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Gold hits record against Aussie, breaks 2000 against Dollar

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    ActionForex.com
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    Gold breaks above 2000 handle against US Dollar today, and even hit a new record high surpasses 3000 handle against Australian Dollar . Risk selloff picks up momentum as European investors start to react to weekend’s news about UBS takeover of the troubled Credit Suisse. Apparently, the announcement did little to calm investors’ nerve.

    For XAU/AUD, it broke through 2873.61 record high (made in 2020) last week and the up trend continues today. For now, near term outlook will stay bullish as long as 2871.30 support holds. Immediate focus is on 100% projection of 2438.01 to 2795.89 from 2648.89 at 3006.77. Sustained break there could prompt further upside acceleration to 161.8% projection at 3227.93. That level is close to long term level of 61.8% projection of 1604.40 to 2873.61 from 2438.01 at 3222.38.

    Meanwhile XAU/USD’s rise from 1614.60 is on track to 61.8% projection of 1614.60 to 1959.47 from 1804.48 at 2017.60. A firm break through this level will pave the way for a retest of the 2074.84 record high. In any case, outlook in XAU/USD will remain bullish as long as 1936.15 resistance turned support holds. The long-term uptrend could also be set to resume, potentially reaching 61.8% projection of 1160.17 to 2074.85 from 1614.60 at 2179.86.

     

    BoJ members support persistent monetary easing, discussed side effects

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      ActionForex.com
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      In the Summary of Opinions from BoJ’s March meeting, many members expressed support for continuing with the current monetary easing and yield curve control. However, there were also discussions on potential side effects and concerns related to the policy.

      One member acknowledged the side effects of the current monetary easing, such as distortions in the yield curve. They stressed the need for BoJ to examine market functioning without preconceptions while assessing the balance between positive effects and side effects. Nonetheless, this member believed that the bank should “persistently continue with large-scale monetary easing” in the current phase.

      Another member commented that it would take time to examine the effects of modifications in yield curve control on market functioning. They expect that when observed CPI inflation declines and market projections of interest rates calm down, “distortions on the yield curve are expected to be corrected”.

      A member warned against hasty policy changes, stating that the risk of missing the chance to achieve the price stability target should be considered more significant than the risk of delaying policy changes, given the current improvements in the price environment.

      Another member emphasized the importance of BoJ maintaining its commitment to the 2% price stability target. They argued that starting a discussion on the target could lead to “unnecessary speculation” on monetary policy conduct, despite the growing possibility of achieving the target. Similarly, this member saw no need to revise the joint statement of the government and BoJ.

      Full BoJ Summary of Opinions here.

      Market sentiment remains fragile despite CS takeover and coordinated central bank actions

        By
        ActionForex.com
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        Over the weekend, two significant actions were announced in an attempt to stabilize the markets amidst the ongoing banking crisis. These actions included the government-supported takeover of troubled Credit Suisse by UBS and a coordinated move by six major central banks to enhance the provision of US dollar liquidity. Despite these measures, market sentiment remains fragile, with stocks in Japan, Hong Kong, and Singapore extending declines.

        UBS’s takeover of Credit Suisse was made possible with the support of the Swiss federal government, FINMA, and SNB. SNB noted that this move aims to secure financial stability and protect the Swiss economy during these exceptional circumstances. Based on the Federal Council’s Emergency Ordinance, Credit Suisse and UBS can obtain a liquidity assistance loan with privileged creditor status in bankruptcy for a total amount of up to CHF 100B. Additionally, SNB can grant Credit Suisse a liquidity assistance loan of up to CHF 100B backed by a federal default guarantee.

        In a separate announcement, Fed, alongside BoC, BoE, BoJ, ECB, and SNB, revealed a coordinated action to increase the availability of liquidity via the standing US dollar liquidity swap line arrangements. To enhance the swap lines’ effectiveness, the central banks will increase the frequency of 7-day maturity operations from weekly to daily, starting on March 20, 2023, and continuing at least until the end of April.

        These swap lines between central banks serve as crucial liquidity backstops to ease strains in global funding markets. By mitigating these strains, central banks aim to maintain the supply of credit to households and businesses. However, the ongoing decline in stock markets across Asia signals that further actions may be needed to restore confidence and stability in the global financial markets.

        Hong Kong HSI is trading down -2.5% at the time of writing. The decline from 22700.85 (Jan high) is still in progress with the index bounded well inside the falling channel, and capped below 55 hour EMA. Outlook will stay bearish as long as 19804.56 support turned resistance holds. Next target is 100% projection of 22700.85 to 19804.56 from 21005.66 at 18109.37.

         

        Eurozone CPI finalized at 8.5% yoy, core CPI at 5.6% yoy

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          ActionForex.com
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          In February, Eurozone CPI was finalized at 8.5% yoy, a marginal drop from January’s 8.6% yoy. Meanwhile, core CPI, which excludes volatile components like energy, food, alcohol, and tobacco, was finalized at 5.6% yoy, up from the previous month’s 5.3% yoy. The primary drivers of the annual Eurozone inflation rate were food, alcohol, and tobacco, contributing 3.10%, followed by services at 2.02%, non-energy industrial goods with 1.74%, and energy at 1.64%.

          EU’s overall CPI for February was finalized at 9.9% yoy, slightly lower than January’s 10.0% yoy. Among member states, Luxembourg, Belgium, and Spain registered the lowest annual rates at 4.8%, 5.4%, and 6.0%, respectively. In contrast, Hungary, Latvia, and Czechia experienced the highest annual rates at 25.8%, 20.1%, and 18.4%, respectively. Notably, annual inflation fell in fifteen member states, remained unchanged in two, and rose in ten.

          Full release here.

          ECB Kazimir: We are not yet at the finish line

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            ActionForex.com
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            ECB Governing Council member Peter Kazimir has asserted that the recent events in financial markets have not altered his stance on the necessity of continuing with monetary tightening. The Slovak central bank governor acknowledged the delicate nature of the current situation but emphasized that the end goal has not yet been reached.

            Kazimir said, “even the current events on the financial markets do not change my view that we need to continue,” with monetary tightening.

            “I am very well aware of the delicacy of the situation … but we are not yet at the finish line,” he added.

            He said underlying inflation is “stubbornly sticky”. “There are risks to inflation on both sides, but in my view, upward risks are much greater.”

            Nevertheless, he also noted it was useless to speculate what ECB could do at next meeting on May 4. ECB raised interest rate by 50bps yesterday, but omitted tightening reference in the accompanying statement.

            ECB Villeroy: We sent a signal of confidence

              By
              ActionForex.com
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              ECB Governing Council member Francois Villeroy de Galhau told BFM Business radio that yesterday’s 50bps sent a “signal of confidence that is strong and dual” to the public.

              “It reflects both confidence in our anti-inflation strategy and confidence in the solidity of European and French banks,” he said.

              Regarding recent banking crisis, Villeroy, also the Bank of France Governor, noted that “French and European banks are very solid,” and they are “not in the same situation as US banks”.

              ECB had the “tools to ensure the liquidity of banks”, but according to him, it’s unlikely that they have to be used.

              Bitcoin broke key resistance, safe-haven asset or tech sector barometer?

                By
                ActionForex.com
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                Bitcoin has showcased remarkable resilience amid recent turmoil in financial markets, prompting discussions about its potential status as a safe-haven asset. The leading cryptocurrency has outperformed traditional safe havens such as gold this week, further fueling this debate.

                Interestingly, Bitcoin has displayed a correlation with the NASDAQ index, suggesting that it may serve as a leading indicator or confirmation signal for risk appetite, particularly in the technology sector. It’s could still be more of a tech sector barometer.

                In either case, the breakthrough of 25242 resistance indicates that rally from 15452 is resuming. More significantly, the break above the 55 week EMA and 25198 structural resistance suggests that Bitcoin is now in the midst of correcting the entire downtrend from its 2021 record high of 68986, as a medium term move.

                In the short term, further gains are expected, with a target of 100% projection of 15452 to 25242 from 19552 at 29342. The market’s reaction at this level will provide insight into the potential trajectory of the medium-term rise from 15452.

                Additionally, the momentum of Bitcoin’s ascent could be an important factor in determining the likelihood of NASDAQ breaking through the 12269.55 resistance level.

                As market participants keep a close eye on these developments, Bitcoin’s performance may hold broader implications for the technology sector and the overall market sentiment.

                 

                 

                NASDAQ displays bullish sign after major banks rescue First Republic

                  By
                  ActionForex.com
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                  US stocks experienced a notable rebound overnight as major banks stepped in to rescue the beleaguered First Republic Bank, preventing the potential contagion from evolving into a full-blown banking crisis.

                  Bank of America, Goldman Sachs, JP Morgan, and others have collectively agreed to deposit USD 30B in First Republic, which has faced a mass withdrawal of customer funds in the wake of Silicon Valley Bank’s collapse and concerns that First Republic could be next.

                  In a joint statement on Thursday, the banks expressed their confidence in the US banking system, stating, “Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most.”

                  Among the major US stock indexes, NASDAQ led the way with an impressive 2.48% rally. From a technical perspective, there are indications of bullish momentum, as the index closed above the near-term trend line resistance. This development suggests that the corrective pullback from 12269.55 may have concluded at 10982.80 already.

                  In the coming days, reaction to the 11827.92 resistance level should be closely monitored. A firm break above this threshold would solidify the bullish case, potentially leading to a resumption of the rally from 10207.47 through the 12269.55 resistance level.

                  ECB press conference live stream

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                    ActionForex.com
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                    ECB hikes 50bps, next move data-dependent

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                      ActionForex.com
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                      ECB raises the three key interest rates by 50bps today. After that, the main refinancing, marginal lending facility and deposit facility rates will be 3.50%, 3.75%, and 3.00% respectively.

                      There was no reference to further tightening in upcoming meetings. Instead the governing council will continue with a “data-dependent approach”, with decisions determined by inflation outlook, dynamics of underlying inflation, and strength of monetary policy transmission.

                      In the new economic projections, headline inflation forecast was revised down across the horizon. But core inflation forecast was revised up in 2023. GDP growth forecast is also revised up in 2023.

                      • Headline inflation is forecast to average 5.3% in 2023, 2.9% in 2024, and 2.1% in 2025. The estimate was downgraded from December’s 6.3% in 2023, 3.4% in 2024, and 2.3% in 2025.
                      • Core inflation is projected to average 4.6% in 2023, 2.5% in 2025, and 2.2% in 2025. Comparing to December projections of 4.2% in 2023, 2.8% in 2024, and 2.4% in 2025.
                      • GDP growth is forecast to average at 1.0% in 2023, 1.6% in 2024, and 1.6% in 2025, comparing to December’s forecast of 0.5% in 2023, 1.9% in 2024, and 1.8% in 2025.

                      But the central noted that the macroeconomic projections were finalized before recent emergence of financial market tensions. Hence, there is additional uncertainty around the above baseline assessments.

                      Full statement here.

                      US initial jobless claims dropped to 192k

                        By
                        ActionForex.com
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                        US initial jobless claims dropped -20k to 192k in the week ending March 11, below expectation of 205k. Four-week moving average of initial claims dropped -750 to 196.5k.

                        Continuing claims dropped -29k to 1684k in the week ending March 4. Four-week moving average of continuing claims dropped -1750 to 1676.5k.

                        Full release here.

                        Swiss SECO: Growth below average this year, but no recession

                          By
                          ActionForex.com
                          -

                          Swiss economic growth projections for 2023 and 2024 have been revised by the State Secretariat for Economic Affairs (SECO), as recent forecasts indicate mixed outcomes for the nation.

                          The Swiss economy, adjusted for sporting events, is now anticipated to grow by 1.1% in 2023, a slight increase from December’s 1.0% forecast. However, the outlook for 2024 has been lowered, with an expected growth rate of 1.5% compared to the previous 1.6% projection. While 2023’s growth rate remains below average, it is not expected to plunge the economy into a recession.

                          Meanwhile, inflation is forecast to decelerate from 2.8% in 2022 to 2.4% in 2023, a revision from the initial 2.2% estimate, before settling at 1.5% in 2024, in line with prior expectations.

                          Early indicators for the first quarter of 2023 suggest a robust performance for the Swiss economy. Private consumption is projected to experience modest growth in the coming quarters, supported by a strong labor market and nominal wage increases. However, investment growth is likely to remain below average under current conditions.

                          SECO predicts that the European energy situation will stabilize further by the end of 2024, contributing to a gradual decline in global inflation rates. This should lead to a recovery in international demand. Nevertheless, the Swiss economy may outperform these projections if the energy landscape and inflation rates prove to be more favorable than anticipated, potentially resulting in stronger demand both domestically and globally.

                          Full release here.

                          Japan posted record February trade deficit

                            By
                            ActionForex.com
                            -

                            In February, Japan exports rose 6.5% yoy to JPY 7655B, below expectation of 7.1% yoy. Imports rose 8.3% yoy to JPY 8552B, below expectation of 12.2% yoy. Consequently, the country experienced its largest February trade deficit to date at JPY -897.7B.

                            The breakdown of trade relations painted an interesting picture, with the US and China displaying contrasting trends. Exports to the US surged by 14.9% yoy, while imports increased by 6.6%, resulting in a favorable surplus of JPY 530.5B. However, trade with China proved more challenging, as exports dipped by -10.9% yoy and imports saw a marginal decrease of 0.6% yoy, culminating in a deficit of JPY -209.8B.

                            On a more positive note, seasonally adjusted figures highlighted a 4.4%mom rise in exports to JPY 8146B, accompanied by a 3.0% mom drop in imports to JPY 9336B. As a result, trade deficit narrowed to JPY -1191B, outperforming the expected JPY -1460B.

                             

                            Australia employment grew 64.6k in Feb, unemployment rate dropped to 3.5%

                              By
                              ActionForex.com
                              -

                              Australia employment grew 64.6k in February, well above expectation of 48.5k. Full-time employment rose 74.9k. Part-time employment decreased -10.3k.

                              Unemployment rate dropped from 3.7% to 3.5%, below expectation of 3.6%. Participation rate rose 0.1% to 66.6%. Monthly hours worked rose 3.9% mom.

                              Bjorn Jarvis, ABS head of labour statistics said: “with employment increasing by around 65,000 people, and the number of unemployed decreasing by 17,000 people, the unemployment rate fell to 3.5 per cent. This was back to the level we saw in December.

                              “The February increase in employment follows consecutive falls in December and January. In January, this reflected a larger than usual number of people waiting to start a new job, the majority of whom returned to or commenced their jobs in February.

                              Full release here.

                              NZ GDP contracted -0.6% qoq in Q4, RBNZ may slow tightening

                                By
                                ActionForex.com
                                -

                                New Zealand’s Q4 GDP contracted by -0.6% qoq, missing the expected contraction of 0.2% qoq. The primary industries fell by 1.3%, service industries were down by 0.1%, and goods-producing industries were down by 0.3%.

                                Although the Finance Minister Grant Robertson acknowledged that the GDP could fluctuate as the country continues to recover from COVID, he also highlighted that the economy is nearly 6.7% larger than pre-pandemic levels, outpacing other countries.

                                Despite this, the GDP figure is significantly below RBNZ’s forecast of 0.7% growth, suggesting that the central bank may not need to be as aggressive with its tightening in the future. As a result, economists are now predicting that the RBNZ will opt for a more modest 25bps rate hike in April instead of the previously expected 50bps.

                                Full GDP release here.

                                Credit Suisse to borrow from SNB to calm markets

                                  By
                                  ActionForex.com
                                  -

                                  Credit Suisse’s measures to ease investor concerns over potential contagion and a banking crisis have failed to lift market pressures, with the Asian markets remaining under pressure.

                                  The bank announced it would borrow up to CHF50B from the SNB, calling it a “decisive action to pre-emptively strengthen its liquidity.” The loan and a repurchase of billions of dollars of Credit Suisse debt aim to manage its liabilities and interest payment expenses.

                                  Earlier, in a joint statement with the Swiss financial market regulator FINMA, the SNB assured the markets that the Credit Suisse had met “strict capital and liquidity requirements” and said, “there are no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the US banking market.”

                                  “If necessary, the SNB will provide CS with liquidity,” FINMA and SNB said.

                                  Hong Kong HSI gapped down today and is trading down -1.6% at the time of writing. From a technical perspective, the index’s decline from 22700.85 is still ongoing, and unless the 55-day EMA (now at 20256.19) is breached, a further decrease is anticipated. Even as a corrective move, this drop could aim for the 100% projection of 22700.85 to 19783.07 from 21005.66 at 18087.88.

                                  EUR/USD head and shoulder in the making, ECB to hike how much?

                                    By
                                    ActionForex.com
                                    -

                                    ECB faces mounting pressure to deliver a decisive response to the recent bank rout that is raising serious doubts on whether they will raise interest rates by 50bps tomorrow as previously indicated. Market expectations for a 50bps hike have dropped to less than 30%, with a 70% chance of just a 25bps hike.

                                    In February’s statement, ECB said explicitly that “the Governing Council intends to raise interest rates by another 50 basis points at its next monetary policy meeting in March”. However, the central bank has a recent history of overturning its intentions, leaving investors uncertain of their next move.

                                    In June 2022 statement, it said “the Governing Council intends to raise the key ECB interest rates by 25 basis points at its July monetary policy meeting”. But then in July, it hiked the three key interest rates by 50bps.

                                    But of course, that’s just an “intention”. ECB never pre-commits to any policy move.

                                    EUR/USD is now close to completing a head and shoulder top, with left shoulder at 1.0733, head at 1.1032, and right shoulder at 1.0759. Theoretically speaking, firm break of the neckline should have confirmed the reversal pattern already. On the other hand, strictly speaking, the ideal short entry should be on recovery back to the neckline, which might never happen.

                                    To take a middle, decisive break of 38.2% retracement of 0.9534 to 1.1032 at 1.0258 will be taken as confirmation of the reversal. 61.8% retracement at 1.0106 will be the immediate near term target.

                                    Let’s see whether ECB would help complete this technical formation.

                                    US retail sales down -0.4% mom in Feb, ex-auto sales dropped -0.1% mom

                                      By
                                      ActionForex.com
                                      -

                                      US retail sales declined -0.4% mom to USD 697.9B, below expectation of 0.2% mom. Ex-auto sales fell -0.1% mom to USD 567.2B, matched expectations. Ex-gasoline sales dropped -0.4% mom to USD 639.5B. Ex-auto, gasoline sales was flat over the month at USD 508.9B.

                                      Total sales for the December 2022 through February 2023 period were up 6.4% from the same period a year ago.

                                      Full release here.

                                      US PPI down -0.1% mom in Feb, goods fell -0.2% mom, services dropped -0.1% mom

                                        By
                                        ActionForex.com
                                        -

                                        US PPI for final demand dropped -0.1% mom in February, below expectation of 0.3% mom. Prices for goods dropped -0.2% mom while prices for services was down -0.1% mom. Prices less foods, energy, and trade services rose 0.2% mom.

                                        For the 12 months ended in February, PPI slowed from 5.7% yoy to 4.6% yoy, below expectation of 5.1% yoy. Prices for final demand less foods, energy, and trade services advanced 4.4yoy .

                                        Full release here.

                                        Ifo Spring Forecast: German economy to contract slightly in 2023

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                                          ActionForex.com
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                                          According to the Spring 2023 economic forecast released by Germany’s Ifo, the country’s economy is expected to contract by -0.1% in 2023 before growing 1.7% in 2024. Headline inflation is projected to slow slightly to 6.2% in 2023 before dropping to 2.2% in 2024. However, core inflation, which excludes energy prices, is expected to rise further to 6.3% in 2023 and then decline to 2.8% in 2024.

                                          Ifo stated that the “subdued performance of the global economy is dampening German exports,” while high inflation rates are “depressing consumer spending and construction activity through declining purchasing power and significantly increased financing costs.” The report also noted that inflation has become increasingly broad-based over the past year, remaining at historic highs for several months. While the direct contribution of energy prices has weakened, inflation in all other goods and services has increased steadily, reaching 7.6% in February.

                                          The report added, “In addition to higher production costs passed on by companies to consumers, a noticeable widening of profit margins in some, particularly consumer-related, areas of the economy also contributed to this.”

                                          Full release here.

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