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The euro has posted sharp gains and punched above the symbolic 1.10 level. In the North American session, EUR/USD is trading at 1.1031, up 1.24% on the day.

We continue to see significant volatility in the currency markets. The euro plunged 3.0% per cent last week but has reversed directions, as the US dollar has dropped against the major currencies today for the first time in five days. The greenback had rallied as skyrocketing oil prices had sapped risk appetite. On Tuesday, President Biden announced a total ban on Russian energy imports, which will put even more upward pressure on oil prices.

The mood has changed dramatically on Wednesday. A buy-the-dip move has boosted equities and led to a bond selloff, with yields falling. The dollar index has fallen sharply to 98.19, down 0.88% and the US dollar outlook is suddenly not looking so bullish.

The Fed is poised to commence its rate lift-off next week, likely by a quarter-point. That’s the easy part of the equation. What happens after that has become very unclear, especially with a full-blown war in Europe and oil prices above US 120. Fed policy makers can now add stagflation to their plate of worries, which could mean a slower pace of rate hikes than had been expected.

ECB meets as stagflation worries increase

The ECB meets on Thursday and may delay tapering and a rate hike due to stagflation worries. Inflation has not been as red-hot in the eurozone as in the US, but inflation has been accelerating and has become a serious issue for the central after years of little inflation. The ECB had sounded more hawkish in tone recently, but the conflict in Ukraine, skyrocketing oil prices and possible disruptions in Russian energy supplies to Europe has clouded the economic outlook and will likely result in a more cautious stance from the ECB in this time of extreme turbulence.

EUR/USD Technical

• EUR/USD is putting pressure on resistance at 1.1053. Above, there is resistance at 1.1156
• There is support at 1.0886 and 1.0796

Spot gold was down around 2.5% on Wednesday, as fresh wave of optimism on de-escalating conflict in Ukraine hit the markets and sparked demand for riskier assets, pushing the safe-haven metal in defensive.

Pullback from Tuesday’s peak at $1970, posted after daily advance of nearly 3% and just few dollars away from record high at $2074 (Aug 7 2020) broke below $2000 zone (former resistance reverted to support), signaling further weakness as conditions remain favorable for riskier assets, prompting investors to stronger profit-taking.

Technical studies also work in favor of such scenario, as the price is rapidly losing bullish momentum and stochastic is emerging from overbought territory.

Break below $2000 pivot could extend pullback towards solid supports at $1960/50 zone (Fibo 38.2% of $1780/$2070 / rising 10DMA), which should ideally contain dips and keep larger bulls in play.

Situation over Ukraine is expected to remain metal’s key driver and further calmer tones would maintain fresh risk sentiment and keep gold under pressure.

However, overall situation of high uncertainty remains very supportive for safe-haven gold, with scenario of fresh escalation of the crisis that would neutralize current fragile hopes of stabilizing the situation and probably send yellow metal’s price to new record highs, to be considered.

Res: 2000; 2021; 2049; 2070.
Sup: 1980; 1974; 1959; 1952.

A barrel of Oil on the spot market briefly topped $130 for Brent and $125 for WTI, having retreated to $127 and $121, respectively, by the start of European trading. Oil received its latest boost on expectations that the US will announce an embargo on Russian energy imports.

Traders took short-term profits on Biden’s speech, which kept Oil rising further. On the sellers’ side was also news that the UK was unable to repeat the US move and is instead set to halt energy imports from Russia before the end of the year. Biden also noted that many European countries would not stop buying Russian Oil and Gas any time soon because of their heavy reliance on them.

The latest comments have somewhat dampened pressure on the Oil price, as have earlier International Energy Agency calculations on ways to reduce Europe’s energy consumption from Russia by up to 80% as early as this year. Such plans often over-idealise the possibility of a coordinated effort, but their mere appearance has a stabilising effect on the market.

For its part, Russia has also worked to prove its role as a reliable energy supplier, loading Crude Oil at ports in line with the schedule.

Nevertheless, markets continue to face an increased risk premium, and Russian Oil struggles to find new buyers. The UAE and Saudi Arabia try to use the situation to their advantage, refusing to cooperate with the US to increase oil supplies. Iran is haggling for more favourable terms on the nuclear deal. Russia, the architect of the deal, has suddenly become an obstacle to it, demanding legal guarantees from the US that sanctions will not affect Russian-Iranian trade, thereby trying to thwart the US attempts to increase oil supply in countries where US sanctions limit production.

We would venture to guess that all existing conditions are already built into the Oil quotes, and its price is now near a ceiling for the coming weeks and months. From here, we could see the establishment of a fairly broad corridor of $95-130 per barrel for Brent for the foreseeable future. This is a vast range, reflecting the outlook’s persistence of extreme volatility and extreme uncertainty.

Daily Pivots: (S1) 115.36; (P) 115.58; (R1) 115.88; More...

Range trading continues in USD/JPY and intraday bias remains neutral. On the upside, firm break of 116.34 will resume larger up trend from 102.58 to 118.65 long term resistance next. On the downside, though, break of 114.40 will continue the corrective pattern from 116.34 with another fall to 113.46 support.

In the bigger picture, no change in the view that rise from 102.58 is the third leg of the up trend from 101.18 (2020 low). Such rally should target a test on 118.65 (2016 high). Sustained break there will pave the way to 120.85 (2015 high) and raise the chance of long term up trend resumption. This will remain the favored case as long as 55 week EMA (now at 111.64) holds.

Daily Pivots: (S1) 0.9258; (P) 0.9282; (R1) 0.9316; More....

Sideway trading continues in USD/CHF and intraday bias remains neutral. Choppy rise from 0.8925 would still be in favor to extend higher as long as 0.9090 support holds. Break of 0.9341 will target 0.9372 resistance and then 0.9471. On the downside, however, break of 0.9090 will bring deeper fall back to 0.8925 support.

In the bigger picture, medium term outlook will be neutral at best as long as 0.9471 resistance holds. Larger down trend could still extend through 0.8756 (2021 low). However, firm break of 0.9471 will argue that the trend has already reversed and rebound the rally from 0.8756 with another impulsive move.

Daily Pivots: (S1) 1.3074; (P) 1.3109; (R1) 1.3137; More...

Intraday bias in GBP/USD remains neutral for some consolidations. But upside of recovery should be limited by 1.3270 support turned resistance. On the downside, sustained break of 61.8% projection of 1.4248 to 1.3158 from 1.3748 at 1.3074 will extend the down trend from 1.4248 to 100% projection at 1.2658.

In the bigger picture, current development suggests that the up trend from 1.1409 (2020 low) has completed at 1.4248. Decline from 1.4248 could still be a corrective move, or it could be the start of a long term down trend. In either case, deeper decline would now be seen back to 61.8% retracement of 2.1161 to 1.1409 at 1.2493. In case, break of 1.3748 resistance is needed to indicate medium term bottoming, or outlook will stay bearish.

Daily Pivots: (S1) 1.0849; (P) 1.0903; (R1) 1.0958; More...

EUR/USD's recovery from 1.0805 extends higher today but outlook is unchanged. Intraday bias stays neutral first. While stronger recovery cannot be ruled out, upside should be limited by 1.1120 support turned resistance to bring down trend resumption. On the downside, firm break of 61.8% projection of 1.2265 to 1.1120 from 1.1494 at 1.0786 will pave they way to 100% projection at 1.0349 next. However, strong break of 1.1120 will bring stronger rebound back to 1.1494 structural resistance instead.

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 extend range trading first.

Risk sentiment seemed to have improved drastically today. There are talks that both Russia and Ukraine are softening their tone, which might give an exit for Russia abandoning the invasion eventually. Germany DAX is leading major European indexes higher with more than 5% rebound. US futures also point to higher open. Both gold and oil dip too. In the currency markets, Euro is currently the strongest one for the day, followed by Aussie and then Kiwi. Yen is the worst performer followed by Dollar and Swiss Franc.

Technically, attention will be paid to how US stocks close today, particularly the volatile NASDAQ. A close above 13837.58 resistance would definitely be a positive sign. Further break of 55 day EMA in the coming days would suggest that correction from 162122 (or at least this falling leg of the corrective pattern) has completed, and turn near term outlook bullish for stronger rebound. Such development would also be reflected in the currency markets with sustainable rebound in Euro. However, failing to break through 13837.58 will keep status quo, at least for now, and indicate that risk sentiment remains fragile.

In Europe, at the time of writing, FTSE is up 1.64%. DAX is up 5.24%. CAC is up 4.73%. Germany 10-year yield is up 0.0721 at 0.187. Earlier in Asia, Nikkei dropped -0.30%. Hong Kong HSI dropped -0.67%. China Shanghai SSE dropped -1.13%. Singapore Strait Times rose 1.48%. Japan 10-year JGB yield rose 0.0121 to 0.167.

Gold back pressing 2k as rally lost momentum ahead of record high

Gold dips notably today, after failing to break through 2074.84 record high earlier. With the depth of the retreat, more corrective trading is now likely for the near term. While gold cold gyrate below 2000 handle, downside should be contained by 1960.83 support to bring another rally. Decisive break of 2074.84 will pave to way to next medium term target at 61.8% projection of 1160.17 to 2074.84 from 1682.60 at 2247.86.

However, break of 1960.83 support will delay the bullish case. Gold could then be in correction to rise from 1682.60 (the preferred case), or it's starting a third leg of the corrective pattern from 2074.84 (less preferred case). But both ways, Gold could have a test on 1877.80 support before setting on the next move.

Bitcoin extending triangle consolidation, back at 42k

Bitcoin is back at 42k handle over risk sentiment improves. Currently, price action from 33000 are seen as developing into a corrective pattern, probably in form of a triangle. Thus, upside of the current rebound should be limited by 45313 resistance. Eventually, larger decline from 68986 is still expected to resume through 33000 at a later stage. Nevertheless, firm break of 45313 will dampen this view and argue that the trend might be reversing.

RBA Lowe: A rate hike this year is plausible

RBA Governor Philip Lowe reiterated in a speech that Australia has the "scope to wait and assess incoming information" before working on interest rates.

He highlighted two issues that policymakers are "paying close attention to". The first is the "persistence of supply-side price shocks" and the extent of impact from Russia's invasion of Ukraine. Secondly, that's "how labor costs in Australia evolve".

He noted that "given the outlook, though, it is plausible that the cash rate will be increased later this year." There is both a risk to "waiting too long" and "moving too early". But Low finished with the point that "it is only possible to achieve a sustained period of low unemployment if inflation remains low and stable". And, "recent developments in Europe have added to the complexities here."

Australia Westpac consumer sentiment dropped to 96.6 in Mar, worst since Sep 2020

Australia Westpac consumer sentiment index dropped -4.2% to 96.6 in March, down from 100.8. That's the worst reading since September 2020, which was also the last time thee index was below the 100-level.

Westpac said: "The latest monthly fall comes as no surprise. The war in Ukraine; the floods in south- east Queensland and Northern NSW; ongoing concerns about inflation and higher interest rates were all likely to impact confidence, although the size of the decline is still notable."

Westpac maintained the view that the first RBA rate hike in the tightening cycle will start on August 2, following two more inflations reports of Q1 and Q2.

China PPI slowed to 8.8% yoy in Feb, CPI unchanged at 0.9% yoy

China PPI slowed from 9.1% yoy to 8.8% yoy in February, above expectation of 0.8% yoy. Senior National Bureau of Statistics statistician Dong Lijuan said, PPI was "affected by the increased commodity prices globally such as crude oil and non-ferrous metals".

CPI was unchanged at 0.9% yoy, above expectation of 0.8% yoy. affected by the Chinese New Year holiday and the fluctuation of international energy prices, CPI saw a bigger month on month increase," added Dong after CPI rose by 0.6 per cent month on month.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0849; (P) 1.0903; (R1) 1.0958; More...

EUR/USD's recovery from 1.0805 extends higher today but outlook is unchanged. Intraday bias stays neutral first. While stronger recovery cannot be ruled out, upside should be limited by 1.1120 support turned resistance to bring down trend resumption. On the downside, firm break of 61.8% projection of 1.2265 to 1.1120 from 1.1494 at 1.0786 will pave they way to 100% projection at 1.0349 next. However, strong break of 1.1120 will bring stronger rebound back to 1.1494 structural resistance instead.

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 extend range trading first.

Economic Indicators Update

Bitcoin is back at 42k handle over risk sentiment improves. Currently, price action from 33000 are seen as developing into a corrective pattern, probably in form of a triangle. Thus, upside of the current rebound should be limited by 45313 resistance. Eventually, larger decline from 68986 is still expected to resume through 33000 at a later stage. Nevertheless, firm break of 45313 will dampen this view and argue that the trend might be reversing.

Gold dips notably today, after failing to break through 2074.84 record high earlier. With the depth of the retreat, more corrective trading is now likely for the near term. While gold cold gyrate below 2000 handle, downside should be contained by 1960.83 support to bring another rally. Decisive break of 2074.84 will pave to way to next medium term target at 61.8% projection of 1160.17 to 2074.84 from 1682.60 at 2247.86.

However, break of 1960.83 support will delay the bullish case. Gold could then be in correction to rise from 1682.60 (the preferred case), or it's starting a third leg of the corrective pattern from 2074.84 (less preferred case). But both ways, Gold could have a test on 1877.80 support before setting on the next move.