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Daily Pivots: (S1) 1.0954; (P) 1.0977 (R1) 1.1008; More...

EUR/USD rebounds strongly today and immediate focus is now on 1.1120 support turned resistance. Sustained break there will argue that it's at least correcting the decline from 1.2265. Intraday bias will be back to the upside for 38.2% retracement of 1.2265 to 1.0805 at 1.1363. On the downside, however, break of 1.0943 support will retain near term bearishness, and bring retest of 1.0805 low.

In the bigger picture, the decline from 1.2348 (2021 high) is expected to continue as long as 1.1494 resistance holds. Firm break of 1.0635 (2020 low) will raise the chance of long term down trend resumption and target a retest on 1.0339 (2017 low) next. Nevertheless, break of 1.1494 will maintain medium term neutral outlook, and extending term range trading first.

Euro rebounds strongly today on hope of positive development out of negotiation between Ukraine and Russia. Top Russian negotiator Vladimir Medinsky was quoted saying that talks were constructive and a Putin-Zelenskyy meeting is possible. BBC also quoted Russian deputy defence minister Alexander Fomin saying they will "radically reduce" military activity outside Kyiv and Chernihiv. Additionally, the common currency is lifted by rising German 10-year bund yield, which is above 0.7% handle for the first time since 2018. On the other hand, Swiss Franc is sold off broadly on reverse safe-haven flow, followed by Dollar.

Technically, immediate focus in now on some levels in Euro pairs to confirm the underlying rebound. The levels include 1.1120 resistance in EUR/USD, 0.8456 temporary top in EUR/GBP. More importantly, break of 1.0400 resistance in EUR/CHF will resume the rebound from 0.9970 to 1.0610 key structural resistance. Further break there will be a sign of larger bullish reversal.

In Europe, at the time of writing, FTSE is up 1.33%. DAX is up 2.67%. CAC is up 2.99%. Germany 10-year yield is up 0.118 at 0.700. Earlier in Asia, Nikkei rose 1.10%. Hong Kong HSI rose 1.12%. China Shanghai SSE dropped -0.33%. Singapore Strait Times rose 0.06%. Japan 10-year JGB yield dropped -0.0072 to 0.252.

Germany Gfk consumer sentiment dropped to -15.5, hopes vanished into thin air

Germany Gfk consumer sentiment for April dropped sharply from -8.5 to -15.5. In March, economic expectations dived from 24.1 to -8.9, lowest since May 2020 during the first lockdown at -10.4. Income expectations tumbled from 3.9 to -22.1, hitting the lowest value since 2009, which was at -22.9. Propensity to buy dropped slightly from 1.4 to -2.1.

"In February hopes were still high that consumer sentiment would recover significantly with the foreseeable easing of pandemic-related restrictions. However, the start of the war in Ukraine caused these hopes to vanish into thin air. Rising uncertainty and sanctions against Russia have caused energy prices in particular to skyrocket, putting a noticeable strain on general consumer sentiment," explains Rolf Bürkl, GfK consumer expert.

Also released, import price index rose 1.3% mom in February, below expectation of 2.1% mom.

BoJ opinions emphasize importance to maintain monetary easing

In the Summary of Opinions of the March 17-18 meeting, BoJ noted, "unlike the United States and the United Kingdom, Japan is not in a situation where the inflation rate will likely exceed the price stability target of 2 percent in a continuous manner." Hence, "it is important for the Bank to continue with monetary easing to support the economic recovery from the pandemic."

Situations surrounding Ukraine have "caused price rises of energy and other items", and this will "push down domestic demand while raising the CPI." Under these circumstances, it is "necessary to improve labor market conditions and provide stronger support for wage increases".

One member warned that "if downward pressure on economic activity and prices increases, the economy may instead be in danger of falling into deflation again. If it becomes difficult to achieve the price stability target, the Bank should act nimbly and without hesitation."

Released from Japan, unemployment rate dropped from 2.8% to 2.7% in February, better than expectation of 2.8%.

Australia retail sales rose 1.8% mom in Feb, hitting second highest on record

Australia retail sales rose 1.8% mom to AUD 33.09B in February, well above expectation of 1.0% mom.

Director of Quarterly Economy Wide Statistics, Ben James, said February's result saw retail sales reach their second highest level on record after November 2021 and turnover continuing to regain lost momentum caused by the peak of the Omicron outbreak in January.

"Lower COVID-19 case numbers in February, alongside the further easing of restrictions over the month, saw consumer spending return to similar behaviour seen previously as states and territories come out of a COVID-19 wave," James said.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0954; (P) 1.0977 (R1) 1.1008; More...

EUR/USD rebounds strongly today and immediate focus is now on 1.1120 support turned resistance. Sustained break there will argue that it's at least correcting the decline from 1.2265. Intraday bias will be back to the upside for 38.2% retracement of 1.2265 to 1.0805 at 1.1363. On the downside, however, break of 1.0943 support will retain near term bearishness, and bring retest of 1.0805 low.

In the bigger picture, the decline from 1.2348 (2021 high) is expected to continue as long as 1.1494 resistance holds. Firm break of 1.0635 (2020 low) will raise the chance of long term down trend resumption and target a retest on 1.0339 (2017 low) next. Nevertheless, break of 1.1494 will maintain medium term neutral outlook, and extending term range trading first.

Economic Indicators Update

Australian retail sales outperform

Australian retail sales posted a 1.8% gain for a third straight month. The February release beat the consensus estimate of 1.0% and is a further indication that the economic recovery continues.

The Australian dollar has sparkled in March, gaining 3.20%. The risk-sensitive currency is flying high despite plenty of risk apprehension in the markets. The Russia-Ukraine war has resulted in millions of refugees in the middle of Europe and relations between Russia and the West haven’t been this frosty in decades.

In China, the government continues to resort to extreme measures in order to contain an upsurge in Covid cases. The government has imposed rolling lockdowns on Shanghai, which has a population of some 25 million. The property crisis has faded from the headlines, but it hasn’t gone away. Since Evergrande’s default last year, Chinese property developers are finding themselves locked out of the global debt market, and the country’s third-largest developer missed two bond payments last week.

In this turbulent environment, the driver behind the Australian dollar’s impressive performance has been the resource-based economy, as the range of commodities that Australia exports has been in huge demand as prices continue to head higher. Despite friction with China, Australia’s largest trading partner, the export sector is booming.

The Morrison government released its annual budget earlier today, and as expected, the response from the Australian dollar was a yawn. With the government trailing in the polls and an election expected in May, the budget had some goodies for voters, such as tax cuts and a temporary reduction in the fuel tax. With inflation on the rise, the government as well as the RBA are under pressure to relieve the surging cost of living.

AUD/USD Technical

• 0.7414 is the first line of support. Below, there is support at 0.7313
• There is resistance at 0.7577 and 0.7639

• Platinum broke round support level 1000.00
•  Likely to fall to support level 959.00

Platinum recently broke the round support level 1000.00 (which has been repeatedly reversing the price from last January).

The breakout of the support level 1000.00 coincided with the breakout of the 61.8% Fibonacci correction of the previous wave (B) from December.

Platinum can be expected to fall further in the active impulse wave 3 toward the next support level 959.00.

• EURNZD reversed from support level 1.5710
• Likely to rise to resistance level 1.6100

EURNZD earlier reversed up from the key support level 1.5710 (which stopped the previous sharp downward impulse wave 1), intersecting with the lower daily Bollinger Band.

The upward reversal from the support level 1.5710 started the active short-term correction (ii).

Given the strength of the support level 1.5710 and strong NZD outflows – EURNZD can be expected to rise further toward the next resistance level 1.6100 (target for the end of the active correction (ii)).

Brent lost 7.7% to $106.4 on Monday on fears of a drop in demand due to a lockdown in Shanghai, China’s financial hub. In addition, the Saudi and Yemeni cease-fire and the upcoming Ukraine-Russia talks in Turkey helped reduce the heat on the energy market.

However, Monday’s decline looks like only a temporary respite, and all these factors are still too weak to break the momentum that has been sustained since December.

Brent has gained 2% since Tuesday morning to $108.5, with buyers buoyed by reports that Saudi Arabia might raise the selling price of its Oil by as much as 5% in May. The pipeline accident in the Caspian Sea and falling exports from Russia are also on the side of oil bulls right now.

OPEC has denied plans to accelerate quota increases at its next monthly meeting on the 31st of March. Cartel officials also note that it is not yet possible to replace Oil from Russia entirely.

Meanwhile, Iran’s nuclear programme talks have taken a few steps back, removing hopes of a supply surge from the market. US oil producers are in no hurry to exploit market conditions. The number of working rigs is increasing, but no production increase has taken place so far, which has averaged 11.6 million barrels per day over the last six months. US commercial oil inventories are now 17.8% lower than a year ago.

Oil has remained in a bull market even though its movements are no longer unidirectional. From a state of panic buying in early March, Oil has become more pragmatic. Its price now looks high compared with levels a year and two years ago, but from 2011 to 2014, it traded around current levels, with demand being notably weaker. A period of heightened geopolitical uncertainty is setting up a $100-120 Brent range in the coming weeks. A break in the upward trend will only occur with a final turn towards détente.

BTC is up 4% on Monday, ending the day around $48K, and corrected by about 1% to $47.5K on Tuesday morning. Ethereum was up 1.8% in the last 24 hours to $3.4K. Among the leading altcoins, Terra soared by 10%, Doge corrected by 2%. In most others, there is a slight correction in the growth of the last days, but they are in positive territory over the last day.

According to CoinMarketCap, the total capitalization of the crypto market increased by 1% over the day, to $2.15 trillion. The Bitcoin dominance index fell by 0.1 points to 42.1%.

The crypto-currency index of fear and greed rose by 11 points over the day, to 60, and moved from neutral level to the “greed” grade. On Tuesday, the index dropped to 56 points.

Bitcoin continued to rise on Monday after it broke through the strong resistance of the February highs around $45K in the previous evening. By the end of the day, BTC has renewed the highs of early January above $48K, having won back the decline since the beginning of the year. The growth of the first cryptocurrency rested on the 200-day moving average ($48.2K). Confident consolidation above it promises to strengthen and expand the growth of the entire crypto market and breathe fresh impetus into the growth of bitcoin. In December, we saw a false break, but then the price levels were higher, and corrective sentiment intensified in the stock markets.

Now Bitcoin is growing along with the rise of stock indices and often even acts as a leading indicator of investor sentiment. According to Arcane Research, BTC’s correlation with the S&P 500 stock indicator recently hit a 17-month high.

According to CoinShares, institutions invested $193 million in crypto funds last week, and it was the most significant amount in three months. Glassnode believes that the Bitcoin trend has already changed to bullish, as evidenced by the increase in the number of addresses accumulating BTC.

EURJPY pulled back to close at 135.93 on Monday after its aggressive rally topped at an almost seven-year high of 137.52 on Monday.

The price is trying to regain some ground today, but the 2018 resistance of 136.50 – 137.00 is keeping the bulls under control as the widened Bollinger bands foresee some stabilization in the short term. The fact that the Stochastics are sloping downwards to exit the overbought area, the RSI is very close to its October peak, and the MACD is testing its 2020 highs, is also endorsing weaker price momentum in the coming sessions.

Should selling pressures intensify, traders could initially seek support within the 134.47 – 134.00 territory. A break below that base and a step beneath 133.47 would downgrade the bullish long-term outlook back to neutral, likely triggering a sharper decline towards the 132.60 level. Moving lower, the bears may take a rest around 131.35.

In the positive scenario, where the price crawls back above the 136.50 – 137.00 wall, the bulls may attempt to pierce the 137.50 high and reach the 138.90 resistance from August 2015. The next target could be the 140.65 hurdle from June 2015.

Summarizing, the technical picture for EURJPY hints at a potential slowdown, though if the bulls manage to claim the 136.50 – 137.00 region, the pair may chart new higher highs.

GBPUSD’s negative bearing has been rekindled after the 1.3270-1.3300 resistance band curbed advances, which began from the recorded 16-month low of 1.3000. The falling simple moving averages (SMAs) suggest that the intensity of the downward trend is intact.

Currently, the Ichimoku lines signal prevailing bearish forces despite the rising red Tenkan-sen line. The short-term oscillators are conveying mixed messages in directional momentum. The MACD, in the negative zone, is above its red trigger line but has started to turn lower again, while the RSI is improving in the bearish region. The negatively charged stochastic oscillator, whose %K line has pierced into oversold territory, is promoting additional negative moves in the pair.

If the price slips underneath yesterday’s intraday low of 1.3066, support could commence around the 16-month trough of 1.3000. Diving past this would resuscitate the broader descent that began from the more than three-year high of 1.4248, turning sellers’ focus towards the 1.2854-1.2913 support band. From here, should the price sink deeper and not consider the 1.2800 hurdle, the bears may then aim for the 1.2643-1.2686 support border that extends back to mid-June 2020.

Alternatively, if buying interest ramps up, the red Tenkan-sen line at 1.3183 along with the 1.3200 handle could provide initial upside constraints. Not much higher, the 1.3270-1.3300 resistance boundary may challenge buyers’ efforts to reinstate optimism in the pair. That said, if the pair successfully climbs north of the 1.3300 barrier, the bulls could then encounter the approaching 50- and 100-day SMAs at 1.3348 and 1.3378 respectively. Should upside momentum endure, they may then confront the Ichimoku cloud and the 1.3436-1.3485 resistance barricade.

Summarizing, GBPUSD is exhibiting a bearish bias below the 1.3300 high and the SMAs. A break below 1.3000 could power the bearish outlook, while a price hike beyond the 1.3300 level would be required to trigger positive developments in the pair.

The Japanese yen has stabilized on Tuesday, after starting the week with sharp losses. USD/JPY is trading at 123.60 in the European session.

Yen flirts with 125 line

The yen took investors on a wild ride on Monday. USD/JPY climbed almost 300 points and broke above the symbolic 125 line for the first time since August 2015 before retreating and closing at 123.90. The yen was hammered after the BoJ rushed to defend its yield target, making an unlimited bid for 10-year JGBs at 0.25%. The bid has been extended until Thursday. The 4-day period is the longest intervention ever by the BoJ, and the move could lead to further losses for the wobbly yen. So far, the intervention hasn’t pushed 10-year yields downwards, as they are currently at 0.25%.

The BoJ has intervened in dramatic fashion so as to keep benchmark yields at an upper limit of 0.25%, as the Bank is committed to maintain a loose policy in order to kickstart the weak economy. This puts the BoJ out of sync with the Federal Reserve and other major central banks which are tightening policy in order to contain re-hot inflation.

The yen has been on a massive slide, with USD/JPY up over 7% in March. The weak yen is exacerbating inflation by making imports more expensive, which could make it difficult for the BoJ to continue trying to cap yields at ultra-low rates. The US/Japan rate differential has been widening, which has been the driver behind the yen’s spectacular slide.

Besides the BoJ, another player that should be monitored is Japan’s Ministry of Finance (MOF). The MOF is uncomfortable with the yen’s sharp downswing, and a BofA note on Monday said that if the yen climbs above 125, the ministry could warn speculators against intervention, while a break above 1.30 could trigger actual intervention by the MOF, according to BofA.

Don’t change channels – things could get very interesting if the yen continues to lose ground.

USD/JPY Technical

• 123.32 is a weak support line. Below, there is support at 121.21
• There is resistance at 124.55 and 126.66