In our view, a deeper slowdown in headline inflation, as we saw in China earlier this week, cannot be ruled out. Moreover, we should not be surprised if the rate of increase in prices, excluding energy and food, also falls short of expectations. A recovery in supply chains and a slowdown in wage growth are working against inflation.
A weaker-than-expected reading or other reliable signs of waning inflation could unleash a wave of pressure on the Dollar, reducing the chances of another Fed rate hike. Weaker inflation data is also good for demand for equities and commodities, as markets will reinforce expectations that inflation has peaked. The Dollar would then stand a good chance of rallying off this year's lows.
On the other hand, if prices rise significantly more than expected, this will push the Dollar higher. Technically, the DXY could form a double bottom with lows in early February and April. Equities and commodities could go down.
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A weaker-than-expected reading or other reliable signs of waning inflation could unleash a wave of pressure on the Dollar, reducing the chances of another Fed rate hike. Weaker inflation data is also good for demand for equities and commodities, as markets will reinforce expectations that inflation has peaked. The Dollar would then stand a good chance of rallying off this year's lows.
On the other hand, if prices rise significantly more than expected, this will push the Dollar higher. Technically, the DXY could form a double bottom with lows in early February and April. Equities and commodities could go down.
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Gold in demand
Despite its proximity to historical highs, the short-term momentum suggests that buying will intensify even on minor pullbacks. A week earlier, gold made a local high of $2030 and then corrected by 2.25%. The intraday chart on Monday afternoon clearly shows a bullish trend. The intermittent spikes in the Asian session were not sustained, but this trendline remained in force.
It appears more like a large buyer building up its long position than speculating on the news. This mini-trend will be challenged if it falls below $2008. The final break of this trend will come when it falls below the previous local lows of around $2002.
But it is worth taking a step back and looking at the more fundamental trends. The amplitude of gold's move on March 20-21 created a broad and rising range in which gold has been trading. The lower boundary is now $1965, and the upper edge is $2040.
Despite its proximity to historical highs, the short-term momentum suggests that buying will intensify even on minor pullbacks. A week earlier, gold made a local high of $2030 and then corrected by 2.25%. The intraday chart on Monday afternoon clearly shows a bullish trend. The intermittent spikes in the Asian session were not sustained, but this trendline remained in force.
It appears more like a large buyer building up its long position than speculating on the news. This mini-trend will be challenged if it falls below $2008. The final break of this trend will come when it falls below the previous local lows of around $2002.
But it is worth taking a step back and looking at the more fundamental trends. The amplitude of gold's move on March 20-21 created a broad and rising range in which gold has been trading. The lower boundary is now $1965, and the upper edge is $2040.
A further step back in time suggests that gold is now in bullish momentum, having completed an almost canonical Fibonacci retracement after rallying from the September-November lows to the February peak. The final target for this pattern is the $2170 area, which is nearly $100 above the historical highs.
If gold does rewrite the highs, it will be in an even longer-term growth cycle with a potential target of $2650. This is no longer a target for this quarter but for next year.
If gold does rewrite the highs, it will be in an even longer-term growth cycle with a potential target of $2650. This is no longer a target for this quarter but for next year.
The most exciting thing is that the big buyers in the last few quarters could be the central banks of the big emerging markets, such as China and Saudi Arabia. In this case, gold is an alternative to dollar-denominated government bonds, which look politically unpalatable in the short term, whereas gold is politically neutral.
Nevertheless, it is worth recognising that, contrary to the long-term bullish picture for gold. The blow could be pretty painful for short-term buyers. Gold remains in a long-term bullish trend as long as it trades above $1950-1960. A pullback here could become a reality in the event of high inflation data or continued hawkish Fed rhetoric in the coming weeks, seriously punishing the most desperate bulls.
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Nevertheless, it is worth recognising that, contrary to the long-term bullish picture for gold. The blow could be pretty painful for short-term buyers. Gold remains in a long-term bullish trend as long as it trades above $1950-1960. A pullback here could become a reality in the event of high inflation data or continued hawkish Fed rhetoric in the coming weeks, seriously punishing the most desperate bulls.
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#WaveAnalysis
#EURJPY broke resistance area
• Likely to rise to resistance level 147.00
EURJPY recently broke the resistance area located at the intersection of the resistance level 145.40 (former monthly high from March) and the resistance trendline of the wide down channel from October.
The breakout of the resistance area accelerated the active short-term impulse wave 3 of the intermediate impulse wave (C) from January.
EURJPY can then be expected to rise further toward the next resistance level 147.00 (target for the completion of the active impulse wave 3).
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#EURJPY broke resistance area
• Likely to rise to resistance level 147.00
EURJPY recently broke the resistance area located at the intersection of the resistance level 145.40 (former monthly high from March) and the resistance trendline of the wide down channel from October.
The breakout of the resistance area accelerated the active short-term impulse wave 3 of the intermediate impulse wave (C) from January.
EURJPY can then be expected to rise further toward the next resistance level 147.00 (target for the completion of the active impulse wave 3).
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#WaveAnalysis
#EURUSD under bullish pressure
• Likely to rise to resistance level 1.1035
EURUSD currency pair under the bullish pressure after the earlier breakout of the resistance level 1.0950 (former top of the previous impulse wave (1) from the end of March).
The breakout of the resistance level continues the active medium-term impulse wave (3) from the start of April.
Given the strong daily uptrend, EURUSD can then be expected to rise further toward the next resistance level 1.1035 (former multi-month high from February).
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#EURUSD under bullish pressure
• Likely to rise to resistance level 1.1035
EURUSD currency pair under the bullish pressure after the earlier breakout of the resistance level 1.0950 (former top of the previous impulse wave (1) from the end of March).
The breakout of the resistance level continues the active medium-term impulse wave (3) from the start of April.
Given the strong daily uptrend, EURUSD can then be expected to rise further toward the next resistance level 1.1035 (former multi-month high from February).
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Bitcoin is consolidating around the $30K mark for the third day, moving in a tight $20.7-30.3K range. Yesterday's news from the US had a moderately negative impact on the price but did not cause any sustained pressure.
The $30,000 mark was significant for Bitcoin in 2021 and the first half of 2022, acting as a market mode switch. Last year, bitcoin consolidated around this price for about five weeks before plunging sharply. There is a greater chance of a mirror dynamic, with the bulls taking a long time to gather their strength before making a decisive move higher.
The entire cryptocurrency market could follow a similar dynamic to the flagship cryptocurrency.
Bank of America noted that there had been a substantial outflow of bitcoins from cryptocurrency exchanges to users' wallets. This occurs when investors intend to hold BTC for the long term, suggesting that the pressure from sellers may be easing.
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The $30,000 mark was significant for Bitcoin in 2021 and the first half of 2022, acting as a market mode switch. Last year, bitcoin consolidated around this price for about five weeks before plunging sharply. There is a greater chance of a mirror dynamic, with the bulls taking a long time to gather their strength before making a decisive move higher.
The entire cryptocurrency market could follow a similar dynamic to the flagship cryptocurrency.
Bank of America noted that there had been a substantial outflow of bitcoins from cryptocurrency exchanges to users' wallets. This occurs when investors intend to hold BTC for the long term, suggesting that the pressure from sellers may be easing.
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US inflation weighs on the dollar
Last month, US inflation fell more than expected due to cheaper energy and food. The CPI rose 5%, down from 6% the previous month and just below the expected 5.1%. We had warned of this possibility.
However, it is challenging to see this as a surprise game-changer in the coming weeks. Moreover, core inflation - the real enemy of the Fed - accelerated from 5.5% to 5.6%. This is 1 point below the September peak, but it is further evidence that reversing this trend will take work.
Although trading robots reflecting the headlines have triggered a rally in equities and a sell-off in the dollar, only the latter has proved resilient. The bond markets, or "smart money", shifted their expectations for the Fed's next move slightly, putting the probability of a quarter-point hike at 68%, down from 72% the day before.
Last month, US inflation fell more than expected due to cheaper energy and food. The CPI rose 5%, down from 6% the previous month and just below the expected 5.1%. We had warned of this possibility.
However, it is challenging to see this as a surprise game-changer in the coming weeks. Moreover, core inflation - the real enemy of the Fed - accelerated from 5.5% to 5.6%. This is 1 point below the September peak, but it is further evidence that reversing this trend will take work.
Although trading robots reflecting the headlines have triggered a rally in equities and a sell-off in the dollar, only the latter has proved resilient. The bond markets, or "smart money", shifted their expectations for the Fed's next move slightly, putting the probability of a quarter-point hike at 68%, down from 72% the day before.
The USD's reaction was much more pronounced. The Dollar Index has lost 0.85% from its pre-release level and is back at 101.0, close to the lows seen in early February. The technical picture is now more supportive of the USD bears. EURUSD and GBPUSD are testing their 10- and 12-month highs, respectively. This dynamic leads us to view the February pullback in these pairs as a correction, which they overcame by mid-April.
The following key levels on the way up are at 1.13 for the euro and 1.30 for the pound, both of which seem relatively distant targets given the accumulated fatigue from last month's rally.
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The following key levels on the way up are at 1.13 for the euro and 1.30 for the pound, both of which seem relatively distant targets given the accumulated fatigue from last month's rally.
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PPI fell by 0.5% in March, and the annual growth rate fell from 4.9% to 2.7%, the lowest since Jan 2021, but more importantly, it is close to the last 20 years’ average.
For now, the market is celebrating the sharp divergence between expectations and facts by buying more risky assets and selling the dollar. Interest rate futures are pricing in a 40% chance that the Fed will leave rates at current levels in early May. This is still not a critical reversal, as a week and a month ago, these odds were over 50% (and on 13 March, there was an 18% chance of a cut).
This problem is receding into the background, and the Fed's focus can now turn to wages and prices in the service sector. So far, the only solution to this problem is a drastic economic growth slowdown. This is probably related to the Fed's expected moderate recession this year. This could signal that the central bank will put the brakes on monetary policy, contrary to market expectations.
For now, the market is celebrating the sharp divergence between expectations and facts by buying more risky assets and selling the dollar. Interest rate futures are pricing in a 40% chance that the Fed will leave rates at current levels in early May. This is still not a critical reversal, as a week and a month ago, these odds were over 50% (and on 13 March, there was an 18% chance of a cut).
This problem is receding into the background, and the Fed's focus can now turn to wages and prices in the service sector. So far, the only solution to this problem is a drastic economic growth slowdown. This is probably related to the Fed's expected moderate recession this year. This could signal that the central bank will put the brakes on monetary policy, contrary to market expectations.
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#WaveAnalysis
#Gold broke resistance level 2030
• Likely to rise to resistance level 2100
Gold continues to rise after the price broke the minor resistance level 2030 (which reversed the price at the start of this month).
The breakout of the resistance level 2030 continues the active minor impulse wave 3 which belongs to the sharp upward impulse sequence (3) from February.
Given the multi-month uptrend, Gold can then be expected to rise further toward the next resistance level 2100 (forecast price for the completion of the active impulse wave 3).
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#Gold broke resistance level 2030
• Likely to rise to resistance level 2100
Gold continues to rise after the price broke the minor resistance level 2030 (which reversed the price at the start of this month).
The breakout of the resistance level 2030 continues the active minor impulse wave 3 which belongs to the sharp upward impulse sequence (3) from February.
Given the multi-month uptrend, Gold can then be expected to rise further toward the next resistance level 2100 (forecast price for the completion of the active impulse wave 3).
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#WaveAnalysis
#USDCAD reversed from key resistance level
• Likely to fall to support level 1.3295
USDCAD currency pair continues to fall after the earlier downward reversal from the key resistance level 1.3555 (former support from the start of March).
The resistance level 1.3555 was further strengthened by the recently broken trendline from 2022, acting as the resistance after it was broken.
Given the strongly bearish USD sentiment seen today, USDCAD can then be expected to fall further toward the next support level 1.3295 (which stopped wave (a) in February).
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#USDCAD reversed from key resistance level
• Likely to fall to support level 1.3295
USDCAD currency pair continues to fall after the earlier downward reversal from the key resistance level 1.3555 (former support from the start of March).
The resistance level 1.3555 was further strengthened by the recently broken trendline from 2022, acting as the resistance after it was broken.
Given the strongly bearish USD sentiment seen today, USDCAD can then be expected to fall further toward the next support level 1.3295 (which stopped wave (a) in February).
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#WaveAnalysis
#USDCHF under strong bearish pressure
• Likely to fall to support level 0.8800
USDCHF under the strong bearish pressure after the pair broke the support area located between the support levels 0.9020 and 0.8920 (former multi-month low from 2021).
The breakout of this support area accelerated the active intermediate impulse wave (3) from March.
USDCHF can then be expected to fall further toward the next support level 0.8800 (which stopped the weekly downtrend at the start of 2021, target price for the completion of the active impulse wave (3)).
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#USDCHF under strong bearish pressure
• Likely to fall to support level 0.8800
USDCHF under the strong bearish pressure after the pair broke the support area located between the support levels 0.9020 and 0.8920 (former multi-month low from 2021).
The breakout of this support area accelerated the active intermediate impulse wave (3) from March.
USDCHF can then be expected to fall further toward the next support level 0.8800 (which stopped the weekly downtrend at the start of 2021, target price for the completion of the active impulse wave (3)).
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The cryptocurrency's market capitalisation rose 4.3% in the last 24 hours, hitting the $1.29 trillion. Ether's rally is successfully pulling most of the market with it.
Bitcoin is up 2.4% overnight, underperforming the market but revisiting last June's highs near $30.8K.
Ethereum is up more than 10% overnight, trading above $2100. This is its highest level since last May. The rally was triggered by the successful activation of the Shapella hard fork.
The update was activated on the night of the 12th at 22:30 GMT, allowing withdraw from the stacking. Contrary to fears, this did not put pressure on the ETH exchange rate, but instead accelerated the upward trend that started in December.
According to Nansen, full withdrawals are available for 7,948 validators with a total of 284,622 ETH (more than $546 million) in their balances. The total assets in the stack exceed 18 million ETH. However, 56% of the validators' addresses do not have the 0x01 prefix required to unlock assets.
Bitcoin is up 2.4% overnight, underperforming the market but revisiting last June's highs near $30.8K.
Ethereum is up more than 10% overnight, trading above $2100. This is its highest level since last May. The rally was triggered by the successful activation of the Shapella hard fork.
The update was activated on the night of the 12th at 22:30 GMT, allowing withdraw from the stacking. Contrary to fears, this did not put pressure on the ETH exchange rate, but instead accelerated the upward trend that started in December.
According to Nansen, full withdrawals are available for 7,948 validators with a total of 284,622 ETH (more than $546 million) in their balances. The total assets in the stack exceed 18 million ETH. However, 56% of the validators' addresses do not have the 0x01 prefix required to unlock assets.
Fed shrinks balance sheet slower than ECB
The Fed’s balance sheet shrank by 17.6 bn last week to 8.615 bn. Down 119bn over three weeks, the balance sheet is still 275bn higher than at the start of March.
Pumping liquidity into the financial system helps to support demand for risky assets, as it reduces stress in the financial system and creates more optimistic expectations for the banking sector and the market.
A shrinking balance sheet is only good news for the dollar in theory. In practice, the ECB is more disciplined in reducing its balance sheet. Moreover, comments from European officials are shaping expectations that the next ECB rate hike will also be a 50bp hike. Markets are currently pricing in a 69% probability of the Fed’s 25bp hike and a 31% probability of no hike.
The Fed’s balance sheet shrank by 17.6 bn last week to 8.615 bn. Down 119bn over three weeks, the balance sheet is still 275bn higher than at the start of March.
Pumping liquidity into the financial system helps to support demand for risky assets, as it reduces stress in the financial system and creates more optimistic expectations for the banking sector and the market.
A shrinking balance sheet is only good news for the dollar in theory. In practice, the ECB is more disciplined in reducing its balance sheet. Moreover, comments from European officials are shaping expectations that the next ECB rate hike will also be a 50bp hike. Markets are currently pricing in a 69% probability of the Fed’s 25bp hike and a 31% probability of no hike.
The situation with US banks in March highlighted the Fed’s flexibility and willingness to change course as circumstances dictate. This is good news for the economy, commodities, and equity markets, but it is also a negative agenda for the dollar. The US is clearly in the lead regarding policy tightening, while the ECB is raising interest rates and selling assets from its balance sheet more actively.
We expect this to continue, putting moderate pressure on the USD against its major rivals. On the macro monetary policy, 2022 is similar to 2002, when the #EURUSD began a strong recovery, and the pair rose by more than 50% in less than three years.
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We expect this to continue, putting moderate pressure on the USD against its major rivals. On the macro monetary policy, 2022 is similar to 2002, when the #EURUSD began a strong recovery, and the pair rose by more than 50% in less than three years.
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The Swiss Producer and Import Price Index rose by 0.2% in March, slowing the annual growth rate to 2.1% from 2.7%. Producer price pressures are easing faster than expected 2.7%. Easing inflation is a long-awaited signal for the SNB, which has raised its rate by 225 b.p. since the middle of last year to 1.5%.
Swiss CPI accelerated unexpectedly in January and February. Still, a continued slowdown in producer and import prices will likely keep a lid on consumer inflation in the coming months.
The Swiss franc exchange rate is also playing its role in easing inflation. From its peak in November to Thursday's low, the USDCHF exchange rate has lost more than 12.5%, taking prices back to February 2021 levels. The current rate of 0.8880 is quite close to multi-year lows near 0.8800.
Switzerland is now entering a situation where inflation is on a steady downward path, and the franc is close to historically uncomfortable levels for the SNB.
The central bank may start to change its rhetoric to a more dovish one.
Swiss CPI accelerated unexpectedly in January and February. Still, a continued slowdown in producer and import prices will likely keep a lid on consumer inflation in the coming months.
The Swiss franc exchange rate is also playing its role in easing inflation. From its peak in November to Thursday's low, the USDCHF exchange rate has lost more than 12.5%, taking prices back to February 2021 levels. The current rate of 0.8880 is quite close to multi-year lows near 0.8800.
Switzerland is now entering a situation where inflation is on a steady downward path, and the franc is close to historically uncomfortable levels for the SNB.
The central bank may start to change its rhetoric to a more dovish one.
The crypto market has gained around 7.2% in the last seven days to $1.268 trillion. The crypto market is recovering, like climbing the stairs, and is now consolidating at the same level it consolidated in May-June last year. To get to the next floor, with a market cap of $1.7 trillion, would require a jump of 34% - quite a climb, requiring a shift in market sentiment.
#Bitcoin is trading 6% higher than a week ago, stuck at $30K. #Ethereum has jumped 13% to $2100. Other leading altcoins in the top 10 are up 2.3% (#XRP) to 26% (#Solana).
Traders should be prepared that the $30K mark for the first cryptocurrency could act as solid resistance after it was rigid support in 2021. That said, technically, bitcoin has already proven the end of the bear market by securing above key moving averages and steadily retreating from the bottom.
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#Bitcoin is trading 6% higher than a week ago, stuck at $30K. #Ethereum has jumped 13% to $2100. Other leading altcoins in the top 10 are up 2.3% (#XRP) to 26% (#Solana).
Traders should be prepared that the $30K mark for the first cryptocurrency could act as solid resistance after it was rigid support in 2021. That said, technically, bitcoin has already proven the end of the bear market by securing above key moving averages and steadily retreating from the bottom.
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