Fundamental updates by Solid ECN

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
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Economic Calendar: Holidays in US and Canada Thin out Liquidity​

diplomats was far from encouraging and it should deteriorate sentiment rather than improve it.

Economic calendar for today is light with only some second-tier data being scheduled for release during the European trading hours. A point to note is that US traders will be off today to observe Presidents Day. On top of that, traders from Canada will also be off to observe Family Day holiday. As a result, liquidity conditions in the afternoon are expected to be much thinner (changes to trading hours listed below). AUD may see some action this evening and the coming Asian session, thanks to scheduled releases of flash PMI for February and RBA minutes.

9:00 am GMT - Poland, data pack for January.
  • Industrial production. Expected: 4.2% YoY. Previous: 1.0% YoY​
  • Wage growth. Expected: 12.6% YoY. Previous: 10.3% YoY​
  • Employment. Expected: 1.8% YoY. Previous: 2.2% YoY​

Overnight/Asian session
  • Monday, 10:00 pm GMT - Australia, flash PMIs for February.​
  • Tuesday, 0:30 am GMT - RBA minutes​
  • Tuesday, 0:30 am GMT - Japan, flash manufacturing PMI for February​

US holiday - trading hours changes
  • No trading - BRAComp, CORN, SOYBEAN, WHEAT, SOYOIL, LEANHOGS, CATTLE, SUGAR, COCOA, COFFEE, COTTON​
  • Trading until 4:30 pm GMT - VIX​
  • Trading until 6:00 pm GMT - US30, US100, US500, US2000, USDIDX, TNOTE​
  • Trading until 7:15 pm GMT - PLATINUM, PALLADIUM​
  • Trading until 7:30 pm GMT - GOLD, SILVER, GASOLINE, OIL.WTI, NATGAS​
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

AUDUSD​

  • Indices from Asia-Pacific traded mixed today. Nikkei and S&P/ASX 200 dropped 0.2% each, Kospi and Nifty 50 gained 0.1% while indices from China traded mostly lower.​
  • DAX futures point to a more or less flat opening of the European cash session today.​
  • RBA minutes showed that Australian central bankers see inflation as more broad and persistent than expected. The document also strongly hinted that rate hike pause at meeting in February was not an option.​
  • New Zealand Treasury said in a statement that reconstruction after a cyclone hit will be a boost to the New Zealand economy. Treasury noted, however, that boost to the demand will increase inflationary pressures in the economy and may cause RBNZ to hold rates at higher levels for longer.​
  • BoJ Governor Kuroda expects wage growth in the Japanese economy to accelerate as labor market gets tighter.​
  • Australian manufacturing PMI index ticked higher in February, from 50.0 to 50.1. Services index moved from 48.6 to 49.2.​
  • Japanese manufacturing PMI dropped from 48.9 to 47.4 in February (exp. 49.2).​
  • Cryptocurrencies are trading mixed with major coins posting decent gains. Bitcoin trades 1% higher, Ethereum gains 0.6% and Dogecoin moves 0.4% higher.​
  • Energy commodities trade mixed - Brent drops 0.6%, WTI trades 0.9% lower and US natural gas prices increased 0.3%.​
  • Precious metals pull back as USD strengthens - gold trades 0.2% lower, silver drops 0.5% and platinum declines 0.7%.​
  • USD and GBP are the best performing major currencies while NZD and AUD lag the most.​

audusd_3.png


In spite of a rather hawkish RBA minutes release, Australian dollar is pulling back today. AUDUSD is one of the worst performing major FX pairs as USD is on the rise. AUDUSD made an attempt at breaking back above a price zone marked with 50-session moving average (green line) and 50% retracement of the downward move launched in April 2022 but failed and a pullback was launched.​
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

AUDNZD​

  • Wall Street dropped hard during the first session after a long weekend. S&P 500 dropped 2.00%, Dow Jones moved 2.06% lower, Nasdaq plunged 2.50% and Russell 2000 slumped 2.70%.​
  • While US stocks launched the day in bad moods, declines accelerated after solid US data (services PMI coming back above 50) boosted USD and Treasury yields, with 10-year rate climbing above 3.9%.​
  • Indices from Asia-Pacific traded lower as well but scale of the drop was smaller. Nikkei dropped 1.3%, S&P/ASX 200 traded 0.3% lower, Kospi slumped 1.7% and Nifty 50 declined 1%. Indices from China traded 0.2-0.8% lower.​
  • DAX futures point to a flat opening of the European cash session today.​
  • NZD gained after RBNZ delivered a 50 bp rate hike, putting cash rate at 4.75% - the highest level since late-2008. Majority of economists expected such a move but there were some calls for 25 bp hike or even pause following a recent cyclone hit.​
  • RBNZ signaled need for more rate hikes and confirmed its peak rate forecast at 5.50%.​
  • AUD weakened following disappointing data for Q4 2022. Wage index increased by 0.8% QoQ (exp. 1.0% QoQ) while construction work completed dropped by 0.4% QoQ (exp. +1.5% QoQ).​
  • Cryptocurrencies trade mostly lower - Bitcoin drops 1.6% while Ethereum and Dogecoin decline 1% each. Litecoin bucks the trend and gains 1%.​
  • Energy commodities are pulling back amid overall increase in risk aversion - Brent drops 0.3%, WTI trades 0.4% lower and US natural gas prices plunged 2.5%.​
  • Gold and silver trade little change while platinum and palladium jump around 0.8% each.​
  • NZD and JPY are the best performing major currencies while AUD, CAD and USD lag the most.​
audnzd_1.png


AUDNZD is plunging today amid a mix of NZD-positive and AUD-negative news. The pair pulled back from the resistance zone marked with 61.8% retracement and plunged back below recently-broken 200-session moving average (purple line). AUDNZD is attempting to make a break below the zone marked with 50% retracement, which would pave the way for a test of 1.0870 area, marked with 38.2% retracement.​
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

Economic Calendar: CBRT Rate Decision, US Q4 GDP Revision​

  • European indices set for slightly higher opening​
  • Revisions of European CPI data and US GDP data​
  • CBRT expected to cut rates by 50 bp​
Futures markets point to a slightly higher opening of the European cash session today. This comes after a mixed trading in Asia earlier today and a mixed Wall Street trading yesterday. FOMC minutes release triggered a slight hawkish reaction on the markets (USD up, equities down) but it did not translate into any larger move.

Economic calendar for the day ahead includes some interesting releases. The Central Bank of the Republic of Turkey is set to announce its next rate decision at 11:00 am GMT today and expectations are for 50 basis point rate cut. European CPI data and US Q4 GDP report will be revisions but may still trigger some moves on EURUSD should they show significant deviations from preliminary values. EURUSD may also see some moves on speeches from ECB and Fed members today. Energy traders will tune in for data on US oil and natural gas inventories. Last but not least, Moderna, Booking Holdings and Beyond Meat can be found among today's earnings reporters.​
  • 10:00 am GMT - Euro area, CPI inflation for January (final). First release: 8.5% YoY​
  • 11:00 am GMT - CBRT rate decision​
  • 1:30 pm GMT - US, GDP report for Q4 (annualized, revision). First release: 2.9%​
  • 1:30 pm GMT - US, jobless claims. Expected: 199k. Previous: 194k​
  • 3:30 pm GMT - EIA natural gas storage. Expected: -60 bcf. Previous: -100 bcf​

4:00 pm GMT - DOE report on US oil inventories.
  • Oil inventories. Expected: +1.2 mb (API: +9.89 mb)
  • Gasoline inventories. Expected: +1.5 mb (API: +0.89 mb)
  • Distillate inventories. Expected: +0.4 mb (API: +1.37 mb)​

Central bankers' speeches​

  • 9:30 am GMT - BoE Mann​
  • 10:45 am GMT - BoE Cunliffe​
  • 3:00 pm GMT - ECB De Cos​
  • 3:50 pm GMT - Fed Bostic​
  • 7:00 pm GMT - Fed Daly​

Top Wall Street earnings reports​

  • Alibaba Group (BABA.US) - before market open​
  • Moderna (MRNA.US) - before market open​
  • Cheniere Energy (LNG.US) - before market open​
  • Domino's Pizza (DPZ.US) - before market open​
  • Nikola (NKLA.US) - before market open​
  • Booking Holdings (BKNG.US) - after market close​
  • Warner Bros Discovery (WBD.US) - after market close​
  • Wish (WISH.US) - after market close​
  • Beyond Meat (BYND.US) - after market close​
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

Economic calendar: Second-tier US data, central bankers' speeches​

  • European indices set for slightly higher opening​
  • Second-tier data from the United States​
  • UK PM Sunak meets EC President von der Leyen to discuss Northern Ireland protocol​
European index futures point to a slightly higher opening of the cash session on the Old Continent today. This comes after a rather downbeat Asian session during which most of the regional indices traded lower.

Economic calendar for the day ahead is light. Traders will be offered some second-tier data from the United States, like durable goods orders or pending home sales. UK Prime Minister Sunak is set for a meeting with EC President von der Leyen to discuss Northern Ireland protocol. UK Deputy PM Raab said that great progress has been made and that the deal is close so GBP may see some moves today if some kind of statement is released after the meeting.

While today's calendar is light, things get more interesting later into the week with the release of February CPI data from Europe, ECB minutes or US ISM indices for February.

1:30 pm GMT - US, durable goods orders for January.
  • Headline. Expected: -3.9% MoM. Previous: 5.6% MoM​
  • Ex-transport. Expected: 0.1% MoM. Previous: -0.2% MoM​
3:00 pm GMT - US, pending home sales for January. Expected: 0.9% MoM. Previous: 2.5% MoM

Central bankers' speeches

  • 9:00 am GMT - BoE Broadbent​
  • 11:00 am GMT - BoE Saporta​
  • 3:30 pm GMT - Fed Jefferson​
  • 3:45 pm GMT - ECB De Cos​
  • 5:00 pm GMT - ECB Lane​

Key reports in the later part of the week

Tuesday​

  • China PMIs for February​
  • French CPI for February​
  • Canadian GDP report for Q4​
  • US Conference Board consumer confidence index for February​

Wednesday​

  • Final manufacturing PMIs for February from Europe and the United States​
  • German CPI for February​
  • US ISM manufacturing index for February​

Thursday​

  • Euro area CPI for February​
  • ECB minutes​

Friday​

  • Final services PMIs for February from Europe and the United States
  • US non-manufacturing ISM index for February
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

EURUSD​


Flash CPI reports for February from France and Spain were released today at 7:45 am GMT and 8:00 am GMT, respectively. Expectations were for a slight acceleration in French headline price growth and a slight slowdown in Spanish price growth. French data turned out to be higher-than-expected and provided some support for EUR while pushing European indices, like DE30, slightly lower. Spanish reading further magnified those moves as it showed price growth accelerating in spite of an expected slowdown.​

France​

  • Annual: 6.2% YoY vs 6.1% YoY expected (6.0% YoY previously)​
  • Monthly: +0.9% MoM vs +0.7% MoM expected (+0.4% MoM previously)​

Spain​

  • Annual: 6.1% YoY vs 5.7% YoY expected (5.9% YoY previously)​
  • Monthly: +1.0% MoM vs +0.9% MoM expected (-0.4% MoM previously)​

Those releases offer an important insight but, as far as market reaction is concerned, the best is yet to come. German CPI reading for February, the most closely watched one in Europe, will be released tomorrow at 1:00 pm GMT and is expected to show a slowdown from 8.7 to 8.5% YoY. Release of ECB minutes scheduled for Thursday, 12:30 pm GMT also has a scope to move EUR.

EURUSD

de30_1.png
[/url]

EURUSD caught a bid following French and Spanish CPI data and retested the 1.06 mark. However, no decisive break higher was made yet.

DE30



Equities, including German DE30, took after today's CPI data. DE30 is making a test of the lower limit of the ongoing short-term trading range in the 15,300 pts area.​
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

US500​

  • US indices finished the first trading session of a new month mostly lower. While Dow Jones and Russell 2000 finished more or less flat, S&P 500 dropped almost 0.5% and Nasdaq moved over 0.6% lower​
  • Poor performance of US equity indices was accompanied by another pick-up in US yields. 10-year Treasury yield climbing above 4% for the first time since November 2022​
  • Indices from Asia-Pacific traded mixed today. Nikkei dropped 0.1%, Nifty 50 moved 0.3% lower, S&P/ASX 200 traded flat and Kospi added 0.6%. Indices from China traded 0.1-0.8% lower​
  • DAX futures point to a flat opening of the European cash session today​
  • Reuters reports that Chinese officials may set a 6% GDP growth target for 2023, what would be higher than 4.5-5.5% proposed back in November. Target is expected to be announced on Sunday, March 5​
  • Australian building approvals slumped 27.6% MoM in February (exp. -9.2% MoM)​
  • Japanese capital expenditures increased 7.7% YoY in Q4 2022​
  • Salesforce (CRM.US) rallied over 15% in the after-hours trading following the release of the earnings report. Company reported sales at $8.38 billion (exp. $7.99 billion) and EPS at $1.68 (exp. $1.36). Salesforce announced expansion of buyback programme from $10 to $20 billion​
  • Cryptocurrencies are trading lower on Thursday - Bitcoin drops 0.3%, Dogecoin trades 1% lower and Ethereum pulls back 0.5%​
  • Energy commodities trade lower - oil pulls back 0.3% while US natural gas prices drop 0.6%​
  • Precious metals pull back amid USD strengthening - gold drops 0.2%, platinum dips 0.4% and silver trades 0.7% lower​
  • USD and CAD are the best performing major currencies while NZD and JPY lag the most​

us500_4.png


Continued drop in US bonds (TNOTE - light blue overlay) is putting pressure on Wall Street indices. 10-year US yields climbed above 4% yesterday and S&P 500 futures (US500) are making a break below 200-session moving average today.​
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

US100​

The Fed released its semi-annual monetary policy report today, and next week Powell will testify before Congress. His statement may provide some hints regarding future rate hike path and measures which may be taken during the March meeting. Highlights of the report:

Further hikes are needed
  • Financial conditions have tightened significantly since June​
  • Service inflation excluding the housing sector remains elevated, further dynamics will depend on the labor market​
  • Bringing inflation back to 2% likely requires period of below-trend growth, some softening of labor market conditions​
  • Inflation abroad remains high, which has an impact on domestic prices​
  • The labor market will remain strong for now​
us100_1.png


Today's report did not cause any major market moves, as next week's Powell semiannual testimonies is much more important. EURUSD rebounded slightly and the US100 remains at session highs.​
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

AUDUSD​

AUDUSD is one of the pairs that may see some moves in the coming hours and days. The pair took a hit at the launch of this week's trading as China set a rather disappointing 2023 GDP growth target of 'around 5%'. This is because trading AUDUSD is often seen as a proxy China trade due to the Australian economy being highly dependent on demand from China, especially for its commodities.

The pair will likely also see some moves during the coming Asian session as the Reserve Bank of Australia is set to announce a monetary policy decision on Tuesday, 3:30 am GMT. Market expects a 25 basis point rate hike, to 3.60%. If confirmed, this would mark the fifth consecutive 25 basis point rate hike. Statement accompanying the latest decision noted that the RBA Board sees further rate hikes as appropriate and minutes from the latest meeting even showed that discussions were whether to hike by 25 or 50 bp. While a 25 bp rate hike looks like a done deal at a meeting tomorrow, a lot of attention will be paid to guidance and whether the RBA remains on a hawkish path.

When it comes to the US dollar, the currency may become more volatile on Tuesday and Wednesday when Fed Chair Powell delivers his semiannual testimony to Congress (3:00 pm GMT on both days, text release around 1:30 pm GMT on Tuesday). However, as Powell's speeches will come ahead of key US macro data, like NFP this Friday or CPI next week, it is widely expected that Powell will stick to his previous messaging and will not deliver any surprises.

audusd_6.png


Taking a look at AUDUSD chart at D1 interval, we can see that the pair has been attempted to make a break below the 38.2% retracement of the downward move launched in April 2022 for a few days. No such break occurred yet but it cannot be ruled out, especially if RBA surprises with a dovish message, like for example hinting that rates are close to peak. On the other hand, defending this area would be a strong bullish signal and could pave the way for a recovery towards 50% retracement in the 0.6900 area.​
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

AUDUSD​

AUDUSD is pulling back as today's RBA statement was seen as less hawkish than the last time. The pair is attempting to make a break below the support zone marked with 200-session moving average (purple line) and a 38.2% retracement of the downward move launched in April-2022.

audusd_7.png
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

Gold​

  • US indices finished yesterday's trading significantly lower following a hawkish testimony from Fed Chair Powell. Powell hinted that Fed is ready to accelerate rate hikes if situation requires it​
  • Some banks and institutions are now seeing chance of Fed hiking rates to 6% and holding them there for a longer period of time​
  • 2y-10y and 2y-30y yield curves are the most inverted in over 4 decades with both spreads exceeding -100 bps​
  • S&P 500 dropped 1.53%, Dow Jones moved 1.72% lower and Nasdaq declined 1.25%. Small-cap Russell 2000 traded 1.11% lower​
  • Indices from Asia-Pacific traded mostly lower today. S&P/ASX 200 dropped 0.8%, Kospi plunged 1.3%, Nifty 50 dipped 0.5% and indices from China traded 0.3-2.3% lower. Nikkei was outperformer and managed to finished 0.5% higher​
  • DAX futures point to a slightly lower opening of the European cash session today​
  • RBA Governor Lowe said that rate hike cycle may be paused at the next meeting if incoming data warrants it​
  • OPEC Secretary General Al Ghais said that Russian oil production remains resilient​
  • According to poll conducted by Reuters, majority of economists surveyed expect Bank of Japan to end yield curve control this year​
  • According to Washington Post, US is preparing to lift Covid-19 travel testing restrictions for arrivals from China​
  • API report pointed to a 3.83 million barrel drop in US oil inventories (exp. -0.5 mb)​
  • Cryptocurrencies are pulling back today. Bitcoin and Dogecoin drop around 0.5% each while Ethereum trades flat​
  • Energy commodities trade higher - oil gains 0.4-0.5% while US natural gas prices climb 0.5%​
  • Precious metals trade mixed - silver drops 0.1%, gold trades flat and platinum adds 0.5%​
  • AUD and USD are the best performing major currencies while JPY and CHF lag the most​

gold_16.png


GOLD took a hit yesterday on hawkish Powell testimony and plunged around 2%. Precious metal erased most of the gains made over the previous week and is once again trading near the support zone ranging above $1,800 mark.​
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

Economic Calendar​

  • European indices launch session flat
  • Jobless claims and US natural gas storage report
  • Market odds for 50 bp FOMC rate hike in March drop
European stock market indices launched today's cash trading session little changed compared to yesterday' closing levels. This comes after a mixed trading on Wall Street yesterday and in Asia today. Powell said during the second of his congressional semiannual hearings that while inflation is dropping, it will stay elevated for some time and recent policy moves are yet to impact real economy. Those comments made market odds for a 50 bp rate hike at the next FOMC meeting drop.

Economic calendar for the day ahead is light, allowing investors to catch a breath after Powell and before the NFP report. Weekly jobless claims data and EIA natural gas storage report are the only noteworthy readings scheduled for today. While jobless claims data is unlikely to trigger any major moves, EIA report may trigger some NATGAS volatility. Speeches from central bankers may offer some FX volatility in the afternoon.​
  • 1:30 pm GMT - US, jobless claims. Expected: 195k. Previous: 190k
  • 3:30 pm GMT - EIA report on US natural gas storage. Expected: -76 bcf. Previous: -81 bcf

Central bankers' speeches
  • 1:15 pm GMT - BoE Breeden
  • 3:00 pm GMT - Fed Barr
  • 2:00 pm GMT - NBP Chairman Glapiński​
  • 6:45 pm GMT - BoC Rogers​
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

USDJPY​

USDJPY bounced off the 136 swing area following today's BoJ decision. The pair is now attempting to make a break above the 50-hour moving average (green line) in the 136.80 area.

usdjpy_10.png
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

US30​

US index futures traded significantly higher this morning after the Fed and US Treasury stepped in to limit contagion risk from SVB collapse. Emergency lending programme was announced that will allow banks to access liquidity needed to service deposits. US Treasury Secretary Janet Yellen approved necessary decisions assuring that bank deposits are protected and announced that all depositors will be able to access. While broad market performance on Monday morning showed that the situation has calmed, problems may not be over yet. SVB collapsed and FDIC took control over it while Signature Bank was shut down by regulators due to systemic risk following SVB collapse. However, another bank is rumored to be close to collapsing - First Republic Bank. Shares of this bank are trading 60% lower in premarket today and it is said to be the next in-line should the domino effect continue. Slump in First Republic Bank shares are dragging down the whole market with DAX and other European blue chips indices trading 2-3% lower on the day. US equity futures erased all of the gains and are now trading flat or slightly lower compared to Friday's closing prices.

us30.png


Taking a look at Dow Jones futures chart (US30) at D1 interval, we can see that all of the gains made earlier today were erased already and now the index is trading lower. The index tested resistance zone marked with 38.2% retracement and 200-session moving average this morning but has pulled back since and is now testing support zone ranging around 31,750 pts area.​
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

US2000​

  • US indices finished yesterday's trading lower, following a volatile session. S&P 500 dropped 0.15%, Dow Jones moved 0.28% lower and Russell 2000 slumped 1.60%. Nasdaq was outperformer and gained 0.45%​
  • Some relief can be spotted on the bond markets with US 2-year yield climbing 15 basis points today, following an over-100 basis point slump yesterday. 2-year US yield sits around 4.17-4.18% today​
  • Indices from Asia-Pacific traded lower today. Nikkei plunged 2.2%, S&P/ASX 200 moved 1.4% lower, Kospi slumped 2.5% and Nifty 50 traded 0.6% down. Indices from China traded 0.4-2.2% lower​
  • DAX futures point to a flat opening of the European cash session​
  • Fed Chair Powell said that thorough, transparent and swift review of SVB failure is needed. Results of the review will be published at the beginning of May​
  • Canadian regulator will boost monitoring and begin daily check-ins with domestic banks in an attempt to prevent SVB-like banking collapse in Canada​
  • Suzuki, finance minister of Japan, said that he does not expect significant financial impact from SVB collapse on Japanese financial system​
  • US National Security Adviser Sullivan said that the Biden-Xi phone call will take place after the Chinese National Party Congress ends. No comment on topics to be discussed was offered​
  • Nomura expects Fed to deliver a 25 bp rate cut and QT pause announcement at next week's FOMC meeting. BlackRock does not expect FOMC to halt rate hike cycle as response to SVB was swift, decisive and situation is not repeat of 2008​
  • According to Global Times report, Chinese authorities are considering increasing retirement age as the country is beginning to struggle with rapidly aging population​
  • South China Morning Post reports that Russia has agreed to 60-day extension to Russia-Ukraine grain deal​
  • Australian household spending dropped 01.% MoM in February​
  • Cryptocurrencies are trading relatively little changed following yesterday's rally. Bitcoin gains 1%, Ethereum drops 0.2% and Dogecoin traded 0.7% lower​
  • Oil is trading 0.8-0.9% lower this morning while gold drops 0.1%​
  • NZD and CAD are the best performing major currencies while JPY and EUR lag the most​

us2000.png


Russell 2000 (US2000) was the worst performing major Wall Street index yesterday, dropping over 1.5%. As fallout from SVB collapse is likely to be limited to smaller banks, small-cap index is taking a much bigger hit than S&P 500 or Dow Jones.​
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

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-n-1_1.png


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.

eurusd-n-2_1.png


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

Master Trader
Nov 16, 2021
2,653
22
54
39

EURUSD​

ECB to announce rates at 1:15 pm GMT, markets split between +25 and +50 bp

The European Central Bank is scheduled to announce the rate decision today at 1:15 pm GMT with ECB President Lagarde holding a post-meeting press conference at 1:45 pm GMT. Economists surveyed by Bloomberg and Reuters point to a 50 basis point rate hike but those surveys may be outdated already and do not reflect real expectations, following latest turmoil in the banking sector. Let's take a look at today's decision!

What's priced in?​

Economists expected the European Central Bank to hike rates by 50 basis points today, putting the deposit rate at 3.00% - the highest level since late-2008. Such an outcome is expected by 55 out of 56 economists in a Bloomberg poll. Deutsche Bank is the only one predicting a 25 basis point move. However, it should be said that Deutsche Bank changed its forecast to 25 basis points as recently as yesterday amid a turmoil in the European banking sector. As money markets are much quicker to react to developments in financial markets than economists, a look at market pricing for today's meeting may offer a better picture. Markets currently price in around 40% chance of a 50 basis point rate hike and around 60% chance of a 25 basis point rate move.

eurusd-n-1_2.png


Money markets are 60-40 split between a 25 and 50 basis point rate hike at today's meeting.

How things changed after SVB-CS turmoil​

Disconnect between economists' expectations and money market pricing is quite massive and it is easy to pinpoint the reason behind it - turmoil in the US and European banking sectors. While market participants were not too concerned about the ECB abandoning the plan to hike by 50 basis points, things changed this week as contagion fears spread to Europe with Credit Suisse shares freefalling yesterday. This has led to a massive drop in rate hike expectations with a chance of 50 basis points rate hike dropping from almost-100% to around-40%!

eurusd-n-2_2.png


Markets were almost fully pricing in a 50 basis point rate hike at today's meeting as recently as a week ago!

ECB faces dilemma amid Credit Suisse turmoil​

Turmoil in the European banking sector is causing a dilemma for the ECB - should it press on with significant rate hikes in an attempt to get inflation control even if it risks triggering a European banking crisis? This is a tricky choice to make.

On one hand, Credit Suisse managed to get assurances from the Swiss National Bank and Swiss regulator that it will receive support should the situation require. Credit Suisse announced that it intends to exercise an option to borrow an additional 50 billion CHF from Swiss National Bank via a covered-loan facility in order to improve its liquidity position. This led to relief on the market and an over-30% jump in Credit Suisse shares so far today.

On the other hand, support from SNB does not mean that woes for Credit Suisse are over. It is not a secret that Credit Suisse has been involved in some of recent high-profile market scandals, like Archegos or Greensill scandals. It looks like there may be some significant compliance and risk management flaws in the Swiss bank and it is having a negative impact on investors' confidence in the bank. While support from authorities helped ease concerns for now, another worrying piece of news on Credit Suisse may see troubles and market turmoil reignite.

Cautious message from Lagarde looks likely​

Having said that, a cautious decision today if made, like hiking by just 25 basis points or even holding rates unchanged, should not come as a surprise. It will likely trigger dovish reaction on the markets (EUR down and equities up) given that expectations are split between +25 and +50 bp move. However, the accompanying statement is likely to be very cautious. ECB President Lagarde will face questions on banks' condition during the press conference but it looks highly likely that she will play down current risks, applaud actions by Swiss authorities and hint that ECB needs to better understand the situation and reasons behind it before making any response. She is also likely to be prudent when making statements on future policy moves and refrain from making clear comments on the size of rate hikes as she did last month when she strongly hinted that a 50 basis point rate increase is coming at the March meeting.

It should also be noted that it will be a quarterly ECB meeting and it means that a new set of economic projections will be released. Those are likely to point to lower headline inflation in the months ahead while core price growth is expected to be little change compared to previous forecasts.

A look at the markets: EURUSD and DE30​

EURUSD slumped yesterday as banking sector woes spread across the Atlantic. The pair tested a short-term upward trendline but bulls managed to defend it. A point to note is that this trendline can be seen as the neckline of the head and shoulders pattern with the shoulderline being in 1.0740. A dovish ECB could see that pair erase today's daily gains and slump below the trendline. This would pave the way for a deeper drop.

eurusd-n-3.png


Markets were almost fully pricing in a 50 basis point rate hike at today's meeting as recently as a week ago!

ECB faces dilemma amid Credit Suisse turmoil​

Turmoil in the European banking sector is causing a dilemma for the ECB - should it press on with significant rate hikes in an attempt to get inflation control even if it risks triggering a European banking crisis? This is a tricky choice to make.

On one hand, Credit Suisse managed to get assurances from the Swiss National Bank and Swiss regulator that it will receive support should the situation require. Credit Suisse announced that it intends to exercise an option to borrow an additional 50 billion CHF from Swiss National Bank via a covered-loan facility in order to improve its liquidity position. This led to relief on the market and an over-30% jump in Credit Suisse shares so far today.

On the other hand, support from SNB does not mean that woes for Credit Suisse are over. It is not a secret that Credit Suisse has been involved in some of recent high-profile market scandals, like Archegos or Greensill scandals. It looks like there may be some significant compliance and risk management flaws in the Swiss bank and it is having a negative impact on investors' confidence in the bank. While support from authorities helped ease concerns for now, another worrying piece of news on Credit Suisse may see troubles and market turmoil reignite.

Cautious message from Lagarde looks likely​

Having said that, a cautious decision today if made, like hiking by just 25 basis points or even holding rates unchanged, should not come as a surprise. It will likely trigger dovish reaction on the markets (EUR down and equities up) given that expectations are split between +25 and +50 bp move. However, the accompanying statement is likely to be very cautious. ECB President Lagarde will face questions on banks' condition during the press conference but it looks highly likely that she will play down current risks, applaud actions by Swiss authorities and hint that ECB needs to better understand the situation and reasons behind it before making any response. She is also likely to be prudent when making statements on future policy moves and refrain from making clear comments on the size of rate hikes as she did last month when she strongly hinted that a 50 basis point rate increase is coming at the March meeting.

It should also be noted that it will be a quarterly ECB meeting and it means that a new set of economic projections will be released. Those are likely to point to lower headline inflation in the months ahead while core price growth is expected to be little change compared to previous forecasts.


eurusd-n-4.png

A look at the markets: EURUSD and DE30​

EURUSD slumped yesterday as banking sector woes spread across the Atlantic. The pair tested a short-term upward trendline but bulls managed to defend it. A point to note is that this trendline can be seen as the neckline of the head and shoulders pattern with the shoulderline being in 1.0740. A dovish ECB could see that pair erase today's daily gains and slump below the trendline. This would pave the way for a deeper drop.​
 

Solid ECN

Active Trader
Mar 3, 2022
625
3
34
39

AUDJPY​

  • Swiss National Bank announced that UBS will buy Credit Suisse in a government-arranged deal. UBS will purchase CS for 3 billion CHF and will get additional 9 billion CHF in government guarantees. Apart from that, 10 billion CHF in additional liquidity will also be provided​
  • Bank shares underperformed in early trading on Monday as UBS-CS deal includes writing down of AT1 bonds to zero. As those bonds have notional value of around 16 billion CHF, there concerns over exposure of other banks​
  • ECB President Lagarde hopes that the rescue deal will be enough to calm turmoil in European banking sector. Lagarde also said that ECB is ready to support European banks with loans should they require it​
  • Fed Chair Powell and US Treasury Secretary Yellen issued a joint statement stressing that US banking and financial systems are resilient​
  • Fed along with 5 other central banks (ECB, BoJ, BoE, SNB and BoC) announced actions to boost USD liquidity. Those 6 central banks will now hold daily auctions for USD through swap lines, instead of weekly auctions as it was before​
  • Bank of Japan said that there were no bids in a daily FX swap auction for USD today, in a sign that liquidity crunch is not as severe as feared​
  • US and European index futures launched new week's trade with small bullish price gaps. However, those gains were quickly erased and now both DAX and S&P 500 futures trade more or less flat compared Friday's cash closing prices​
  • Indices from Asia-Pacific traded lower today. Nikkei and S&P/ASX 200 dropped 1.4%, Kospi traded 0.6% lower, Nifty 50 plunged 1.2%​
  • Indices from China traded lower with Hang Seng (-3.4%) being top underperformer​
  • RBA Assistant Governor Kent said that Australian banks are resilient. Kent also said that RBA will take into account financial conditions while making next interest rate decision​
  • Goldman Sachs slashed its 1-year ahead Brent price forecast from $100 to $94 per barrel​
  • People's Bank of China left 1- and 5-year rates unchanged at 3.65 and 4.30%, respectively. Decision was in-line with market expectations​
  • Risk-off moods can be on cryptocurrency markets at the beginning of a new week - Bitcoin drops 2%, Ethereum trades 2.6% lower and Dogecoin dips 1.9%​
  • Energy commodities drop at the start of a new week - WTI drops over 2% and looks towards a test of the $65 per barrel area​
  • Precious metals trade mixed - gold gains 0.7%, silver adds 0.2% and platinum drops 0.6%​
  • CHF and JPY are the best performing major currencies while AUD and NZD lag the most​
audjpy_3.png


AUDJPY, a well-known risk barometer, is taking a hit at the beginning of new week's trade. The pair is attempting to make a break below a mid-term support zone ranging above 88.00. Note that similar attempts were made last week but all of them failed.​
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

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.​

eurusd-n-1_3.png


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.

eurusd-n-2_3.png
  • USD index, Daily time frame chart.​
  • JPY leads the gains this trading session.​
eurusd-n-3_1.png
 

SOLIDECN

Master Trader
Nov 16, 2021
2,653
22
54
39

AUDUSD​

Yesterday's trading on Wall Street and in Europe ended higher, making up for losses from earlier in the day initiated by the uncertainty surrounding the takeover of Credit Suisse by UBS. Better sentiment fueled Asian markets today. Stock exchanges in Japan are closed due to a national holiday.​
  • AUDUSD pair breaks back below the 0.6700 level. The case for a pause in the rate hike cycle by the RBA at its 4 April meeting has strengthened. According to the RBA minutes released today, the Board agreed to reconsider the case for pausing rate hikes and to closely examine incoming data from the economy.​
  • The ECB's Holzmann is softening his previous calls for three consecutive 50 basis point rate hikes.​
  • From the US, there was some news affecting the stock market. The US Treasury is looking at unlimited deposit guarantees (via the FDIC) if the banking crisis worsens.​
  • On the political front, investors are looking at the Putin-Xi meeting in Moscow, which may bring new threads in the realm of the Ukraine conflict and other geopolitical-economic relations.​
  • PIMCO lost $340 million on the redemption of Credit Suisse Bank's AT1 bond. Lawyers from Switzerland, the United States and the United Kingdom are talking to Credit Suisse's AT1 bondholders about possible legal action after up to $17 billion in losses related to the redemption.​
  • Goldman Sachs commented on the current state of the equity market this way - "valuations don't look particularly attractive".​
  • Bill Ackman, founder and hedge fund manager of Pershing Square Capital commented that the FOMC should consider holding off on rate hikes for tomorrow's Committee decision. Today marks the start of the Fed's two-day meeting in Washington.​
  • Citi predicts a 25bp rate hike on Wednesday, and notes that the tone of the press conference will now be particularly important.​
  • Citadel and Trafigura traders believe that the turmoil in the banking market is temporary and unlikely to cause far-reaching perturbations in the global economy. Demand for oil should strengthen.​

Quotations:​

Futures in Europe point to a bullish opening to the session on the Old Continent. US contracts are also gaining, however the scale of the increases is minimal. On the FX market, the USD is currently performing best. NZD and AUD are the worst performers. Energy commodities are down, extending the wave of uncertainty in the economy. Gold and silver are correcting recent gains and recording slight declines. Bitcoin is currently losing 0.4 per cent and slipping towards $27,800.

audusd_10.png


The AUDUSD pair is currently trading in a structure bounded by important support and resistance levels. The upcoming FOMC decision and ongoing banking uncertainty could create additional volatility on the pair.​