Articles
US Dollar loses value for third straight week as Q1 comes to an end
302708 March 31, 2023 22:26 FXStreet Market News
- US Dollar Index looks to end the third straight week in negative territory.
- EUR/USD bullish bias stays intact in the near term.
- Quarter-end flows could impact the USD’s valuation ahead of the weekend.
The US Dollar (USD) started this week under bearish pressure as easing fears over a global financial crisis allowed investors to move toward risk-sensitive assets. After having closed the previous two weeks in negative territory, the US Dollar Index (DXY) continued to push lower and came within a touching distance of 102.00 before staging a modest rebound early Friday. Renewed expectations about the US Federal Reserve (Fed) pausing its tightening cycle at the upcoming meeting also put additional weight on the USD shoulders.
On Friday, the USD staged a technical correction against its major rivals but lost some of its strength after softer-than-expected inflation data. The US Bureau of Economic Analysis reported that the Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred gauge of inflation, declined to 4.6% on a yearly basis in February from 4.7% in January. On a monthly basis, Core PCE inflation rose 0.3%, compared to the market expectation of 0.4%. Nevertheless, the DXY remains on track to end the third straight week in negative territory and has lost more than 2% in the month of March.
Daily digest market movers: US Dollar struggles to extend rebound
- Annual PCE Price Index declined to 5%, Core PCE Price Index edged lower to 4.6%.
- The CME Group FedWatch Tool shows that markets are pricing in a nearly 50% chance that the US Federal Reserve will leave its policy rate unchanged at the upcoming meeting.
- The US Bureau of Economic Analysis announced on Thursday that it revised the annualized Gross Domestic Product (GDP) growth for the fourth quarter to 2.6% from 2.7% in the previous estimate.
- Brazil and China have reportedly reached an agreement to ditch the US Dollar as an intermediary in trade transactions.
- Wall Street’s main indexes look to open in positive territory as US stock index futures trade modestly higher after inflation figures.
- The US Department of Labor’s weekly data revealed that Initial Jobless Claims rose by 7,000 to 198,000 in the week ending March 25.
- The Conference Board’s monthly data showed on Tuesday that the Consumer Confidence Index rose modestly in March while the one-year inflation expectation component edged slightly higher to 6.3%.
- The benchmark 10-year US Treasury bond yield has been moving sideways between 3.5% and 3.6% following Monday’s decisive rebound.
- While speaking on Monday, Federal Reserve Governor Philip Jefferson refrained from sharing his view about whether the Fed should continue raising interest rates.
- China’s Taiwan Affairs Office threatened retaliation over Taiwan President Tsai Ing-wen’s visit to the US on Wednesday.
- FOMC Chairman Jerome Powell reportedly told the Republican Study Committee on Wednesday that they intend to raise the policy rate one more time before the end of the year.
- CME Group FedWatch Tool shows that markets are pricing in a 45% possibility that the Fed will leave its policy rate unchanged in May.
- Inflation in Germany, as measured by the Consumer Price Index (CPI), declined to 7.4% on a yearly basis from 8.7% in February but came in above the market expectation of 7.3%. In the Eurozone, the annual Harmonized Index of Consumer Prices (HICP) ticked up to 5.7% in March from 5.6% in February.
- FDIC issued a statement over the weekend announcing that First Citizens BancShares Inc bought all the loans and deposits of SVB.
Technical analysis: US Dollar on the back foot against Euro
EUR/USD bullish bias stays intact in the near term with the Relative Strength Index (RSI) indicator on the daily chart holding near 60. This technical reading also suggests that the pair has more room on the upside before turning overbought. Additionally, the pair continues to trade above the 50-day Simple Moving Averages after having tested it toward the end of the previous week.
1.0900 (psychological level, static level) aligns as key technical level for EUR/USD. If the pair manages to stabilize above that level, it could target 1.1000 (end-point of the latest uptrend) and 1.1035 (multi-month high set in early February).
On the downside, 1.0800 (psychological level) could be seen as interim support ahead of 1.0730 (50-day SMA, 20-day SMA) and 1.0650/60, where the 100-day SMA and the Fibonacci 23.6% retracement of the latest uptrend is located. A daily close below the latter could be seen as a significant bearish development and open the door for an extended slide toward 1.0500 (psychological level) and 1.0460 (Fibonacci 38.2% retracement).
How is the US Dollar correlated with US stock markets?
Stock markets in the US are likely to turn bearish if the Federal Reserve goes into a tightening cycle to battle rising inflation. Higher interest rates will ramp up the cost of borrowing and weigh on business investment. In that scenario, investors are likely to refrain from taking on high-risk, high-return positions. As a result of risk aversion and tight monetary policy, the US Dollar Index should rise while the broad S&P 500 Index declines, revealing an inverse correlation.
During times of monetary loosening via lower interest rates and quantitative easing to ramp up economic activity, investors are likely to bet on assets that are expected to deliver higher returns, such as shares of technology companies. The Nasdaq Composite is a technology-heavy index and it is expected to outperform other major equity indexes in such a period. On the other hand, the US Dollar Index should turn bearish due to the rising money supply and the weakening safe-haven demand.
United States UoM 5-year Consumer Inflation Expectation: 2.9% (March) vs 2.8%
302707 March 31, 2023 22:21 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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United States Michigan Consumer Sentiment Index below expectations (63.2) in March: Actual (62)
302706 March 31, 2023 22:21 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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Tezos price primed for 15% to 25% gain as Mumbai upgrade elevates its transaction processing time
302704 March 31, 2023 22:17 FXStreet Market News
- Tezos price has traded on its Mumbai upgrade, which went live successfully on Wednesday.
- XTZ took a small slide lower in the past few days.
- With traders grasping what the update means for the future of XTZ, expect more inflow with bulls breaking out.
Tezos (XTZ) price is taunting the odds as it unleashed its thirteenth core protocol upgrade this week. The upgrade, dubbed Mumbai, should lift the processing speed to 1 million transactions per second. It should also make it more secure, flexible and developer-friendly, elements that traders will applaud by buying a stake in the altcoin that could spiral up to $1.40.
Tezos price can start cashing in on its protocol upgrade
Tezos price is still caught between two forces from both bullish and bearish sides with the green and red trend lines as barriers. That investors and traders were awaiting the release of the Mumbai upgrade is seen in the rally on Wednesday with a near 10% gain intraday. Unfortunately, too many technical hurdles were coming together on the top side for a substantial rally higher.
XTZ could still see traders welcoming this upgrade as the procession speed kicks it higher. Expect with the positive newsflow that bulls will have bought at $1.10 and push price action through the 55-day and the 200-day Simple Moving Average (SMA). A clean breakout trade can first see $1.20 and next $1.40 on the topside for a staggering 25% gain.
XTZ/USD 4H-chart
Should another rejection occur near $1.15, bulls might flee the scene, however, and look for an easier altcoin to trade. That would translate itself into XTZ allowing a green ascending trend line break. A full swing lower, breaking $1, could test $0.95 in search of support. Bulls would see a red 15% loss in their trading book if they did not cut their positions by then.
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USD/JPY needs more BoJ action to justify a big move lower – SocGen
302703 March 31, 2023 22:17 FXStreet Market News
The Euro needs time, but the Yen still needs change, economists at Société Générale report.
EUR/USD: Waiting for things to calm down before rising
“If/when uncertainty about the global macro and geopolitical backdrop decreases, EUR/USD should move higher. USD/JPY on the other hand needs more BoJ action to justify a big move lower unless Fed easing becomes a realistic short-term prospect.”
“If the BoJ does nothing, and Treasury yields don’t fall, USD/JPY will probably rise. We expect the next policy move in June, which doesn’t really suggest that USD/JPY will break out of its 128-138 year-to-date range.”
“We haven’t changed our forecast of an eventual move to USD/JPY 125, but a more aggressive BoJ adjustment than we expect could see another sharp bout of Yen strength.”
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UMich March final US consumer sentiment 62.0 vs 63.2 expected
302702 March 31, 2023 22:02 Forexlive Latest News Market News
- Prelim was 63.4
- Prior was 67.0
- Current conditions 66.3 vs 66.4 prelim (70.7 prior)
- Expectations 59.2 vs 61.5 prelim (64.7 prior)
- 1-year inflation 3.6% vs 3.8% prelim (4.1% prior)
- 5-10 year inflation 2.9% vs 2.8% prelim (2.9% prior)
I think you can see the impact of the SVB failure and bank run in these revisions. That adds weight to reports that credit card spending stumbled immediately after the turmoil. The question now: Will it bounce back?
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USD/CAD: 1.35 support could face a serious test should US data print on the softer side in coming weeks – TDS
302701 March 31, 2023 22:02 FXStreet Market News
The Canadian economy saw a sharp rebound to begin the new year. CAD barely budged following the stronger data. 1.35 should offer key support but could face a serious test should US data falter in the coming weeks, economists at TD Securities report.
CAD GDP starts 2023 on an even stronger foot than expected
“The Canadian economy roared back to life in January with industry-level GDP exceeding the market consensus with a 0.5% gain. Details were even more upbeat, with broad-based growth and new projections for GDP to rise by 0.3% in February.”
“The CAD barely changed following the stronger GDP report. That may be muddled by quarter-end rebalancing flows. That said, USD/CAD has put in a decent reversal in rather short order from 1.38. So, insofar as this data has altered probabilities for BoC pricing, the pair may have already been priced in.”
“For now, we think 1.35 will be key support for USD/CAD but note that the pair still trades moderately rich. Should US data print on the softer side in the next couple of weeks, that support level could face a serious test.”
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EUR/USD to be at 1.14 at year-end as the ECB’s hawkish stance will provide a tailwind for the Euro – ANZ
302700 March 31, 2023 21:51 FXStreet Market News
Economists at ANZ Bank expect the EUR/USD pair to race higher toward 1.14 by the end of the year.
Relative fundamentals are positive for the EUR vs the USD
“The Euro remains under-valued based on our fair value models and as interest rates between the ECB and Fed narrow, we expect the EUR to outperform.”
“We forecast the EUR/USD to be at 1.14 at year-end as the ECB’s hawkish stance will provide a tailwind for the Euro.”
“While the EUR/USD pair might experience volatility due to the vulnerabilities in the global banking sector, we believe relative fundamentals are positive for the EUR vs the USD.”
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United States Chicago Purchasing Managers’ Index registered at 43.8 above expectations (43.4) in March
302699 March 31, 2023 21:49 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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GBP/USD recovers modest intraday losses post-US PCE Price Index, flat-lines below 1.2300
302698 March 31, 2023 21:49 FXStreet Market News
- GBP/USD attracts some dip-buying and remains closer to over a two-month high set on Friday.
- The USD pares intraday gains in reaction to softer inflation data and lends support to the pair.
- The fundamental backdrop favours bulls and supports prospects for a further appreciating move.
The GBP/USD pair reverses a dip to the 1.2355-1.2350 region and trades in the neutral territory during the early North American session on Friday. The pair, however, remains below over a two-month high touched this Friday and is currently placed around the 1.2380-1.2385 zone, nearly unchanged for the day.
The US Dollar (USD) trims a part of its intraday gains following the release of the Personal Consumption Expenditures (PCE) Price Index and turns out to be a key factor that assists the GBP/USD pair to attract fresh buyers at lower levels. In fact, the US Bureau of Economic Analysis reported that the headline PCE Price Index decelerated to a 5% YoY rate in February – the slowest pace of rise since September 2021. Adding to this, the Fed’s favourite inflation indicator – Core PCE Deflator – edged down to 4.7% during the reported month against consensus estimates pointing to a steady reading of 4.7%.
The data fuels speculations that the Federal Reserve might soon pause the rate-hiking cycle in the wake of the turmoil in the banking sector, which is evident from a fresh leg down in the US Treasury bond yields. This, along with the prevalent risk-on mood, acts as a headwind for the safe-haven Greenback and lends support to the GBP/USD pair. The British Pound is further underpinned by the prospects for additional interest rate hikes by the Bank of England (BoE). The bets were reaffirmed by the UK GDP print, which showed that the economy expanded by 0.1% during the fourth quarter.
The fundamental backdrop favours bullish traders and suggests that the path of least resistance for the GBP/USD pair is to the upside. Hence, any meaningful pullback might still be seen as a buying opportunity and is more likely to remain limited, at least for the time being. Nevertheless, spot prices remain on track to register strong weekly gains and end in the green for the sixth successive week.
Technical levels to watch
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Commodities prices to trend higher in 2023 and beyond – UBS
302697 March 31, 2023 21:45 FXStreet Market News
The global commodities sector has come under pressure in March. But strategists at UBS remain most preferred in this asset class.
Playing the long game in commodities
“We continue to see opportunities in longer-dated Brent Oil contracts with a price target of $100/bbl.”
“We also recommend a long Platinum trade, with a price target of $1,150 due to the metal’s close correlation to Gold.”
“We also see opportunities in selling the downside price risks in Crude oil, Copper, Nickel, Gold and Platinum.”
See – Gold Price Forecast: XAU/USD could reach end-March 2024 target of $2,100 earlier than expected – UBS
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USD Index retreats from daily highs near 102.50 post-PCE
302696 March 31, 2023 21:45 FXStreet Market News
- The index loses momentum near the 102.50 region.
- US PCE showed further loss of traction in February.
- Final Consumer Sentiment comes next in the docket.
The greenback, in terms of the USD Index (DXY), gives away part of the earlier advance to daily highs in the 102.50/55 band.
USD Index trims gains post-PCE
Following the earlier move to daily peaks near 102.50, the index now comes under some selling pressure after the downtrend in US inflation figures was somewhat “confirmed” by the PCE results.
Indeed, prices tracked by the headline PCE rose 5.0% in the year to February and 4.6% when it comes to the Core PCE. Further data releases showed Personal Income rose 0.3% MoM and Personal Spending increased 0.2% vs. the previous month.
Later in the session, the final readings of the Michigan Consumer Sentiment for the month of March are due.
From the Fed’s backyard, Boston Fed S.Collins was again on the wires after suggesting that other sectors should respond to the tighter monetary conditions in the next quarters at the time when she noted that data indicating a slowing economy is welcomed by the Fed.
In the wake of the PCE release, the probability of a rate hike by the Fed at the May event is slightly favoured vs. a “no hike” according to CME Group’s FedWatch Tool.
What to look for around USD
The index rebounds markedly on the back of some hawkish comments from Fed rate setters as of late, although the persistent disinflation – this time via lower PCE figures – could lend support to a potential pivot in May and thus keep the buck under pressure.
So far, speculation of a potential impasse by the Fed in the short-term horizon should keep weighing on the dollar, although the resilience of the US economy and the hawkish narrative from Fed speakers are all seen playing against that view for the time being.
Key events in the US this week: PCE, Personal Income/Spending, Final Michigan Consumer Sentiment (Friday).
Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.
USD Index relevant levels
Now, the index is advancing 0.21% at 102.38 and faces the next resistance level at 103.36 (55-day SMA) followed by 104.05 (100-day SMA) and then 105.88 (2023 high March 8). On the other hand, the breach of 101.93 (monthly low March 23) would open the door to 100.82 (2023 low February 2) and finally 100.00 (psychological level).
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