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In a monthly economic report for March, the government cut its assessment on production for the first time since December amid slowing overseas demand for semiconductors and other items. Its view on corporate earnings was also downgraded for the first time in nearly three years. Full attention should be given to price increases, supply-side constraints and fluctuations in the financial and capital markets," the Cabinet Office said in the report, which described the Japanese economy as "picking up moderately" despite some weakness. It expected that the recovery will continue. Among key components of the economy, industrial production "has been in a weak tone recently," a downgrade from the previous month's view that its pick-up was pausing, the report said. apan's economy narrowly avoided a recession in the October-December quarter and many economists expect it to grow in the current quarter, as private consumption, which makes up over half of gross domestic product, has been supported by pent-up demand for services despite accelerating inflation.

 

GBP/USD continues to trade on either side of 1.2000 in fairly uninspiring trade with the US dollar the driver behind any short-term moves. The US dollar has been moving around this week as Fed speakers continue their hawkish narrative, aided by this week’s punchy core PCE reading that came in hotter than expected. On the flip side, the recent CB consumer confidence data (February) missed by a sizeable margin, adding to any dovish market outlook.
The final S&P UK PMI reading released earlier in the session point to renewed consumer confidence. According to Dr. John Glen, chief economist at CIPS, ‘As recessionary fears started to recede, there were expectations of improving business opportunities in the next 12 months resulting in the highest future optimism since March last year’. With the UK finely balanced between recession and expansion, the Bank of England (BoE) may rein back on future rate hikes after this month’s meeting. The BoE is expected to hike by 25 basis points on March 23. Next week there is very little UK economic data of importance and this again leaves cable looking at the US dollar as the driver of price action.

The daily GBP/USD chart looks mixed with a slight downside bias. Cable is being supported at the same time being pressed down on by the 20- and 50-dmas. There seems to be reasonable short-dated support just above 1.1900, an area that has been repeatedly tested in the last month. A break below would leave the January 6 low at 1.1842 vulnerable.

 

Metals prices are moving higher amid a week of financial turmoil, with Wall Street's largest banks looking to deposit $30 billion into First Republic in order to save it from collapse. Three-month copper is up 1.9% to $8,692 a metric ton while aluminum is 1.3% higher at $2,308.50 a ton. Gold meanwhile is 0.6% higher at $1,934.40--putting this week's rise to 3.6%. Investor sentiment feels better heading into the weekend. As well as the moves from Wall Street, the European Central Bank dropping its commitment to keep raising interest rates at a steady pace was welcomed by the market, helping investors to move "risk-on".

Even though gold prices aimed higher on Wednesday, the yellow metal might find that maintaining its momentum will be difficult. A weaker US Dollar likely helped give XAU/USD the juice it needed to squeeze out a third consecutive daily gain. Gold’s 1.35% gain this week so far is shaping up to be the best since early January.

Fed Funds Futures indicated that markets priced in a peak policy rate of 5.5% in September shortly after the ISM figures. As a result, the 2-year Treasury yield jumped closer to 5%, bringing the rate closer to the 2007 high.

Traders will turn their attention to the next round of US jobless claims data and an economic outlook speech from Federal Reserve Board Member Christopher Waller.
On the daily chart, gold may be readying to resume the near-term downtrend since late January. A bearish Death Cross recently formed between the 20- and 50-day Simple Moving Averages (SMAs). In fact, over the past 24 hours, the 20-day line held as resistance, maintaining the downside focus.

 

The Swiss Franc is caught in a vortex between a banking crisis and a risk-off event as markets are asking questions of what the ramifications of the failure of three US banks will be. Credit Suisse has been bailed out by the Swiss National Bank (SNB) today. They will provide up to CHF 50 billion of liquidity to the embattled investment bank and Credit Suisse will buy CHF 3 billion of their own debt. Going into today, Credit Suisse’s 1-year credit default swaps, (CDS) the cost of insuring the banks’ debt, went from under 5% to 37%. The share price remains well below CHF 2. The high above CHF 80 in 2007 is but a distant memory. The Franc is often seen as a haven in times of uncertainty, but currency traders are conflicted with a Swiss bank in the centre of the current crisis of confidence. The emerging banking woes are less than a week old but the path ahead for rates has pivoted dramatically. The terminal rate for the Federal Reserve is now around 4.85%, a long way from over 5.90% seen last week. USD/CHF closed outside the lower band of the 21-day Simple Moving Average (SMA). Resistance could be at the prior peaks of 0.9440, 0.9455 and 0.9550. The latter also currently intersects near the 200- and 260-day SMAs, which may lend resistance. Support may lie at the breakpoints of 0.9288, 0.9220 and 0.9085 or the previous lows of 0.9070 and 0.9060.

The euro’s rebound against the US dollar on Monday from near-strong support could be a sign that the single currency isn’t ripe to break lower ahead of the key Euro area CPI data due later this week. From a macro perspective, the story by and large so far this month has been surprisingly strong US data, as reflected in the jump in the US Economic Surprise Index to a 10-month high.

Euro area data have been less upbeat – the Economic Surprise Index is still in positive territory but retreated since the beginning of February. This week, preliminary February CPI inflation data from Germany (Wednesday) and the Euro area (Thursday) will be closely watched. Ahead of the data, long-term euro zone expectations rose to a new 10-month high on Monday. So far, headline Euro area inflation is easing, but core inflation remains sticky. Rate futures are pricing in around 150 basis points of ECB rate hikes by September, largely unchanged from early February. 

On technical charts, EUR/USD posted a bullish engulfing pattern on the daily candlestick charts on Monday as it nears a fairly strong cushion at the January low of 1.0480, also the price objective of a minor double top (the February 9 and February 14 highs). See “EUR/USD Price Setup: A Bit More Downside Within a Broader Consolidation?”, published February 20.

This support is crucial as any break below could open the way toward the 200-day moving average (now at 1.0330). Importantly, such a break would disrupt the higher-top-higher-bottom pattern since September, that is, a risk to the five-month-long uptrend. 

 

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German 40 threatens lower bound of rising wedge as CCI approaches oversold territory. Consolidation builds in a narrow range with a potential hanging man candle on the daily chart limiting the bullish move.
Dax prices have recently been trading sideways, struggling to break in either direction. While prices have maintained strong bullish momentum at the start of the year, key technical levels have come back into play.

With a rising wedge from the 2022 October low showing a strong rebound that drove Dax prices over 30% over the past four months has run into major resistance at the daily high of 15500.
If prices fall below 15296 (support), a break below 15200 could fuel a bearish breakout. Meanwhile, with the recent data solidifying a higher probability for additional rate hikes this year, fundamental factors will likely assist in driving the next move.

 

The gradual drift lower in the Hang Seng Index (HSI) reflects some of the unwindings of extreme overbought conditions. While the index could have a bit more downside in the near term, it is too soon to conclude that the uptrend has reversed.

The HSI index rose over 55% from a low of 14597 hit in October – the lowest level since the Great Financial Crisis. The 14-day Relative Strength Index rose above 80 at the end of January – the highest in two years. Levels above 70 are considered to be overbought and the closer the RSI goes toward 100, the more difficult it gets for a market to sustain the pace and the extent of the gains.

On technical charts, the index has pulled back from quite a strong ceiling on a horizontal line from early 2022 (at about 22525), coinciding with the 89-week moving average. In the process, the index has fallen below minor support at the late-January low of 21383. 
On the daily charts, the index is consolidating within the four-month-long uptrend , as the color-coded candles show. Market breadth is still strong even after the retreat - 88% of the Hang Seng Index members are above their respective 100-DMA, and 64% of the members are above their respective 200-DMAs.
The index is approaching a crucial converged support area: the early-December high of 19926, coinciding with the 89-DMA and the 200-DMA. Stronger support is on the lower edge of the Ichimoku cloud cover (now at about 18000), roughly around the late-December low of 18885. The downside could be contained within the 18885-19950 area. The index would need to break below 18885 for the four-month-long upward pressure to reverse.

WTI crude oil prices sank 4.08% on Tuesday, marking the worst single-day performance in 2 months. As was the case with most financial assets over the past 24 hours, oil was closely tracking the market reaction to testimony from Federal Reserve Chair Jerome Powell before the Senate Banking Committee.

Oil prices can be quite sensitive to interest rate expectations. After all, higher interest rates would serve to slow down the economy to combat high inflation. If that opens the door to slower growth, then that could translate into less demand for WTI. Focusing on the remaining 24 hours, oil prices are eyeing 2 key event risks. The first is weekly DOE oil inventories. Supply is seen rising by 0.119 million barrels. The second item will be JOLTS job openings data. The latter will offer further insight into the state of the labor market amid the data-dependent Fed.

 

On the daily chart, WTI seems to be trading within the boundaries of a Bearish Rectangle chart formation. The floor seems to be around 72.27 with the ceiling around 82.13. While prices remain within this pattern, the near-term technical picture may remain neutral. But, a downside breakout opens the door to an increasingly bearish outlook.

 

 

US equity markets continue to defy market logic and push back toward levels last seen a few weeks ago. With the Fed’s ‘a bit higher for a bit longer’ rate narrative being priced into the market, equities should, in a traditional sense at least, be testing support levels, not resistance levels. While the trend remains your friend, it may be better from a risk/reward basis for traders to demand better prices before entering the market.

The S&P 500 is currently nudging higher and is within 50 points of printing a new multi-month high. This grind higher, supported by the short-dated 20-day moving average, continues to confound traders as US bond yields probe new multi-week highs. The technical outlook remains positive with the recent golden cross (50-/200-day crossover) boosting sentiment, while a medium-term series of higher lows confirms that traders are continuing to buy dips. There is a cluster of recent highs between 4180 and 4208 which may cap, or at least slow, the current move, while the first level of support is seen around 4100.