2023 Market Forecast by SolidECN

[SOLIDECN]

AUDJPY​

Monthly activity data from China was released during the Asian trading session and turned out to be mixed. This was the first monthly activity reading from China in 2023 and included year-to-date data for February, so for January and February combined. Industrial production missed expectations slightly, retail sales came more or less in-line with market expectations and urban investments beat expectations. While data came in mixed compared to expectations, a point to note is that all three metrics increased compared to year ago values. Small beat in retail sales data is welcome as Chinese authorities hinted they aim to leave fiscal spending more or less unchanged compared to 2022, meaning that domestic demand will be key in achieving goals set for 2023.
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China, Monthly activity data for January-February period

• Industrial Production: 2.4% YoY vs 2.7% YoY expected
• Retail Sales: 3.5% YoY vs 3.4% YoY expected
• Urban Investments: 5.5% YoY vs 4.3% YoY expected​

As it is usually the case, the Australian dollar moved following the release of Chinese data as China is a key trading partner for Australia, especially when it comes to commodities exports. Taking a look at AUDJPY at D1 interval, we can see that the pair jumped earlier today (orange circle) but has since erased all of the gains and turned lower. A point to note is that today's upward move could be seen as an attempt to break back above the lower limit of a recently broken upward channel. Attempts to climb back above this hurdle were made today, yesterday and on Monday and failed on all three days, suggesting that resumption of declines may be on the cards.​

 

[SOLIDECN]

EURUSD​

A relief on the markets triggered by actions of US authorities over the weekend, aimed at containing risk from SVB collapse, turned out to be short-lived. US and European stock markets rallied yesterday but those moves are being reversed today. German DAX futures (DE30) are trading over 1% lower at press time while S&P 500 futures (US500) drop 0.6%. DE30 bears attempt to break below 15,000 pts mark at press time. A move lower on equity markets is accompanied by strengthening of USD which pressures EURUSD and GOLD.

While there is no clear reason behind the drop, it looks like markets remain nervous due to the situation in the banking sector. However, attention may be turning to the European banking sector. Shares of Credit Suisse are trading 10% lower today and hit a fresh record low. Credit Suisse top shareholder ruled out any further financial assistance to the European bank, which has been plagued by issues over recent years.

EURUSD plunged and tested a key near-term support zone in the 1.0675 area, marked with previous local low, 100-period moving average (H1 interval) as well as the lower limit of market geometry. A break below would, at least in theory, hint a bearish trend reversal.

DE30 has once again failed to break above the 15,244-15,285 pts resistance zone and launched a pull back. The index is attempting to make a break below psychological 15,000 pts at press time.​

 

[SOLIDECN]

AUDUSD​

AUDUSD broke above the 0.6630 resistance zone following a solid jobs report from Australia. The pair is now testing the 200-hour moving average (purple line).

 

[SOLIDECN]

EURUSD​

EURUSD pair’s strong decline stopped at 1.0515 yesterday, which formed solid support against the price, to rebound bullishly and start building bullish wave on the intraday basis, motivated by stochastic positivity.

Therefore, we expect to witness more bullish bias in the upcoming sessions, and the targets begin at 1.0640 and extend to 1.0745 after surpassing the previous level. On the other hand, we should note that breaking 1.0515 will stop the expected rise and press on the price to suffer additional losses that reach 1.0440.​

 

[SOLIDECN]

GBPUSD​

GBPUSD pair attempted to break the minor support 1.2060 but it consolidates above it, to keep the chances valid to resume the bullish trend on the intraday basis, waiting to visit 1.2260 as a next main target.

Stochastic provides clear positive signals now to support the expectations to rise in the upcoming sessions, and breaching 1.2145 will ease the mission of achieving the waited positive targets. We remind you that breaking 1.2060 will push the price to decline to test the most important support at 1.1940 before any new positive attempt.​

 

[SOLIDECN]

USDJPY​

The USDJPY pair faced clear negative pressure to break 133.30 and settles below it by today’s open, to head towards expected turn to decline, on its way to achieve negative targets that start at 131.60 and extend to 130.50.

The EMA50 forms negative pressure against the price to support the continuation of the expected bearish trend, while stochastic positivity might cause some sideways fluctuation before resuming the decline. Note that breaching 133.30 and holding above it will reactivate the positive scenario and push the price towards 135.40 initially.​

 

[SOLIDECN]

EURUSD​

Media reports surfaced saying that ECB officials told at a meeting with European ministers yesterday that some of European banks could be vulnerable amid SVB-Credit Suisse turmoil. Headlines triggered a slump on EUR market as well as European stock market indices. EURUSD dipped back below 1.06 mark while DE30 attempts to take out daily lows near 14,750 pts.

EURUSD dipped below 1.06 on media reports that ECB sees some European banks as vulnerable.​

 

[SOLIDECN]

USDCHF​

USDCHF pair provided clear negative trades yesterday, and begins today with new decline to attempt to break 0.9260 level again, reinforcing the expectations of continuing the bearish trend in the upcoming sessions, reminding you that our waited targets begin at 0.9150 and extend to 0.9060.

Stochastic provides negative signals that support the continuation of the expected decline, reminding you that the continuation of the bearish wave depends on the price stability below 0.9316.​

 

[SOLIDECN]

US100​

• Markets remained nervous on the final trading day of the week with major European and US indices pulling back​
• Top blue chips indices from Europe dropped over 1% lower while major Wall Street indices, like S&P 500 and Nasdaq, are trading around 1.0-1.5% lower on the day​
• Flight to safety can be spotted on the markets with money flowing to precious metals and bonds​
• Gold is trading over 3% higher on the day as short- and long-term US yields plunge with psychological $2,000 level being just 1% away​
• Markets are pricing around 60% chance of Fed hiking rates by 25 basis points next week and around 40% of keeping them unchanged​
• USD is one of the worst performing G10 currencies today​
• In spite of yesterday's liquidity boost from major central banks, share price of First Republic Bank saw only short-lived relief and is plunging 25% today​
• Credit Suisse remains in the center of attention in Europe with bank calling its CFO teams to work over the week and look for 'scenarios for the bank'​
• Also, media reports saying that major banks are limiting trading with Credit Suisse are mounting. Deutsche Bank and Societe Generale are said to be the latest to restrict trading with CS​
• Energy commodities are pulling back amid an overall increase in risk aversion. Brent and WTI are trading 2% lower and is heading for the biggest weekly drop since April 2022 while US natural gas prices plunge 7%​
• Downward pressure on US natural gas prices is further magnified by new weather forecast for the United States that hint at near- or above-average temperatures in key heating regions over the next 2 weeks​
• University of Michigan consumer sentiment for March missed expectations significantly, dropping from 67.0 to 63.4 (exp. 67.0). Both current situation and expectations subindices missed estimates significantly​
• In spite of risk-off moods seen across most financial markets, cryptocurrencies are having a great day. Bitcoin jumps 6% and trades in the $26,500 area​

Nasdaq-100 (US100) failed to sustain bullish momentum and break above the 12,750 pts resistance zone. The index is pulling back today as concerns over the condition of the US and European continue to linger over markets. However, Nasdaq-100 drops the least among major Wall Street indices due to an almost non-existent share of the banking sector in the index.​

 

[Solid ECN]

EURUSD​

The EURUSD pair shows calm positive trades to gradually towards our waited target at 1.0745, getting good support by the EMA50, to keep the bullish trend suggested for the upcoming period.

It is important to monitor the price when reaching the targeted level, as breaching it will extend the bullish wave to reach 1.0920 areas as a next main station, while consolidating against the bullish wave will press on the price to rebound bearishly to test the minor support areas around 1.0635 initially. On the other hand, we should note that breaking 1.0635 will stop the expected rise for today and push the price to turn to decline to visit 1.0515 level as a first station.​

 

[Solid ECN]

GBPUSD​

The GBPUSD pair provided new positive trades to test 1.2200 barrier, waiting to get positive motive that assists to push the price to continue the price and achieve our positive targets that start at 1.2260 and extend to 1.2440 after surpassing the previous level.

The EMA50 continues to support the expected bullish wave, which depends on the price stability above 1.2060, as breaking it will put the price under negative pressure that targets testing 1.1940 before any new attempt to rise.​

 

[Solid ECN]

Gold​

Precious metals gain amid increase in risk-aversion and pullback in US yields

Strong upward move launched on the gold market on March 8, 2023 is continuing at the beginning of a new week. Risk-off moods can be spotted on the financial markets at the beginning of a new week and it is providing support for safe haven assets, like for example gold. UBS will buy troubled Swiss lender, Credit Suisse, in a government-brokered deal. However, this failed to ease market concerns as the deal will include write down of Credit Suisse's AT1 bonds and this may turn out to be a hit to banks and other institutions with exposure to Credit Suisse. Apart from that, Fed and 5 other central banks (ECB, BoJ, BoE, BoC and SNB) will switch from weekly to daily USD swap auctions in order to boost USD liquidity. US yields pulled back providing even more support for precious metals.

As a result of those market moves, gold is trading over 1% higher on the day. Gold price climbed above $2,000 per ounce this morning, reaching the highest level since March 2022.​

 

[SOLIDECN]

EURUSD​

Euro continues to recover against the dollar at the beginning of this week, after a sharp crash in the last week - that was motivated by the worries around Credit Suisse that put the European banking sector under pressure and heavily penalized the euro.

Daily Time Frame EUR/USD​

• On the daily chart, we can see that the price is once again testing the upper limit of the range, close to 1.0695.​
• This will be a decisive zone for the price to understand the next momentum in the currency pair.​

Dollar Index Daily Time Frame

On the dollar index chart, we can see that the bullish movement slowed down after the price tested the 50 period exponential moving average (EMA).
As long as the price remains below this zone, we should expect the bearish movement to continue over the next few sessions.

• USD index, Daily time frame chart.​
• JPY leads the gains this trading session.​

 

[SOLIDECN]

S & P​

Also news that JPMorgan CEO Jamie Dimon is leading discussions with other CEOs of other large US banks in an effort to provide further support, including potentially converting their $30 billion in deposits into a capital injection, only slightly calmed investors' nerves. According to Wall Street Journal, preliminary discussions have been focused on ways that the banks can boost the beleaguered banks capital. Also in play is a potential investment by the banks themselves.

Also according to CNBC, JPMorgan Chase is advising First Republic Bank on strategic alternatives, one of which is capital raise which could dilute current shareholders. A sale of the bank is also taken into consideration.

First Republic (FRC.US) stock has been in free fall recently. Last week alone, a troubled San Francisco-based lender lost nearly 70.0% of its market value. Sell-off accelerated in pre-market, however sellers failed to retest all-time low at $9.00 and buyers managed to erase some of the losses in the evening. Nevertheless, the main sentiment remains bearish and only a break above the local resistance zone around $42.25 could let to a bigger upward correction.​

 

[SOLIDECN]

US500​

The key event of the month, the FOMC interest rate decision, is ahead of us. Although the Fed's decision is always referred to as the event of the month, tomorrow's decision will be even more closely scrutinized by the market due to the lingering spectre of the banking crisis in the background. The mood on Wall Street is a veritable rollercoaster at the moment, but let us try to take a look at where the US500 benchmark has been moving and what might happen in the coming days.

As we can see on the chart of the US500 contracts on the D1 interval attached below, the instrument's quotations have been moving in a very interesting technical structure for almost 2 years. The US500 broke out above the long-term downtrend line and successfully defended its outer extension, which encouraged the bulls to rise. However, we are inexorably approaching the next limitation, namely the resistance set by the uptrend initiated in the last quarter of 2022.

What will happen next? To answer this question, we need to consider the factors that are shaping current market sentiment, namely tomorrow's FED decision and the specter of a banking crisis. At the moment, the money market is pricing in an 83.4% chance of a 25 basis point hike, which seems market neutral at the moment. However, the key factor will be Powell's comments after the meeting regarding the hike cycle in the context of banking uncertainty. The risk of worsening problems in the sector will go a long way to curbing the hawkish enthusiasm of the Fed, which, remember, is in an advanced stage of tightening and seeing positive developments in the economy, such as last week's good PPI inflation reading. Today, equity market sentiment was bolstered by further comments from the US Treasury, which was reported to be looking at providing unlimited deposit guarantees (via the FDIC) if the banking crisis worsens. In the event of a dovish FED, stock markets could eagerly extend the current upward momentum and break out above resistance near 4080 points. On the other hand, if the FED maintains a firm monetary stance, a downward impulse could be initiated towards support near 3870 points.​

 

[SOLIDECN]

EURUSD Economic Calendar​

European indices gain at the beginning of a new week​

• DE30 tests 15,300 pts area​
• German Ifo index for March in the calendar​

European stock markets launched today's cash trading session higher with German DE30 testing 15,300 pts area in the first minutes of trade. Upbeat moods can be seen all across the Old Continent and on other financial markets as well with cryptocurrencies trading higher and oil advancing. GBP and AUD are the best performing G10 currencies while USD and JPY lag the most.

Economic calendar for the day ahead is rather light with just two noteworthy survey data prints scheduled. First, traders will be offered the German Ifo index for March, which is expected to stay mostly unchanged. Secondly, the Dallas Fed index for March will be released and it is expected to swing to negative. Nevertheless, this report rarely moves the markets. However, a number of ECB speakers as well as BoE Governor Bailey and Fed Jefferson are scheduled to speak throughout the day and it may lead to some FX volatility. Things get more interesting in the second half of the week with releases of flash CPI data from Europe.
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• 9:00 am BST - Germany, Ifo index for March. Expected: 91.0. Previous: 91.1​
• 3:30 pm BST - US, Dallas Fed index for March. Expected: -5.0. Previous: 2.0​

Central bankers' speeches​

• 8:30 am BST - ECB De Cos​
• 9:00 am BST - ECB Simkus​
• 9:30 am BST - ECB Nagel​
• 3:40 pm BST - ECB Elderson​
• 4:00 pm BST - ECB Centeno​
• 5:00 pm BST - ECB Schnabel​
• 7:00 pm BST - BoE Governor Bailey​
• 11:00 pm BST - Fed Jefferson​

Key events in the later part of the week

Tuesday​

• 3:00 pm BST - US, Conference Board consumer confidence for March​
• 9:40 pm BST - API report on US oil inventories​

Wednesday​

• 3:30 pm BST - US, DOE report on oil inventories​

Thursday​

• 8:00 am BST - Spain, CPI inflation for March​
• 1:00 pm BST - Germany, CPI inflation for March​
• 1:30 pm BST - US, GDP report for Q4 (revision)​
• 3:30 pm GMT - US, EIA report on natural gas storage​

Friday

• 2:00 am BST - China, official PMIs for March
• 7:45 am BST - France, CPI inflation for March
• 10:00 am BST - Euro area, CPI inflation for March
• 1:30 pm BST - US, PCE inflation for February
• 3:00 pm BST- US, University of Michigan consumer sentiment for March (final)

 

[SOLIDECN]

Breaking: EUR ticks higher after German IFO beat​

German Ifo Institutes released a new set of business climate indices for March today at 9:00 am BST. Data turned out to be much better than expected. Headline index climbed from 91.1 to 93.3, while a downtick to 91.0 was expected. This was driven by solid beats in both current conditions and expectations subindices. Ifo economists noted that recession in Germany became more unlikely and that proportion of business that want to raise prices has dropped. Around 41% of companies complained about supply bottlenecks in March.​

• German Ifo Business Climate for March: 93.3 vs 91.0 expected (91.1 previously)​
• Current Conditions: 95.4 vs 94.1 expected (93.9 previously)​
• Expectations: 91.2 vs 88.3 expected (88.5 previously)​

Market reaction to the upbeat Ifo data was fairly muted. DE30 barely saw any move while EURUSD moved around 0.1% higher.

EURUSD ticked higher following release of better-than-expected Ifo data. The main currency pair is testing short-term resistance zone marked with 38.2% retracement of a recent upward impulse.​

 

[SOLIDECN]

EURUSD​

EURUSD is struggling to find a direction at the beginning of a new week. The main currency pair is trading little changed on the day even in spite of a decent beat in German Ifo indices for March. Headline Ifo index jumped from 91.1 to 93.3 (exp. 91.0). This beat was driven mostly by a jump in expectations subindex from 88.5 to 91.2 (exp. 88.3). Nevertheless, EUR stayed fairly muted following the release. A number of ECB speakers scheduled for today may provide some volatility on EUR-related FX pairs later into the day. However, euro and other European assets are expected to get more volatile in the second half of the week as flash CPI data from the Old Continent will be released. German reading on Thursday, 1:00 pm BST and French reading on Friday, 7:45 am BST will be the most closely watched ones. Both are expected to show significant deceleration.

Taking a look at EURUSD chart at H4 interval, we can see that the pair halted the recent drop at the 50-period moving average (green line) near 38.2% retracement of the downward impulse launched at the beginning of February. However, subsequent rebound was halted today at the resistance zone marked with 50% retracement and the pair has struggled to determine direction for the next move since. A failure to break above could lead to a retest of the aforementioned 38.2% retracement in the 1.0710 area. On the other hand, a break above would pave the way for a test of swing levels marked with 61.8 and 78.6% retracements in 1.0830 and 1.0920 areas, respectively.​

 

[SOLIDECN]

Gold​

The improvement of market sentiment puts pressure on safe haven assets

The beginning of the final week of March looks much compared to the end of the previous one, when the cost of insuring Deutsche Bank's debt against the risk of default surged to the highest on record on Friday. Today, however, the moods improved, mostly thanks to the final sale of Silicon Valley Bank, which may probably end the topic of instability of the banking sector. Additionally, the FDIC will continue to participate in the takeover of SVB by First Citizens.

In Europe, investors were worried that Deutsche Bank could be another bank which faces serious problems, but it is worth remembering that recent years have brought a significant improvement in the bank's situation. Firstly - Deutsche recorded 10 quarters of profitability, secondly, the CET1 index, which shows the bank's solvency, amounted to 13.4% (although it is still lower than the average for EU countries). On the other hand, the bank's coverage ratio was 142% at the end of 2022, and the net stable funding ratio reached 119%. These data do not suggest that the bank may collapse quickly.

Therefore, the moods are improving significantly - we are observing a solid rise of US yields, which puts pressure on gold. Price pulled back 1.5% below $1950 and approaches the local lows of March 21/22 and 38.2 Fibonacci retracement of the last upward wave.​

 

[SOLIDECN]

AUDUSD​

• US indices finished yesterday's trading mostly higher with tech shares lagging behind. S&P 500 gained 0.16%, Dow Jones moved 0.60% higher and Russell 2000 added 1.08%. Nasdaq dropped 0.47%​
• Indices from Asia-Pacific traded mostly higher today as well. Nikkei gained 0.2%, S&P/ASX 200 traded 1% higher, Kospi added 0.8% and Nifty 50 dropped 0.2%. Indices from China traded mixed​
• DAX futures point to a slightly higher opening of the European cash session today​
• Jose Manuel Campa, chair of European Banking Authority, warned in an interview with Handelsblatt that risk in the financial system remains very high and that increasing interest rates are weighing on financial markets​
• French finance minister Le Maire said that France wants to cut the deficit to 3% of GDP by 2027. French budget deficit stood at 4.7% of GDP and was lower than 5% target set by the government​
• Russia announced that it has carried out anti-ship missile tests in the Sea of Japan in a move that is seen as response to Japanese PM Kishida visiting Ukraine last week​
• Goldman Sachs now estimates probability of US economy falling into recession within the next 12 months at 35%, up from previous 25%​
• Fed's Jefferson said that inflation has been longer lasting and that current policy rate is too high​
• Israeli Prime Minister Benjamin Netanyahu withdrew a judicial reform that spark nationwide protests​
• Australian retail sales increased 0.2% MoM in February (exp. 0.3% MoM)​
• Cryptocurrencies are trading mixed - Bitcoin drops 0.9%, Dogecoin trades 0.6% lower, Ethereum gains 0.3% and Ripple jumps almost 2%​
• Energy commodities trade mixed - oil drops 0.3-0.4% while US natural gas prices climb 0.7%​
• Precious metals trade mostly lower - silver and platinum drop around 0.1% each while palladium trades 0.5% lower. Gold is an outperformer with 0.2% gains​
• AUD and JPY are the best performing major currencies while USD and EUR lag the most​

In spite of a miss in Australian retail sales data for February, AUD is one of the best performing G10 currencies today. AUDUSD trades 0.6% higher today and has managed to break above the 200-hour moving average (purple line).​