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FOREX Week Ahead

Safe-heaven-fprex-weeka-ahead-FXPIG

The US dollar had a wild week, finishing the week mixed against its major trading partners, as market participants reassess the effects of the Fed’s dovish commitment and how much weaker the German economy will become.  Risk-aversion remains the key theme for financial markets after the three-month/10-year yield curve inverted for the first time since the financial crisis.  The trade war and Brexit took a backseat this week, but a key trade meeting in Beijing and votes in Parliament will deliver crucial updates to the next respective steps.  All eyes will also be on the Attorney General as he will be concluding his review of the Mueller Report.

Euro sinks as recession concerns grow for Germany

The euro collapsed after German PMI data contracted for a third consecutive month, making many economists who expected Germany to stabilise scratch their heads.  As the German manufacturing sector falls further into contraction territory, many are pricing in much lower growth for the largest economy in the euro zone.

The ECB is not going to be raising rates anytime soon and recessionary concerns could start to raise expectations of further stimulus from the Bank.  Euro weakness is now also approaching some longer-term technical levels at 1.12 and if that breaks, deeper support could come from the psychological 1.10 handle.

Gold stronger on Fed and safe-haven flows

The precious metal had two main catalysts for bullishness this week.  The Fed’s decision to wipe out all rate hike increases for 2019 and their downgrade of their growth outlook signaled to investors that the Fed is very concerned about the economy.  The other key catalyst was the slower global growth concerns that stemmed from the weaker than expected PMI data from Europe.

In the short-term, it appears there are not many economic releases or triggers that will alleviate weakening economic growth concerns.  Trade deal optimism has derailed many of golds rallies in recent months, but we may see markets be less optimistic until we see a meeting on the books for President Trump and Xi.

Oil

Oil prices are under pressure as global growth concerns spark fears that demand might be softer than expected. The fundamental case for higher prices still remains valid, but if we continue to see further deterioration in Europe and Asia, we could see production cuts matter less.  Rising production from the US is expected to make fresh record highs and ultimately be a headwind for higher crude prices.

Brexit

Another critical week for PM May is upon us.  This could be her last stand as she tries to push through her unpopular Brexit deal through Parliament.  The March 29th Brexit deadline has been pushed back to April 12th.  The pressure is on for May to try to deliver a Brexit deal or we may see a long extension.

The British pound remains vulnerable to a no-deal Brexit, but many scenarios still remain in play, but we could get further clarity after UK Parliament votes on many amendments.  Control of Brexit, leadership challenges and referendums are all in play next week.

Source: marketpulse

The US dollar had a wild week, finishing the week mixed against its major trading partners, as market participants reassess the effects of the Fed’s dovish commitment and how much weaker the German economy will become

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ECB’s Draghi: International trade is...

Draghi_Forex_International-trade_FXPIG

According to Reuters, European Central Bank President Mario Draghi told EU leaders at this week's summit that the international trade was the main reason for the economic slowdown in the euro area.

Key quotes (via Reuters)

  • ECB sees protracted weakness, pervasive uncertainty in eurozone economy.
  • Risks of recession still quite low.
  • Sees substantial degree of monetary policy accommodation as needed.
  • Aggregate consequences from Brexit on eurozone are small.
  • Central banks are prepared for Brexit, private sector needs to step up preparation.

Source: fxstreet

According to Reuters, European Central Bank President Mario Draghi told EU leaders at this week's summit that the international trade was the main reason for the economic slowdown in the euro area...

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BoE: No surprises here

BoE_FX_FOREX_FXPIG

Deutsche Bank analysts note that in the middle of political turbulence in the UK, the Bank of England’s MPC voted to keep interest rates unchanged at 0.75%, in line with market expectations.

Key Quotes

“Regarding Brexit, the minutes said that “Brexit uncertainties had also continued to weigh on confidence and short-term economic activity, notably business investment.” In terms of the future path of monetary policy, the minutes said that “were the economy to develop broadly in line with its February Inflation Report projections, an ongoing tightening of monetary policy over the forecast period, at a gradual pace and to a limited extent, would be appropriate to return inflation sustainably to the 2% target at a conventional horizon.”

Source; fxstreet

Deutsche Bank analysts note that in the middle of political turbulence in the UK, the Bank of England’s MPC voted to keep interest rates unchanged at 0.75%, in line with market expectations...

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Gold climbs to session tops

Gold_climbs-to session-top_FXPIG_Forex

  •  USD fails to capitalize on the overnight rebound and helps regain traction.
  •  Dovish Fed outlook/renewed US-China trade tensions remained supportive.

Gold quickly reversed an Asian session dip to $1307 area and is currently placed at session tops, recovering all of the previous session's modest pull-back from three-week tops.

The US Dollar failed to capitalize on the overnight rebound from the post-FOMC slump to the lowest level since early February and eventually turned out to be one of the key factors underpinning demand for the dollar-denominated commodity.

With investors looking past Thursday's upbeat US economic data, an ultra-dovish FOMC - indicating that there will be no more rate hikes in 2019, kept the USD under pressure and provided an additional boost to the non-yielding yellow metal.

This coupled with resurfacing US-China trade tensions, especially after the US President Donald Trump said to keep tariffs on China for a substantial period of time, further benefitted the precious metal's relative safe-haven status and remained supportive.

Adding to this, the fact that the commodity has managed to hold its neck above the key $1300 psychological mark could be another factor attracting some technical buying and contributing to the positive move for the fifth session in the previous five.

In absence of any major market moving US economic releases, the USD price dynamics and the broader market risk sentiment might continue to act as key determinants of the commodity's move on the last trading day of the week.

Technical levels to watch

A follow-through buying has the potential to lift the metal back towards $1320 supply zone before bulls eventually aim towards testing the next major hurdle near the $1329-30 region. On the flip side, any meaningful retracement might continue to find some support ahead of the $1300 handle, below which the commodity might accelerate the slide further towards $1294-93 horizontal support.

Source: fxstreet

Gold quickly reversed an Asian session dip to $1307 area and is currently placed at session tops, recovering all of the previous session's modest pull-back from three-week tops...

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Gold loses momentum

Gold_momentum_FXPIG_Forex
  • US Dollar Index recovers to mid-96s.
  • European equity indices post losses on Wednesday.
  • Markets are focused on FOMC announcements.

After meeting resistance near $1310 area yesterday, the XAU/USD pair reversed its course on Wednesday and eased from its weekly highs as the greenback gathered some strength ahead of the critical FOMC decisions. As of writing, the pair is trading at $1303, losing 0.22% on a daily basis.

The US Dollar Index, which posted daily losses for the seventh time in the last eight trading days on Tuesday, staged a modest recovery today and was last seen adding 0.05% on the day at 96.46. However, the lack of fundamental drivers suggests that the index is making technical movements, which are unlikely to gain momentum ahead of the Fed's announcements.

In a recently published article, TD Securities analysts said that they anticipate the dot plot to suggest one more hike (to neutral) this year, and potentially no additional hikes in 2020 based on recent comments from several Fed officials. “More clarity about when runoff ends, and the size of the balance sheet at that time, should be forthcoming, if not in a separate statement then as part of Powell's press conference. Look for a neutral market reaction, as outright rate cuts are priced for 2019,” analysts added.

On the other hand, reports of BMW warning investors of a significant drop in profits in 2019 weighed on major European equity indexes today and hurt the market sentiment, helping the pair float above the $1300 handle. At the moment, Germany DAX is losing more than 1% on the day and the Euro Stoxx is down around 0.6%.

Source: fxstreet

After meeting resistance near $1310 area yesterday, the XAU/USD pair reversed its course on Wednesday and eased from its weekly highs as the greenback gathered some strength ahead of the critical FOMC decisions. As of writing, the pair is trading at $1303, losing 0.22% on a daily basis...

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BOJ’s Kuroda:..more easing...

BoJ_more-easing_Kuroda_Forex-FXPIG

The latest comments from the Bank of Japan (BOJ) Governor Kuroda, via Reuters, he said that the Japanese central bank is supporting the households and companies through yield curve control (YCC).

Weakness is spreading in china’s real economy.

“We will be watching china’s economy carefully.”

Expects china’s growth to be stable more or less.

“BOJ can be said to be dovish.”

“We will mull more easing if price momentum is lost.”

Easing options will include increasing bond purchases.

Source: fxstreet

The latest comments from the Bank of Japan (BOJ) Governor Kuroda, via Reuters, he said that the Japanese central bank is supporting the households and companies through yield curve control (YCC)...

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FOMC Preview

FOMC_Preview_17-banks_FOREX_FXPIG

Today, world markets are keenly awaiting the outcome of an all-important FOMC’s March meeting, and as we move towards the decision timings, here are the expectations as forecasted by the economists and researchers of 17 major banks.

The consensus amongst most economists and analysts suggest, that the Fed will likely leave its current policy rate unchanged, while the central bank is likely to move the median policy rate forecast for 2019 to just one hike from two previously. In addition, they are expecting that Fed will likely announce an end to its quantitative tightening.

ABN AMRO

“We expect the FOMC to keep interest rates on hold this Wednesday, and to announce an end to the balance sheet runoff in September, though there is a risk the announcement could slip to a subsequent meeting.”

“We expect Chair Powell to strike a somewhat dovish tone in his press conference, noting the continued global economic uncertainty given the lack of a stabilisation in the global industrial sector. However, we also expect him to acknowledge the substantial improvement in domestic financial conditions since late last year, and signs of resilience in domestic demand, such as the rebound in consumer confidence.”

“At the same time, while we expect a shift lower in the dots rate hike projections to show just one rate hike in 2019, this might disappoint financial markets, which now price in around 6bp of rate cuts by year end. We continue to think the Fed is done with rate hikes, but that it will maintain a modest tightening bias in its rate hike projections for as long as the economic outlook remains broadly positive.”

Standard Chartered

“We expect the FOMC decision on 20 March to leave the current policy rate unchanged, move the median policy rate forecast for 2019 to one hike (from two), maintain 2020 at one hike and discuss the end to the balance-sheet taper in a separate communication or at the press conference.”

“We believe the distribution around the median projected policy rate (‘dot plot’) in the Summary of Economic Projections (SEP) will be important. A tighter distribution around the median would be a dovish signal to the markets.”

“Further, we expect Chair Powell to de-emphasise the dot plot during the press conference. We also expect a modest downgrade to the GDP projections in 2019, unchanged inflation projections, and a modest downgrade to estimates of neutral policy rate and the non-accelerating inflation rate of unemployment (NAIRU). The median long-run potential growth rate estimate could decline as well.”

“With respect to the balance sheet, we expect the Committee to announce the framework for ‘tapering the taper’ at this meeting.”

“We believe the Committee will choose to end balance-sheet tapering gradually rather than at once, though this will be an operational rather than a policy-signalling consideration. We believe the Fed will announce reinvestments of MBS proceeds into Treasury securities, concomitantly shortening the duration of the portfolio.”

ING

“This week’s Fed meeting will see interest rates left unchanged and the central bank sticking to its “patient” approach to policymaking. However, look out for announcements regarding the balance sheet with “quantitative tightening” seemingly coming to an end.”

“Recent data has been somewhat mixed, so with inflation described as 'muted' the central bank can be 'patient' with regards to the timing of when to react with any policy change.”

“We would expect all of these words and phrases to get a mention in either the press release or the accompanying press conference on Wednesday. The only substantive change is likely to be a more cautious set of forecasts for the Fed funds target range. Rather than signalling two rate rises this year and one in 2020, we think they will opt for just one hike in 2019 with one more in 2020.”

“The balance sheet currently stands at just under $4trillion with the Fed signalling that it may bring this process of balance sheet reduction (or quantitative tightening) to an end as early as the end of this year. We could see this being formally announced on Wednesday and it would leave the Federal Reserve with a much larger balance sheet than was originally envisaged at the start of the process.”

SEB Bank

“There is little doubt that Fed will maintain the target range for fed funds rate at 2.25 to 2.50% at the meeting that concludes on 20 March. Revisions to Fed’s econ projections are likely to be relatively small but we expect median forecast for policy rate path (‘the dot plots’) to shift from indicating two rate hikes in 2019 to unchanged rates.”

“The Fed is finalizing its plan for the balance sheet but the result will likely be presented at the 1 May meeting rather than at the March meeting.”

Mizuho Bank

“No change in policy is expected so focus will be squarely on the press conference, new forecasts & Dot Plot.”

“A marginally firmer US dollar and a slightly higher oil prices should cancel each other out in terms of the inflation forecast. The risks to the CPI forecast are on the downside but should be modest.”

“Despite downward revisions to growth forecasts elsewhere, the US economy is holding up quite well and the Fed’s GDP forecasts are expected to be little changed. Limited changes in the growth and inflation forecasts suggest limited changes in the dots.”

“However, we suspect that with downside risks to activity overseas remaining on the radar, there will be a small downward revision to the dots but that they will still imply that higher policy rates rather than lower policy rates are more likely.”

Citibank

“Citi analysts expect the Fed to change the median “dot” to indicate one hike only in 2019 but with hawkish risks that it keep them unchanged at two. End of balance sheet reduction may also be announced and the meeting is also likely to see changes to the Fed’s assessment of the US economy.”

Westpac

According to analysts at Westpac, the market focus this week will be on Wednesday’s FOMC meeting, which is again likely to emphasis a need for patience.

“Of key interest will be the quarterly Summary of Economic Projections, including revisions to key forecasts, as well as any discussion around balance sheet normalisation.”

“The consensus is that the Fed Funds “dots” will be lower, but the key question is how far will they fall? The existing median for two hikes this year should likely fall to one, consistent with Westpac’s view. Two of seventeen dots expect no hikes this year, but with the Fed in data dependent mode and key communications underscoring the need for patience, it would be no surprise if this number was to jump significantly from two.”

“In addition, we will be very interested in the long run projection. It is likely to fall to 2.5%, which will provide some scope for a further fall in 10yr yields, although considering our expectation that yields should peak at or around the Fed Funds peak, an extended rally under that scenario should be short-lived. The more bullish scenario for bonds would be if the Fed were to indicate a willingness to cut rates near term.”

Deutsche Bank

“No change in policy is expected and the meeting should reinforce the message that the Fed will remain patient for now. That being said, our economists believe that there are two key topics that market participants should focus on.

The first is any signals about the timeline for ending the Fed’s balance sheet unwind and the second is any insights into the conditions needed to drop their patient guidance and possibly raise rates again later in 2019.”

“On the former, while an announcement of the date for stabilising the SOMA portfolio is possible this week, we now think it is more likely at the May FOMC meeting.”

“On the latter, Powell should maintain significant flexibility while likely reiterating that a dissipation of the crosscurrents, evidence of continued above-potential growth, & higher inflation are all likely preconditions for another rate increase this cycle.”

HSBC

“FOMC is expected to maintain the current target range for the federal funds rate at the March meeting.”

“The Fed’s narrative on interest rates has been clear since the dovish pivot at the January FOMC meeting: monetary policy is currently in a good place, and the FOMC will remain patient in assessing the need for any further adjustments to the policy stance.”

“The March FOMC meeting is therefore likely to reinforce this. The Summary of Economic Projections will be released at the same time and the median “dots” could show that further   rate hikes are likely, although less so than in December.”

Danske Bank

“We expect the Fed will keep the target range unchanged at 2.25-2.50% and make no major changes to the statement.”

“Powell & Co have emphasised that they will be " patient" in raising hikes but the question is what that means in terms of the "dots" , which are released alongside the rate decision.”

“We expect Fed to lower its 'dot' signal further to just one rate hike in 2019 (down from two). We expect them to be revised lower also for 2020 and 2021 and we will not be surprised if the Fed signals "one and done". We expect the longer-run dot is to be unchanged at 2.75%.”

“If the Fed confirms it has changed its reaction function by looking more at inflation expectations and less on the unemployment rate, a June hike seems less likely, as marked-based inflation expectations remain well below historical average.”

“Still, markets are pricing the Fed too dovish at the moment , as they think the Fed is on hold for the rest of the year. A change in Fed's rhetoric can happen fast. A good example is the rate increase in March 2017 where the market was not expecting a rate hike until Fed signalled it three weeks in advance.”

“We believe the Fed will announce it will end shrinking its balance sheet in Q4.”

Royal Bank of Canada

“The Fed is universally expected to hold the fed funds target range unchanged at the March 20th FOMC meeting alongside softening in Q1 GDP growth data and increased concerns about the global growth backdrop. And revised assessments of the most likely path for interest rates going forward are likely to show fewer and more gradual hikes through the end of 2020.”

National Bank Financial

“Keeping in accordance with its most recent communications, which emphasized the central bank’s wait-and-see approach, the Fed will stay on the side-lines this time. The newest version of the dot plot, for its part, should show participants lowering their rate hikes expectations for 2019 from two to one.”

“On February 27, Chair Powell said he expected the Fed balance sheet plan to be announced “fairly soon”. Thus, we may get more details as to when the Fed expect to halt the runoff of its balance sheet and what will be the reinvestment policy going forward for maturing Treasuries as well as for mortgage backed securities.”

ANZ

“The recent Fed guidance points to it cutting its interest rate guidance (dot plot) by around 50bp over 2019 and 2020, leaving one hike in the forecast horizon, which ANZ don’t expect the Fed to act on.”

“We have taken out our final rate hike and see policy on hold. The Fed’s tightening cycle looks done for the foreseeable future. Only a sharp and sustained inflation overshoot could trigger further hikes – a scenario we don’t envisage in the next couple of years.”

“The Fed may announce an end for quantitative tightening, but the specifics on the balance sheet’s hiatus period, optimal reserve holdings and the duration of its Treasury securities portfolio may not be addressed.”

“Chair Powell may be asked about whether the Fed will adopt an inflation overshoot strategy. We expect him to reiterate that the bar is high for changes to the current framework.”

Rabobank

“The Fed’s new set of projections is likely to reflect the more dovish statements since December," Rabobank analysts argue.

“The FOMC has taken a pause, but several participants are still thinking of hiking later in the year. On balance, we may still see one hike for 2019 in the dot plot. For 2020, the chance of no more hikes in the dot plot is considerably larger.”

“The March meeting may give us more details about the balance sheet normalization that is likely to come to a halt in the second half of 2019.”

“We still expect the US economy to slide into recession in the summer of 2020 and the Fed to remain on hold for the remainder of 2019, before cutting rates in 2020.”

NAB

National Australia Bank (NAB) analysts are eyeing that the dot plot charts for further cues on the interest rates outlook for this year.

“FOMC meeting on Wednesday will include a new set of forecasts and Chair Powell's press conference. There should be some hefty revisions to the outlook, with our focus on whether members still expect to hike rates this year and if the committee has adjusted its estimate of the neutral funds rates.”

“Recent speeches suggest members expect 0-1 more hikes this year, down from 2 hikes projected in December, and that the range for the neutral rate has been trimmed to 2.50-2.75% from 2.5-3.5% in December.”

“The Fed could also update its plans for its balance sheet, where we think the Fed will most likely halt the rundown by the end of this year.”

“Markets continue to price the Fed as being done in raising rates, with the next move priced as a 22% chance of a cut by year's end.”

Nordea Markets

“The Fed is likely to stick to its "patience" stance at the March FOMC meeting, with "patience" meaning that rates will remain on hold until it becomes clear whether the economic outlook has worsened as much as the markets seem to believe or whether the outlook will remain relatively bright after the fog clears, as the majority of FOMC members still seem to believe.”

“Based on recent speeches, we believe that at least half of the dots will have migrated lower, reflecting FOMC members' reduced inclination to hike rates, with the median down to one hike this year (from two in December) and another hike in 2020 (unchanged from December).”

“Market sentiment has brightened and the FOMC may decide to keep the announcement about the details of the end of quantitative tightening (QT) for a rainy day, but some details could also be announced as early as this week. Our baseline continues to be a QT tapering starting in Q3 and QT ending in Q4, with excess reserves around USD 1,000bn. It will be market-negative if the Fed announces that excess reserves will continue to drop after the end of QT.”

Barclays

“Recent Fed speak suggests that the Fed is likely to pare back its economic projections and the path of the hiking cycle at the upcoming meeting.”

“We believe the risks are skewed toward a dovish surprise. Fed may mark growth down by a tenth or so.”

“Fed is likely to leave its inflation forecasts unchanged. Should translate into a reassessment lower of the path of policy.”

“The median path of the funds rate may show only one hike over the forecast horizon, with the terminal rate at 2.5-2.75% and a neutral rate of 2.5%. Fed also expected to outline the path of the balance sheet.”

Source: fxstreet

Today, world markets are keenly awaiting the outcome of an all-important FOMC’s March meeting, and as we move towards the decision timings, here are the expectations as forecasted by the economists and researchers of 17 major banks...

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FOREX Tech Targets

Forex_tech_analysis_FXPIG_19.03.2019

EUR/USD: Neutral (since 21 Aug 18, 1.1485): EUR has likely moved into a consolidation phase.

There is not much to add as EUR eked out a fresh 2-week high of 1.1359 before easing off to end the day little changed at 1.1336 (+0.09%). We continue to hold the same view as last Wednesday (13 Mar, spot at 1.1285) wherein EUR has “moved into a consolidation phase” and is expected to trade sideways. In view of the low volatility, our expected 1.1230/1.1380 range is likely enough to contain the movement in EUR for several more days. Looking ahead, the prospect for a break of 1.1380 first is slightly higher but in view of the current lackluster momentum, any advance is expected to struggle to move beyond the next major resistance at 1.1420 (the late-Feb peak).

GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): GBP is expected to trade with a positive bias. No change in view from yesterday, see reproduced update below.

Volatility eased further as GBP traded within a range of less 100 pips last Friday (between 1.3204 and 1.3300), the narrowest daily range for the whole of last week. We continue to view the price action as part of sideway trading phase that could last for another couple of days but in the longer run, we still expect GBP to trade with a ‘positive bias’ (see update from last Wed, 14 Mar, spot at 1.3290). As highlighted, a break of last week’s 1.3380 peak could lead to further GBP strength to 1.3470. On the downside, the ‘key support’ has moved higher to 1.3100 from 1.3050. Only a break of the ‘key support’ would suggest that GBP has made a short-term top.

AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): AUD is expected to trade sideways.

AUD tested the top of our expected 0.7000/0.7120 range as it touched 0.7119 before easing off quickly. The advance lacks momentum and is unlikely to be sustained. In other words, the price action reinforces our view as highlighted last Wednesday (13 Mar, spot at 0.7070) wherein there is no directional bias and AUD is expected to trade sideways. However, we have adjusted the expected range to 0.7040/0.7140.

NZD/USD: Neutral (since 07 Dec 18, 0.6880): NZD has moved into a consolidation phase. No change in view from yesterday, see reproduced update below.

There is not much to add as NZD traded in a quiet manner last Friday and registered an ‘inside day’. The price action reinforces our view from last Tuesday (12 Mar, spot at 0.6835) wherein NZD has “moved into a consolidation phase”. In other words, we continue to expect NZD to trade sideways even though a 0.6775/0.6885 range is likely enough to contain the price action for the next several days (narrowed from 0.6750/0.6885 previously). Looking forward, the prospect for a break of 0.6885 first appears to be higher but in view of the lackluster momentum, any gain is expected to struggle to move beyond the solid resistance zone of 0.6805/20.

USD/JPY: Neutral (since 09 Oct 18, 113.10): Bias is tilted to the upside but advance could be limited and short-lived.

After rising relatively quickly to a high of 111.89 last Friday (15 Mar(, USD has not been able to make much headway. While we continue to hold the view that the “bias is tilted the upside”, upward pressure has waned considerably. That said, as long as 110.80 is intact, we continue to see chance for a higher USD even though any advance could be short-lived and limited to a test of 112.40. Overall, USD has to move and stay above 111.65 or the prospect a higher USD would diminish quickly.

Source:

There is not much to add as EUR eked out a fresh 2-week high of 1.1359 before easing off to end the day little changed at 1.1336 (+0.09%). We continue to hold the same view as last Wednesday...

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Gold Technical Analysis

•  After an Asian session dip to $1298, the precious metal regained positive traction and was seen building on Friday's goodish bounce from 200-hour SMA.

•  Currently hovering around 23.6% Fibo. level of the $1280-$1313 recent up-move, bullish oscillators on the 1-hourly chart support prospects for further gains.

•  Meanwhile, technical indicators on 4-hourly/daily charts are also catching up with the positive momentum and add credence to the constructive set-up.

•  Hence, any dips to the $1300 psychological mark might be seen as a buying opportunity for a move back towards the recent swing highs, around the $1313 region.

XAU/USD

Overview:
   Today Last Price: 1305.23
   Today Daily change %: 0.24%
   Today Daily Open: 1302.16
Trends:
   Daily SMA20: 1310
   Daily SMA50: 1304.05
   Daily SMA100: 1271.46
   Daily SMA200: 1239.2
Levels:
   Previous Daily High: 1306.45
   Previous Daily Low: 1294.1
   Previous Weekly High: 1313.3
   Previous Weekly Low: 1290.6
   Previous Monthly High: 1346.85
   Previous Monthly Low: 1300.1
   Daily Fibonacci 38.2%: 1301.73
   Daily Fibonacci 61.8%: 1298.82
   Daily Pivot Point S1: 1295.35
   Daily Pivot Point S2: 1288.55
   Daily Pivot Point S3: 1283
   Daily Pivot Point R1: 1307.7
   Daily Pivot Point R2: 1313.25
   Daily Pivot Point R3: 1320.05

Source: fxstreet

Gearing up for a move towards recent swing highs, around $1313 area...

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Fed to signal rate hike

FOREX_Fed_one-more-rate-hike_FXPIG

Danske Bank analysts are expecting that the US Fed will likely keep the target range unchanged at 2.25-2.50% and make no major changes to the statement in its forthcoming meeting this Wednesday.

Key Quotes

Powell & Co have emphasised that they will be " patient" in raising hikes but the question is what that means in terms of the "dots" , which are released alongside the rate decision.”

We expect Fed to lower its 'dot' signal further to just one rate hike in 2019 (down from two) . We expect them to be revised lower also for 2020 and 2021 and we will not be surprised if the Fed signals "one and done". We expect the longer-run dot is to be unchanged at 2.75%. That said, Fed has begun downplaying the importance of the dots given the increased uncertainty around the base case, so be careful putting too much weight on them going forward.”

Our current base case is two Fed hikes (in June and December) based on our overall positive economic outlook. Economic growth is strong, unemployment rate is moving lower, wage growth is moving gradually higher and risk sentiment in markets has rebounded. PCE core inflation, however, has softened in recent months. However, if the Fed confirms it has changed its reaction function by looking more at inflation expectations and less on the unemployment rate, a June hike seems less likely, as marked-based inflation expectations remain well below historical average.”

“Still, markets are pricing the Fed too dovish at the moment , as they think the Fed is on hold for the rest of the year. A change in Fed's rhetoric can happen fast. A good example is the rate increase in March 2017 where the market was not expecting a rate hike until Fed signalled it three weeks in advance.”

We believe the Fed will announce it will end shrinking its balance sheet in Q4.”

Source: fxsreet

Danske Bank analysts are expecting that the US Fed will likely keep the target range unchanged at 2.25-2.50% and make no major changes to the statement in its forthcoming meeting this Wednesday...

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FOREX TECH Targets

Forex-Bulls-and-bears_tech-targets_FXPIG_18.03

EUR/USD: Neutral (since 21 Aug 18, 1.1485): EUR has likely moved into a consolidation phase.

EUR rebounded and recouped most of last Thursday’s (07 Mar) decline before closing slightly higher on Friday. The price action reinforces our view as highlighted last Wed (13 Mar, spot at 1.1285) wherein EUR has moved into a consolidation phase and is expected to trade sideways. However, after the quiet price action over the past few days, we have narrowed the expected range to 1.1230/1.1380 from 1.1200/1.1380. Looking ahead, the prospect for a break of 1.1380 first is slightly higher but in view of the current lackluster momentum, any advance is expected to struggle to move beyond the next major resistance at 1.1420 (the late-Feb peak).

GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): GBP is expected to trade with a positive bias.

Volatility eased further as GBP traded within a range of less 100 pips last Friday (between 1.3204 and 1.3300), the narrowest daily range for the whole of last week. We continue to view the price action as part of sideway trading phase that could last for another couple of days but in the longer run, we still expect GBP to trade with a ‘positive bias’ (see update from last Wed, 14 Mar, spot at 1.3290). As highlighted, a break of last week’s 1.3380 peak could lead to further GBP strength to 1.3470. On the downside, the ‘key support’ has moved higher to 1.3100 from 1.3050. Only a break of the ‘key support’ would suggest that GBP has made a short-term top.

AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): AUD is expected to trade sideways. No change in view from last Friday, see reproduced update below.

There is no change to the view as highlighted on Wednesday (13 Mar, spot at 0.7070) wherein AUD has moved into a consolidation phase and is expected to trade sideways in the coming days. The rapid dip to 0.7042 yesterday (14 Mar) and the subsequent quick bounce from the low reinforces our view. In other words, there is no directional bias and AUD is expected to continue to trade sideways, likely between 0.7000 and 0.7120.

NZD/USD: Neutral (since 07 Dec 18, 0.6880): NZD has moved into a consolidation phase.

There is not much to add as NZD traded in a quiet manner last Friday and registered an ‘inside day’. The price action reinforces our view from last Tuesday (12 Mar, spot at 0.6835) wherein NZD has “moved into a consolidation phase”. In other words, we continue to expect NZD to trade sideways even though a 0.6775/0.6885 range is likely enough to contain the price action for the next several days (narrowed from 0.6750/0.6885 previously). Looking forward, the prospect for a break of 0.6885 first appears to be higher but in view of the lackluster momentum, any gain is expected to struggle to move beyond the solid resistance zone of 0.6805/20.

USD/JPY:  Neutral (since 09 Oct 18, 113.10): Bias is tilted to the upside but advance could be limited and short-lived. No change in view from last Friday, see reproduced update below.

The “mild downward pressure” that we highlighted on Monday (11 Mar, spot at 111.05) fizzled out sooner than anticipated as USD moved above the strong 111.80 resistance yesterday (14 Mar). The underlying tone has improved and the bias for the next several days is tilted to the upside. However, momentum is not strong and any advance could be short-lived and limited to a test of 112.40. On the downside, last Friday (08 Mar) low near 110.80 is expected to be strong enough to hold, at least for several days (minor support is at 111.10).

Source: efxdata

EUR rebounded and recouped most of last Thursday’s (07 Mar) decline before closing slightly higher on Friday. The price action reinforces our view as highlighted last Wed (13 Mar, spot at 1.1285) wherein EUR has moved into a...

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GBP/USD fades

GBP_USD_FOREX_FXPIG

•  News that DUP is considering to support government’s deal lifts the British Pound.
•  The upside remains capped ahead of the final Brexit vote on Article 50 extension.

The GBP/USD pair managed to recover a major part of the early lost ground and jumped back above the 1.3300 handle in the last hour, albeit quickly retreated few pips thereafter.

Having touched an intraday low level of 1.3239, the pair managed to regain some traction and the uptick picked up the pace during the early European session in reaction to unconfirmed news that the DUP is considering to support the government's deal.

The uptick, however, lacked any strong bullish conviction as investors preferred to wait for this week's final Brexit vote on an extension of the March 29 deadline. The UK Parliament on Wednesday voted to reject the idea to leave the European Union without a trade deal and would vote again on Thursday for an extension of Article 50.

Meanwhile, questions on whether there would be a short extension or a long extension held investors from placing any aggressive bullish bets, which coupled with a modest US Dollar uptick, supported by a strong rebound in the US Treasury bond yields, further collaborated towards keeping a lid on additional gains.

Hence, it would be prudent to wait for a strong follow-through buying before traders start positioning for a fresh leg of an up-move amid absent relevant major market-moving economic releases either from the UK or the US.

Technical levels to watch

Yohay Elam, FXStreet's own Analyst writes, “1.3365 was the February high and remains relevant. 1.3388 was the fresh peak seen on Wednesday. The next levels date to June 2018. 1.3485 capped cable in June and 1.3625 held it down in May. The next levels are 1.3710 and 1.3920.”

“Some support awaits at 1.3240 which was the daily low, and it is followed by levels such as 1.3185, 1.3150, and 1.3110 that were relevant before the recent volatility sent GBP/USD all over them. The most significant downside support is 1.2960 which was a double-bottom,” he added further.

Source: fxstreet

The GBP/USD pair managed to recover a major part of the early lost ground and jumped back above the 1.3300 handle in the last hour, albeit quickly retreated few pips thereafter...

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AUD: RBA market pricing absorbed

AUD_RBA_market_FX_FOREX_FXPIG

Analyst at Westpac, explains that the AUD/USD pair has shown every sign of breaking 0.7000 last Friday but ultimately printed a low of 0.7003, which lends confidence to the view that the Aussie has absorbed enough punishment for now in terms of markets pricing in RBA easing.

Key Quotes

“Rates markets price >100% chance of a cut by August which aligns with our view, but the 45% chance of a cut by May seems rather high given the RBA’s current growth forecasts, its neutral rhetoric and the strong labour market data it likes to highlight (the Feb report is obviously keenly awaited next Thursday).”

“Admittedly, AUD’s commodity price support has slipped a little in recent days. But the Aussie still appears to be on the cheap side of the fair value range.”

“Our expectation that the US dollar trades on the back foot around the FOMC meeting should help AUD/USD find buyers on dips near term but the 50dma at 0.7137 and 100dma at 0.7160 will be difficult to break.”

Source: fxstreet

AUD/USD pair has shown every sign of breaking 0.7000 last Friday but ultimately printed a low of 0.7003, which lends confidence to the view that the Aussie has absorbed enough ...

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Forex Today

Forex_USD-bounces_FXPIG

Broad-based US dollar recovery was the main underlying theme that triggered a fresh selling-wave across the fx board in Asia this Thursday. The rebound in the greenback was mainly driven by a recovery in Treasury yields across the curve while the extension of the corrective slide in GBP/USD from the 2019 tops also added to the uptick in the buck. Markets resorted to profit taking on the GBP longs heading into the vote on Article 50 extension later today. The Euro tracked the correction in the Cable and marched towards the 1.13 handle.

Among the Asia-pac currencies, the Aussie was the biggest loser and headed for a test of the 0.7050 support following mixed Chinese data dump, followed by the Yen and the NZD. The USD/JPY pair clinched for-day tops at 111.61 on reports of Japanese growth downgrade while the Kiwi returned below 0.6850 levels.

On the related markets front, the Asian equities traded mixed, led by the declines in the Chinese stocks while both crude benchmarks traded modestly flat, with WTI having eased-off multi-months near 58.50 levels. Gold futures on Comex slipped and edged back towards the 1300 levels.

Main Topics in Asia

US Pres. Trump: In no rush to complete China trade deal - Reuters

Gold Technical Analysis: Rejected at 4H 200MA, hourly RSI diverges in favor of bears

Japanese Govt considering a slight downgrade in its monthly report for March - Nikkei

UK Press: PM May is preparing a third meaningful vote on Brexit on March 20

China Jan-Feb data dump: Retail sales rise 8.2%, industrial output drop 5.3%

China NBS: China's economic growth in Jan-Feb within reasonable range

Tapering? BOJ's ETF purchases hits lowest since 2016

Sources: US aims to cut Iran oil exports to under 1 million bpd from May - Reuters

Ex-National Economic Council Head Cohn: US desperate to sign trade deal with China

Key Focus Ahead

Markets remain focused on the Brexit-related developments amid a no deal Brexit rejected by the UK lawmakers and the Brexit extension of 2 months seeming the most likely bet, as rumor mills talk of the third meaningful vote on the UK PM May’s Brexit deal next week. Meanwhile, the EUR calendar remains a thin-showing, with the German final CPI release dropping in at 0700 GMT, following the Swiss producers and import prices at 0730 GMT.

In the NA session, the US weekly jobless claims, import prices and the Canadian new housing price index are due at 1230 GMT. At 1400 GMT, the US new home sales data will be eyed for fresh dollar trades. In the American afternoon, at 1900 GMT, the UK parliamentary vote on Article 50 extension is scheduled while New Zealand’s business PMI and visitors arrivals data will be published at 2130 GMT and 2145 GMT respectively.

EUR/USD has reversed last week's post-ECB sell-off, whats next?

EUR/USD's drop to 21-month lows below 1.12 has been reversed, but the relief could be short-lived, as the US 10-year treasury yield has bounced up from three-month lows seen earlier this week.

GBP/USD revisits sub-1.3300 area as UK MPs eye deadline extension

Investors may concentrate on how the UK members of parliament (MPs) can agree over delaying Article 50 deadline today. On the data front, initial jobless claims for the week ending on March 04 and January month new home sales are on cards.

GBP Soars 2% on Brexit Vote, 1.35 Next?

Having had years to reach an agreement, expectations for a 2 month extension are low but if May puts in the request and the EU accepts it (and there's no reason for them not to), GBPUSD could extend its rally to 1.35.

WTI Technical Analysis: Ichimoku Cloud is bullish, double tops broken, eyes on $60.00bbls

The price is now testing the territory on the 58 handle, breaking the double-top highs. Bulls look to higher grounds while holding above the $57.93bbls and the horizontal prior resistance line going back to mid-Nov 2018.

Source: fxstreet

Broad-based US dollar recovery was the main underlying theme that triggered a fresh selling-wave across the fx board in Asia this Thursday. The rebound in the greenback was mainly driven by...

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EUR/USD remains bid and flirts

EURUSD_Remains-bid_flirts_Forex_FXPIG
  • The pair extends the upside beyond the 1.1300 handle.
  • EMU Industrial Production surprised to the upside in January.
  • Brexit vote on ‘no deal’ expected to be rejected later today.

EUR/USD keeps the rally well and sound for yet another session on Wednesday, probing fresh tops beyond the critical 1.1300 the figure although losing some shine afterwards.

EUR/USD bolstered by sentiment, looks to Brexit

The pair keeps the bid tone unchanged since last Friday, managing to regain the 1.1300 barrier and practically fully revert the ECB-led deep pullback to new 2019 lows around 1.1180 (March 7).

In the meantime, the continuation of the upbeat sentiment in the risk-associated universe keeps bolstering the rally in spot despite developments in the US-China trade front have cooled down as of late, particularly after US trade negotiator R.Lighthizer said yesterday that there are ‘major issues’ yet to be resolved in the dispute.

Data wise in Euroland, Industrial Production in the bloc had a promising start of the year, expanding at a monthly 1.4% in January, reverting at the same time December’s contraction. Moving forward, US Durable Goods Orders and Producer Prices are coming up next across the pond.

What to look for around EUR

Market participants appear to have already adjusted to the recent and renewed dovish stance from the ECB, focusing instead on the broad risk-appetite trends as the main driver of the price action in the near term. In the longer run, the performance of the economy in the region should remain in centre stage along with prospects of re-assessment of the ECB’s monetary policy. In this regard, it is worth mentioning that investors keep pricing in the first rate hike by the central bank at some point in H2 2019. On the political front, headwinds are expected to emerge in light of the upcoming EU parliamentary elections, where the focus of attention will be on the potential increase of the populist option among voters.

EUR/USD levels to watch

At the moment, the pair is gaining 0.07% at 1.1294 and a break above 1.1304 (high Mar.12) would target 1.1311 (21-day SMA) en route to 1.1369 (55-day SMA). On the downside, the next support aligns at 1.1176 (2019 low Mar.7) followed by 1.1118 (monthly low Jun.20 2017) and finally 1.1021 (high May 8 2017).

Source: fxstreet

EUR/USD keeps the rally well and sound for yet another session on Wednesday, probing fresh tops beyond the critical 1.1300 the figure although losing some shine afterwards...

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