2023 Market Forecast by Solidecn

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USDJPY​

The USDJPY pair settles around 134.00 level since yesterday, affected by stochastic negativity that slows the intraday bullish wave, waiting to resume the rise and achieve our positive targets that start at 135.40 and extend to 137.70 after surpassing the previous level.

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Therefore, we will keep our bullish overview conditioned by the price stability above 133.30, as breaking it will put the price under the negative pressure again, to head towards visiting 131.75 areas initially.​
 
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EURUSD​

A relief on the markets triggered by actions of US authorities over the weekend, aimed at containing risk from SVB collapse, turned out to be short-lived. US and European stock markets rallied yesterday but those moves are being reversed today. German DAX futures (DE30) are trading over 1% lower at press time while S&P 500 futures (US500) drop 0.6%. DE30 bears attempt to break below 15,000 pts mark at press time. A move lower on equity markets is accompanied by strengthening of USD which pressures EURUSD and GOLD.

While there is no clear reason behind the drop, it looks like markets remain nervous due to the situation in the banking sector. However, attention may be turning to the European banking sector. Shares of Credit Suisse are trading 10% lower today and hit a fresh record low. Credit Suisse top shareholder ruled out any further financial assistance to the European bank, which has been plagued by issues over recent years.

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EURUSD plunged and tested a key near-term support zone in the 1.0675 area, marked with previous local low, 100-period moving average (H1 interval) as well as the lower limit of market geometry. A break below would, at least in theory, hint a bearish trend reversal.

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DE30 has once again failed to break above the 15,244-15,285 pts resistance zone and launched a pull back. The index is attempting to make a break below psychological 15,000 pts at press time.​
 

AUDUSD​

AUDUSD broke above the 0.6630 resistance zone following a solid jobs report from Australia. The pair is now testing the 200-hour moving average (purple line).

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EURUSD​

EURUSD pair’s strong decline stopped at 1.0515 yesterday, which formed solid support against the price, to rebound bullishly and start building bullish wave on the intraday basis, motivated by stochastic positivity.

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Therefore, we expect to witness more bullish bias in the upcoming sessions, and the targets begin at 1.0640 and extend to 1.0745 after surpassing the previous level. On the other hand, we should note that breaking 1.0515 will stop the expected rise and press on the price to suffer additional losses that reach 1.0440.​
 
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GBPUSD​

GBPUSD pair attempted to break the minor support 1.2060 but it consolidates above it, to keep the chances valid to resume the bullish trend on the intraday basis, waiting to visit 1.2260 as a next main target.

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Stochastic provides clear positive signals now to support the expectations to rise in the upcoming sessions, and breaching 1.2145 will ease the mission of achieving the waited positive targets. We remind you that breaking 1.2060 will push the price to decline to test the most important support at 1.1940 before any new positive attempt.​
 

EURUSD​


ECB to announce rates at 1:15 pm GMT, markets split between +25 and +50 bp

The European Central Bank is scheduled to announce the rate decision today at 1:15 pm GMT with ECB President Lagarde holding a post-meeting press conference at 1:45 pm GMT. Economists surveyed by Bloomberg and Reuters point to a 50 basis point rate hike but those surveys may be outdated already and do not reflect real expectations, following latest turmoil in the banking sector. Let's take a look at today's decision!

What's priced in?​

Economists expected the European Central Bank to hike rates by 50 basis points today, putting the deposit rate at 3.00% - the highest level since late-2008. Such an outcome is expected by 55 out of 56 economists in a Bloomberg poll. Deutsche Bank is the only one predicting a 25 basis point move. However, it should be said that Deutsche Bank changed its forecast to 25 basis points as recently as yesterday amid a turmoil in the European banking sector. As money markets are much quicker to react to developments in financial markets than economists, a look at market pricing for today's meeting may offer a better picture. Markets currently price in around 40% chance of a 50 basis point rate hike and around 60% chance of a 25 basis point rate move.

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Money markets are 60-40 split between a 25 and 50 basis point rate hike at today's meeting.

How things changed after SVB-CS turmoil​

Disconnect between economists' expectations and money market pricing is quite massive and it is easy to pinpoint the reason behind it - turmoil in the US and European banking sectors. While market participants were not too concerned about the ECB abandoning the plan to hike by 50 basis points, things changed this week as contagion fears spread to Europe with Credit Suisse shares freefalling yesterday. This has led to a massive drop in rate hike expectations with a chance of 50 basis points rate hike dropping from almost-100% to around-40%!

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Markets were almost fully pricing in a 50 basis point rate hike at today's meeting as recently as a week ago!

ECB faces dilemma amid Credit Suisse turmoil​

Turmoil in the European banking sector is causing a dilemma for the ECB - should it press on with significant rate hikes in an attempt to get inflation control even if it risks triggering a European banking crisis? This is a tricky choice to make.

On one hand, Credit Suisse managed to get assurances from the Swiss National Bank and Swiss regulator that it will receive support should the situation require. Credit Suisse announced that it intends to exercise an option to borrow an additional 50 billion CHF from Swiss National Bank via a covered-loan facility in order to improve its liquidity position. This led to relief on the market and an over-30% jump in Credit Suisse shares so far today.

On the other hand, support from SNB does not mean that woes for Credit Suisse are over. It is not a secret that Credit Suisse has been involved in some of recent high-profile market scandals, like Archegos or Greensill scandals. It looks like there may be some significant compliance and risk management flaws in the Swiss bank and it is having a negative impact on investors' confidence in the bank. While support from authorities helped ease concerns for now, another worrying piece of news on Credit Suisse may see troubles and market turmoil reignite.

Cautious message from Lagarde looks likely​

Having said that, a cautious decision today if made, like hiking by just 25 basis points or even holding rates unchanged, should not come as a surprise. It will likely trigger dovish reaction on the markets (EUR down and equities up) given that expectations are split between +25 and +50 bp move. However, the accompanying statement is likely to be very cautious. ECB President Lagarde will face questions on banks' condition during the press conference but it looks highly likely that she will play down current risks, applaud actions by Swiss authorities and hint that ECB needs to better understand the situation and reasons behind it before making any response. She is also likely to be prudent when making statements on future policy moves and refrain from making clear comments on the size of rate hikes as she did last month when she strongly hinted that a 50 basis point rate increase is coming at the March meeting.

It should also be noted that it will be a quarterly ECB meeting and it means that a new set of economic projections will be released. Those are likely to point to lower headline inflation in the months ahead while core price growth is expected to be little change compared to previous forecasts.

A look at the markets: EURUSD and DE30​

EURUSD slumped yesterday as banking sector woes spread across the Atlantic. The pair tested a short-term upward trendline but bulls managed to defend it. A point to note is that this trendline can be seen as the neckline of the head and shoulders pattern with the shoulderline being in 1.0740. A dovish ECB could see that pair erase today's daily gains and slump below the trendline. This would pave the way for a deeper drop.

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Markets were almost fully pricing in a 50 basis point rate hike at today's meeting as recently as a week ago!

ECB faces dilemma amid Credit Suisse turmoil​

Turmoil in the European banking sector is causing a dilemma for the ECB - should it press on with significant rate hikes in an attempt to get inflation control even if it risks triggering a European banking crisis? This is a tricky choice to make.

On one hand, Credit Suisse managed to get assurances from the Swiss National Bank and Swiss regulator that it will receive support should the situation require. Credit Suisse announced that it intends to exercise an option to borrow an additional 50 billion CHF from Swiss National Bank via a covered-loan facility in order to improve its liquidity position. This led to relief on the market and an over-30% jump in Credit Suisse shares so far today.

On the other hand, support from SNB does not mean that woes for Credit Suisse are over. It is not a secret that Credit Suisse has been involved in some of recent high-profile market scandals, like Archegos or Greensill scandals. It looks like there may be some significant compliance and risk management flaws in the Swiss bank and it is having a negative impact on investors' confidence in the bank. While support from authorities helped ease concerns for now, another worrying piece of news on Credit Suisse may see troubles and market turmoil reignite.

Cautious message from Lagarde looks likely​

Having said that, a cautious decision today if made, like hiking by just 25 basis points or even holding rates unchanged, should not come as a surprise. It will likely trigger dovish reaction on the markets (EUR down and equities up) given that expectations are split between +25 and +50 bp move. However, the accompanying statement is likely to be very cautious. ECB President Lagarde will face questions on banks' condition during the press conference but it looks highly likely that she will play down current risks, applaud actions by Swiss authorities and hint that ECB needs to better understand the situation and reasons behind it before making any response. She is also likely to be prudent when making statements on future policy moves and refrain from making clear comments on the size of rate hikes as she did last month when she strongly hinted that a 50 basis point rate increase is coming at the March meeting.

It should also be noted that it will be a quarterly ECB meeting and it means that a new set of economic projections will be released. Those are likely to point to lower headline inflation in the months ahead while core price growth is expected to be little change compared to previous forecasts.

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A look at the markets: EURUSD and DE30​

EURUSD slumped yesterday as banking sector woes spread across the Atlantic. The pair tested a short-term upward trendline but bulls managed to defend it. A point to note is that this trendline can be seen as the neckline of the head and shoulders pattern with the shoulderline being in 1.0740. A dovish ECB could see that pair erase today's daily gains and slump below the trendline. This would pave the way for a deeper drop.​
 

USDJPY​

The USDJPY pair faced clear negative pressure to break 133.30 and settles below it by today’s open, to head towards expected turn to decline, on its way to achieve negative targets that start at 131.60 and extend to 130.50.

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The EMA50 forms negative pressure against the price to support the continuation of the expected bearish trend, while stochastic positivity might cause some sideways fluctuation before resuming the decline. Note that breaching 133.30 and holding above it will reactivate the positive scenario and push the price towards 135.40 initially.​
 
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USDJPY​

  • US indices finished yesterday's session higher as a rescue package for First Republic Bank eased market concerns about another bank failure in the US. S&P 500 rose 1.76%, Dow Jones added 1.17% and Russell 2000 jumped 1.38%. Nasdaq outperformed and managed to finish 2.48% higher​
  • Indices from Asia-Pacific traded higher today - Nikkei rose 1.10%, S&P/ASX 200 moved 0.48% higher while Kospi and Nifty 50 gained 0.60% and 0.25% respectively. Indices from China traded higher as well​
  • DAX futures point to a higher opening of today's European cash session​
  • First Republic Bank reportedly exploring potential sale, according to Fox Business​
  • US Treasury Secretary Yellen told senators that government refunds of uninsured deposits will not be extended to every bank that fails, only those that pose systemic risk to the financial system​
  • Fitch believes that recent developments in US will not cause major shifts in US monetary policy​
  • S&P affirms US at AA+; with Outlook Stable pointing to continued economic resilience​
  • MUFG analysts said US inflation data remained elevated enough to justify FED 25bp rate hike next week​
  • Goldman Sachs expects ECB to hike rates by 25 bps in May​
  • Japan Economy Minister Goto doesn't expect a big impact on Japan's economy from US banking sector issues​
  • Cryptocurrencies are trading higher today - Bitcoin jumped over 4.0% and is testing 26,000 mark, while Ethereum advances more than 2.0%​
  • Energy commodities are trading mixed - oil rose 0.3% while US natural gas prices fell 0.8​
  • Precious metals trade higher today - silver jumped 1.4%, gold adds 0.7%​
  • AUD and NZD are the best performing major currencies while USD and CAD lag the most​
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USDJPY pair pulled back to major support at 133.00, which coincides with 38.2% Fibonacci retracement of the upward wave launched in January 2021.​
 
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USDCHF​

USDCHF pair provided clear negative trades yesterday, and begins today with new decline to attempt to break 0.9260 level again, reinforcing the expectations of continuing the bearish trend in the upcoming sessions, reminding you that our waited targets begin at 0.9150 and extend to 0.9060.

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Stochastic provides negative signals that support the continuation of the expected decline, reminding you that the continuation of the bearish wave depends on the price stability below 0.9316.​
 
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Bitcoin​

Cryptocurrencies are enjoying another day of strong gains with BITCOIN rallying over-7% and looking towards the $27,000 mark. The most popular coin took out a local high from Tuesday today and reached a fresh 9-month high. While cryptocurrencies performed poorly between mid-February and early-March, the digital asset market took a U-turn this week. Actions of US authorities aimed at stemming contagion risk from collapse of tech- and crypto-related banks, triggered a rally on cryptocurrencies market. Bitcoin is currently trading over 35% above a local low reached as recently as a week ago on March 10, 2023. Solid gains have been all across the cryptocurrency market this week.

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A number of cryptocurrencies rallied over-20% over the past week! Taking a look at the BITCOIN chart at D1 interval, we can see that the coin has not only fully recovered from the February 21 - March 10 sell-off but has even jumped noticeably above mid-Friday's peak in the $25,000 area. Coin is closing in on a $27,000 mark. Near-term potential resistance levels to watch are marked with lower and upper limits of a short-term trading range from May and June 2022 at $29,000 and $31,500, respectively.​
 
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EURUSD​

Industrial production in the US remain unchanged at 0.0% in February, below market consensus of a 0.2% MoM rise.

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EURUSD is rather unimpressed by today's data. The pair continues to trade around 1.0620 level.​
 
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US100​

  • Markets remained nervous on the final trading day of the week with major European and US indices pulling back​
  • Top blue chips indices from Europe dropped over 1% lower while major Wall Street indices, like S&P 500 and Nasdaq, are trading around 1.0-1.5% lower on the day​
  • Flight to safety can be spotted on the markets with money flowing to precious metals and bonds​
  • Gold is trading over 3% higher on the day as short- and long-term US yields plunge with psychological $2,000 level being just 1% away​
  • Markets are pricing around 60% chance of Fed hiking rates by 25 basis points next week and around 40% of keeping them unchanged​
  • USD is one of the worst performing G10 currencies today​
  • In spite of yesterday's liquidity boost from major central banks, share price of First Republic Bank saw only short-lived relief and is plunging 25% today​
  • Credit Suisse remains in the center of attention in Europe with bank calling its CFO teams to work over the week and look for 'scenarios for the bank'​
  • Also, media reports saying that major banks are limiting trading with Credit Suisse are mounting. Deutsche Bank and Societe Generale are said to be the latest to restrict trading with CS​
  • Energy commodities are pulling back amid an overall increase in risk aversion. Brent and WTI are trading 2% lower and is heading for the biggest weekly drop since April 2022 while US natural gas prices plunge 7%​
  • Downward pressure on US natural gas prices is further magnified by new weather forecast for the United States that hint at near- or above-average temperatures in key heating regions over the next 2 weeks​
  • University of Michigan consumer sentiment for March missed expectations significantly, dropping from 67.0 to 63.4 (exp. 67.0). Both current situation and expectations subindices missed estimates significantly​
  • In spite of risk-off moods seen across most financial markets, cryptocurrencies are having a great day. Bitcoin jumps 6% and trades in the $26,500 area​

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Nasdaq-100 (US100) failed to sustain bullish momentum and break above the 12,750 pts resistance zone. The index is pulling back today as concerns over the condition of the US and European continue to linger over markets. However, Nasdaq-100 drops the least among major Wall Street indices due to an almost non-existent share of the banking sector in the index.​
 
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US500​

Concerns over the condition of the banking sector triggered a sell-off on the global stock markets this week and now investors hope that FED will ease its hawkish rhetoric at a meeting scheduled for next week.. We will get to know what Fed's response is the coming Wednesday at 6:00 pm GMT. However, rate decisions from the Bank of England and Swiss National Bank will also draw attention, and so will flash PMIs for September from Europe and US. Be sure to watch US500, DE30 and GBPCHF next week!

US500​

FOMC rate decision is a key event of the week. The market anticipates the Fed will hike rates by just 25 basis points, in light of easing inflationary pressures and the recent banking turmoil. However, some expect that the central bank can reverse course if the financial system is in distress. We will see whether those expectations are met on Wednesday, 6:00 pm GMT and any deviation away from a 25 bp move could potentially trigger additional volatility on the markets. The meeting will also be closely watched as a new set of economic forecasts will be provided.

DE30​

While central banks will draw the most attention next week, release of flash PMI indices for March may also trigger a jump in volatility. German manufacturing and services indices are expected to rise slightly compared to February releases and weaker-than-expected print could provide some fuel for DE30 bulls. As usual, focus in Europe will be primarily on releases from France (Friday, 8:15 am GMT) and Germany (8:30 am GMT).

GBPCHF​

Fed is not the only major central bank scheduled to announce a monetary policy decision next week. Investors will also hear from the Bank of England and Swiss National Bank, both decisions on Thursday. The former is expected to deliver a 25 bp rate hike. However, interest rate futures are pricing a 40% probability that rate will remain unchanged. At the same time SNB is in a tough situation, taking into account elevated inflation and uncertainties surrounding Credit Suisse. Investors expect a more dovish approach from Swiss policy makers. Market now expects only a 25 bp rate hike, while at the beginning of the month a 75 bp move was priced in.​
 
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EURUSD​

The EURUSD pair shows calm positive trades to gradually towards our waited target at 1.0745, getting good support by the EMA50, to keep the bullish trend suggested for the upcoming period.

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It is important to monitor the price when reaching the targeted level, as breaching it will extend the bullish wave to reach 1.0920 areas as a next main station, while consolidating against the bullish wave will press on the price to rebound bearishly to test the minor support areas around 1.0635 initially. On the other hand, we should note that breaking 1.0635 will stop the expected rise for today and push the price to turn to decline to visit 1.0515 level as a first station.​
 
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GBPUSD​

The GBPUSD pair provided new positive trades to test 1.2200 barrier, waiting to get positive motive that assists to push the price to continue the price and achieve our positive targets that start at 1.2260 and extend to 1.2440 after surpassing the previous level.

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The EMA50 continues to support the expected bullish wave, which depends on the price stability above 1.2060, as breaking it will put the price under negative pressure that targets testing 1.1940 before any new attempt to rise.​
 
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AUDJPY​

  • Swiss National Bank announced that UBS will buy Credit Suisse in a government-arranged deal. UBS will purchase CS for 3 billion CHF and will get additional 9 billion CHF in government guarantees. Apart from that, 10 billion CHF in additional liquidity will also be provided​
  • Bank shares underperformed in early trading on Monday as UBS-CS deal includes writing down of AT1 bonds to zero. As those bonds have notional value of around 16 billion CHF, there concerns over exposure of other banks​
  • ECB President Lagarde hopes that the rescue deal will be enough to calm turmoil in European banking sector. Lagarde also said that ECB is ready to support European banks with loans should they require it​
  • Fed Chair Powell and US Treasury Secretary Yellen issued a joint statement stressing that US banking and financial systems are resilient​
  • Fed along with 5 other central banks (ECB, BoJ, BoE, SNB and BoC) announced actions to boost USD liquidity. Those 6 central banks will now hold daily auctions for USD through swap lines, instead of weekly auctions as it was before​
  • Bank of Japan said that there were no bids in a daily FX swap auction for USD today, in a sign that liquidity crunch is not as severe as feared​
  • US and European index futures launched new week's trade with small bullish price gaps. However, those gains were quickly erased and now both DAX and S&P 500 futures trade more or less flat compared Friday's cash closing prices​
  • Indices from Asia-Pacific traded lower today. Nikkei and S&P/ASX 200 dropped 1.4%, Kospi traded 0.6% lower, Nifty 50 plunged 1.2%​
  • Indices from China traded lower with Hang Seng (-3.4%) being top underperformer​
  • RBA Assistant Governor Kent said that Australian banks are resilient. Kent also said that RBA will take into account financial conditions while making next interest rate decision​
  • Goldman Sachs slashed its 1-year ahead Brent price forecast from $100 to $94 per barrel​
  • People's Bank of China left 1- and 5-year rates unchanged at 3.65 and 4.30%, respectively. Decision was in-line with market expectations​
  • Risk-off moods can be on cryptocurrency markets at the beginning of a new week - Bitcoin drops 2%, Ethereum trades 2.6% lower and Dogecoin dips 1.9%​
  • Energy commodities drop at the start of a new week - WTI drops over 2% and looks towards a test of the $65 per barrel area​
  • Precious metals trade mixed - gold gains 0.7%, silver adds 0.2% and platinum drops 0.6%​
  • CHF and JPY are the best performing major currencies while AUD and NZD lag the most​
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AUDJPY, a well-known risk barometer, is taking a hit at the beginning of new week's trade. The pair is attempting to make a break below a mid-term support zone ranging above 88.00. Note that similar attempts were made last week but all of them failed.​
 
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Oil​

Oil launched a new week's trading lower amid an overall increase in risk aversion. WTI drops below $65 per barrel and trades at the lowest level since November 2021! Declines accelerated after price dropped below a key $70-72 price zone last week. The $60-65 area is a demand zone marked with local lows from 2021 and local highs from 2019 and 2020.

There are few reasons behind a drop in oil prices:​
  • Concerns over conditions of banking and financial systems in the United States and Europe. UBS will acquire Credit Suisse but it failed to ease market concerns​
  • Demand in China remains weak - imports stay low, run rates in refineries drop but at the same time Chinese exports of oil derivatives are increasing, what may hint at oversupply in the country​
  • Lack of interest from speculators - end-February data shows oil being extremely net oversold by speculators​
  • Goldman Sachs - one of the world's largest institutional bulls when it comes to oil - slashed Brent price 12-month ahead forecast from $100 to $94 per barrel​
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WTI (OIL.WTI) drops below $65 per barrel. Price dropped to a key zone, marked with local highs and lows from previous years, as well as with the range of two largest downward impulses in recent year (2014 and 2020).​
 
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Gold​

Precious metals gain amid increase in risk-aversion and pullback in US yields

Strong upward move launched on the gold market on March 8, 2023 is continuing at the beginning of a new week. Risk-off moods can be spotted on the financial markets at the beginning of a new week and it is providing support for safe haven assets, like for example gold. UBS will buy troubled Swiss lender, Credit Suisse, in a government-brokered deal. However, this failed to ease market concerns as the deal will include write down of Credit Suisse's AT1 bonds and this may turn out to be a hit to banks and other institutions with exposure to Credit Suisse. Apart from that, Fed and 5 other central banks (ECB, BoJ, BoE, BoC and SNB) will switch from weekly to daily USD swap auctions in order to boost USD liquidity. US yields pulled back providing even more support for precious metals.

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As a result of those market moves, gold is trading over 1% higher on the day. Gold price climbed above $2,000 per ounce this morning, reaching the highest level since March 2022.​
 
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EURUSD​

Euro continues to recover against the dollar at the beginning of this week, after a sharp crash in the last week - that was motivated by the worries around Credit Suisse that put the European banking sector under pressure and heavily penalized the euro.

Daily Time Frame EUR/USD
  • On the daily chart, we can see that the price is once again testing the upper limit of the range, close to 1.0695.​
  • This will be a decisive zone for the price to understand the next momentum in the currency pair.​
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Dollar Index Daily Time Frame
  • On the dollar index chart, we can see that the bullish movement slowed down after the price tested the 50 period exponential moving average (EMA).​
  • As long as the price remains below this zone, we should expect the bearish movement to continue over the next few sessions.​

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  • USD index, Daily time frame chart.​
  • JPY leads the gains this trading session.​
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DE30​

European indices had a poor start to a new week with major indices from the Old Continent launching today's cash trading session with significant bearish price gaps. This came after a government-brokered deal for UBS to acquire Credit Suisse failed to shore up market sentiment. Issue of Credit Suisse's AT1 bonds being written down to zero sparked concerns that it may be a problem for banks and financial institutions with exposure to those bonds. However, indices began to regain ground as the session progressed and all of the earlier losses have been erased already. Indices from Western Europe trade 0.5-1.0% higher on the day with German DAX adding 0.7% and French CAC40 jumping 0.9%.

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Taking a look at the DE30 chart at H4 interval, we can see that another attempt at breaking below the 14,750 pts support zone was made today and once again it turned out to be a failure. Index caught a bid later on and rallied towards the psychological 15,000 pts mark. While the index managed to break above this hurdle, bulls failed to break above the 15,050 pts swing area. However, the index remains close to this resistance and another attempt to break above it later into the day cannot be ruled out.​
 
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