Thread: Daily Market Analysis from ForexMart

Rally in euro and pound may end quickly

The unexpected crisis in the US banking sector has crushed all hopes for a new acceleration in the pace of interest rate hikes. Goldman Sachs economists said they no longer see the Fed raising rates next week, even after US authorities took steps to contain the crisis caused by the collapse of Silicon Valley Bank and Signature Bank. This caused two-year Treasury bond yields to fall by 18 basis points to 4.34%, reaching its sharpest three-day drop since October 1987. Expectations of a less aggressive policy stance and sharp demand for German bonds also affected the euro.

Most likely, Fed officials will announce a pause in interest rate hikes this week ahead of their meeting on March 21-22. Economists were expecting to see around 0.25% to 0.5% increase earlier, but everything changed since last Sunday, when US authorities had to act very quickly in order to contain the spreading of SVB's problem to other US banks. The Fed had to open an emergency line of credit, allowing banks to pledge a range of high-quality assets to obtain cash for a period of one year. They also pledged to fully protect uninsured depositors in SVBs, as well as relax lending conditions through the Fed's discount window. These measures should provide liquidity shortages to banks.

Now, the Fed is expected to raise the rate by a quarter point next week, which means that the peak will be around 5.1% in six months, slightly lower than the previously projected 5.74%.

The current situation is quite negative for dollar as it most certainly raises risk appetite. However, market players should keep in mind that if the crisis in the US banking sector is not solved quickly, it will spread to other regions, which will result in a collapse in other currencies such as euro and pound.

Ahead is an important US report, that is, the inflation data for February this year. Economists are predicting that the index will show a 0.4% increase, slightly lower than the previous month's 0.5%. Yearly data should be 5.5%, which is also lower than the 5.6% earlier.

Demand for euro has intensified after all the news, so buyers have a chance to continue building the new upward trend. However, the quote needs to stay above 1.0700 as only by that will euro go beyond 1.0730 and head towards 1.0770 and 1.0800. Should the quote decline below 1.0700, EUR/USD will slip to 1.0666.

In GBP/USD, bulls also control the market, but the quote needs to stay above 1.2130 so that pound could have the chance to break through 1.2170 and head towards 1.2215 and 1.2265. If bears manage to gain control, the pair may dip to 1.2080 and 1.2050.

Hot forecast for EUR/USD on 15/03/2023

The US media has already found the culprit in the banking crisis, and of course it is the Federal Reserve. They're saying that everything happened because the Fed has aggressively lifted interest rates. Supposedly, the main reason why two banks went bankrupt was because of the central bank. Now they are demanding that the Fed immediately start reducing interest rates and switch on the printing press and put out the fire with money. Furthermore, critics of the Fed have another reason to celebrate. Yesterday, we learned that US inflation slowed from 6.4% to 6.0%. It is decelerating for the eighth straight month, and in such circumstances, it will be very difficult for Fed Chairman Jerome Powell to explain the need not only to further raise interest rates, but also to do anything other than lower the refinancing rate.

Inflation (United States):

The dollar, on the other hand, will continue to be under pressure, as it loses ground not only because of the banking crisis in the United States and the clouds gathering over the Fed. Apparently, the banking crisis is already starting to spill over to Europe as well. We're talking about macro data, which are starting to point to more and more problems in the United States, and the stabilization of the situation in the euro area. In particular, the rate of industrial production decline in Europe should be replaced by growth from -1.7% to 0.5%.

Industrial production (Europe):

In the United States, the growth rate of retail sales should slow down from 6.4% to 4.3%. And if all of these forecasts are confirmed, the dollar will have no choice but to keep losing ground.

Retail Sales (United States):

The euro continued to rise against the U.S. dollar after a brief pullback. It passed 1.0700 earlier, which played the role of support, strengthening the bullish sentiment in the market.

On the four-hour chart, the RSI technical indicator is moving in the upper area of 50/70, which indicates bullish sentiment among traders. On the daily chart, the RSI recently climbed above the 50 midline, which indicates a change in sentiment.

On the four-hour and one-hour charts, the Alligator's MAs are headed upwards, which corresponds to the upward cycle from the middle of last week. On the daily chart, the primary signal will show change in trading sentiment, as the moving lines are intertwined with each other.

Outlook

The technical signal that shows change in sentiment, which indicates that the euro will gradually recover against the decline in February, will emerge if the price stays above 1.0800. Until then, that level will act as resistance, relative to which it is possible to reduce the volume of long positions on the euro.

The complex indicator analysis unveiled that in the intraday and short-term periods, technical indicators are pointing to bullish

Trading Signal for GOLD (XAU/USD) for March 17 - 20, 2023: key level $1,921 (21 SMA - symmetrical triangle)

Early in the European session, Gold (XAU/USD) is trading around 1,927, above the 21 SMA, and within a symmetrical triangle formed in the last 48 hours.

The outlook for gold remains bullish. If it consolidates above the daily pivot point (1,920), it could continue rising to reach 1,945, the level which coincides with the third weekly resistance.

A technical bounce around the 21 SMA located at 1,921 could give us the opportunity to resume buying with targets at 1,937 and 1,945.

On the contrary, in case gold breaks the uptrend channel formed since March 10 and consolidates below 1,917 in the next few hours, we could expect a further bearish movement and the instrument could reach 5/8 Murray located at 1,906 and finally could fall towards the EMA 200 located at 1,882.

According to the 1-hour chart, gold has upside potential. It is likely that if it trades above 1,920 (21 SMA), we could expect it to reach the resistance zone of 1,945.

Our trading plan is to watch a key level of 1,921 which could set the trend for gold. If it trades below this level in the next few hours, it will be considered an opportunity to sell and could accelerate the bearish movement until the price covers the gap left at 1,867.

Hot forecast for GBP/USD on 20/03/2023

The US industrial production report turned out to be much worse than expected and the previous data was revised from 0.8% to 0.5%. And instead of slowing to 0.2%, the industrial production showed a decline of 0.2% year-on-year. These results made it possible for the pound to fully recover its losses, which the pound suffered right after the Credit Suisse announcement, which triggered the euro's fall and eventually pulled the pound down. The single currency has not returned to its previous values and it will probably do that during the day. Moreover, we found out that Credit Suisse has been purchased by another Swiss bank - UBS. So it looks like Europe managed to save the emerging bank crisis, which gives investors optimism of course. Anyway, the GBP has won back its losses, and now it will wait for the euro. So, a temporary stagnation is the most likely outcome. Moreover, the macroeconomic calendar is totally empty today.

Industrial Production (United States):

GBP/USD ended last week with growth. As a result, it came close to the local high of the uptrend, which indicates the bullish sentiment prevails.

On the four-hour, one-hour and one-day charts, the RSI technical indicator is moving in the upper area of the indicator, which confirms the signal of growth of the volume of long positions on the euro.

On the four-hour and one-day charts, the Alligator's MAs are headed upwards, which corresponds to the bullish momentum.

Outlook

We can assume that keeping the price stable above 1.2200 will strengthen long positions in the market, which in turn will open the way towards 1.2300. However, falling below 1.2100 may lead to another move towards the psychological level of 1.2000.

The complex indicator analysis unveiled that in the intraday, medium-term and short-term periods, technical indicators are pointing to bullish sentiment.

EUR/USD and GBP/USD trading plan for beginners on March 23, 2023

Details of the economic calendar on March 22
The U.S. Federal Reserve raised its benchmark interest rate for the eighth time in a year. During the March meeting, the regulator expectedly raised the interest rate by 25 basis points to 4.75–5%. The central bank also stressed some additional policy firming ahead.

As for the banking sector, Fed Chairman Jerome Powell has repeatedly said that the U.S. banking system is reliable and stable. According to him, recent events are likely to tighten credit conditions for households and businesses and put pressure on economic activity, hiring, and inflation.

Analysis of trading charts from March 22
EUR/USD broke through the 1.0800 resistance level during the inertial movement. As a result, there was an increase in the volume of long positions, which indicated the recovery of the euro relative to the decline in February.

GBP/USD jumped above 1.2300 during the general sale of dollar positions. This move indicates a subsequent price recovery from the fall in February.

Economic calendar for March 23
The Bank of England will hold a meeting today, where interest rate is expected to be raised by 25 basis points to 4.25%. Of particular interest will be the regulator's commentary on future actions. Note that inflation data released yesterday showed an acceleration in growth to 10.4%. This may serve as a basis for a further interest rate hike.

Time targeting:

Bank of England meeting results – 12:00 UTC

EUR/USD trading plan for March 23
Based on the technical signal that the euro is overbought in the intraday period, we can assume that a pullback will appear on the market. During which, there will be a regrouping of long positions. However, speculators may ignore signals from technical analysis in vain. In this case, the price may move towards the local high of the medium-term upward trend (1.1033).

GBP/USD trading plan for March 23
A stable holding of the price above the level of 1.2300 allows the further growth of the British currency up to complete recovery. However, it is worth taking into account the technical factor of overbought, which can reach a critical point in this price move.

Hot forecast for EUR/USD on 27/03/2023

At first glance, preliminary estimates of PMIs in Europe turned out to be very good. At 55.6, the services Purchasing Managers' Index hit a 10-month high in March, up from 52.7 in February, with a forecast of 52.3 points. In other words, it should have declined, but instead it rose. Due to that the flash composite output index, which should have decreased from 52.0 to 51.3 points, rose more-than-expected to 54.1 in March. Only the manufacturing PMI fell to a four-month low of 47.1 from 48.5 in the previous month, though it should have increased to 49.8 points. To a certain extent this was what prevented the euro from rising further.

Composite PMI (Europe):

And after the opening of the US trading session, the euro fell, because in America, not only were the same PMIs better than forecasts, in fact, they turned out to be much better. The US Manufacturing PMI in March was 49.3 points, up from the previous value of 47.3 points. It was expected to have fallen to 47.0 points. Meanwhile, the Services PMI jumped to 53.8 points instead of increasing from 50.6 to 51.0. As a result, the composite purchasing managers index rose from 50.1 points to 53.3 points, with a forecast of 49.0 points.

Composite PMI (United States):

Today, the macroeconomic calendar is completely empty and the market is likely to consolidate around the reached values.

The euro entered a bearish correction after it sharply rose last week. The pair broke through a resistance level of 1.0800. As a result, the volume of short positions increased.

On the four-hour chart, the RSI downwardly crossed the 50 middle line, thus reflecting bearish sentiment among traders.

On the same chart, the Alligator's MAs are intertwined, signaling a slowing bull cycle. On the one-day chart, the Alligator's MAs are still headed upwards.

Outlook

Based on the corrective phase, its scale has already reached the possible limit. Therefore, the euro can still recover and climb above 1.0800. However, in case the bearish sentiment persists, and the quote stays below 1.0700, the market situation may still change.

The complex indicator analysis points to a correction in the short-term and intraday periods.

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Oil prices have many positive factors for growth

Oil prices were up and down on Wednesday afternoon. The West Texas Intermediate (WTI) for May delivery was trading at $73.39 a barrel, up 0.36% on the New York Mercantile Exchange.

Oil prices have been hit especially hard by the banking crisis - falling all of 13% two weeks ago. However, last week ended with the price rising by about 3%.

Oil prices were also moving up on Tuesday. The market, obviously, overestimated the prospects amid a decline of exports from Iraq's Kurdistan and considering the dynamics of stocks in the United States. The activity of M&A in the US banking sector was also extremely positive.

Recall that oil pumping from Kurdistan through the Kirkuk-Ceyhan pipeline was suspended. It means that 370 million barrels a day of oil from Kurdistan and another 75,000 from the fields of northern Iraq simply would not come to the world market. And it's all about the International Chamber of Commerce, which decided that the supply of this oil is illegal.

It is clear that oil prices benefit from this supply cut in light of an already tight market. However, we don't know how long the Kurdish supply will stop.

Meanwhile, strikes are ongoing in France, leading to the shutdown of some major refineries, in particular the TotalEnergies plant in Gonfreville-l'Orcher, which processed 240,000 barrels of oil a day. And on Monday, the strike at the refinery was extended for another three days, which created a temporary but very negative impact on crude oil consumption in the European Union. At the same time, problems with fuel availability at gas stations are worsening in France, adding to the already significant pressure on consumers' costs.

Meanwhile, a weekly review by the Energy Information Administration of the U.S. Department of Energy reported that the country's commercial oil inventories fell by 7.5 million barrels, or 1.6%, last week.

According to the terms of the OPEC+ agreement, the allowed production level for Russia in February was 10.478 million bpd. In other words, Russia did not produce about 537,000 bpd in the reporting month in order to reach its full production quota.

Since December 5, oil sanctions came into force, according to which the European Union does not accept the Russian oil, which is transported by sea. In addition, the G7 countries, Australia and the European Union imposed a price cap on Russian oil transported by sea at $60 per barrel, and more expensive oil can no longer be transported and insured. Russia, in response to such measures, banned from February 1 to supply oil to foreign parties if the contracts directly or indirectly provide for the use of the marginal price fixing mechanism.

Gold to climb above $2,000​​​​​​​

Throughout this week, many analysts predicted that gold could jump to $2,000 and even above. The yellow metal met expectations and reached the specified peaks. Now the primary task for the precious metal is to sustain its gains, experts believe.

Weak data on the US labor market has acted as a strong driving force behind gold's rally. Recall that in February, the number of job openings in the US labor market (JOLTS) dropped to 9.93 million, the lowest level since May 2021. Notably, in January 2023, the figure was 10.56 million. According to analysts, the current data indicates a cooling labor market. Previously, Fed officials, including Chairman Jerome Powell, emphasized that the overheated US labor market hinders the regulator in their efforts to curb inflation. Therefore, the Federal Reserve is confidently moving towards its goal, specifically achieving a 2% inflation rate.

Experts estimate that the current JOLTS reports have reinforced market expectations of the Fed's shift to a softer approach to monetary policy. Currently, the majority of analysts (almost 60%) expect the regulator to keep the key interest rate in a range of 4.75% - 5% per annum at the May meeting. At the same time, some experts anticipate a 25 basis-point rate hike.

After the JOLTS reports were released, the yellow metal broke through the level of $2,000 per troy ounce. On Tuesday evening, April 4, gold prices jumped from $1,990 to $2,020 within 20 minutes. Later, the precious metal stabilized at around $2,010, reaching the highest level since March 2022. On Wednesday, April 5, gold slightly appreciated, rising to $2,040 per troy ounce.

According to experts' estimates, the precious metal added 2% amid a weaker greenback. As a result, the US dollar index, which measures the performance of the dollar against a basket of six currencies, fell by 0.55% to 101.58. However, despite a decline in the dollar and a rise in the precious metal, Commerzbank economists believe that gold may enter a correction and lose value. This is facilitated by a recent increase in oil prices, which worries market participants and increases the risk of another inflationary spiral.

Currently, the value of gold is being formed by "fears of the dollar as economic factors do not provide substantial support for the US currency," David Lennox, an analyst at Fat Prophets, said. In addition, demand for the yellow metal as a safe-haven asset increased amid the recent banking crisis and geopolitical tensions.

Economists at Swiss investment bank UBS assume that gold will gain ground in the near future, proving its traditional "safe-haven" status in the current uncertain environment. Amid recent turmoil in the financial market, spot gold prices surpassed the $2,000 mark, reaching a 12-month high. The yellow metal gained momentum due to falling yields in the US, a weaker dollar, and increased risk appetite, experts estimated.

According to UBS forecasts, in the current situation, gold will reach the target mark of $2,100 per troy ounce in 2023. Previously, bank analysts expected the metal to achieve this height by the end of March 2024. However, things have changed, and the precious metal is now actively gaining value. This can be attributed to the global banking crisis. Against this background, gold prices soared to an all-time high, rising above $2,000 per troy ounce. A subsequent minor correction did not change investors' views. Market participants remained bullish on the precious metal.

Another factor contributing to higher gold prices is increased demand from central banks seeking to diversify their investments. Notably, gold is a great choice for investors to hedge against potential financial risks amid possible monetary policy easing. Market players are currently pricing in such a scenario.

Many analysts believe that by the end of this year, the FOMC may move to lower interest rates. However, this step is not favorable to gold. A perfect driving force for gold would be a situation where the Fed and the ECB begin to cut rates earlier than anticipated, while inflation targets are not met. In this case, demand for gold as a safe-haven asset will increase sharply. However, there is an alternative scenario. It suggests that the precious metal will trim some of its early gains if higher oil prices raise concerns about another inflationary spiral and further interest rate hikes.

Among recent forecasts, there is an almost fantastic one. Some economists expect gold prices to reach $3,000 per troy ounce. They believe it is a matter of time as the financial system has faced serious shocks. Against this background, interest in safe-haven assets is growing, primarily in gold. After the metal overcomes the barrier of $2,000 per troy ounce, it will probably head toward a new high. This scenario is possible in the long run.

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Hot forecast for GBP/USD on 10/04/2023

There is nothing surprising about the fact that the market stood still on Friday despite the release of the US Department of Labor report, as both Europe and North America were observing Good Friday. However, the contents of the report were quite interesting. It was not about the unemployment rate, which remained unchanged as expected, but about the number of new non-farm jobs created, which was only 236,000. It was expected to be 250,000, while in the previous month 326,000 new jobs were created. In other words, the US labor market is clearly losing momentum, which of course increases the chances of a gradual easing of the monetary policy of the Federal Reserve. And it will naturally put pressure on the dollar. The only thing is to wait for the market's reaction after the opening of the US trading session, since Europe is still observing a holiday.

Number of new non-farm jobs created (United States):

The GBPUSD pair is in the stage of a pullback from the resistance level of 1.2500. As a result, the pound has lost about 0.8%, which is approximately 110 pips. Despite the ongoing pullback, the uptrend persists, as shown by the recent update of the local high of the medium-term.

On the four-hour chart, the RSI downwardly crossed the 50 middle line, during the pullback. In the intraday period, the signal points to the growth in the volume of short positions.

The Alligator's MAs are intertwined in the 4-hour time frame, signaling a slowing bull cycle. In the daily chart, the Alligator's MA's are still heading upward, reflecting a bullish cycle.

Outlook

We can assume that the pullback serves as a time of regrouping trading forces, during which a new wave of growth is possible. However, in order to make this a reality, a number of technical conditions must be met. First and foremost, the current pullback should end. The 1.2380/1.2400 area may serve as a support. A subsequent signal in favor of growth is when the price trades within the level of 1.2500, and as a result, the volume of long positions may increase.

As for the bearish scenario, traders consider it as a full-size correction, where the current pullback will remain towards the level of 1.2300.

The complex indicator analysis unveiled that in the intraday and short-term periods, technical indicators are pointing to the pullback. Meanwhile, in the medium-term periods, the indicators are reflecting an upward cycle.