#WaveAnalysis
#AUDCAD reversed from support area
• Likely to rise to resistance level 0.9200
AUDCAD today reversed up from the support area located between the pivotal support level 0.9070 (which has been reversing the price from December), standing near the lower daily Bollinger Band and the 38.2% Fibonacci correction of the previous sharp impulse wave (1) from October.
The upward reversal from the support level 0.9070 is likely to form the daily Bullish Engulfing pattern today – the strong buy signal for this currency pair.
AUDCAD can then be expected to rise further toward the next resistance level 0.9200 (which stopped the earlier impulse wave 1).
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#AUDCAD reversed from support area
• Likely to rise to resistance level 0.9200
AUDCAD today reversed up from the support area located between the pivotal support level 0.9070 (which has been reversing the price from December), standing near the lower daily Bollinger Band and the 38.2% Fibonacci correction of the previous sharp impulse wave (1) from October.
The upward reversal from the support level 0.9070 is likely to form the daily Bullish Engulfing pattern today – the strong buy signal for this currency pair.
AUDCAD can then be expected to rise further toward the next resistance level 0.9200 (which stopped the earlier impulse wave 1).
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#WaveAnalysis
#EURCAD reversed from support level 1.4740
• Likely to rise to resistance level 1.492
EURCAD today reversed up from the support area located between the key support level 1.4740 (previous resistance from the start of March), standing near the 38.2% Fibonacci correction of the previous upward impulse (iii).
The upward reversal from the support level 1.4740 stopped the previous minor ABC correction (iv).
Given the prevailing daily uptrend, EURCAD can then be expected to rise further toward the next resistance level 1.492 (top of the previous impulse wave (iii)).
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#EURCAD reversed from support level 1.4740
• Likely to rise to resistance level 1.492
EURCAD today reversed up from the support area located between the key support level 1.4740 (previous resistance from the start of March), standing near the 38.2% Fibonacci correction of the previous upward impulse (iii).
The upward reversal from the support level 1.4740 stopped the previous minor ABC correction (iv).
Given the prevailing daily uptrend, EURCAD can then be expected to rise further toward the next resistance level 1.492 (top of the previous impulse wave (iii)).
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The S&P CoreLogic Case-Shiller house price index for the 20 largest US metropolitan areas fell for the seventh consecutive month in January. The index fell by 6.8% during this period, and the annual growth rate slowed to 2.6%. The annual growth rate peaked in April last year, shortly after the Fed began to raise interest rates. The nominal level of the index peaked in June when the central bank began to raise interest rates by 75 points at once.
From this perspective, the housing market is now dragging down headline inflation rather than heating it.
A separate Federal Housing Finance Agency report showed a less aggressive price fall nationwide. Prices rose 0.2% m/m and 5.3% y/y in January.
Cooling the housing market could be an important reason for the Fed to stop tightening policy. However, the price correction is unlikely to be complete. Both price indices published today have broken away from the trend rate and are now around a quarter above the trend level.
From this perspective, the housing market is now dragging down headline inflation rather than heating it.
A separate Federal Housing Finance Agency report showed a less aggressive price fall nationwide. Prices rose 0.2% m/m and 5.3% y/y in January.
Cooling the housing market could be an important reason for the Fed to stop tightening policy. However, the price correction is unlikely to be complete. Both price indices published today have broken away from the trend rate and are now around a quarter above the trend level.
The housing market is an interesting leading indicator for the economy. In the US, house prices also closely correlate with final demand and stock market indices. However, the history of the mortgage crisis suggests that markets fall when house prices are actively falling. Still, the gradual cooling of prices may not be detrimental to the market recovery, as seen from 2009-2011, when there was a clear divergence between rising markets and falling house prices.
After spending most of Tuesday below $27.0K, bitcoin began to gain strength towards the end of the day, trading at $27.5K on Wednesday morning, up 2.3%. Total crypto market capitalisation rose 3% to $1.16 trillion, driven by general demands for risky assets following optimism around Alibaba and continued confidence in an imminent Federal Reserve rate cut.
Technically, BTCUSD found support from buyers after a correction to 76.4% of the rally since March 10th. Such shallow retreats (compared to a typical pullback to 61.8%) are characteristic of strong bull markets. More cautious investors may prefer to wait for confirmation of new bullish momentum with a takeover of $29.0K.
Adam Cochran, a partner at venture capital firm Cinneamhain Ventures, described the CFTC's lawsuit as an attempt to deal a fatal blow to Binance and did not rule out that the authorities "have a good chance of success". The regulator classified BTC, Ethereum, Litecoin, USDT and BUSD as "commodities" in the lawsuit.
Technically, BTCUSD found support from buyers after a correction to 76.4% of the rally since March 10th. Such shallow retreats (compared to a typical pullback to 61.8%) are characteristic of strong bull markets. More cautious investors may prefer to wait for confirmation of new bullish momentum with a takeover of $29.0K.
Adam Cochran, a partner at venture capital firm Cinneamhain Ventures, described the CFTC's lawsuit as an attempt to deal a fatal blow to Binance and did not rule out that the authorities "have a good chance of success". The regulator classified BTC, Ethereum, Litecoin, USDT and BUSD as "commodities" in the lawsuit.
The GfK consumer climate index for Germany rose by 1.1 points to -29.5 in April, a very low level by historical standards and still below the lows of the pandemic in the year 2020. Sentiment has been improving since October, allowing talk of a recovery from the inflation and energy shock in Europe's largest economy, although the pace of recovery has slowed.
Interestingly, the turnaround in consumer sentiment coincided with a "bottom" in EURUSD. The single currency rallied strongly in the final quarter of last year, briefly topping 1.10 in early February before a technical correction. In the second half of March, the single currency recovered against the dollar, despite selling pressure from Credit Suisse and Deutsche Bank.
Interestingly, the turnaround in consumer sentiment coincided with a "bottom" in EURUSD. The single currency rallied strongly in the final quarter of last year, briefly topping 1.10 in early February before a technical correction. In the second half of March, the single currency recovered against the dollar, despite selling pressure from Credit Suisse and Deutsche Bank.
We believe this interest in the single currency correlates with rising business and consumer sentiment indices. The economic recovery will allow the ECB to maintain a tighter monetary policy.
Assuming a positive correlation between consumer sentiment and the EURUSD exchange rate, we expect the #1 currency pair to continue its upward trend but with a much more subdued amplitude than at the end of last year. As early as April, the euro could fully emerge from its correction and rise above 1.10, but it is unlikely to exceed 1.12 in the year's first half.
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Assuming a positive correlation between consumer sentiment and the EURUSD exchange rate, we expect the #1 currency pair to continue its upward trend but with a much more subdued amplitude than at the end of last year. As early as April, the euro could fully emerge from its correction and rise above 1.10, but it is unlikely to exceed 1.12 in the year's first half.
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UK credit and money supply data published on Wednesday mostly came out weaker than expected, indicating a continued tightening of financial conditions. The unexpected exception was the number of approved mortgage applications.
The M4 unit shrank by 0.4% m/m, contrary to forecasts of a 0.9% growth. By last year, growth slowed to 1.0% - close to the cyclical lows of late 2018. The continued slowdown in lending is not particularly surprising. The net increase in lending in February was 2.1bn, which has fallen almost continuously since last August under pressure from rising interest rates.
What is surprising is the rebound in the mortgage market. Banks approved 43.5K applications last month, up from 39.6K and 40.5K in the previous couple of months. Local approvals peaked in August when their number exceeded 73.5K. The current data is encouraging, as similar sharp reversals have been harbingers of a general trend reversal over the last twenty years.
The M4 unit shrank by 0.4% m/m, contrary to forecasts of a 0.9% growth. By last year, growth slowed to 1.0% - close to the cyclical lows of late 2018. The continued slowdown in lending is not particularly surprising. The net increase in lending in February was 2.1bn, which has fallen almost continuously since last August under pressure from rising interest rates.
What is surprising is the rebound in the mortgage market. Banks approved 43.5K applications last month, up from 39.6K and 40.5K in the previous couple of months. Local approvals peaked in August when their number exceeded 73.5K. The current data is encouraging, as similar sharp reversals have been harbingers of a general trend reversal over the last twenty years.
The UK housing market has a noticeable impact on investor sentiment towards the Pound, and reversals of the former to growth have been closely associated with a rebound in GBP.
Earlier in March, the GBPUSD successfully defended the bullish uptrend for a second time, holding above the 200-day moving average and quickly returning to territory above $1.2000. Before that, the pair experienced a similar pullback in December.
In addition to the unexpected upturn in mortgage activity, investors should also look for a sustained rise in inflation. These reports pressure the Bank of England to tighten monetary policy. And this is good news for the British Pound, where interest rates and bond yields are lower than in the US.
Earlier in March, the GBPUSD successfully defended the bullish uptrend for a second time, holding above the 200-day moving average and quickly returning to territory above $1.2000. Before that, the pair experienced a similar pullback in December.
In addition to the unexpected upturn in mortgage activity, investors should also look for a sustained rise in inflation. These reports pressure the Bank of England to tighten monetary policy. And this is good news for the British Pound, where interest rates and bond yields are lower than in the US.
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For most of modern history, UK government bond yields have been higher than their US counterparts. This has changed in the zero-rate era. Last year appears to have ended that era, so it would not be surprising to see a return to the historical norm again. Inflation and housing market data so far support this idea.
If we are right, such a reassessment should return interest in the Pound in the foreign exchange market. GBPUSD is now trading at 1.2325, near the year's highs and in line with the cyclical lows of 2016-2020.
If the Pound resurfaces above this former support, a direct route to 1.35-1.40 will open up for it before the end of the year.
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If we are right, such a reassessment should return interest in the Pound in the foreign exchange market. GBPUSD is now trading at 1.2325, near the year's highs and in line with the cyclical lows of 2016-2020.
If the Pound resurfaces above this former support, a direct route to 1.35-1.40 will open up for it before the end of the year.
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#WaveAnalysis
#CADJPY broke key resistance 97.20
• Likely to rise to resistance level 98.60
CADJPY continues to rise sharply after the earlier breakout of the key resistance 97.20 (which stopped the previous minor correction (iv) in March).
The breakout of the key resistance 97.20 accelerated the active short-term upward correction 2, which belongs to the higher order impulse wave (C) from the end of February.
CADJPY can be expected to rise further toward the next resistance level 98.60 (which reversed the price earlier this month).
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#CADJPY broke key resistance 97.20
• Likely to rise to resistance level 98.60
CADJPY continues to rise sharply after the earlier breakout of the key resistance 97.20 (which stopped the previous minor correction (iv) in March).
The breakout of the key resistance 97.20 accelerated the active short-term upward correction 2, which belongs to the higher order impulse wave (C) from the end of February.
CADJPY can be expected to rise further toward the next resistance level 98.60 (which reversed the price earlier this month).
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#WaveAnalysis
#EUR50 broke pivotal resistance level 4200.00
• Likely to rise to resistance level 4300.00
EUR50 index under the bullish pressure after the price broke the pivotal resistance level 4200.00 (former strong support from February).
The breakout of the resistance level 4200.00 accelerated the active short-term upward impulse wave (iii), which belongs to the sharp impulse wave C from December.
Given the strong uptrend, EUR50 index can then be expected to rise further toward the next resistance level 4300.00 (which reversed the two of the previous impulse waves (iii) and (v)).
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#EUR50 broke pivotal resistance level 4200.00
• Likely to rise to resistance level 4300.00
EUR50 index under the bullish pressure after the price broke the pivotal resistance level 4200.00 (former strong support from February).
The breakout of the resistance level 4200.00 accelerated the active short-term upward impulse wave (iii), which belongs to the sharp impulse wave C from December.
Given the strong uptrend, EUR50 index can then be expected to rise further toward the next resistance level 4300.00 (which reversed the two of the previous impulse waves (iii) and (v)).
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S&P500 futures are trading at a 3-week high. Returning to the territory above 4000 and exiting above the previous week's highs set up optimism. Since March 13, the S&P500 daily candlesticks have been showing an uptrend.
The index is trading above levels reached as a first reaction to the Fed's comments last Wednesday. The subsequent selloff at the end of last week drew more buyers into the stock.
The positive momentum is supported by the stabilisation of the financial sector (no new bankruptcies) and growing expectations that the Fed has finished raising rates along with solid macroeconomic data.
On the technical side, the bulls managed to keep the S&P500 above the 200-day moving average last week. As a result of trading on Wednesday, the index closed above the 50-day, which failed last Wednesday.
Entering territory above this curve triggered relatively deep selloffs in March, so cautious traders may prefer to wait until Thursday or Friday's close (the last trading day of the month and quarter).
The index is trading above levels reached as a first reaction to the Fed's comments last Wednesday. The subsequent selloff at the end of last week drew more buyers into the stock.
The positive momentum is supported by the stabilisation of the financial sector (no new bankruptcies) and growing expectations that the Fed has finished raising rates along with solid macroeconomic data.
On the technical side, the bulls managed to keep the S&P500 above the 200-day moving average last week. As a result of trading on Wednesday, the index closed above the 50-day, which failed last Wednesday.
Entering territory above this curve triggered relatively deep selloffs in March, so cautious traders may prefer to wait until Thursday or Friday's close (the last trading day of the month and quarter).
However, we are optimistic this time, as the S&P500 has been actively buying back on dips below the 200-day average earlier this month, and the curve has been upward-looking since last week.
On the weekly timeframes, we note that this year's rally has pushed the market above the downtrend line that formed last year's downtrend. The March decline was an attempt to return to this trend, but it did not work out - the S&P500 was redeemed on touching this line.
In addition, the bulls managed to stretch out last week, closing it above the 50-week average. To a large extent, the buying strength this week is supported by the confidence of long-term investors that the market has not fallen into a tailspin.
We are now in the early stages of a bull market, the low point of which nicely coincided with the touch of the 200-week average and 50% correction from the post-COVID growth.
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On the weekly timeframes, we note that this year's rally has pushed the market above the downtrend line that formed last year's downtrend. The March decline was an attempt to return to this trend, but it did not work out - the S&P500 was redeemed on touching this line.
In addition, the bulls managed to stretch out last week, closing it above the 50-week average. To a large extent, the buying strength this week is supported by the confidence of long-term investors that the market has not fallen into a tailspin.
We are now in the early stages of a bull market, the low point of which nicely coincided with the touch of the 200-week average and 50% correction from the post-COVID growth.
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Preliminary estimates for Germany indicated an increase in consumer prices in March by 0.8% m/m and 7.4% y/y, which is higher than the average growth forecasts of 0.7% m/m and 7.3% y/y.
It would be a mistake to celebrate victory over inflation in the eurozone. Germany's monthly price growth remains inconsistent with the ECB's 2% annual growth target. The average monthly price growth rate over the past six months is 0.52%, resulting in a yearly increase of 6.2%, and over the past three months, it has added by an average of 0.9%, consistent with annual rate 10.4%.
The acceleration of inflation over the past three months is striking, and it is due to a tight labour market pushing up service prices and the inflation carryover from the euro's weakening earlier last year.
The ECB may try to overcome these hurdles through monetary tightening, which will simultaneously constrain business activity in the region and strengthen the euro. We should expect a further decisive tightening from the European Central Bank.
It would be a mistake to celebrate victory over inflation in the eurozone. Germany's monthly price growth remains inconsistent with the ECB's 2% annual growth target. The average monthly price growth rate over the past six months is 0.52%, resulting in a yearly increase of 6.2%, and over the past three months, it has added by an average of 0.9%, consistent with annual rate 10.4%.
The acceleration of inflation over the past three months is striking, and it is due to a tight labour market pushing up service prices and the inflation carryover from the euro's weakening earlier last year.
The ECB may try to overcome these hurdles through monetary tightening, which will simultaneously constrain business activity in the region and strengthen the euro. We should expect a further decisive tightening from the European Central Bank.
#WaveAnalysis
#Gold reversed from key support level 1950
• Likely to rise to resistance level 2000
Gold recently reversed up from the key support level 1950 (former strong resistance from January and February).
The upward reversal from the support level 1950 forms the 3rd consecutive upward reversal pattern Piercing Line – pointing toward the higher probability of further gains.
Given the clear uptrend Gold can then be expected to rise further toward the next round resistance level 2000 – from where the price is likely to correct down.
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#Gold reversed from key support level 1950
• Likely to rise to resistance level 2000
Gold recently reversed up from the key support level 1950 (former strong resistance from January and February).
The upward reversal from the support level 1950 forms the 3rd consecutive upward reversal pattern Piercing Line – pointing toward the higher probability of further gains.
Given the clear uptrend Gold can then be expected to rise further toward the next round resistance level 2000 – from where the price is likely to correct down.
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#WaveAnalysis
#USDCAD under bearish pressure
• Likely to fall to support level 1.3400
USDCAD currency pair under the bearish pressure after the price broke the key support level 1.3560 (low of the previous correction (iv)) intersecting with the 50% Fibonacci correction of the sharp upward impulse from February.
The breakout of the support level 1.3560 accelerated the active short-term upward impulse wave (c), which belongs to the ABC correction 2 from the start of this month.
USDCAD currency pair can then be expected to fall further toward the next support level 1.3400 (target price for the completion of the active impulse wave (c)).
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#USDCAD under bearish pressure
• Likely to fall to support level 1.3400
USDCAD currency pair under the bearish pressure after the price broke the key support level 1.3560 (low of the previous correction (iv)) intersecting with the 50% Fibonacci correction of the sharp upward impulse from February.
The breakout of the support level 1.3560 accelerated the active short-term upward impulse wave (c), which belongs to the ABC correction 2 from the start of this month.
USDCAD currency pair can then be expected to fall further toward the next support level 1.3400 (target price for the completion of the active impulse wave (c)).
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#WaveAnalysis
#GBPUSD broke resistance level 1.22664
• Likely to rise to resistance level 1.2440
GBPUSD rising after the pair broke above the resistance level 1.22664 (top of the previous correction 2 from the middle of February).
The breakout of the resistance level 1.22664 continues the active short-term impulse wave C, which belongs to the intermediate ABC correction (2) from the start of March.
Given the strong uptrend and the widespread dollar sales, GBPUSD currency pair can then be expected to rise further toward the next resistance level 1.2440 (monthly high from December and January and the target price for the completion of the active impulse wave C).
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#GBPUSD broke resistance level 1.22664
• Likely to rise to resistance level 1.2440
GBPUSD rising after the pair broke above the resistance level 1.22664 (top of the previous correction 2 from the middle of February).
The breakout of the resistance level 1.22664 continues the active short-term impulse wave C, which belongs to the intermediate ABC correction (2) from the start of March.
Given the strong uptrend and the widespread dollar sales, GBPUSD currency pair can then be expected to rise further toward the next resistance level 1.2440 (monthly high from December and January and the target price for the completion of the active impulse wave C).
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Bitcoin Adjusting First Quarter Gains
The crypto market's capitalisation fell by 1.1% over the past day to 1.17 trillion, which resembles profit-taking after 50% of market growth in the first quarter of this year.
Bitcoin underwent an even more active sell-off the night before, losing about 2% in 24 hours, but holding near $ 28K, bringing the result of the first quarter to 70%. A full correction from these levels involves a pullback to $ 26K or even $ 25K.
The fact that the stock market has maintained a positive bias over the past day, and the dollar has been declining, additionally supports the idea of a local shake-up of crypto portfolios, but not the return of pessimism. If this happens, anxiety will kick in when the decline is under $ 25K.
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The crypto market's capitalisation fell by 1.1% over the past day to 1.17 trillion, which resembles profit-taking after 50% of market growth in the first quarter of this year.
Bitcoin underwent an even more active sell-off the night before, losing about 2% in 24 hours, but holding near $ 28K, bringing the result of the first quarter to 70%. A full correction from these levels involves a pullback to $ 26K or even $ 25K.
The fact that the stock market has maintained a positive bias over the past day, and the dollar has been declining, additionally supports the idea of a local shake-up of crypto portfolios, but not the return of pessimism. If this happens, anxiety will kick in when the decline is under $ 25K.
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Dollar preparing to stare into the abyss
The dollar index is ending with a decline for the fourth of the last five weeks, almost completely erasing the gains from February's rise. Although it cannot be ruled out that the quarterly portfolio shakeout will create traction in the Dollar, it is still more likely that the US currency will fall further in the coming quarters.
We consider the sharp reversal of the Dollar from rising to falling at the end of September a turning point. Before that, the DXY had been gaining following an increasingly tight monetary policy stance by the Fed. But after last September's meeting, hopes of an imminent end to tightening loomed on the horizon for financial markets.
The dollar index is ending with a decline for the fourth of the last five weeks, almost completely erasing the gains from February's rise. Although it cannot be ruled out that the quarterly portfolio shakeout will create traction in the Dollar, it is still more likely that the US currency will fall further in the coming quarters.
We consider the sharp reversal of the Dollar from rising to falling at the end of September a turning point. Before that, the DXY had been gaining following an increasingly tight monetary policy stance by the Fed. But after last September's meeting, hopes of an imminent end to tightening loomed on the horizon for financial markets.
The link between the Dollar and Fed policy expectations has become even closer this year. In January, the Dollar was accelerating its fall as markets were banking on a rate cut even before the end of the year. There was a sharp reversal in February when high inflation put a 50-point hike back on the FOMC agenda for March. In March, these expectations melted away with the banks.
The banks' problems are tightening financial conditions as rates do, according to Powell at a press conference on 22 March. This was a hint that further rate rises are not guaranteed.
In contrast, other regions may need to continue their crusade for inflation, thereby reducing the spreads of debt securities yields.
This is a typical story in the currency market, with the Fed at the forefront of the monetary cycle, which initially forms 12-18 months of dollar growth on rate hikes, but then triggers a move in the opposite direction. In the last six months, we have seen the quite typical and understandable reversal of the Dollar.
Last year, the rise in the Dollar also helped with inflation, bringing the expected policy reversal closer to easing. However, now it is the turn of other developed country currencies, where central banks will try to tighten financial conditions to suppress inflation.
The banks' problems are tightening financial conditions as rates do, according to Powell at a press conference on 22 March. This was a hint that further rate rises are not guaranteed.
In contrast, other regions may need to continue their crusade for inflation, thereby reducing the spreads of debt securities yields.
This is a typical story in the currency market, with the Fed at the forefront of the monetary cycle, which initially forms 12-18 months of dollar growth on rate hikes, but then triggers a move in the opposite direction. In the last six months, we have seen the quite typical and understandable reversal of the Dollar.
Last year, the rise in the Dollar also helped with inflation, bringing the expected policy reversal closer to easing. However, now it is the turn of other developed country currencies, where central banks will try to tighten financial conditions to suppress inflation.
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