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The Japanese yen softened after weaker-than-expected GDP in Q4. Despite choppiness in recent price action, confidence in the greenback remains high.

A failed attempt at the supply zone (115.80) suggests a lack of momentum, but a swift bounce off 114.65 reveals strong enough buying interest.

A bullish breakout would lead to the double top at 116.35. Its breach could end the two-month-long consolidation and trigger an extended rally towards January 2017’s highs around 118.00. 115.40 is fresh support.

Bitcoin has jumped by 8.7% over the 24 hours, to $41,450. Ethereum has added 7.9% over the same time, while other leading altcoins from the top ten show growth from 3.3% (XRP) to 21% (Terra).

According to CoinMarketCap, the total capitalization of the crypto market grew by 6.9% over the day, to $1.83 trillion. The dominance index jumped to 43%.

The Cryptocurrency Fear and Greed Index rose 1 point to 22, remaining in “extreme fear” territory.

Bitcoin was bought on the decline to $38K, and the move to $40K on Wednesday morning caused a surge in buying, probably associated with the closing of part of the short positions, quickly bringing the price to current levels.

The last bitcoin growth impulse confirmed the break of the downtrend: the chart confidently rebounded from the former upper limit of the downtrend trading range. However, as before in March, a consolidation above the previous highs in the area of $45K is required to confirm a break in the trend.

On March 14, the European Parliament will approve the final version of the bill on the regulation of cryptocurrencies without wording that could be interpreted as a potential ban on bitcoin mining. US President Biden will also sign an executive order to regulate cryptocurrencies this week. The focus may be on tracking transactions and preventing circumvention of US sanctions.

EUR/USD

The market is in a pullback phase after the euro managed to push off a 22-month low at 1.0805. News of the issuance of new defense and energy bonds supported the bulls, but they failed to overcome resistance at 1.0936. The market seems stretched and despite negative expectations, a deeper and more aggressive retracement is possible. If the bulls manage to take over 1.0936, prices can test the zones at 1.1050 or 1.1107. Daily support bulls can expect in the range between 1.0850 and 1.0805. If this zone is however breached, it is possible that the declines will deepen to 1.0640 or 1.0450. Today there are no significant events in the economic calendar, but given the situation in Ukraine, volatility is expected to remain high.

USD/JPY

In the early hours of today, the bulls managed to overcome the resistance at 115.73. The breakthrough has not yet been confirmed and the pair is likely to return to its range between 114.73 and 115.73. If buyers hold positions, prices can test the double top at 116.33. The structure comes from the higher time frames and if it's broken a rally towards 118.00 could be expected.

GBP/USD

The Cable managed to form a bottom at 1.3100, and the zone is the first daily support. The shallow correction implies covering short positions rather than a return of the bulls to the market. Expectations are for a corrective movement towards 1.3214. Due to the worsened sentiment, with the continuation of the sell-offs and a break of 1.3100, the declines could reach 1.2920 and even 1.2710.

EUGERMANY40

The German index is still under the control of the bears, as at the beginning of the session it managed to convincingly bounce from the formed bottom around 12500 and reach its daily peak of 13345. Pressure down was not late and later in the day the index returned below the levels from 13093. With a confirmed break up, we can see an increase to 13805, but if the trend continues we can see a deepening again to 12430.

US30

Volatility was particularly high during yesterday's session. The index bounces by the support at 32360 in an attempt to form a double bottom at the zone. The Bulls capitulated around the resistance at 33330 and eventually the index closed in the red. The declines are likely to continue, with 32360 being the first support for the bulls and 32930 is the most significant resistance. If the support breaks, a drop to the weekly support 31600 is possible.

Markets

Yesterday’s news of the day undoubtably came from Bloomberg. The news agency ran a story about the European Union discussing plans to jointly issue bonds to finance defense spending and take up a notch or two in the energy transition. The proposal is in its early stages and other than it may happen on a “potentially massive scale” and may be presented after an informal EU summit later this week, not much is known.

The market reaction was similar to what we’ve seen when the EU announced its pandemic recovery fund (NextGenEU). European/German bond markets in particular saw large moves. The German curve bear steepened with changes ranging from 6.7 bps (2y) to 14 bps (30y). The 10y yield rose 12.7 bps with about half of the move driven by real yields. European swap yields rose 5.9 bps at the front end to 10.5 bps (10y). US yields rose in sympathy, adding 4.8 bps (2y) to 7.2 bps (10y).

The euro rebounded from the 2020 lows at 1.085 to just shy of 1.09. For a more significant upleg, the common currency needs more concrete guidance on the plans. EUR/GBP finished above 0.83(2).

Central-European currencies had a good run, in a move driven largely by a generally constructive sentiment. The Polish zloty outperformed regional peers. Its central bank also raised policy rates more than expected (see below).

Commodity prices rose further but in a less broad-based manner compared to the previous days. Oil stood out (+4% in Brent, $128) after the US decided to ban Russian imports effective immediate. The UK said it would phase out Russian crude by the end of the year.
 
Stocks in Asian dealings trade mixed with China (-1.5%) underperforming. Inflation in the country as expected stabilized at 0.9% y/y in February. Producer price inflation eased for a fourth month straight to be at a still-high 8.80%. The Chinese yuan trades little changed around USD/CNY 6.32. Most other currencies trade quietly.

The euro gets a slight advantage as European equity markets look set for a nice open in the green (+1.8%). EUR/USD inches above 1.09. EUR/JPY extends yesterday’s rebound from 125.16 to well above 126(.4) today. EUR/CHF tries to leave parity further behind (1.0137). Core bonds are looking for direction after taking a blow yesterday.
 
Markets today will be counting down to the ECB meeting on Thursday, even as the high-profile event has been overshadowed by geopolitics. The war in Ukraine obviously serves as the running story with the ability of causing sudden volatility. For the time being though and in the absence of such war headlines, sentiment looks good. It may keep core bond yields’ downside protected, also in Europe after yesterday’s Bloomberg report.

EUR/USD could enjoy a minor bid. From a technical perspective, it still has some way to go. The EUR/USD 1.10 area acts as a first resistance but for the downside alert to be called off, the pair should at least take out 1,11 first. The first downside reference is situated at 1.078.

News Headlines

The National  Bank of Poland (NBP) yesterday raised its main reference rate by 75 bps to 3.50%, more than the 50 bps expected by analysts. The NBP assessed the economic situation in Poland at the start of the year as favourable, but the military action in Ukraine is a significant factor of uncertainty. According to March inflation and GDP forecasts, the NBP sees 2022 and 2023 inflation at 9.3%-12.2% and 7%-11 respectively, sharply higher from November. Inflation will return to 2.8%-5.7% in 2024. Growth for this and next year is expected lower between 3.4%-5.3% and 1.9%-4.1%. The NBP acknowledged that a risk persists that inflation will be running of the NBP target over the monetary transmission horizon but gave little guidance on the pace of further rate hikes. The NBP will also take necessary action to ensure macroeconomic and financial stability. It may intervene in the FX market to limit fluctuations of the zloty that are said to be inconsistent with de direction of monetary policy and not in line with the fundamentals of the Polish economy. The zloty, which had profited early in the session from the headlines on a possible EU financing plan, hardly gained further ground post the NBP decision and closed the day at 4.895.

Joint decision from the US and the UK to ban the Russian oil sent another shockwave to commodity prices yesterday.

The European natural gas prices spiked to the all-time-highs and crude oil rallied to $130 mark, but the rise was manageable, confirming that the embargo on Russian oil was already, widely priced in. Therefore, the market reaction to the Russian oil ban hints that the upside potential may be exhausted in the short run.

In the medium to long run, we may see an advance to the $140/150 range if the war in Ukraine continues. Yet, a sustained move above these levels would bend the global recovery, hit the global demand and trigger a meaningful downside correction to more affordable levels.

Still, I wouldn’t short oil now, as the positive trend is very strong and swimming against such a strong tide could hurt. What happened in nickel trading yesterday is a warning that short-selling while the fundamentals point strongly to the topside is a highly risky bet.

Day traders buy, hedge funds sell

Stock markets are highly volatile as uncertainties loom. The European indices rallied at yesterday’s open yet the gains remained short-lived. This is because the rallies are mostly driven by intra-day trades, whereas longer term investors are leaving the market; hedge funds and the like are reportedly cutting exposure and covering shorts as visibility became very limited.

The VIX index rises steadily, as the selloff in the stocks continue. The S&P500 started the day in the positive and ended 0.72% down, while Nasdaq lost some 0.30%. The US futures are flat, while European futures are in the positive, but the gains are fragile.

Joint bond selloff

What really boosts the optimism in the European markets is the news that the EU countries will be issuing a massive joint bond to finance energy and defense… so the European Central Bank (ECB) could potentially buy it.

Joke aside, the extra massive cash would add to the inflationary pressures in Europe and should, in theory, force the ECB to become more aggressive on its monetary policy despite the Ukrainian threat to the economic recovery.

The ECB hawks are therefore in charge of the market and the EURUSD is trading past the 1.09 mark since yesterday.
Safe havens in demand

The US dollar index consolidates a touch below the 99 mark, gold spiked to $2070 an ounce, and the current market environment justifies an advance to fresh ATH in the yellow metal. The next natural target for the gold bulls is at $2100 per ounce.

Constructive for Bitcoin

Bitcoin rallied early on Wednesday, after US Treasury Secretary Yellen accidentally published remarks revealing that Biden's impending crypto order, which caused much fear and stress among the crypto traders, would take a constructive approach in regulating the digital asset industry. A constructive approach from the US would be a big step for the digital assets, as the regulation is one of the major risks to their valuation.

Bitcoin rallied past the $41K mark on news and we could see some more positiveness building toward the $45K in the coming hours.

Daily Pivots: (S1) 151.01; (P) 151.51; (R1) 152.03; More...

Intraday bias in GBP/JPY is turned neutral with a temporary low formed at 150.95. Some consolidations could be seen but outlook will stay mildly bearish as long as 155.20 resistance holds. Break of 150.95 will resume the fall from 158.04, as the the third leg of the consolidation pattern from 158.19, to 148.94 support.

In the bigger picture, price actions from 158.19 are seen as developing into a consolidation pattern to up trend from 123.94 (2020 low). Downside should be contained by 38.2% retracement of 123.94 to 158.19 at 145.10 to bring rebound. Firm break of 158.19 will resume the up trend to long term fibonacci level at 167.93. However, sustained break of 145.10 will raise the chance of trend reversal and target 61.8% retracement at 137.02.

Daily Pivots: (S1) 125.23; (P) 125.98; (R1) 126.86; More....

Intraday bias in EUR/JPY remains neutral for consolidation above 124.37. Some consolidations could be seen but upside should be limited by 127.90 support turned resistance to bring another fall. On the downside, break of 124.37 will resume the decline from 133.13 to 121.94 medium term fibonacci level.

In the bigger picture, current development suggests that whole rise from 114.42 (2020 low) has completed 134.11 already. Fall from there is developing into a medium term down trend. Next target is 61.8% retracement of 114.42 to 134.11 at 121.94. On the upside, firm break of 127.36 support turned resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of recovery.

Daily Pivots: (S1) 1.4839; (P) 1.4945; (R1) 1.5098; More...

Intraday bias in EUR/AUD remains neutral for consolidation above 1.4561. Stronger recovery cannot be ruled out But upside upside should be limited well below 1.5354 support turned resistance to bring fall resumption. On the downside, break of 1.4561 will target 161.8% projection of 1.6343 to 1.5354 from 1.6223 at 1.4476. Sustained break there will pave the way to 1.3624 long term target zone.

In the bigger picture, fall from 1.9799 is seen as a long term impulsive move. Next target is 61.8% projection of 1.9799 to 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623, which is close to 1.3624 long term support (2017 low). Some support could be seen there to bring interim rebound. But overall, break of 1.5354 support turned resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of recovery.

Daily Pivots: (S1) 0.8285; (P) 0.8316; (R1) 0.8353; More...

The break of 0.8304 support turned resistance suggests short term bottoming at 0.8201. Intraday bias is now mildly on the upside for 0.8405 resistance first. Break there will target key structural resistance at 0.8476. On the downside, however, break of 0.8201 will resume larger down trend.

In the bigger picture, the down trend from 0.9499 is expected to continue as long as 0.8476 resistance holds. Sustained trading below 0.8276 support will argue that the whole up trend from 0.6935 (2015 low) has reversed. Deeper fall should be seen to 61.8% retracement of 0.6935 to 0.9499 at 0.7917 next.

Daily Pivots: (S1) 1.0058; (P) 1.0118; (R1) 1.0190; More....

Intraday bias in EUR/CHF remains neutral for consolidation above 0.9970. Stronger recovery cannot be ruled out. But upside should be limited well below 1.0298 support turned resistance to bring down trend resumption. On the downside, firm break of 0.9970 will target 161.8% projection of 1.0936 to 1.0298 from 1.0610 at 0.9578.

In the bigger picture, long term down trend from 1.2004 (2018 high) is still in progress. Next target is 100% projection of 1.2004 to 1.0505 to 1.1149 at 0.9650. Firm break there will target 100% projection at 0.9650. In any case, break of 1.0505 support turned resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will remain bearish.