fresh positions before Friday’s US jobs data, because only God knows what could happen when the data falls in. Risks are two-sided, as soft data could easily spur a risk rally.

Gold and energy

The rapid surge in the US dollar and the rising US yields weigh on precious metals. Gold, which was supposed to have a great year, is now in the bearish consolidation zone, below the major 38.2% Fibonacci retracement on November to February rally, and is now testing the 100-DMA, which stands a couple of dollars above the $1800 level, to the downside. A strong data between today and Tuesday could rapidly send the price of an ounce below the $1800 mark. The next natural target for gold bears is the 200-DMA, at $1775 per ounce.

American crude on the other hand failed big time holding on to the gains above the 100-DMA and dropped nearly $5 per barrel although crude oil inventories in the US unexpectedly fell last week.

Rising recession odds due to hawkish Fed expectations is why the bears are out and selling.

Market movers today

After Fed chair Powell's testimony, US macro data releases are back in focus to gauge the risk of a reacceleration in the hiking pace. Today initial jobless claims are on the agenda, ahead of the big labour market report tomorrow.

In Sweden, January data for production, new orders, household consumption and the monthly GDP indicator are on the agenda. Riksbank's Bunge and Jansson will also speak today.

The Bank of Japan (BoJ) meeting early Friday morning will be the last one for current governor Kuroda. We still think BoJ will tweak its yield curve control in the short-term. It is not likely to happen this time, but we were also surprised last time they did it in December. Either way, we think it is a matter of time and could happen during Q2.

The 60 second overview

Fed: In his second Congress testimony, Fed chair Powell stressed that no decision has been made on the size of this month's rate increase, stressing again the FOMC's data dependence. Yesterday's data pointed to an ongoing strong labour market. US companies added 242,000 jobs in February according to ADP employment report and job openings fell less than expected in January to 10.8 million from 11.2 million, according to the JOLTS report. Markets price in a 75% chance of a 50bp hike from the Fed at the March meeting now.

EU fiscal rules: Updated fiscal policy guidance from the European Commission urged EU countries to start phasing out government support programmes after the pandemic and energy crisis, as Brussels prepares to reinstate Stability and Growth Pact (SGP) rules in 2024. However, the planned reinstatement coincides with ongoing discussions to overhaul the SGP rules, where consensus remains yet elusive. Especially Germany remains sceptic about the idea of countries striking individual deals on their public finances with the Commission. Should a reform fail to pass later this year, the old 3% deficit and 60% debt target would reapply. However, the Commission might still apply some leeway in the interpretation of the rules, as a strict application could trigger a slump in public investments just at a time when demands from the green transition, digitalisation, energy and defence are piling up.

China: China's inflation rate slowed more than expected to 1% in February. Factory gate prices also continued to fall for a fifth consecutive month. Despite the rapid recovery, China has so far not emerged as a major reflationary force for the global economy, although upside risks still persist.

FI: European yields staged a modest rally in the 10y point, leaving most EGBs 4bp lower on the day, with the exception of Italy where BTPs-Bund spread tightened 5bp vs. Bunds to stand at 177bp. The curves bull flattened from the long end, which saw 30y yields down by 6-11bp subject to each jurisdiction. The move was accelerated on a stronger-than-expected ADP report. After two days of Powell being in congress, a 50bp rate hike here later this month is clearly in play. Friday's labour market report and next week's US CPI are focal points. Markets have repriced ECB and Fed policy rate peaks to 4.16% and 5.59% respectively.

FX: Apart from some volatility during Powell's testimony before the House, EUR/USD traded mostly in a tight 1.0540-55 range. Now the cross, as G10 FX in general, has its eyes on the NFP report tomorrow amid data dependent Fed and with 42bp priced for the March meeting. USD/JPY remains elevated, though the JPY has recovered somewhat and the cross is now below 137. EUR/SEK is trading just above 11.30 ahead of today's activity data at 08:00 and two Riksbank speeches, Bunge and Jansson, all potential market movers. The NOK has erased some of its losses over night after EUR/NOK briefly visited 11.30+ and ahead of the CPI data tomorrow.

Credit: Yet another day with high interest in the primary market and slight profit taking in the secondary corporate bond market. iTraxx Main ended 1bp wider at 76bp while iTraxx X-over widened 2bp to 396bp. In the primary market Vestas Wind Systems A/S issued a new EUR500m Sustainability-Linked Bond with 3.25 year maturity at MS+60bp (coupon 4.125%) after having attracted significant interest with a final order book above EUR2bn.

Nordic macro

In Sweden, January data for production, new orders, household consumption and the monthly GDP indicator are on the agenda today. January data thus far, consisting of hours worked and real goods trade balance, has developed stronger than expected, and we expect manufacturing production to bounce higher on the back of a strong gain in new orders in the December reading. However, private consumption most likely drops again thus continuing to paint a picture of a two-speed economy, with stronger business sector and weakness within household consumption. Vice Governors Aino Bunge and Per Jansson will also hit the wires today with speeches at separate events.

DXY:

Price is still at the 1st resistance area of 105.82, which is an overlap resistance. If the price were to reverse from this level, it could potentially drop to our 1st support at 103.80, which has the 38.2% Fibonacci retracement. The next support level is at 102.79, which is an overlap support that lines up with the 61.8% Fibonacci retracement.

In terms of resistance, if the price were to break the 1st resistance, it could push up to 107.730, which is an overlap resistance. Worth noting that there’s a bearish divergence being formed against the RSI too which suggests a potential bearish reversal.

EUR/USD:

EURUSD has held well above our intermediate support at 1.0535 and is seeing bullish divergence vs RSI. A bounce from here could see prices rise to our 1st resistance at 1.0697 which is slightly below our 38.2% Fibonacci retracement.

The first major support is at 1.0485 which is a strong overlap support. If price were to break this level, we could see it drop further to 1.0354 which is our 2nd support.

GBP/USD:

Price is respecting a descending resistance line, pushing prices down towards our 1st support at 1.1764, which is an overlap support. It’s worth noting that the price is also experiencing bearish momentum from the Ichimoku cloud, which could add to the conviction we have that the price will be pushed lower.

Regarding resistance levels, our 1st resistance is at 1.1918, which is an overlap resistance, and the 2nd resistance level is at 1.2144.

USD/CHF:

Price has tested and reversed nicely at the 1st resistance level of 0.9436, which is a strong resistance, as we have seen multiple touches on this level in the past. If the price were to break from this level, it could push up to the 2nd resistance at 0.9545.

Regarding support levels, if price were to reverse from the 1st resistance, we could see it drop to the 1st support at 0.9337. The 2nd support level is at 0.9283, which lines up with the 50% Fibonacci retracement.

USD/JPY:

Price is seeing support from an ascending support line and bullish momentum from the Ichimoku cloud. We could see it continue to be squeezed against the 1st resistance of 138.04 which is a key overlap resistance. If price were to break that level, we could see a further push up to 2nd resistance at 139.64.

AUD/USD:

Price is experiencing strong bearish momentum from a long-term descending resistance line. Along with that, we can see the bearish Ichimoku cloud pushing prices further down. The 1st support that needs to be broken is at 0.6535, which is an overlap support. If the price were to break from this level, the next key support level would be at 0.6379, which is another overlap support.

Regarding resistance levels, the 1st resistance is at 0.6640 which is a strong Overlap Resistance, and the 2nd resistance is at 0.6696 which is a short term pullback resistance level.

NZD/USD:

We are currently seeing a strong bearish momentum in the price, and the bearish Ichimoku cloud is pushing prices further down. Price could come down to the 1st support level at 0.6017, and if the price were to break from that level, it could drop down to the 2nd support level at 0.5863, which is another overlap support.

Regarding resistance levels, the 1st resistance is at 0.6131, which is an overlap resistance, and the 2nd resistance is at 0.6276 – yet another overlap resistance.

USD/CAD:

Price is approaching a major resistance at 1.3830 and is seeing strong bullish momentum from our ascending support line and Ichimoku cloud support. The 1st support we’re looking at is at 1.3699 which is a pullback support.

DJ30:

Price is currently dropping towards the 1st support level at 32583. If price were to break this level, the next support level is at 32083, which the price has had multiple touches in the past.

Regarding resistance levels, if price were to break from the 1st resistance level, the next resistance level is at 33839, which is a strong overlap resistance.

GER30:

Price is testing major swing high resistance at 15654 which is a swing high resistance. If price were to break this level, we could see a push up to 2nd resistance at 15851. However, a reversal from here could see prices drop to 1st support at 15234 which is an overlap support.

BTC/USD:

Price is in a descending channel and is fast approaching major support at 21367 which is a nice overlap support. From there, we could potentially see a short term bounce as price would be close to the lower support of the channel.

Our 1st resistance is at 22910 which is an overlap resistance.

US500

Price has previously reversed from a major overlap resistance at 4073, which also lines up with the 61.8% Fibonacci retracement. We could see it drop to the 1st support level at 3917, which is the recent swing low. Please take note of the intermediate support level at 3945.

If the price were to break from the 1st resistance level, the next resistance level is at 4159.

ETH/USD:

Price is in a descending channel and has finally broke our 1st support-turned-resistance at 1549 – this could trigger a bigger move down to 1st support at 1462.

It’s worth noting that there is a bearish Ichimoku cloud which is also pushing prices lower with its bearish momentum.

WTI/USD:

Price structure is a big messy on WTI/USD. We do see a first support at 76.47 which is a 61.8% Fibonacci retracement and our 2nd support is at 75.23 which is a 78.6% Fibonacci retracement.

In terms of resistance, we can see an overlap resistance at 77.48 – if price were to break that resistance, the next closest resistance is all the way up at 80.81 which is a major swing high resistance.

XAU/USD (GOLD):

Price is testing our 1st support level at 1804, which is an overlap support. If the price were to break from this level, we could see it drop back down to the 2nd support level at 1785, which is a major overlap support.

Regarding resistance levels, our 1st resistance level is at 1824, which is an overlap resistance, and the 2nd resistance level is at 1864, which is an overlap resistance that lines up with the 38.2% Fibonacci retracement.

Daily Pivots: (S1) 1.3760; (P) 1.3788; (R1) 1.3831; More....

USD/CAD's rally continues to high as 1.3816 so far. Intraday bias remains on the upside for retesting 1.3976 high. Firm break there will resume larger up trend and target 1.4234 projection level. On the downside, break of 1.3744 minor support will turn intraday bias neutral and bring consolidations. But retreat should be contained well above 1.3554 support to bring another rally.

In the bigger picture, the up trend from 1.2005 (2021 low) is still in progress. Next target is 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 remains bullish even in case of deep pull back.

In the Asian session, forex markets are quiet with most pairs and crosses trading within yesterday's range. Although Fed Chair Jerome Powell softened his hawkish tone slightly, noting that "no decision has been made" on the next rate move, the markets remain convinced of a 50bps rate hike later this month. Traders are holding off on making any significant moves until tomorrow's non-farm payroll report, and the even more significant move could come after next Tuesday's US CPI.

Sterling has been sluggish due to uncertainty over BoE's rate outlook. The MPC is clearly split with hawks like Catherine Mann wanting more to be done. Doves like Swati Dhingra prefer to hold. Governor Andrew Bailey sounding non-committal. But there's potential of a clearer move after tomorrow's UK GDP release.

Technically, GBP/CHF is still considered to be in sideway consolidation from 1.1574 only. That is, rise from 1.0183 is expected to resume sooner or later through 1.1574. However, sustained break of 38.2% retracement of 1.0183 to 1.1574 at 1.1043 will open up deeper decline to 61.8% retracement at 1.0714 and possibly below.

In Asia, Nikkei closed up 0.63%. Hong Kong HSI is up 0.37%. China Shanghai SSE is down -0.01%. Singapore Strait Times is down -0.29%. Japan 10-year JGB yield is up 0.0084 at 0.515. Overnight, DOW dropped -0.18%. S&P 500 rose 0.14%. NASDAQ rose 0.40%. 10-year yield rose 0.001 to 3.976.

Fed Beige Book: Economy in slight growth, inflation to moderate

According to the Fed's recent Beige Book report, US economy experienced slight growth at the beginning of the year. However, consumers' purchasing power and discretionary income have been affected by high inflation and higher interest rates. The labor market conditions were solid, with moderate wage increases expected in the coming year. Inflationary pressures persisted throughout various districts, but the rate of price increases has moderated, with many contacts anticipating this trend to continue.

Overall economic activity "increased slightly" in early 2023 with six of twelve districts reported that activity " expanded at modest pace". Several districts said "high inflation and higher interest rates continued to reduce consumers' discretionary income and purchasing power". Manufacturing activity "stabilized following a period of contraction".

Labor market conditions "remained solid" while ages "generally increased at a moderate pace". Wages increases are expected to "moderate further in the coming year".

Inflationary pressures "remained wide spread" but price increased "moderated" in many districts. Looking ahead, "contacts expected price increases to continue to moderate over the year."

Bitcoin extends pull back after voluntary liquidation of crypto-friendly bank

Bitcoin has continued to experience a near-term pullback this week due to a decline in risk appetite following hawkish comments by Fed Chair Jerome Powell. Additionally, the voluntary liquidation of Silvergate Bank, a major player in cryptocurrency markets, has weighed down the digital currency, marking a setback for wider adoption of cryptocurrencies in the economy.

From a technical perspective, Bitcoin's rebound from 15452 could have ended at 25242 in February, after being rejected by 25198 resistance. The daily MACD shows a bearish divergence, and the 55-day EMA was broken this week.

However, confirmation of a near-term reversal would require a firm break of 21357 support. Otherwise, outlook remains neutral. Alternatively, a firm break of 21357 would signal a deeper decline back to the 15452 low.

Looking ahead

The European calendar is empty today. US will release Challenger job cuts and jobless claims.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3760; (P) 1.3788; (R1) 1.3831; More....

USD/CAD's rally continues to high as 1.3816 so far. Intraday bias remains on the upside for retesting 1.3976 high. Firm break there will resume larger up trend and target 1.4234 projection level. On the downside, break of 1.3744 minor support will turn intraday bias neutral and bring consolidations. But retreat should be contained well above 1.3554 support to bring another rally.

In the bigger picture, the up trend from 1.2005 (2021 low) is still in progress. Next target is 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 remains bullish even in case of deep pull back.

Economic Indicators Update

Bitcoin has continued to experience a near-term pullback this week due to a decline in risk appetite following hawkish comments by Fed Chair Jerome Powell. Additionally, the voluntary liquidation of Silvergate Bank, a major player in cryptocurrency markets, has weighed down the digital currency, marking a setback for wider adoption of cryptocurrencies in the economy.

From a technical perspective, Bitcoin's rebound from 15452 could have ended at 25242 in February, after being rejected by 25198 resistance. The daily MACD shows a bearish divergence, and the 55 Day EMA was broken this week.

However, confirmation of a near-term reversal would require a firm break of 21357 support. Otherwise, outlook remains neutral. Alternatively, a firm break of 21357 would signal a deeper decline back to the 15452 low.

According to the Fed's recent Beige Book report, US economy experienced slight growth at the beginning of the year. However, consumers' purchasing power and discretionary income have been affected by high inflation and higher interest rates. The labor market conditions were solid, with moderate wage increases expected in the coming year. Inflationary pressures persisted throughout various districts, but the rate of price increases has moderated, with many contacts anticipating this trend to continue.

Overall economic activity "increased slightly" in early 2023 with six of twelve districts reported that activity " expanded at modest pace". Several districts said "high inflation and higher interest rates continued to reduce consumers' discretionary income and purchasing power". Manufacturing activity "stabilized following a period of contraction".

Labor market conditions "remained solid" while ages "generally increased at a moderate pace". Wages increases are expected to "moderate further in the coming year".

Inflationary pressures "remained wide spread" but price increased "moderated" in many districts. Looking ahead, "contacts expected price increases to continue to moderate over the year."

Full Beige Book here.