Currency and market analytics by Tickmill UK

EURUSD remains range-bound as markets look for fresh upside catalysts


EUR/USD advanced slightly on Friday following strong bearish backlash after the pair tested horizontal resistance level on Thursday. Despite the intensive pullback, managed to sustain pricing above 1.08, with technical indicators signaling a lack of significant bearish momentum. The reversal was instigated by a weakening US Dollar fueled by improved risk appetite in the market. However, the US Treasury bond yields' upward trajectory, supported by favorable US data, limited bearish momentum in the greenback, restraining EUR/USD's bullish aspirations.

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Meanwhile, GBP/USD demonstrated resilience as it surged above 1.2700, marking its highest level in three weeks. The momentum, propelled by robust UK private sector activity, encountered headwinds in the American session on Thursday, leading to a partial retracement. Despite early stability above 1.2650, GBP/USD remains vulnerable to fluctuations, especially in the absence of significant data releases from both the UK and the US.

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Key economic data releases played a pivotal role in shaping market sentiments. Notably, the decline in first-time jobless claims in the US to its lowest level since early January, coupled with the S&P Global Composite PMI maintaining expansion territory, underscored the resilience of the US economy. Similarly, upbeat PMI data from the UK fueled optimism surrounding the Pound Sterling. However, the surge in the benchmark 10-year US Treasury bond yield to its highest level since late November acted as a catalyst for the US Dollar's resurgence, exerting pressure on GBP/USD's upward trajectory.

Gold prices experienced a retreat from weekly highs, hovering around $2,025 during Friday's London session. The downward pressure stemmed from tempered expectations of imminent rate cuts by the Fed. As Fed policymakers express reservations regarding inflation reaching the coveted 2% target, gold struggles to significantly extend its upside momentum.

The Fed's stance on interest rates, characterized by a preference for maintaining rates within the 5.25%-5.50% range for some time in order to properly assess monetary policy transmission, reflects a cautious approach towards monetary policy. Amidst January's persistent inflation figures, policymakers exhibit a reluctance to hastily implement rate cuts, fearing potential repercussions on consumer price inflation. This cautious demeanor underscores the Fed's commitment to a balanced approach in navigating economic uncertainties.

Gold, often viewed as a safe-haven asset, faces headwinds as the opportunity cost of holding non-yielding assets escalates amidst the Fed's inclination towards prolonging higher interest rates. The diminished prospects of rate cuts diminish the attractiveness of gold as an investment avenue, prompting investors to reassess their portfolios. Consequently, gold prices experience downward pressure amidst the prevailing market sentiment favoring the US Dollar.


Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 
EUR/USD Sees Modest Rise Amidst Dollar Weakness



At the dawn of the trading week, the EUR/USD pair has started on a modestly positive note, edging higher by 0.2%, however remaining below the intraday resistance level at 1.0850. This upward movement comes against the backdrop of a weakened US Dollar, driven primarily by the surprising move from the Chinese central bank, which fixed the Renminbi higher on Monday morning, sparking broad-based USD selling.

While today's uptick suggests a slight recovery, the pair remains ensnared within a new short-term downtrend, trying to regain ground above the critical 200-day SMA line. This downtrend was further exacerbated by last week's decline following the release of Eurozone and US flash PMI data, which underscored the resilience of the US economy, contrasting with Eurozone performance.

The resilience of the US economy has reignited discussions regarding the Federal Reserve's monetary policy trajectory. Despite earlier expectations of three interest rate cuts this year, recent data indicating US economic strength has prompted reassessment. If the Fed opts for a slower rate-cutting pace, it could buoy the US Dollar, drawing increased foreign capital inflows seeking higher returns.

Short-term technical analysis of the Dollar index (DXY) shows that the FOMC-induced decline towards 103 was followed by sharp rebound to 104 and breakout of the medium-term resistance line. This recovery occurred after Friday encouraging PMI data which could be a sign that the market cast doubts on the dovish Fed signals made during the FOMC meeting. In turn, this increases risk that the rally will continue after retest of the line which flipped into support level:

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Adding to the market's speculation, the surprise decision by the Swiss National Bank to cut interest rates has raised concerns that the European Central Bank might follow suit. Historically, the ECB and SNB have mirrored each other's policy moves, albeit with the SNB typically following the ECB. However, the recent SNB decision has flipped this narrative, prompting investors to anticipate potential ECB rate adjustments on signs of easing inflation pressures on the European continent, as indicated by the SNB move.

The statements from ECB Chief Economist Philip Lane affirming confidence in wage inflation converging towards the 2% inflation target further underscore the likelihood of impending rate cuts, adding another layer of complexity to the currency markets. Wage pressures have often been cited by the ECB officials as the key variable that explains persistence of inflation due to the self-reinforcing “wage-consumption-inflation” cycle.

Further complicating the currency landscape is the intervention talk emanating from Japan, with Masato Kanda, Japan’s currency chief, hinting at potential market operations to support the Yen. USD/JPY has dipped, hovering in the 151.300s, spurred by the historical precedent of Bank of Japan (BoJ) intervention when the pair breaches the 150.000 mark. This sentiment is bolstered by data from the currency futures market, revealing an increase in bearish bets on the Yen during the BoJ's March meeting week, despite rumors of a rate hike.

The vicinity around the 150 level on USDJPY has consistently posed a formidable obstacle for buyers, with the pair failing to maintain any substantial upward momentum amid concerns of currency interventions. It seems probable that this scenario will persist, and any data indicating weakness in the USD is likely to trigger a surge in bearish momentum, pushing the pair towards levels more favorable for the Japanese government. From a technical standpoint, it appears that the near-term selling target for the pair could lie within the range of 148-148.50:


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In the realm of upcoming events, attention turns to the Federal Reserve Bank of Atlanta President Raphael Bostic's scheduled speech, which could offer insights into the Fed's policy stance. Additionally, US New Home Sales and the Chicago Fed National Activity Index releases are poised to influence market sentiment.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 
Dollar rally stalls as market participants wait for more signals of the strength of the US economy


The EUR/USD pair is showing resilience, defending its near-term support level at 1.08. Broad, albeit slight dollar weakness contributed to the strength of the pair. However, recent economic data releases from both the United States and Europe have injected fresh dynamics into the forex landscape, influencing market sentiment and shaping expectations regarding central bank policies.

The release of US Durable Goods Orders for February presented a positive surprise, with headline figures surpassing expectations. Headline Durable Goods Orders rose by 1.4%, exceeding the forecast of 1.3%. Moreover, various components, including Durable Goods Orders ex Defense and Nondefense Capital Goods ex Aircraft, outperformed market estimates.

Furthermore, commentary from Federal Reserve officials, particularly from Raphael Bostic, President of the Federal Reserve Bank of Atlanta, has been notably hawkish. Bostic's assertion that the Fed is likely to cut interest rates only once in 2024 contrasts with the market's expectation of three cuts. Such comments temper the extent of dollar sell-offs and contribute positively to the upside potential of the currency.

Conversely, European Central Bank officials have adopted a more dovish tone, signaling a potential shift towards earlier interest rate cuts. ECB Member Fabio Panetta's remarks regarding the emerging consensus for a rate cut, possibly as early as June, have weighed on the Euro's outlook. Additionally, ECB Chief Economist Philip Lane's confidence in wage inflation reaching levels consistent with the ECB's target suggests a forthcoming start of a policy easing cycle.

The prospect of lower interest rates in Europe, coupled with the likelihood of a dovish stance from the ECB, rein in upward momentum in the pair. A rate cut in April, as hinted by Panetta, could further undermine the Euro's attractiveness, potentially leading to decreased inflows of foreign capital.

Short-term technical analysis suggests that the resurgence of buying pressure, signaling a potential pullback, may occur specifically around the medium-support line, aligning with the 1.0750 level:

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Meanwhile, the Pound Sterling has exhibited strength against the US Dollar, extending its gains above 1.2650. Despite concerns regarding the Bank of England's (BoE) dovish stance, driven by lower-than-anticipated inflation data, the GBP/USD pair has shown resilience. The BoE's recent monetary policy statement indicated a reluctance to reduce interest rates immediately, although market expectations of rate cuts persist.

Technically speaking, the recent price action has seen a breakdown below both the resistance line and the ascending support line, leaving the pair with limited prospects for an immediate recovery. Sellers are likely to target the 1.25 level before considering their triumph, potentially paving the way for bullish momentum thereafter:

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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 
EUR/USD Dips as Diverging Central Bank Policies Drive Market Sentiment


In the ever-volatile currency markets, the EUR/USD pair demonstrated a downward trajectory on Wednesday, eventually stabilizing in a narrow band between 1.082 and 1.084. Despite Spanish inflation data for March meeting economists' expectations at 3.2% for the headline reading, the pair struggles to meaningfully extend it upsides. In this scenario, Tuesday's bearish reversal can be interpreted as a mere technical retreat from the psychological barrier of the 1.08 level, which swiftly lost momentum, reinstating the pair on its downward trajectory:

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EURUSD’s bearish trend underscores the contrasting stances of two major central banks: the US Federal Reserve and the European Central Bank, shaping investor sentiment and currency flows.

The recent discourse among ECB officials suggests a growing likelihood of interest rate cuts in June. ECB Governing Council members, including Madis Muller and Fabio Panetta, hinted at an impending shift in monetary policy, emphasizing the emergence of a consensus favoring rate reductions. Moreover, ECB Chief Economist Philip Lane underscored that wage inflation is steadily converging towards normal levels, signaling a significant step toward removing the primary obstacle to ECB interest rate cuts in the near future.

Conversely, the Federal Reserve's stance appears more divided. While Chairman Jerome Powell advocates for a June rate cut, dissenting voices within the Fed, such as Raphael Bostic and Lisa Cook, advocate for a cautious approach, emphasizing the need for sustainable inflation returns. The variance in viewpoints within the Federal Reserve underscores a heightened level of uncertainty regarding both the pace and magnitude of future interest rate adjustments, surpassing the level of uncertainty observed within the ECB's discussions.

Looking ahead, market participants eagerly anticipate Friday's release of the Core Personal Consumption Expenditures Price Index, considered the Fed's preferred gauge of inflation. The result of this event is positioned to significantly impact the Fed's decision-making process regarding interest rates, as it will complement CPI data by offering a comprehensive view of inflation from the perspective of demand side (compared to supply side as in the case with CPI).

In parallel, the gold market remains in a consolidative phase below the $2,200 mark, as traders await further clarity on the Fed's policy trajectory. The upcoming PCE release on Friday is expected to provide meaningful insights into USD demand dynamics, thereby impacting gold prices. Moreover, upbeat US economic indicators, such as Tuesday's Durable Goods Orders, coupled with persistent inflationary pressures, may prolong the Fed's stance on maintaining higher interest rates, bolstering US Treasury bond yields and the USD.

Short-term price analysis in Gold reveals an initial failure to sustain a breakout above the $2200 level on March 21. Nevertheless, the price swiftly regained its upward momentum, positioning itself for a second attempt at testing this critical level. This resilience suggests robust demand near the all-time high, heightening the likelihood of a new record being established in the near future. A potential bullish target could reside in the mid-$2250 range, reflecting the market's underlying strength and upward trajectory:


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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 
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