European Flash PMI’s and Canada Inflation Report

Australia’s ASX 200 index fell by -12.7 points and currently trades at 7,338.80
Japan’s Nikkei 225 index has fallen by -37.31 points and currently trades at 27,494.63
Hong Kong’s Hang Seng index has fallen by -207.23 points and currently trades at 20,679.73
China’s A50 Index has fallen by -31.48 points and currently trades at 13,679.43

UK and Europe:-

UK’s FTSE 100 futures are currently down -6.5 points, the cash market is currently estimated to open at 8,007,81
Euro STOXX 50 futures are currently down -6 points, the cash market is currently estimated to open at 4,265.18
Germany’s DAX futures are currently down -5 points, the cash market is currently estimated to open at 15,472.55

US Futures:-

DJI futures are currently down 130 points
S&P 500 futures are currently down -44.75 points
Nasdaq 100 futures are currently down -17.75 points
The RBA minutes firmly backed a 25bp over a 50bp, which suggests aggressive hikes are most likely in the past-although there is still room for at least two more hikes.

Australia’s private sector contracted for a fifth consecutive month according to the latest PMI report, with services mostly weighing on the broader economy.

Japan’s flash manufacturing PMI contracted at its fastest pace in 30 months.

NZ producer prices were much softer than expected, which plays further into a 50bp RBNZ hike over a 75bp.

CAD/JPY, with a Canadian inflation and retail sales report on tap, CAD pairs are in focus – and one of the more interesting pairs is CAD/JPY. Strong inflation and retail sales should keep bets alive for another BOC hike and likely send CAD pairs higher, and even more so if oil prices remain under pressure.

The pullback found support around the early December lows/late December highs and weekly pivot point, and we’re keen to seek bullish setups with any low-volatility retracement towards the said support zone. 100 is likely to provide resistance along the way, a break above which brings the 100.28 highs and weekly Q into focus.

FOMC Minutes Instant Insight

In their January meeting, Fed officials agreed to continue rate hikes until high inflation is controlled.

The Fed is still attuned to the risk they may have to do more to keep inflation falling, a hawkish tilt that may come into more precise view when policymakers issue new interest rate and economic projections at a meeting in four weeks.

Economic data since the last meeting show the economy growing strongly and adding jobs at an unexpectedly rapid pace, but inflation remains well above the Committee’s longer-run goal of 2% and the labor market remains very tight.

The Federal Reserve released the minutes from its latest policy meeting on Wednesday, which revealed that a solid majority of Federal Reserve officials agreed to raise the target range of the federal funds rate 25 bp.

The Policy statement issued on Feb 1st said “ongoing increases” would still be needed, but shifted the focus from the pace of coming rate hikes to their “extent”.

The Fed officials are still attuned to the risk they may have to do more in order to keep inflation falling, a hawkish tilt that may come into more precise view when policymakers issue new interest rate and economic projections at a meeting in four weeks.

Markets saw a muted initial reaction to the minutes. The risk appetites fade slightly. Major indices are approaching their daily lows after yesterday’s big drops, while treasury yields are ticking up a couple of bps across the curve and the US Dollar index hits fresh weekly highs.

Moving forward, there is nothing in these FOMC minutes that should keep the central bank from raising interest rates “higher for longer” if US economic data continues to come in stronger than expected.

EUR/USD slides further as the Dollar gains steadily

EUR/USD extended its decline below the 1.0600 support.
A key bearish trend line is forming with resistance near 1.0580 on the 4-hours chart.
GBP/USD could dive if it breaks the 1.1920 support.
Gold price is at risk of a move below the $1,800 support.

The Euro started another decline after it failed to recover above 1.0800 against the US Dollar. EUR/USD extended its decline below the 1.0700 support zone.

The pair settled below the 1.0650 support level, the 100 simple moving average and the 200 simple moving average.
The decline gained pace below the 1.0620 and 1.0600 support levels. A low is formed near 1.0536 and the pair is now consolidating losses. On the upside, and immediate resistance is near the 1.0575 level.

There is also a key bearish trend line forming with resistance near 1.0580. The next major resistance is near the 1.0620 level. A clear move above the 1.0620 resistance might start a steady increase. The next target could be near 1.0700 level and the 100 simple moving average, where the bears might appear. Any more gains could open the doors for a move towards the 1.0800 level.

On the downside, an immediate support in near the 1.0540 level. The next major support is near the 1.0500 level, below which there is a risk of a move towards the 1.0450. Any more losses could open the doors for a drop towards 1.0380.

NZD/CHF Wave Analysis

NZDCHF reversed from support level 0.5750
Likely to rise to resistance level 0.5830

NZDCHF recently reversed up from the key support level 0.5750. The support level 0.5750 coincided with the 50% Fibonacci correction of the previous upward ABC correction from the start of October.

NZDCHF can be expected to rise further toward the next resistance level 0.5830.

AUD/CHF:
AUDCHF reversed from support level 0.6300
Likely to rise to resistance level 0.6380

AUDCHF recently reversed up from the key support level 0.6300. The upward reversal from the support level 0.6300 is likely to from the daily Bullish Engulfing – which will mark the end of the previous minor impulse wave 3.

Given the oversold daily Stochastic, AUDCHF can be expected to rise further toward the next resistance level 0.6380.

The Week Head:- BOJ, RBA and BOC Meetings

An exciting week for markets, with three major currency central banks announcing their monetary policy decisions and a Nonfarm payroll report. The RBA’s meeting on Tuesday is the most likely to be the live one, but don’t write off the BOJ’s ability of surprising market at Governor Kuroda’s last meeting of his 10-year reign.

And the NFP report could be the cherry on top for the week, given it blew past expectations on January with over a 500k jobs growth print, creating a strong-dollar response and for some members to doubt their own December projections. It will certainly be a report to watch.

Money markets priced in a 4% ECB terminal rate.

Fed members continued their hawkish rhetoric, with Kashkari open to a 25 or 50bp March hike the terminal rate could be higher than 5.4%, along with Waller. Australian GDP and inflation reports were softer than expected. China’s PMI data was stronger than expected, the Hang Seng enjoyed its second best day this year.

BOE’s Governor Baily’s speech suggested the BOE’s next rate decision is finely balanced between a hike and a hold.
The Reserve Bank of Australia is expected to hike cash rate by 25bp on Tuesday, it would be their 10th consecutive hike to take the cash rate to 3.6%. The RBA cash rate futures imply a 75% chance of such an outcome, down from 81% earlier in the week following softer GDP and inflation figures.

The case may have diminished slightly for another 25bp hike, but it remains strong enough to almost take as a given, due to inflation remaining over 7%. So that likely means we need to pour over the statement to look for any clues of a slower pace of tightening or of a pause. The odds of a smaller hike or actual pause strike as slim. But it is such unexpected events that trigger the higher levels of volatility.

Bank Of Canada meeting:

The BOC’s OCR is currently 4.5% after slowing their pace of tightening to 25bp in December. And in all likelihood, they are going to hold rates at a 15-year high on Wednesday.

Their January statement suggested that to be the case, should data remain in line with their own forecast:
“IF economic developments evolve broadly in line with the MPR outlook, Governing Council expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases”.

Bank Of Japan:

The BOJ’s Friday 10th March meeting as his last chance to change policy before handing over the reign to his successor, Kazuo Weda. But given that Kazuo Ueda’s confirmation hearing in February was as dovish as ever, we will not hold our breath for any sudden change by Kuroda’s BOJ on Friday. But if we’ve learned anything from the BOJ over the years, it is to expect the unexpected. So be on guard for volatility irrespective of your own expectations, because then the worst case scenario is that nothing moves.

AUD/USD Defends January Low Ahead of RBA Rate Decision

AUD/USD trades in a narrow range after struggling to push back above the 200-Day SMA, and the Reserve Bank of Australia rate decision may keep the exchange rate afloat as the central bank is expected to implement higher interest rates.

AUD/USD appears to be defending the January low as it holds within last week’s range, and the exchange rate may stage further attempts to trade back above the long-term moving average as the RBA continues to carry out its hiking-cycle.

The RBA is anticipated to raise the official cash rate by another 25bp in March as the central bank insists that further increases in interest rates are likely to be needed over the months ahead, and the central bank may pursue a more restrictive policy as the recent inflation data had suggested more breadth and persistence in inflation than had been expected.

The RBA may adjust the forward guidance for monetary policy as inflation was likely to have reached its peak in the December quarter, and Governor Philip Lowe and CO. may look to switch gears over the coming months as the forecasts for output and inflation had been prepared on the technical assumption of the cash rate reaching around 3.3per cent.

With that said, a 25bp RBA rat hike along with a hawkish forward guidance may generate a bullish reaction in the Australian Dollar, but the exchange rate may struggle to defend the January low if the central bank plans to conclude its hiking-cycle in the months ahead.
AUD/USD trades in a narrow range as it holds above the January low 0.6688, with a push above the 200-day SMA raising the scope for a move towards the 0.6820 to 0.6870 region.

However, AUD/USD may threaten the opening range for 2023 as it struggles to push above the moving average, with a move below January low opening up the 0.6600 handle.

Failure to defend the yearly opening range may push the Relative Strength Index towards oversold territory, and a move below 30 in the oscillator is likely to be accompanied by a near-term decline in AUD/USD like the price action seen last year.

EUR/USD Takes Out February Low Ahead of US Jobs Report

EUR/USD takes out the February low following the failed attempts to trade back above the 50-day SMA, and developments coming out of the US may keep the exchange rate under pressure as the NFP report is anticipated to show another rise in employment.

EUR/USD fails to defend the opening range for March as Federal Reserve Chairman Jerome Powell warns of a higher trajectory for US interest rates, and the exchange rate may struggle to hold above the January low amid growing speculation for a 50bp Fed rate hike.

According to the CME Fed Watch Tool, market participants are pricing a greater than 70% probability for the Fed funds rate to increase to a fresh threshold of 5.00% to 5.25% on March 22, and it remains to be seen if Chairman Powell and Co. will project a steeper path for US interest rates as the central bank is scheduled to update the Summary of Economic Projections.

EUR/USD trades to fresh monthly low of 1.0524 after failing to push back above the 50-day SMA, and the exchange rate may attempt to test the January low as long as it holds below the moving average.
Failure to defend the yearly opening range may push EUR/USD towards the December 2022 low, with a move below 1.0370 raising the scope for a run at the 200-day SMA.

However, lack of momentum to test the January low may lead to range bound conditions in EUR/USD, with a move above 1.0610 bringing the 50-day SMA 1.0723 back on the radar.

Preview of NZ Q4 GDP

The expectation is 0.2% fall in GDP for the December Quarter, following two quarters of extremely strong growth.

This does not necessarily mark the start of a recession. GDP data has been choppy since Covid, and the details don’t tell a consistent story about whether monetary policy is biting.

Nevertheless, it does show that the economy is coming from a less overheated starting point than the Reserve Bank thought.
We think that will nudge them towards a smaller 25 basis point hike at the April OCR review.

The New Zealand economy went on a tear through the middle part of last year, as the return of overseas tourists lifted GDP by almost 4% over the June and September quarters. Coming off the back of that, we were already bracing for much more subdued growth in December quarter. But the final batch of indicators released last week actually suggest a slight contraction. We now estimate that GDP fell by 0.2% in the December quarter.

The details don’t tell as clean a story as we might like about the Reserve Bank’s efforts to slow the economy. Goods-producing sectors were softer across the board in the December quarter, with retail, wholesaling, manufacturing and construction all likely recording declines. But services sectors are still looking robust – and not just those relating to international tourism, but areas like professional services as well. There’s no obvious reason why tight monetary policy would have such disparate effects.

Expectations are of 25bp hike in April.

The RBNZ’s February projections sat somewhere between a 25 and a 50 basis point hike at the next OCR review on 5 April. Previously we favored a 50 point move, on the basis that the RBNZ’a recent tactic have been to move quickly towards where it thinks the OCR needs to be. But with the likelihood of a much weaker than expected GDP result – and effectively no other major data releases between now and April – we now expect the RBNZ to lean towards a smaller 25 basis point increase.

The April review is not a full Monetary Policy Statement so the RBNZ won’t be publishing new projections anyway. But in February there was a sense that the RBNZ has deferred the question of how high interest rates will need to go until the May review, when they will have a better sense of the inflationary effects of both the cyclone’s impact and the fiscal response.

Sentiment Improves as China Data Boosts Hopes of 5% Growth

China’s banks lent a record 4.9 trillion yen in January as the economy reopened from lockdowns. And there was some anticipation to see whether the new loans were making their way through the economy to aid the governments GDP target of around 5% this year. Early data suggests they are:

Retail rose to 3.5% as expected, up from -1.8% previously.

Fixed asset investment rose 5.5%, above 4.4% expected and 5.1% prior.

Industrial output rose 2.4% y/y. This was below estimates of 2.6% y/y, is a big improvement from 1.4% in January.

During the accompanying press conference, the National Bureau of Statistics (NBS) cited seasonality for the slight rise in the unemployment rate to 5.5%, but more importantly, China’s growth target of around 5% is in line with economic data although the economy does face many challenges.

They are certainly an improvement and will contribute to Q1 GDP figures. And against the backdrop of the bad start to the week we had regarding the fallout from SVB, a little good news can make a big difference to help sentiment. The data saw Asian equities and US future point higher, along with AUD, EUR and GBP which are currently the strongest majors.

AUD/JPY:

A bullish trend is developing on the 1-hour chart. Strong volumes accompanied yesterday’s rally to the high, and prices are continuing to drift higher today in Asia whilst respecting trend support. Prices are also above the 20 and 50-bar EMA’s around 89.50, a level which the bias remains above. Bulls will need to break prices above the round number of 90, and a resistance zone also sits nearby between 90.20/30 – but if we can get above here, it opens up a run for the highs around 91.

It need appetite for risk to pick up today for risk pairs such as AUD/JPY to benefit, and the idea scenario would be higher yields, equities and commodity FX. But if sentient turns sour, a clear break beneath 89.50 would pique our bearish interest.

ECB Hike 50bps but Euro Slips

Dovish rate hike by ECB
EUR falls across the board
Attention turns to Lagarde at ECB presser

The ECB had set itself up to disappoint some market participants after talking up 50 basis points. As it turned out, and despite all the troubles in the banking sector, it stuck to script and delivered that 50-bps hike. Initially, the euro rose a tiny bit, but then it slumped. The DAX hit a new weekly and multi-month low, before bouncing back a little off its worst levels. Keep an eye on the EUR/JPY, which could drop to a new low for the year in light of the risk off sentiment.

Traders realized that this was the best ECB could have done in these circumstances. By not hiking and going back on their words, this would have seen the ECB lose some credibility. It had to hike. But here is the clever bit: the ECB also didn’t want to disappoint those who were calling for a smaller or no rate hike at all. So, it provided no forward guidance or commitment to future hikes. It said that “the elevated level of uncertainty reinforces the importance of a data-dependent approach to the Governing Council’s policy rate decision”. In other words, this was as dovish a rate hike as you would have seen in these circumstances.

In addition to providing no forward guidance, it said that it has the toolkit to provide liquidity support if needed and that it is ready to respond to financial and price stability risks.

But the ECB could deliver more rate hikes, if the financial stability risks subside. It hasn’t ruled out the chance for more rate hikes.

Indeed, inflation remains uncomfortably high, which may require further tightening down the line. The recently released Eurozone inflation data barely slowed in February. Headline CPI eased a tad to 8.5% annual pace but remained above expectations of a slowdown to 8.3%. Meanwhile core CPI accelerated to a fresh record high of 5.6% from 5.3%. Core inflation is the key focus for the ECB and the fact that it rose further warrants even more tightening.

RBA Board opens the door to a pause in April

The Minutes emphasize a high degree of uncertainty; do not take into account the global banking disruptions; and point to a pause in April.

The Minutes of the Reserve Bank Board meeting on March 7 highlight that unlike recent meetings when several policy options were considered the March meeting only considered the case for 25 basis point increase – the resulting decision.

However the Minutes note that “Members agreed to reconsider the case for a pause at the following meeting, recognizing that pausing would allow additional time to reassess the outlook for economy.”

There is considerable discussion of market pricing in the Minutes. “ Market pricing implied a 25 basis point increase in the cash rate at the March meeting and suggested that the cash rate would peak at around 4.25% in the second half of 2023,” – with the market response to the global disruptions to the financial sector this pricing has fallen to below 3.6%; that is no further rate hikes with the possibility of rate cuts.

Similarly on international markets the Minutes refer to, “Market participants’ expectations of the path policy rate in advanced economies had shifted up since the previous meeting.” Now, market pricing for the FOMC is predicting a series of rate cuts over the course of 2023.

Read More : http://bit.ly/3lpsirF

GBP/USD Eyes Sustained Increase Above

GBP/USD is showing positive signs above the 1.2220 level.
A connecting bullish trend line is forming with support at 1.2240 on the 4-hours chart.
EUR/USD is well supported above the 1.0720 support zone.
USD/JPY might attempt a recovery wave if it clears the 132.00 resistance.

GBP/USD

The British Pound gained pace above the 1.2050 resistance against the US dollar. GBP/USD broke the 1.2150 level to settle in a positive zone.

Looking at the 4-hours chart, the pair even settled above the 1.2200 level, the 100 simple moving average (red, 4-hours) and the 200 simple moving average (green, 4-hours). It traded towards 1.2350 before there was a downside correction.

The pair tested the 1.2200 support zone and remained in a positive zone. It is now rising, with an immediate resistance near the 1.2320 level.

The first major resistance is near the 1.2350 level. The next major resistance is near the 1.2400. A clear move above the 1.2400 resistance might send the pair towards the 1.2500 zone. Any more gains might send the pair towards 1.2580 or even 1.2700.

On the downside, an immediate support is near the 1.2220. The next major support is near the 1.2200 level, below which there is a risk of a move towards the 100 simple moving average (red, 4-hours). Any more losses might open the doors for a drop towards the 1.1920 level.

Looking at EUR/USD, the pair stayed above the 1.0720 support zone and might attempt a fresh increase if GBP/USD extends gains.