EURUSD D1 03 28 2022 1309

The EUR/USD weekly forecast is mildly tilted towards the downside as the pair failed to sustain above the 1.1000 area after several attempts.

The EUR/USD pair may not attract much speculative interest as it hovers around the 1.1000 level. As war-related uncertainty grew, volatility was limited due to a lean macroeconomic calendar. 
Despite Jerome Powell’s more aggressive stance as Fed chair, the US dollar strengthened on Monday. During the annual economic policy conference of the National Business Economics Association, he said that “inflation is too high” and that the central bank will act accordingly. As early as May, several Fed members reported that they would support a decision to scale back the Fed’s policy. Powell joined the bullish club with this announcement.

Upon Powell’s announcement, Treasuries were sold off, pushing yields to their highest level since May 2019. While yields declined over the days, the week yielded a higher yield.
European Central Bank’s patience is slowly ebbing away. As a result of Christine Lagarde’s unexpected aggressive comments at the last meeting, several members of the ECB have hinted at a rate hike by the end of the year. This is now planned for the third quarter of the year, earlier than previously planned by the central bank.

The Fed aims to achieve maximum employment and price stability, while the ECB is only concerned with price stability. The US and EU are experiencing the highest inflation in decades as economies slowly recover from the massive lockdowns imposed at the pandemic. 

EURUSD W1 03 28 2022 1310

The EUR/USD daily chart shows that the price is hovering around the 20-day MA. As a result, the pair could not find acceptance above the 1.1000 mark. However, the volume remains low for downside correction that started from the 1.1135 area. Therefore, the pair remains in a broad range, and traders should wait for a clear directional bias. Moreover, the traders should watch the triple bottom at 1.0965. If broken, the pair will lead to 1.0900 ahead of 1.0800.

 

 

 

 

 

At the week, Olli Rehn and Ignazio Visco of the ECB governing council tried to calm ECB rate hike expectations, with Rehn suggesting that a rate hike is not around the corner, but has gotten nearer. He also said that policy rates don’t impact energy prices and that wage rises have been subdued. The Banca d’Italia head Visco likewise noted the lack of pressure on wages. Lagarde is set to speak later today after she also tried to weigh in with dovish rhetoric last Thursday.
EUR/USD has suffered heavy losses late Friday and started the new week on the back foot. The souring market mood is making it difficult for the shared currency to find demand and the pair is likely to extend its slide unless risk flows return. The negative shift witnessed in market sentiment helped the greenback find demand ahead of the weekend and the US Dollar Index (DXY) managed to register weekly gains. 

EURUSD W1 02 14 2022 1543

Later in the session, European Central Bank President Christine Lagarde will deliver a speech. In an interview with Redaktionsnetzwerk Deutschland last week, Lagarde argued that raising rates would not solve the inflation problem and said that they don't want to "choke off the recovery." In case Lagarde sounds less hawkish than she did at the ECB's press conference on February 7, the pair could face additional bearish pressure.
The near-term technical outlook suggests that sellers dominate EUR/USD's action to start the week. The Relative Strength Index (RSI) indicator on the four-hour chart is now below 40 and the pair is trading below the 100-period. 

EURUSD D1 02 14 2022 1541

 

 

 

 

 

 

The GBP/USD weekly forecast is bullish as the price found respite at 1.3000 psychological level despite the central bank divergence.

Risk-sensitive currencies like the British pound have been relieved by optimism regarding the probable truth between Russia and Ukraine. As a result, the GBP/USD pair staged an impressive comeback as the US dollar failed to capitalize on the Fed’s dovish outlook. Although the Bank of England (BOE) raised interest rates cautiously, Cable posted its first weekly gain in four weeks. Next week, data on UK inflation and US durable goods will be closely watched, while geopolitical developments in Eastern Europe will also be closely monitored.
The sterling bulls eventually gained control, leading a solid recovery in the major currencies that continued into Thursday. However, as markets repositioned ahead of Wednesday’s critical Fed decision, the US dollar lost its winning momentum and yields. The world’s most powerful central bank raised interest rates by 25 basis points, bringing their target range to 0.25-0.50%. Despite six more rate hikes this year on the Fed’s scatter chart, Chair Jerome Powell said each meeting is a live meeting.
The US dollar did not benefit from the Fed’s hawkish stance as market optimism overshadowed hopes for diplomacy in the Ukraine crisis, eroding its safe-haven appeal. However, the currency pair pared all of its Fed-inspired gains on Thursday following the Bank of England’s cautious rate hike. Despite the uncertainty in Ukraine and its risks to the country’s economic growth, the UK central bank raised interest rates for the third consecutive month by 0.25%. 

GBPUSD W1 03 21 2022 1234

Macro traders are bracing for a quiet start to a busy week, with Wednesday’s UK inflation data expected to be the first major event. Increasing oil prices caused by the crisis in Ukraine will lead to an increase in the UK consumer price index (CPI) to 6.0% from 5.5% previously. Also, in the middle of the week, the UK will release its annual budget report.
The GBP/USD price formed a double bottom at 1.3000 and soared to 1.3210 weekly highs. However, the pair saw fluctuation within 1.3100 to 1.3190 several times. The daily chart shows a cup and handle pattern with a handle top around 1.3200-10. If the price breaks this level, we may see a test of a broken double bottom at 1.3272. 

GBPUSD D1 03 21 2022 1232

 

Trade accordingly with your risk

 

AUDUSD D1 01 31 2022 1249

The US dollar continues to blast higher with brutal momentum as key levels give way in major USD pairs. The momentum is impressive and could be set to continue if longer US yields also become unanchored and rise together with Fed rate hike expectations. But other central banks will be in focus next week as we look for whether hawkish surprises can offer any counterpoint to the strongest weekly surge in the US dollar since the panic phase of the pandemic outbreak.


The US dollar continues to track Fed rate hike expectations higher, with the USD back on an aggressive strengthening path today from the get-go, perhaps as long US treasury yields are back higher  an un-anchoring of long US yields and the yield curve steepening somewhat from here could take the USD move farther than if the long end of the US yield curve remains tame. In my portion of our quarterly outlook that was released this week and written some two weeks ago, Forecasted that the US dollar “could prove resilient for some of the early part of 2022 against the usual pro-cyclical currencies”, as assumed that risk sentiment could crater for a n extended period this quarter as asset markets continue to suffer under the weight of the Fed’s hawkish shift. Assessed that a “broad, aggravated extension of the [USD] strength we saw in late 2021” is unlikely on the assumption that those longer US treasury yields remain anchored. That is an important caveat, and long US treasury yields are creeping back toward the cycle highs. A quick move here significantly above 2.0% for the US 10-year treasury benchmark together with even higher Fed expectations could extend this USD move higher than I would have thought likely when writing the outlook or even after the FOMC meeting. If long yields stay tame, I have a hard time seeing the short end Fed expectations extending much further now that we have effectively already priced in five rate hikes for this calendar year.

Another important factor as 2022 wears on is that the US Federal Reserve is not the only central bank in town and if the Fed is moving in determined fashion to get ahead of inflation, we can expect other central banks to do the same  eventually even the ECB, especially as global prices are generally in US dollars and the price levels could rise even faster elsewhere. 

AUDUSD W1 01 31 2022 1251

The RBA is certain to end its QE purchases as it has pinned the February meeting for a review of this stale policy after the embarrassing breaking of its prior commitment to the 3-year yield control. And after the hefty Q4 CPI surprise, together with ongoing inflationary risks that are aggravated by a weak currency, it is time for the RBA to wax far more hawkish, even though it has focused a considerable portion of its rhetoric on needing to see rising wage levels before raising rates. The market is looking for rate liftoff in April or May – this looks tardy and could be brought forward.
The AUDUSD has collapsed through 0.7000 and below the December pivot low just south of that level after the significant repricing of Fed expectations higher this week. Next week, we have the chance to witness the degree to which signals from other central banks are able to counter the USD strength, for example, if the RBA waxes far more hawkish than expected. This 0.7000 area is a major one and argue the last-ditch bull/bear line as we watch how the pair treats the RBA developments and the status of the USD rally next week. The next major downside area is perhaps the pre-pandemic major support zone near 0.6675.

 

 

 

 

The weekly forecast for gold price is bullish as the deteriorated risk sentiment lends support to the precious metal as a safe-haven asset.

Gold price reacted sharply to changes in risk sentiment throughout the week, ending the week at its highest weekly close since November 2020 near $1950. Russia does not intend to deescalate the conflict with Ukraine.
The price of gold began the week strongly after the US, EU, UK, and other western countries banned some Russian financial institutions from using SWIFT, the global payment system. However, this week, a second round of “peace talks” was organized between Russian and Ukrainian delegations, alleviating investors’ concerns.

Russian military was reported to have increased its presence in Ukraine in an attempt to seize Kyiv, which triggered a surge in safe-haven inflows.

The sharp rise in US Treasury yields resulted from hawkish remarks from FOMC Chairman Jerome Powell on Wednesday, despite a weak market environment. This pushed gold into negative territory. In his semi-annual hearing on the first day, Powell told the House Financial Services Committee that a 25 basis point rate hike in March would be appropriate. Powell indicated that if the first round of rate increases fails to ease price pressures, a rate hike of 50 basis points may be considered later this year. According to the chairman, sanctions against Russia will not directly affect the US economy but are fueling uncertainty about growth prospects.

After losing some ground on Wednesday, gold regained some momentum on Thursday and Friday, erasing some of Wednesday’s losses. On the second day of his Senate Banking Committee hearing, Powell effectively reiterated his economics, inflation, and politics. 

There will be no high-level macroeconomic data out of the US on Monday and Tuesday. As a result, gold’s market value will likely remain affected by the Russian-Ukrainian crisis and risk perceptions. 

XAUUSD W1 03 07 2022 1330

 

Consumer price index (CPI) data for February will be released Wednesday by the US Bureau of Labor Statistics. In January, the CPI rose to 6% from 6% annually. The Fed’s dovish outlook should remain intact unless inflation surprises the downside. The yellow metal’s growth could be limited by a further rise in US Treasury yields due to a strong CPI.

On Wednesday, the European Central Bank (ECB) will also announce its monetary policy decisions. The ECB’s rate hike rates have already been priced in by the markets. However, there are growing concerns about the potential negative impact of the Russo-Ukrainian war on the Eurozone economic outlook, prompting the bank to adopt a dovish stance. Gold remains attractive in this scenario.

If investors don’t see signs of a de-escalation in the Russia-Ukraine conflict, the yellow metal should remain a traditional safe-haven asset next week. However, XAU/USD’s upside potential might be limited by gold’s inverse correlation with US Treasury yields after the Federal Reserve’s monetary policy outlook was released following inflation data. 

XAUUSD D1 03 07 2022 1329

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

USDCAD W1 01 24 2022 1329

 

The USDCAD pair has gone far and fast to the downside since the crude oil market recovered swiftly from its December post-omicron breakout nadir and is now interacting with the psychologically significant 1.2500 area that slow happens to also be the 200-day moving average. Coming up next for the two currencies are signals from their respective central banks, with a hawkish raising of the bar from the Fed likely requiring, for example, calling an early end to QE already at the Jan 26 meeting and possibly indicating that “larger than 25 basis point” hike increments are under consideration.  The Fed is priced to hike to about 1.0% through the December meeting, depending on the barometer. The pricing for the Bank of Canada is less reliable, but it is certainly priced to lead the Fed in hiking this year by around two hikes even if the spread for 2-year yields between the two countries has been relatively flat for over a month, so little new has been priced in on a relative basis recently. On that account, the move lower in USDCAD looks a bit over-extended without new signals from respective central banks. Other factors influencing the exchange rate will include whether oil continues to march to new highs or corrects and risk sentiment, where I suspect extended weakness will begin to offer more safe haven support for the US dollar if long US yields are also on the rise.

USDCAD D1 01 24 2022 1326

 

 

 

 

Central bank policy in Japan and the United States captivated headlines this week but the dollar’s long-term position is under increasing threat from the erosion of real interest rates by inflation.

The USD/JPY rose moderately but remained below resistance at 109.30, as offsetting dovish outlooks from the Bank of Japan (BOJ) and the Federal Reserve left the pair without motive.
In Japan, the BOJ kept monetary policy unchanged as universally anticipated. Governor Haruhiko Kuroda said he is prepared to extend the pandemic relief programs beyond the September deadline. He did not expect inflation to reach its 2% target by the time of his retirement in early 2023.

Rising COVID-19 cases and a slow vaccination rollout have brought on a third state of emergency in Tokyo, Osaka and two other prefectures, inhibiting prospects for an economic recovery, though the BOJ did raise its quarterly growth forecast. The USD/JPY saw its largest one-day gain of the week after the BOJ meeting on Tuesday.

In the US, the central bank also left policy unaltered. Fed Chair Jerome Powell refused to speculate when or under what conditions the governors might reduce the $120 billion of monthly asset purchases that have pinned the short end of the Treasury yield curve.

The US economy expanded at a 6.4% annualized rate in the first quarter, slightly more than predicted. Initial Jobless Claims dropped to 553,000 in the latest week, the lowest level of the pandemic era. Inflation was stronger than projected in March with the headline Personal Consumption Expenditure Price Index (PCE) rising 2.3% on the year, outstripping the 1.6% forecast by a wide margin. Core PCE was 1.8% as expected.
The current bout of US inflation is temporary and largely due to the base effect from the steep decline in prices last year during the lockdown, as the Fed has asserted.

But behind the immediate rationale, fast-rising commodity prices, consumer demand and massive spending by the Federal government may be altering the general price structure.

USDJPY W1 02 28 2022 1439

 

If the basal inflation rate in the US does increase it will undermine the advantage that rising Treasury yields have provided the dollar this year.
In Japan, Retail Trade (sales) rose 5.2% for the year in March, the highest increase since last October and a strong reversal of April’s 1.5% decline. Industrial Production was also much more vibrant than forecast at 4% in March on a 0.0% forecast and 2% decrease in February.

Inflation was again a cause for BOJ concern as annual Tokyo CPI fell 0.6% in April, three times the -0.2% forecast.
The USD/JPY has been propelled this year by the increase in US interest rates and that advantage will continue to underpin the USD/JPY this week

Though the long-term dollar benefit of higher Treasury yields is under potential threat as rising US inflation reduces the currency's real interest rate margin, for the moment the trade impact on the USD/JPY is limited.

The 10-year Treasury yield has added over 70 basis points since the New Year and 10 this week. In the past month, US CPI has jumped from 1.7% to 2.6% and it is expected to rise further as the base index differential over last year increases.

American economic growth is easily outpacing Japan’s and the pandemic status in the US adds to the dollar’s advantage.

Treasury rates will rise despite the Feds obvious reluctance to sanction such, but the key for yields is inflation. Whether the increase in US inflation is transitory or not will not be known for several months. 

USDJPY D1 02 28 2022 1441

 

 

 

 

 

 

EURUSD D1 01 10 2022 1405

 

In December, European inflation reached a record high, up 5% over the year before. The US Federal Reserve has pointed to more aggressive measures to contain inflation.
There were a few surprises in the first week of 2022 for the EUR/USD pair, but it remained largely unchanged. Among the biggest shocks was when the American central bank released minutes of its December meeting, which showed policymakers were considering cutting their bonds.

According to the Fed, if the current improvements in the labor market persist, the conditions for a rate hike are likely to be met relatively soon. Next came the December nonfarm payroll report. The US created 199,000 new jobs in December, half of the market expected. On the other hand, the unemployment rate improved and fell to 3.9%. While the numbers were not impressive, market participants still considered them acceptable.
In December, the euro area’s inflation rate grew by 5%, a new record high after the last month at 4.9%. Also, German consumer prices rose 5.3% compared to the forecast of 5.2%. Inflation is pushing the European Central Bank to reconsider its conservative stance.

The hawkish FOMC minutes from Wednesday have so far proven not hawkish enough to trigger more than the one-off adjustment in the US dollar that seems to be fading quickly as we look toward today’s US December jobs report (more on that below). At the same time, risk sentiment remains broadly stable, speculative- and highly interest rate-sensitive US equities generally aside. This is intriguing as the implication is that as long as US yields and Fed expectations are able to march higher without spooking asset markets, the US dollar may fail to rally and could even weaken, though we need to get EURUSD up out of the sub-1.1400 range for a more interesting signal on that front.

Additionally, for the cycle we have to wonder if the Fed is the cart or the horse here, something that it may itself not understand, as it has already shared its lack of understanding on how its balance sheet affects the economy (though we seem to have a good idea how it affects financial markets – and the standing repo facility of some $1.5 trillion offers the Fed quite a large safety valve for how tapering and possibly a quick move to reducing the balance sheet will affect treasury market and asset market dynamics). Put another way, the economy will pull the Fed this way or that on interest rates more than Fed policy will impact the data, as policy moves only hit with a significant lag of 9-12 months.

Speaking of data, the next step for the USD and market is the December jobs report later today, with the market likely leaning now for quite a strong figure, given the six-month high ADP December private payrolls change number released on Wednesday at +807k. That puts the two-month total for the Nov-Dec ADP private payrolls change at over 1.3 million, while the official BLS nonfarm payrolls change total was a tepid +210k in November. Today’s December tally is expected to show about +450k of payrolls growths. But note: the “two-month net revision” number bears watching, as the US Bureau of Labor Statistics has had difficulty collecting data over the last year and has consistently underestimated the pace of jobs growth, with every month since July seeing growing positive revisions, from a +119k revision in August to a +235k revision in November.

 

EURUSD W1 01 10 2022 1407

 

 

 

 

 

 

NZDUSD D1 02 21 2022 2036

After the economy slumped in Q3 due to a COVID-related lockdown, incoming data show a solid rebound from Q4 last year, as reflected in employment and retail spending data. Meanwhile, inflation pressures have also intensified, as the Q4 headline CPI firmed to 5.9% year-over-year with an acceleration also in underlying inflation as well as non-tradables inflation.”
Against this backdrop, we expect the RBNZ to continue its shift toward a less accommodative monetary policy stance at next week's policy meeting. At the same time, we favor a more measured 25 bps rate hike as opposed to a larger 50 bps increase, particularly after the central bank governor said late last year the RBNZ would take a “cautious” approach to tightening by moving in 25 bps increments “for now. 

NZDUSD W1 02 21 2022 2037

 

As the EUR/USD currency pair hovered around 1.1300 for a fourth straight week, modest gains were posted before the weekend, but no future is apparent. During this time of year, volatility is hit hard by the vacation depression, and the decline towards the end of the year can lead to odd pricing.

The US Federal Reserve and European Central Bank announced their monetary policy decisions last week and released new inflation and growth forecasts. As the markets waited for the release of the results, both central banks responded to the gradual decline in prices, which did not result in any directional movements.

Beginning in January 2022, the Federal Reserve will increase its monthly bond purchases to $ 30 billion from $ 15 billion previously. As a result, the central bank will stop buying government bonds and mortgage-backed securities every month, which means a faster rate hike. The Fed’s scatter chart currently predicts three rate hikes in 2022 and three more in 2023.

Forecasts for 2021 and 2022 have been raised to 5.6% and 2.6%, respectively, from 4.2% and 2.2%. As a result, GDP will grow by 4% in 2022, up from 3.8% in September, while the economy is projected to grow by 0.2% in 2023, up from 2.5 % in September. 

EURUSD D1 12 20 2021 1316

 

In contrast, the ECB has confirmed that it will complete its pandemic emergency program in March 2022, as expected. Moreover, the governing council decided to increase its bond purchase program to €40 billion per month in the second quarter of 2022 and to €30 billion via PEPP in the third quarter.

Recent macroeconomic data confirmed inflation has reached an overheated level, and economic growth has slowed. The US PPI rose 9.6% year-over-year in November, while retail sales rose a modest 0.3%. Germany’s IFO business climate decreased to 94.7 in December, while the EU CPI rose 2.6% year-over-year. 

EURUSD W1 12 20 2021 1318

 

 

Trade accordingly with your risk.

 

 

 

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