The USD bounced higher as the Fed’s Powell is getting more hawkish. This has sent US yields sharply higher and supported the greenback. Powell said that inflation is too high and that the central bank would consider more aggressive actions to control it. The main risk events for today are speeches by several central bankers (from ECB, SNB and Fed) and tomorrow morning European time the UK CPI numbers move the GBP pairs. Yesterday was a great day! GBPUSD hit my T1 and so did XAUUSD while CADJPY moved to my T2 range (fundamentals are strongly bullish for this market). Hope you made some points! This report is mainly an update on these markets but when I see a trade opportunity I will provide new trade ideas via TIOmarkets Twitter and Telegram so stay tuned! USOIL reacted lower after hitting a key resistance at 111.80. Oil extended the recent rally as EU member countries were weighing whether they should ban Russian oil. Oil is likely to remain a great market for trading as sanctions are likely to move the price strongly in the future too. It definitely is a traders’ market at the moment. Follow the TIOmarkets Telegram channel via this Link. I will post updates and sometimes also new trade ideas in the channel. By reading further, you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.
I include Target 1 (T1) and Target 2 (T2) levels (or ranges) in my analysis so that you have an idea of how far the market would probably move if price action supports my trade ideas. The target one is a high probability target while the next target is further away and therefore there’s a greater risk that the market doesn’t reach the level. While I don’t provide investment advice my analysis helps you in your own market analysis and then you can decide how to trade the markets. If you need help more help with your trading join me at the next live analysis webinar here: www.TIOmarkets.com/webinars I will show you live how to analyse the markets and identify trading opportunities.
GBPUSD is hit my T1 target price at 1.3134 before selling off. Now Cable is once again trading near to a key support level at 1.3110 and trying to recover. The strong rejection yesterday after my T1 target was hit has deteriorated the technicals in this market. As a result, we might see the market testing 1.3088 before a recovery can be sustainable. Therefore, I’m ignoring the T2 until this market shows clearer indications of its intentions. For those of you that are trading GBPUSD intraday today, the nearest key levels are 1.3110, 1.3155 and 1.3169.
GBPNZD missed my T1 by 0.12% and traded lower. The pair is still consolidating and therefore a potential long candidate but downside risks have increased. A break above the descending channel high would be welcome and could help us in getting the T1 filled. Otherwise, it’s more likely that the market will keep on consolidating and possibly tests the recent low at 1.9021.
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CADJPY moved to my T2 target zone. I said in Friday’s CADJPY analysis that if the resistance at the latest high is successfully cleared then the market could rally to 95.00 – 95.50. Now this target range has been reached and breached. Fundamentals haven’t changed for either of the economies so the market is still bullish above 95.11. Alternative scenario: The pair drops below the 95.11 support and trades down to the 94.80 – 94.90 range.
Gold hit my T1 yesterday. I published this trade idea on Telegram and Twitter. Gold reacted lower after my analysis but was then bought and rallied to my T1 level at 1940. I will alert you to new opportunities in this market once there is a new opportunity. If 1918 breaks this market could trade all the way down to 1890 or so. But if the level is defended by the bulls we should again look for opportunities on the long side of the market.
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Macro Drivers for the USD As the most followed, invested and traded markets for risky assets are priced in the USD it is helpful to understand what macroeconomic factors impact the other side of the equation, the USD. Whether we are trading EURUSD, XAUUSD or US equity CFDs the factors impacting the dollar, the nominator in the equation, have a significant role in the formation of all medium to long-term price action. The following table summarises the most important fundamentals.
| The Federal Reserve | The Fed is expected to continue rate hikes after a 0.25% hike in its March meeting. The current Dot Plot suggests as many as seven rate hikes this year and puts the median rate for 2022 at 1.9%. Dot Plot is the FOMC participants’ assessment of appropriate monetary policy. |
| Stimulus | The Fed is looking to scale down its bond-buying program (QE) but has signalled that it be careful with tightening due to the war in Europe. |
| Yields | The US 10-year treasury yield has risen to 2.187% as investors sell the bonds and adjust to the expected rate hikes. |
| Employment | The February non-farm payrolls increased by 678K while the analyst consensus had predicted 407K new jobs. Average hourly earnings came in unchanged (0.5% expected). |
| Inflation | The annual headline inflation reading for January came in at 7.5% (7% prior). This was the highest CPI print in 40 years. The core CPI (all items less food and energy) was confirmed at 6.0% (5.5% previous). |
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The Next Main Risk Events
- EUR – ECB President Lagarde Speaks
- CHF – SNB Chairman Jordan Speaks
- GBP – CPI y/y
- GBP – BOE Gov Bailey Speaks
- USD – Fed Chair Powell Speaks
For more information and details see the TIOmarkets economic calendar here.
Market News & Facts
- Powell turns more hawkish: We have the tools to lower inflation
- Waller: 50 bp hikes would be needed as per economic data
- US Existing Home Sales 6.022M (6.10M expected)
- BOJ keeps on stimulating the economy
- BOE hikes 0.25% as expected
- No 0.5% rate hike from the Fed (0.25% vs. 0.25% expected)
- German ZEW Economic Sentiment -39.3 (5.2 expected)
- US PPI m/m 0.8% (1.0% expected)
- US Empire State Manufacturing Index -11.8 (6.5 expected)
- Russia asks military assistance from China
- Russia: US corporate leaders could be arrested and imprisoned
- Canada February payrolls change 336K (160K expected)
- ECB upgrades inflation prediction to 5.1% from 3.2%
- China retail sales 6.7% (3.0% expected)
- EUR – Main Refinancing Rate unchanged
- US JOLTS Job Openings (11.26M, 10.96M expected)
Trade Safe!
Janne Muta
Chief Market Analyst
TIOmarkets.com
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