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Australia Westpac-MI leading index improved slightly from -0.50% to -0.25% in February. But Westpac is expecting "strong above trend growth in 2022", largely due to the aftermath of the extraordinary emergency policy measures from both the fiscal and monetary authorities during 2020 and 2021.

Westpac expects RBA to stand pat in April meeting with its "patience" stance. But after Q1 inflation data and further progress on wages growth, RBA would moving to a tightening bias over June and July, prior to raising the cash rate in August.

Full release here.

ECB President Christine Lagarde said in a speech that the Russia-Ukraine war would "lower growth and raise inflation through higher energy and commodity prices, the disruption of international trade and weaker confidence". But the baseline scenario is still for the economy to "grow robustly in 2022".

However, "uncertainty surrounding the outlook had increased significantly", policy makers are looking at two alternative scenarios that " growth could be dampened significantly and inflation could be considerably higher in the near term". Still, "in all scenarios, inflation is still expected to decrease progressively and settle at levels around our two per cent inflation target in 2024."

Lagarde added that if data support the expectation that medium-term inflation outlook will not weaken even after the end of net asset purchases, ECB will "conclude net purchases in the third quarter". Any adjustments to interest rates will "take place some time after the end of our net purchases and will be gradual."

Full speech here.

Key Highlights

• USD/CHF started a major increase after it broke the 0.9250 resistance.
• It is up over 150 pips and broke many hurdles on the 4-hours chart.
• EUR/USD is still struggling below 1.1080, and GBP/USD is consolidating above 1.3000.
• The Fed Interest Rate Decision is scheduled today (forecast 0.50%, versus 0.25% previous).

USD/CHF Technical Analysis

The US Dollar formed a support base above 0.9200 against the Swiss Franc. USD/CHF started a strong increase and broke many hurdles near 0.9250.

Looking at the 4-hours chart, the pair gained bullish momentum above the 0.9300 resistance. The pair even settled above the 0.9350 level, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

During the increase, there was a clear move above a few key bearish trend lines. Finally, the pair spiked above 0.9400 and is currently consolidating gains.

An immediate resistance on the upside is near the 0.9420 level. The next major resistance is near the 0.9440 level. Any more gains might send USD/CHF towards the 0.9500 resistance.

If there is no upside break above 0.9420, the pair could start a downside correction. An initial support is near the 0.9360 level. The first major support is near the 0.9330 level. The main support is near the 0.9300 zone.

A successful break below the 0.9300 support could start a major decline. In the stated case, USD/CHF may perhaps revisit the 0.9250 support.

Looking at EUR/USD, the pair is still struggling to surpass the 1.1080 resistance zone. Besides, GBP/USD is attempting a recovery wave from the 1.3000 zone.

Economic Releases

• US Retail Sales for Feb 2022 (MoM) – Forecast +0.4%, versus +3.8% previous.
• Fed Interest Rate Decision - Forecast 0.50%, versus 0.25% previous.
• Canadian Consumer Price Index for Feb 2022 (MoM) – Forecast +0.9%, versus +0.9% previous.
• Canadian Consumer Price Index for Feb 2022 (YoY) – Forecast +5.5%, versus +5.1% previous.

Bitcoin has been trading in a range since late January when fears about sky-high inflation took hold over the markets and tensions between Russia and Ukraine first started to escalate. The sideways pattern isn’t showing any signs of breaking up, so why is the price so unusually disciplined at such a tumultuous period for financial markets?

The halving effect

The price of Bitcoin – still the largest cryptocurrency by market cap – exploded higher in 2020 and 2021. Whilst the rising popularity of Bitcoin, both as an asset class as well as its use as a payment method, undoubtedly magnified this spectacular growth, the main driving force behind this rally was likely the halving that takes place every four years, and which last happened in May 2020.

In previous such occasions in 2012 and 2016, the price also rallied, though, with a slightly longer lag from the date of halving, which was then followed by a steep correction. Within this context, Bitcoin’s downfall from its all-time high of $69,000 set in November 2021 is to have been expected. Nonetheless it’s still very puzzling why Bitcoin and the other major cryptocurrencies have been consolidating for so long when volatility has been extremely elevated in the broader markets.

Not much of a safe haven

The price bottomed at a six-month low of $32,950.72 on January 24, halting a two-month slide. But despite some very choppy trading since then amidst the geopolitical storm with Ukraine, it has been unable to rise further than $45,850 or even brush new lows, instead fluctuating around $39,000.

Many market pundits were hoping that Bitcoin would shine as a safe haven from the war. But although cryptocurrencies have come under the spotlight, with the Ukrainian government encouraging donations in cryptos and many Russians using them to evade sanctions, the latter may also be having the opposite effect. Some wealthy Russians are reportedly liquidating their digital coins as they find themselves frozen out of their other assets due to Western sanctions.

Bitcoin’s increasing adoption by institutional investors may also be working against it as the fact that it has not proven to be a good inflation hedge nor a ‘digital gold’ during this torrid time for the markets suggests portfolio managers see it mostly as a speculative trade than anything else.

Regulatory worries have eased lately

On the positive side, both the European Union and United States seem to be only taking baby steps as far as regulating cryptocurrencies is concerned. All the indications are that most governments don’t want to stifle innovation in the field of digital currencies and blockchain technology despite ongoing concerns about fraud and money laundering. This bodes well for Bitcoin, at least in the medium term.

When factoring in all these different forces, it appears that they are negating each other. But what could also be keeping the floor and ceiling of the range in place is dip buyers stepping in to take advantage of the discounted price, while those that entered the market when Bitcoin was near record highs are possibly selling it at every opportunity that the price spikes higher to minimize their losses.

Is the price getting ready for an upside break?

It is encouraging to note, however, that during this consolidation phase, not only is the long-term ascending trendline still in place, but a short-term uptrend has also been forming. With momentum indicators like the Relative Strength Index (RSI) looking fairly neutral, an upward push seems more likely than a downward one, assuming of course that the 50-day moving average doesn’t get in the way.

The Federal Reserve is expected to raise the interest rate by 25 basis points during the upcoming meeting on Wednesday, at 20:00 GMT+2. As inflation keeps surging, this will be the first small attempt to curb it. What does it mean for the US dollar? Let’s find out.
What Led To Rate Hikes

The rise of inflation is undoubtedly a huge problem for the United States right now. The annual inflation rate reached 7.9% in February 2022, the highest level since January 1982. At the same time, the economy is expanding at an ultra-fast pace. For example, the US unemployment rate dropped to 3.8% - a new post-pandemic low. Another factor that triggers Fed to act sooner rather than later is the Russia-Ukraine military conflict. The US sanctions against Russia and the ban of Russia's oil export boosted commodity prices and left no doubt about upcoming rate hikes.
How Many Rate Hikes to Expect

In addition to the Fed Interest Rate Decision, the regulator will release a so-called dot-plot. This is a report, where the Fed members post their expectations of rate hikes. The economists surveyed by Bloomberg see 5 rate increases with the rate reaching 1.25% this year. However, some analysts see an even more hawkish Fed with seven interest rate changes.

The US dollar will likely react to the actual data in these projections. If the Fed turns out to be more hawkish than the market expects it to be (with more than seven rate hikes or half-point rate hike) the USD will soar.

The USD ahead of the Event

If you look at the chart of the US Dollar Index, which tracks the performance of the American currency, you can notice that the decision has already been priced into the market. As a result, the USD has reached the 99.40 level. Thus we can expect a sharp reversal after the meeting unless the Fed surprises. In that case, the US Dollar index can plunge to 98 and even lower to 96.50. Keep in mind that the Federal Reserve may express cautiousness amid the ongoing tensions in Eastern Europe and the possible slowdown of economic growth.

EURUSD has been trading within a symmetrical triangle. That is, after a downtrend, we may see a continuation of the downtrend and reach the support levels at 1.0900 and 1.0850. However, if the Fed fails to surprise the market, the upside momentum to the resistance of 1.1100 (50-period MA) on H4 will be in focus.

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It looks like the "Putin trade" is back on: A few moments ago. stocks, which had rallied sharply, came off their earlier highs, while oil and gold both bounced off their lows... on this:

*PUTIN: KYIV NOT SERIOUS TO FIND MUTUALLY ACCEPTABLE SOLUTION

Whether or not we will see some traction now remans to be seen. But after slumping more than 20% off last week’s highs, crude oil has entered the bear market territory. Will it now rebound?

Source: ThinkMarkets and TradingView.com

Today saw Brent prices collapse further, dipping below the $100 per barrel level, to reach a low so far of around $97.50. WTI has likewise fallen sharply to $94.50. Last week, these contracts were trading at highs of around $138 and $129, respectively.

The collapse has been spectacular.

I think the biggest driver behind the sell-off in oil has been this: investor realisation that Europe is not going to wean off Russian oil supply immediately. Everything else is secondary, including the potential return of Iranian oil supply. Meanwhile, the OPEC has highlighted the risk to the oil demand outlook arising from the Ukraine war and surging inflation.

Also weighing on oil prices is something that had sent prices into the negative last year: surging covid cases and lockdowns. This time, in China, the biggest oil importer in the world. Here, covid cases have spiked sharply, and very sharply in certain regions. Consequently, the government has put tens of millions of people in lockdown. The most important regions are the entire Jilin province and technology hub Shenzhen.

The lockdowns have also weighed heavily on the Chinese yuan. Speaking of which, a report from WSJ says talks over pricing oil in yuan have accelerated as Saudis "have grown increasingly unhappy with decades-old U.S. security commitments to defend the kingdom."

Given the sharp sell-off in oil prices, I would imagine we will see a bit of “bargain” hunting at these levels, especially as the threat of Russian supply disruptions remain high. But we need to see evidence of a rebound first, ideally on a daily closing basis, before bullish speculators start to dip their toes in.

• EURGBP reversed from resistance level 0.8450
• Likely to fall to support level 0.8360

EURGBP recently reversed down from the key resistance level 0.8450 (which has been reversing the price from the start of February).

The resistance zone near the resistance level 0.8450 was strengthened by the upper daily Bollinger Band, resistance trendline of the dialy down channel from October and by the 61.8% Fibonacci correction of the downward impulse from December.

Given the strong daily downtrend – EURGBP can be expected to fall further toward the next support level 0.8360.

• S&P 500 reversed from support level 4140.00
• Likely to rise to resistance level 4300.00

S&P 500 index recently reversed up from the key support level 4140.00 (which has been reversing the index from the middle of last year).

The support zone near the support level 4140.00 was strengthened by the lower daily Bollinger Band.

Given the strength of the support level 4140.00 and the improvement of the risk sentiment across the equities markets – S&P 500 index can be expected to rise further toward the next resistance level 4300.00.

The euro has gained ground for a second straight day and broke above the symbolic 1.10 line before retreating.

German economic sentiment slides

German ZEW Economic Sentiment took a plunge in March, falling from 54.3 to -39.3. The massive decline of 93.6 points was the sharpest on record. The survey of financial experts shows that expectations that Germany will be hit by a recession. The war in Ukraine and the sanctions slapped on Russia have clouded the economic outlook and the survey also showed a huge jump in inflation expectations. Eurozone ZEW Economic Sentiment also tumbled, falling from 48.6 points to -38.7 points.

The euro is particularly sensitive to war in Ukraine, due to the eurozone’s geographic proximity as well as its dependence on Russia for energy supplies. Negotiations between Ukraine and Russia remain deadlocked, but any tangible progress towards a ceasefire would revive risk appetite and provide a boost to the euro.

Investors are keeping an eye on the FOMC meeting on Wednesday. A quarter-point rise is a virtual certainty and a hawkish rate statement could give a boost to the dollar. US Treasury yields have been rising, reflecting market expectations that the upcoming meeting will signal the lift-off for a series of rate hikes in the coming months. The 10-year yield has broken above the 2% line and is currently at 2.10%. The markets have priced in six or seven rate hikes this year, but there are strong reasons in favor of scaling back this projection. The war in Ukraine has caused massive uncertainty in the markets and the Fed would prefer not to make aggressive moves in such a fluid situation. As well, the surge in oil has raised worries about stagflation, so the Fed will have to be doubly cautious about the pace of its tightening.

EUR/USD Technical

• 1.0886 is the first line of support, followed by 1.0774
• There is resistance at 1.1089 and 1.1262