Analytics

As the dollar dipped to fresh mid-February lows to start the week, EURUSD extended the ascent, adding to gains for the fourth session in a row on Tuesday. The greenback turned slightly positive today, but still lacks the recovery momentum at this stage, with traders indecisive ahead of the FOMC decision due on Wednesday. A dovish hike could add to the downside pressure surrounding the US currency this week.

Should the buck resume the decline in the days to come, the EURUSD pair may retarget the 1.0800 mark for the first time in over a month. For the time being, the nearest resistance arrives in the 1.0760 zone that capped the upside bias last week. Adding to more upbeat tone surrounding the shared currency, global risk sentiment has improved following the recent sell-off triggered by bank-related worries.

Bond yields recover as well, suggesting the sentiment keeps improving as lawmakers and policymakers reaffirmed that the financial system remains sound. As a reminder, Switzerland’s largest bank, UBS, agreed to buy its rival Credit Suisse for about $3.2 billion. The decision helped to cap the financial panic that has swept the globe over the past week. However, the emerging optimism remains fragile, with downside risks persisting in the banking sector.

Fed in focus

The EURUSD pair regained the 55-DMA in recent trading and now needs to hold above this moving average in order to preserve the upside momentum and challenge the 1.0800 handle eventually. In a wider picture, a decisive break above 1.1000 is needed for a more sustained ascent in the coming weeks and months.

In the immediate term, the Fed decision will set the tone surrounding the European currency through the dollar’s reaction to the meeting. A more hawkish tone than expected could fuel the dollar’s recovery, thus pressuring the euro. In this scenario, EURUSD may retest the ascending 20-week SMA that has been in focus for a month already. On the upside, the nearest barrier now arrives at 1.0800.

Oil prices keep bleeding these days, staying on the defensive after a plunge to late-2021 lows registered below the $72 handle on Wednesday. Brent crude fell to $71.67 a barrel before bouncing back above $74 today. Still, the futures stay under pressure, struggling to attract demand even around long-term lows.

The price of oil saw the biggest one-day drop in more than eight months as stocks continued to bleed as well amid a collapse of Silicon Valley Bank and Signature Bank and a plunge in Credit Suisse stocks to a record low. Contagion risks stemming from the turmoil in the banking system hurt investor sentiment across the global markets, pressuring oil along with other risky assets.

Elsewhere, the Energy Information Administration report released on Wednesday showed US inventories of crude oil increased for the eleventh time in twelve weeks. Commercial crude oil stockpiles rose by 1.6 million barrels last week versus the expected rise of just 100,000 barrels. On the positive side, stockpiles of gasoline and diesel fuel declined more than expected, while crude-oil production was unchanged from the previous week at 12.2 million barrels a day.

Pressure eases, but risks persist

After hitting their lowest level in over a year in the previous session, Brent crude has steadied on Thursday, refraining from an even deeper sell-off at this stage. In part, this is due to rising expectations of growth in Chinese demand as the country reopened following the lifting of the strict zero-COVID-19 policy.

Oil prices are also supported by a lower US dollar, with the USD index retreating after a spectacular rally seen yesterday. The DXY failed to overcome the 105.00 barrier and has settled below the 104.50 zone instead as Fed’s next rate hike in question now amid the emerging bank crisis.

In the near term, oil prices need to hold above the $74 mark in order to refrain from another dip. Otherwise, traders will shift their focus towards the $70 handle last seen more than one year ago. On the upside, the immediate resistance now arrives at $75, followed by the $78.50 zone. In general, the path of least resistance remains to the downside at this stage.

The US dollar was slightly higher on Tuesday due to some rebound in US Treasury yields. Also, the greenback derived some support from fresh inflation data. February’s headline CPI arrived at 0.5% m-o-m and 6.0% y-o-y, in line with expectations. Meanwhile, the core gauge topped forecasts, rising 0.5%, the quickest pace in five months. The release prompted market participants to increase bets that the FOMC will raise rates by 25 basis points at its March meeting. Earlier, expectations shifted in a more dovish direction following the US banking sector issues.

After some hesitation, the USD index regained the upside bias today, clinging to the 104.00 mark as European stocks keep retreating despite positive dynamics in Asia and solid recovery on Wall Street as major indices clawed back some of their losses in the wake of the Silicon Valley Bank fallout that made US regulators create a plan to backstop all depositors in the bank. By the way, US stock index futures have settled in negative territory in early pre-market trading.

USD would be impacted by ECB

The DXY fell to one-month lows earlier in the day before attracting demand on a dip below 103.50. In the process, the buck climbed back above the 104.00 handle even as Treasury yields have fallen to their lows for the day. However, the dollar is yet to preserve gains as the overall tone in the currency markets looks unstable at this stage, with focus shifting towards the upcoming ECB meeting due on Thursday.

The European central bank is widely expected to raise rates by another 0.5% amid the elevated inflation in the Eurozone. A hawkish hike by the ECB could push the shared currency north, thus pressuring the USD. If the central bank expresses concern over the economic outlook, however, the EURUSD pair will struggle to extend the ascent.

Gold prices recovered back above the ascending 20-DMA as the buying pressure surrounding the US dollar has eased somehow. The XAUUSD pair derived support from the $1,809 mark earlier in the week to get back to the $1,835 zone, flirting with the mentioned moving average ahead of the weekend. However, the rebound looks fragile at the moment, especially as the greenback resumed the ascent in anticipation of US employment data. The bullion could retarget the 100-DMA, today at $1,806, if the dollar rally accelerates in the near term.

The greenback turned positive after a two-day modest retreat from fresh 2023 highs seen just below the 106.00 mark. The USD index managed to hold above the 105.00 figure to regain the upside momentum on Friday as traders await key jobs data that could push the greenback north if the figures exceed expectations. A decisive break above 106.00 would pave the way towards the 106.80 zone, followed by 107.00. On the downside, the 105.00 mark continues to act as the immediate short-term support.

$1,800 may come into focus

In a wider picture, the price of gold could stay on the defensive in the weeks to come amid rising Fed rate hike expectations after hawkish comments from Powell this week. The central bank governor reiterated that the central bank may raise interest rates higher than previously expected, thus pushing the dollar higher across the board.

If the selling pressure surrounding the precious metal reemerges, a failure around the mentioned 100-DMA would pave the way towards the $1,800 psychological level last seen in late-December. Later this month, the path of gold would depend on the Federal Reserve monetary policy decision. A hike by 50 basis points could trigger a sell-off in the gold market as the dollar would rally across the board, thus pushing the non-yielding metal south.

The euro briefly rallied on Wednesday as the dollar plunged across the board after the Institute for Supply Management reported that manufacturing activity contracted for a fourth straight month in February. On the other hand, an index of prices paid by manufacturers rose 51.3 from January’s 44.5, adding to concerns that inflation would remain stubborn. Meanwhile, the benchmark 10-year yield topped 4% for the first time since November, capping the dollar’s decline.

The USD index briefly dipped to the 104.10 zone before in the 104.50 area. On Thursday, the greenback regained the upside bias, but still lacks the momentum to get back above the 105.00 handle that represents the immediate barrier for bulls at this stage.

EURUSD to stay volatile

Against this backdrop, the euro is back under pressure after yesterday’s failed attempt to challenge the 1.0700 mark strengthened by the descending 20-DMA. EURUSD fell 0.3% so far today, holding firmly above the 1.0600 figure despite the resurgent demand for the US dollar.

The pair is likely to stay volatile in the coming days and weeks as traders remain hesitant ahead of this month’s Fed policy meeting.

Still, the shared currency could receive a boost from the ECB if the central bank turns more hawkish similar to the Federal Reserve. Price pressures in the Eurozone remain elevated while an upbeat macroeconomic backdrop persists, suggesting the central bank could continue to tighten aggressively in the coming months. Of note, analysts at Goldman Sachs now expect the ECB to hike its rate by 50 basis points in May, compared to a more modest projection revealed earlier.

In the immediate term, the euro could continue to struggle below both the 20- and 55-DMAs as USD bulls continue to dominate the market. Rising inflation worries would add to risk-off sentiment, thus capping the euro’s upside potential. A failure to hold above 1.0600 would pave the way towards the 1.0570 immediate support.

The US dollar fell across the board at the start of the week to retreat from seven-week highs as traders opted to take some profit after weak durable goods orders data. Fresh data showed that US durable goods orders fell 4.5% in January, worse than the -4.0% forecast after a jump by 5.1% in December. This disappointing data indicated a slight dovish shift in Fed policy expectations, thus triggering a modest bounce in stocks and pressuring the safe-haven greenback.

Following the release, front-end Treasury yields turned lower, adding to the selling pressure surrounding the dollar. The USD index found support around 104.55 to bounce partially on Tuesday. Still, the buck holds below the 105.00 figure so far, struggling to attract more robust demand at this stage. The overall technical picture, however, remains bullish as Fed rates are still expected to remain higher for longer.

USD direction hinges on incoming economic reports

The US currency gained nearly 3% this month, buoyed by stronger-than-expected economic data out of the United States. Now, the market focus shifts to January’s data on jobs and inflation due on March 10 and 14, respectively. The figures will affect Fed policy on interest rates down the road. Ahead of the releases, traders are likely to be reluctant to push the dollar meaningful lower.

In the near term, market participants will focus on this week’s ISM manufacturing and services survey data for February. Should the figures come in higher than expected, the buck will receive another boost and could challenge 2023 highs seen around 105.63 in early January. In case of a deeper downside correction, the DXY could derail the 104.00 figure where last week’s lows around 103.75 may cap the potential selling pressure.

After a sharp sell-off earlier in the week, oil prices rallied on Thursday to stage a solid bounce from nearly three-week lows registered around $80.40. Brent crude retains a bullish bias ahead of the weekend, extending its rebound amid more upbeat sentiment globally.

The tone in the global financial markets has improved overnight, with US equities snapping a four-day losing streak. Still, investors remain cautious, expressing concerns over the outlook for central banks’ monetary policy amid the persisting recession threat.

Oil jumped on expectations of steep cuts to Russian production next month. As a reminder, Moscow plans to cut oil exports from its western ports by up to 25% in March, exceeding its announced production cuts of 500,000 barrels per day.

Strong USD caps gains

Earlier in the week, Brent crude was pressured by US government data. The Energy Information Administration report showed that US crude stockpiles rose by 7.6 million barrels in the week to February 17 to increase for the ninth week in a row. Distillate stockpiles rose 2.7 million barrels versus the expected 1.1-million-barrel draw.

Meanwhile, a stronger dollar continues to cap gains in the oil market. The USD index climbed to fresh early-2023 highs this week, staying buoyed due to a more hawkish Fed. Of note, the Fed minutes released earlier in the week indicated that a few officials could have supported a 50-bps hike in the last meeting, though most backed the 25bps outcome.

Brent crude climbed back to the $83 area to see some rejection from the $83.40 zone earlier in the day. As a result of the latest rally, oil futures turned slightly positive on the weekly charts, but the pressure could yet reemerge as the dollar will rise across the market if the PCE report out of the United States exceeds market expectations.

The price of gold extends its gradual retreat from April peaks seen around $1,960 at the start of the month. The outlook for the precious metal deteriorated after a slide below the descending 20-DMA while the $1,900 psychological level turned back into resistance as well. The XAUUSD pair has been trending lower for the fourth week in a row, targeting the $1,800 mark after a brief break below $1,820 late last week.

Since then, the precious metal has bounced marginally while also staying below the $1,850 zone that represents the immediate resistance at this stage amid a stronger dollar. The US currency derives solid support from a combination of upbeat economic data out of the US and more hawkish remarks from Federal Reserve officials. in particular, Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard both indicated that they would consider a 50 bp lift of the funds rate at the next meeting.

Fed to set further direction

As such, the bullion stays below $1,900, with downside risks persisting while beyond this psychological level. Gold trades marginally lower on Tuesday, albeit refrains from a deeper retreat at this stage as traders turned cautious ahead of fresh major events in the United States. The FOMC meeting minutes will be a key focus for market players, to find clues about Fed’s rate-hike path. Should the central bank sound more hawkish than expected, the dollar will rally across the board, thus pressuring the bullion.

On the economic front, all eyes will be on the PCE price index due later in the week. Prices in January likely jumped 0.5% over the prior month versus 0.1% in December. Strong PCE data could add to a negative tone surrounding gold.

In the near term, the XAUUSD pair needs to get back above the $1,850 zone and challenge the 20-DMA, today at $1,881. On the downside, the immediate support now arrives at $1,830, followed by the $1,800 psychological level.

The price of bitcoin has been rallying this week, refreshing multi-month highs as the buying pressure intensified. The BTCUSD pair extended gains to $24,800 for the first time since August, holding steady after yesterday’s rally. After peaking, the coin retreated slightly while preserving the upside bias on Thursday, suggesting the price could target the $25,000 barrier next.

As the coin exceeded the $24,000 mark, the near-term technical outlook improved further despite persisting investor worries about crypto regulation, with future Fed steps adding to uncertainty both in the traditional financial markets and in the crypto space.

It looks like buyers found reason for optimism in this week’s strong economic data out of the United States. The CPI showed inflation declining slightly to 6.4% on an annual basis, exceeding market expectations. Meanwhile, another report showed that US retail sales increased by the most in nearly two years in January. Sales surged 3.0% after declining by an unrevised 1.1% in the previous month.

BTC moves in sync with dollar

Interestingly, BTC rallied along with the safe-haven dollar this time despite its correlation with stocks. However, Wall Street equities managed to finish with modest gains overnight as the latest data signaled that the US economy is holding up despite increased rate hikes by the Federal Reserve.

In the near term, bitcoin needs to hold above $24,000 in order to stay afloat and extend the ascent. On the downside, the immediate support now arrives at $24,300, followed by $24,000 and the $23,700 zone. Should the buying pressure persist in the coming days, the coin may challenge the $25,000 barrier for the first time in six months. Once above this threshold, the largest cryptocurrency by market capitalization would shift focus towards the $28,000 level last seen last June.

EURUSD registered more than one-month lows around 1.0655 on Monday and has been trending higher since then. After another dip below the 55-DMA, the shared currency bounced back above the 1.0700 mark as the buying pressure surrounding the dollar has eased.

The pair derived support from the mentioned lows to settle around 1.0730 on Tuesday. As the European currency is now back below 1.0900 and the 20-DMA, today at 1.0817, the recovery looks fragile in the near term. In the immediate term, the pair needs regain the 1.0750 region in order to avoid fresh losses.

Anyway, further dynamics depends on the tone surrounding the US dollar. At the start of the week, the USD briefly jumped to the 103.84 figure to notch nearly one-week highs. However, the greenback failed to preserve the upside momentum and retreated back into negative territory, preserving a bearish bias on Tuesday.

EURUSD could threaten 1.0600

The USD index derived support from the 103.00 zone earlier in the day, struggling for further direction now as traders stay cautious ahead of the US CPI report due later today. Meanwhile, the benchmark 10-year US Treasury bond yield moves sideways around 3.7%.

January headline CPI is forecast to have increased 0.5% on a monthly basis, bringing the annual rate to 6.2% from 6.5%. The core index, which excludes energy and food components, is seen rising 0.4%. Should the consumer price index come in higher than expected, the dollar will rally across the market due to expectations that Fed rates may stay higher for longer.

In this scenario, EURUSD would lose the upside momentum to get back below the mentioned 55-DMA. As such, the 1.0650 support zone remains in the market focus for the time being, with the next barrier for euro bears arriving at 1.0600.