• Gold price bulls come alive as safe-haven demand rockets on global banking fears.
• UBS takeover of troubled Credit Suisse only temporarily calms markets.
• Gold gains from subdued US Dollar as bets for next Fed hike fade.

Gold price is rising on the back of safe-haven demand as fears around global banking contagion persist. XAU/USD is trading at $2,007 per Troy Ounce at the time of writing, up almost 1% on the day. It is in a short-term uptrend, with the odds favoring more upside to come.

Gold news: UBS takeover fails to calm markets

A deal to enable rival UBS to take over troubled lender Credit Suisse over the weekend temporarily reassured investors and stabilized sentiment but relief was temporary. Fears around wider banking stability continue to propel investors into assets seen as safe. Stage directions: Enter Solid Gold.

The collapse of Credit Suisse and others, such as Silicon Valley Bank (SVB) and First Republic Bank before it, was triggered by a drying up of liquidity. The rise in inflation and interest rates to combat it has led to a fall in the value of the extensive government bond holdings of many banks, reducing the value of their assets. This, combined with a fall in bank deposits, caused a banking liquidity crunch. 

US Dollar loses momentum as Fed rate bets fall

Gold price has also gained upside from a temporary plateauing of the value of the US Dollar – which it tends to move inversely to, because Gold is priced in Dollars. Expectations that the Federal Reserve will reign in its aggressive interest rate hiking policy – as fears even higher interest rates could exacerbate the banking crisis – have taken the wind out of the US currency’s sails. 

If bets for future interest rate hikes from the Fed continue to decline, this will have a negative impact on the US Dollar and support Gold price. That said, USD also benefits from safe-haven demand, so if the crisis worsens this will provide a back draught.  

Gold price technical analysis

Gold price resumes the rally that started at the beginning of March when Gold found a floor at circa $1,805. Since then, it has climbed over $200 to above $2,000. The precious metal is in a short and medium-term uptrend. Upside momentum is strong, unless it turns on a dime, it should continue rising. 

The elevated Relative Strength Index (RSI) on the daily chart suggests that it may be a little late to buy Gold. At 77, RSI is already in the overbought section above 70. Better to wait until it pulls back before getting in again. There are signs on lower time frames, such as the 4-hour chart, that a pull-back may be underway. 

From a technical perspective, the next upside target is at $2,069 at the March 2022 highs. A sudden reversal and move below $1,887, on the other hand, would bring into doubt the validity of the uptrend and increase the chances a new bear trend might be starting. 

Gold price: Daily Chart

Economists at Danske Bank expect Brent Crude Oil to hover around the $90 mark in the first half of the year before falling to $80 in the fourth quarter.

A rebound of USD will further weigh on prices

“We look for Brent to average $90/bbl in H1 this year and fall to $80/bbl in Q4.”

“Global inflation pressures have started to ease, particularly in the US and Russia looks able to continue to sell oil to the Asian market.”

“A rebound of USD will further weigh on prices.”

• USD/JPY comes under renewed selling on Monday and drops to its lowest level since February.
• The prevalent risk-off environment boosts the safe-haven JPY and weighs heavily on the major.
• A modest USD strength lends some support, though the fundamental backdrop favour bears.

The USD/JPY pair retreats over 200 pips from the daily swing high and drops to its lowest level since February 10 during the first half of the European session on Monday. Spot prices, however, manage to rebound a few pips in the last hour and currently trades around the 131.00 mark, still down over 0.60% for the day.

The prevalent risk-off environment - as reflected by an extended sell-off around the equity markets amid fears of a full-blown banking crisis - drives some haven flows towards the Japanese Yen (JPY) and weighs heavily on the USD/JPY pair. Despite the recent emergency liquidity measures and multi-billion-dollar lifelines for troubled US and European banks, market participants remain concerned about the contagion risk. This, along with looming recession risks, takes its toll on the global risk sentiment and forces investors to take refuge in traditional safe-haven assets.

That said, a modest US Dollar (USD) strength assists the USD/JPY pair to find some support ahead of the mid-130.00s and stall its sharp intraday downfall. The USD uptick, however, remains limited amid the ongoing slump in the US Treasury bond yields. The anti-risk flow, along with diminishing odds for a more aggressive policy tightening by the Fed, lead to a further steep fall in the US bond yields. This comes after the rate-sensitive 2-year US government bond last week recorded its biggest three-day fall since Black Monday in October 1987 and should cap the buck.

The aforementioned fundamental backdrop suggests that the path of least resistance for the USD/JPY pair is to the downside. That said, traders might refrain from placing fresh bearish bets and prefer to move to the sidelines ahead of the two-day FOMC meeting, starting this Tuesday. The Fed will announce its policy decision during the US session on Wednesday, which will play a key role in influencing the near-term USD price dynamics. This, in turn, should provide a fresh impetus to the USD/JPY pair and help investors to determine the next leg of a directional move.

Technical levels to watch

Senior Swiss lawmaker warned on Monday that “the UBS-Credit Suisse merger is an enormous risk.”

“The newly merged bank is too big for Switzerland to handle,” the lawmaker noted.

Market reaction

These comments only deepen the market fears over the banking sector crisis. The European equities are seeing a negative start to the week while the US S&P 500 futures are down 0.54% on the day.

Extra gains could motivate AUD/USD to revisit the 0.6780 zone in the near term, note Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “We expected AUD to trade sideways in a range of 0.6630 and 0.6690 last Friday. However, AUD rose to a high of 0.6725. Upward momentum has improved and AUD is likely to advance further. However, the major resistance at 0.6780 is unlikely to come into view today. On the downside, a breach of 0.6670 (minor support is at 0.6685) would indicate that the current upward pressure has eased.”

Next 1-3 weeks: “We have expected AUD to consolidate since early last week. In our update on Friday (17 Mar, spot at 0.6660), we highlighted that “in view of the decreased volatility, we have narrowed the expected consolidation range to 0.6570/0.6735”. AUD subsequently rose to 0.6725 before closing on a firm note at 0.6699 (+0.62%). Upward momentum has improved and this will likely lead to AUD trading with an upward bias towards 0.6780. Overall, only a breach of 0.6640 (‘strong support’ level) would indicate that the build-up in momentum has faded.”

• EUR/USD’s upside remains limited by the 1.0700 zone.
• The greenback starts the week on the back foot ad extends losses.
• Producer Prices in Germany surprised to the upside in February.

The lack of direction in the global markets prevails in the European morning and motivates EUR/USD to alternate gains with losses near the 1.0670 region at the beginning of the week.

EUR/USD: Next on the upside comes 1.0760

EUR/USD looks to extend the positive bias seen in the second half of the last week with the immediate target at the 1.0700 neighbourhood ahead of the so far monthly peak near 1.0760 (March 15).

The inconclusive price action around the pair falls within the equally vacillating mood around the greenback and the rest of the global assets in a context where market participants remain prudent in light of the developments around the banking sector and the imminence of the FOMC gathering.

In the domestic calendar, Producer Prices in Germany contracted at a monthly 0.3% in February and rose 15.8% from a year earlier. In addition, and later in the session, ECB Chair C.Lagarde is due to speak.

Across the pond, short-term bill auctions will be the sole release later on Monday.

What to look for around EUR

EUR/USD’s intentions to extend the rebound seem to have met some resistance around the 1.0700 zone for the time being.

In the meantime, price action around the European currency should continue to closely follow dollar dynamics, as well as the potential next moves from the ECB in a context still dominated by elevated inflation, although amidst dwindling recession risks for the time being.

Key events in the euro area this week: EMU Balance of Trade, ECB Lagarde (Monday) – EMU, Germany ZEW Economic Sentiment, ECB Lagarde (Tuesday) - ECB Lagarde (Wednesday) – EMU Flash Consumer Confidence, European Council Meeting (Thursday) - European Council Meeting, EMU, Germany Flash PMIs (Friday).

Eminent issues on the back boiler: Continuation, or not, of the ECB hiking cycle. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is retreating 0.08% at 1.0655 and faces the next contention at 1.0516 (monthly low March 15) seconded by 1.0481 (2023 low January 6) and finally 1.0325 (200-day SMA). On the upside, a surpass of 1.0759 (monthly high March 15) would target 1.0804 (weekly high February 14) en route to 1.1032 (2023 high February 2).

Economists at Danske Bank acknowledge that the near-term prospects for NOK look more challenging than previously penciled in and lift the short-end of their forecast profile, but keep the downward trajectory.

Lifting profile but maintaining a downward trajectory

“We acknowledge that the near-term prospects for NOK look more challenging than previously pencilled in. In case systemic risk fears spread further NOK still looks vulnerable. However, in the situation that systemic risk fears subside the NOK rebound could also face headwinds down the road as this would opens the door for markets pricing back in central bank rate hikes. For this reason, we lift the short-end of our forecast profile.”

“We still firmly believe in a more bullish secular positive case building for the NOK years on commodities incl. energy constituting an outperforming equity sector.”

“Forecast: 11.30 (1M), 11.20 (3M), 10.80 (6M), 10.60 (12M).”

In the opinion of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, sustainable gains in GBP/USD look likely once the pair clears the 1.2220 level.

Key Quotes

24-hour view: “We highlighted last Friday that ‘Mild upward pressure could lead to GBP edging higher but a sustained advance above 1.2150 is unlikely’.  The anticipated advance exceeded our expectations as GBP soared to 1.2201 before closing on a firm note at 1.2181 (+0.58%). While GBP could advance further, a sustained rise above 1.2220 appears unlikely. Support is at 1.2155, followed by 1.2125.”

Next 1-3 weeks: “Our latest narrative was from last Thursday (16 Mar, spot at 1.2075) where GBP is likely to trade in a broad consolidation range, expected to be between 1.1950 and 1.2190. GBP edged slightly above 1.2190 on Friday (high of 1.2201) and upward momentum is beginning to build. However, GBP has to break and stay above 1.2220 before a sustained rise is likely (the next resistance is at 1.2270). The risk of GBP breaking clearly above 1.2220 will remain intact as long as it stays above 1.2095 in the next few days.”

Economists at Danske Bank expect the USD/JPY pair to plunge toward the 125 mark in the next three months.

BoJ tightening and valuation to send USD/JPY towards 125

“USD/JPY seems fundamentally overvalued and together with our base case of monetary policy tightening during Q2, we expect the cross to drop to 125 in 3M.”

“Hence, the development in Bank of Japan’s monetary policy stance is important to follow besides the usual US yields and oil price.”

“Forecast: 132 (1M), 125 (3M), 125 (6M), 125 (12M).”

Open interest in natural gas futures markets increased for the second session in a row on Friday, this time by around 2.8K contracts according to preliminary readings from CME Group. Volume, instead, shrank for the second straight session, now by around 3.4K contracts.

Natural Gas: Another move to $2.00 seems in store

Natural gas prices dropped to multi week lows on Friday. The daily retracement was accompanied by rising open interest and is indicative that a deeper decline emerges on the horizon in the very near term. That said, another visit to the $2.00 neighbourhood sooner rather than later remains on the cards.

Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group suggest EUR/USD faces further range bound trading in the next weeks.

Key Quotes

24-hour view: “Our expectations for EUR to trade sideways last Friday were incorrect as it rose to 1.0685. While upward momentum has not improved much, EUR has scope to test 1.0725. The next resistance at 1.0760 is not expected to come under threat. On the downside, a breach of 1.0625 (minor support is at 1.0645) would indicate that EUR is not advancing further.”

Next 1-3 weeks: “After EUR plunged to a low of 1.0514, we highlighted last Thursday (16 Mar, spot at 1.0575) that ‘the risk of EUR dropping further has increased but it remains to be seen if can break the major support at 1.0470’. We added, ‘only a breach of the ‘strong resistance’ at 1.0680 would indicate that the downside risk has faded’. On Friday, EUR rebounded and breached our ‘strong resistance’ level at 1.0680 (high has been 1.0685). Downward pressure has eased and EUR appears to be trading in a consolidation phase, likely in a broad range between 1.0600 and 1.0800.”

European Central Bank (ECB) policymaker Martins Kazaks made some comments on the bank’s future rate hike path on Monday.

He said that “the ECB isn’t done on rate hikes if the baseline holds up.”

Market reaction

EUR/USD is finding some support from the above comments, as it recovers from daily lows of 1.0632. The pair is still down 0.15% on the day at 1.0645, as of writing.

The Pound seems to be holding up surprisingly better than other G10 peers. However, economists at ING expect the EUR/GBP pair to bounce back higher toward 0.88.

Pound resilience in doubt

“We had previously deemed GBP resilience versus the Euro during the banking turmoil as markets seeing the UK banking sector as not as vulnerable as the Eurozone one.” 

“Given GBP is generally more sensitive to risk sentiment than the euro, and the UK banking sector is coming under scrutiny this morning, we see risks of a EUR/GBP rebound back above 0.8800 today.”

• USD/CHF fills a modest bearish gap opening on Monday, though the upside potential seems limited.
• The emergence of some USD buying is seen as the only factor lending some support to the major.
• Bets for a less hawkish Fed, tumbling US bond yields and the risk-off mood to cap gains for the pair.

The USD/CHF pair attracts some buyers following a modest bearish gap opening to the 0.9245 area on Monday and climbs to a fresh daily high during the early European session. The pair, for now, seems to have snapped a two-day losing streak and looks to build on the momentum beyond the 0.9300 mark.

The US Dollar (USD) advances slightly on Monday and acts as a tailwind for the USD/CHF pair, though a combination of factors might hold back bulls from placing aggressive bets and keeps a lid on any meaningful upside. The prevalent risk-off environment is seen lending some support to the safe-haven Swiss Franc (CHF). Apart from this, diminishing odds for a more aggressive policy tightening by the Federal Reserve (Fed) further contribute to capping gains for the major, at least for the time being.

Despite the recent emergency liquidity measures and multi-billion-dollar lifelines for troubled US and European banks, concerns about the contagion risk and the possibility of a full-blown global banking crisis showed little signs of subsiding. Apart from this, looming recession risks take a toll on the global risk sentiment, which is evident from an extended sell-off across the equity markets. The anti-risk flow force investors to take refuge in traditional safe-haven currencies, including the CHF.

The recent developments, meanwhile, fuel speculations that the US central bank will soften its hawkish rhetoric to prevent any further economic pressure from high-interest rates. In fact, the markets are now pricing in a smaller 25 bps lift-off at this week's FOMC meeting, starting on Tuesday, and the Fed will cut rates during the second half of the year. This is reinforced by a further steep decline in the US Treasury bond yields, which caps gains for Greenback and the USD/CHF pair.

Traders also seem reluctant and prefer to move to the sidelines ahead of this week's key central bank event risks - the outcome of the highly-anticipated FOMC meeting on Wednesday, followed by the Swiss National (SNB) meeting on Thursday. Hence, it will be prudent to wait for strong follow-through buying before positioning for any further intraday appreciating move for the USD/CHF pair in the absence of any relevant market-moving economic releases from the USD.

Technical levels to watch

The uncertainty related to financial stability concerns has weighed on risk-sensitive currencies, and not least the Australian Dollar. Economists at Danske Bank expect the Aussie to struggle to gain ground.

Easing financial stability concerns could  provide a modest lift in the near-term

“While reopening in China and the boost to relative rates are supportive for AUD all else equal, we emphasize that the broader risk sentiment remains the main driver for now.” 

“Easing financial stability concerns could  provide a modest lift to AUD/USD in the near-term, but over the longer horizon, we expect the broad USD strength and push towards maintaining global financial conditions restrictive to weigh on the cross.”

“Forecast: 0.68 (1M), 0.67 (3M), 0.66 (6M), 0.66 (12M).”

Gold price attracts fresh buying following an early slide to the $1,968 area on Monday and climbs to over a one-year top, beyond the $2.000 psychological mark during the early part of the European session. The strong intraday move-up validates Friday's breakout through the previous YTD peak, around the $1,958 zone, and supports prospects for an extension of the recent upward trajectory witnessed over the past two weeks or so.

FX option expiries for Mar 20 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0600 706m
• 1.0665 825m
• 1.0715 1b
• 1.0730 107m

- USD/JPY: USD amounts                     

• 131.00 937m
• 132.00 706m
• 132.50 690m
• 133.00 811m

- AUD/USD: AUD amounts  

• 0.6730 831m
• 0.6765 644m
• 0.6785 1.2b

- USD/CAD: USD amounts       

• 1.3750 599m

Economists at Danske Bank maintain their strategic case for a lower EUR/USD and thus keep their downward sloping profile forecasting the pair at 1.02 in six-to-twelve months.

Lower on tighter financial conditions

“We have long argued the strategic case for a lower EUR/USD based on relative terms of trade, real rates (growth prospects) and relative unit labour costs.” 

“We increasingly think there is a potential for the cross to also head lower on a short-term horizon driven by the market realisation that financial conditions need to tighten, relative rates as well as relative asset demand. Financial conditions have indeed tightened recently which help explain the drop in EUR/USD, but we think more could come and keep our forecast profile intact.”

“New energy/real rate shocks are required for a return all the way to the September lows.” 

“Forecast: 1.06 (1M), 1.04 (3M), 1.02 (6M), 1.02 (12M).”

• Coordinated efforts to rescue the global banking sector fail to boost EUR/JPY.
• European banking crisis takes a toll on EUR/JPY despite interest rate hikes.
• Narrowing yield differential with JGBs adds to EUR/JPY volatility amid banking turmoil.

EUR/JPY retraced all of its earlier gains on Monday as investors were on the back foot despite coordinated efforts to rescue the global banking sector. Over the weekend, some major central banks joined to rescue the squeeze on liquidity experienced by some commercial banks.

The Federal Reserve (Fed) reopened the swap line for needy central banks to bid the US Dollar on short-term maturity. This new development initially prompted immunity from the safe-haven Japanese Yen. However, as the session progressed, we saw a U-turn in sentiment and a recovery in safe-haven demand.

The US banking turmoil is reverberating within Europe. It all started with Credit Suisse's financial stability failure, despite the Swiss National Bank's intervention. Things do not look to be settling down, and ultimately the Swiss authority has had to support UBS to take over Credit Suisse.

Last week, the European Central Bank raised interest rates by 50 basis points (bps) despite the problems with Credit Suisse. The rise could act as a double whammy amid the banking crisis. Citing earlier reports, two European banks are under scrutiny amid possible contagion rumors. The cultivation of such a scenario may impact and force central banks to rethink their rate-hiking path. This is likely to have a more negative impact on the Euro than the Yen.

On the other hand, this banking crisis is weighing on global yields. Therefore, the yield differential with Japanese Government Bond yields (JGB) is narrowing, which is one-factor inducing volatility in the Japanese Yen.

Levels to watch

With the ECB likely to act more restrictively overall, economists at Commerzbank see the Franc moderately weaker against the EUR over the course of the year.

EUR/CHF could remain below parity for the time being

“If the Franc weakens too much, foreign exchange interventions by the SNB are likely against the backdrop of the recent inflation development in Switzerland. In the short term, EUR/CHF could therefore remain below parity for the time being.”

“In the medium term, however, we see the CHF weakening moderately. This is because the ECB is likely to raise its key rate more than the SNB by the middle of the year, and since price pressures in Switzerland are likely to ease at the same time, the SNB should allow the Franc to weaken moderately against the EUR.”

Source: Commerzbank Research

• Silver finds support near 50% Fibo. and stalls its modest intraday slide from a multi-week peak.
• The technical setup favours bullish traders and supports prospects for further near-term gains.
• A convincing break below the $21.50 area negates the positive outlook for the white metal.

Silver retreats from its highest level since February 03 touched on the first day of a new week and remains on the defensive through the early European session. The white metal, however, manages to recover a part of its intraday losses and seems poised to prolong its recent appreciating move witnessed over the past two weeks or so.

Last week's sustained breakout through the $21.65-$21.70 confluence resistance was seen as a fresh trigger for bullish traders. Furthermore, a subsequent move and acceptance above the 50% Fibonacci retracement level of the recent sharp pullback from a multi-month peak support prospects for additional gains. Adding to this, bullish oscillators on 4-hour and daily charts suggest that the path of least resistance for the XAG/USD is to the upside.

Hence, some follow-through strength towards testing the 61.8% Fibo. level, around the $22.80-$22.85 region, looks like a distinct possibility. The momentum could get extended beyond the $23.00 mark, towards testing the next relevant hurdle near the $23.25-$23.35 zone en route to the $24.00 round-figure mark. Bullish traders might eventually aim to challenge the multi-month top, around the $24.65 zone touched in early February.

On the flip side, the 50% Fibo. level, around the $22.25 region, helps limit the intraday downtick and should now act as a pivotal point. Any further decline is likely to attract fresh buying near the $22.00 mark and remains limited near the $21.65-$21.70 confluence resistance breakpoint. The latter comprises the 200-period Simple Moving Average (SMA) on the 4-hour chart and the 38.2% Fibo. level, which if broken might negate the positive bias.

Some follow-through selling below the $21.50 area could expose the $21.00 mark, representing the 23.6% Fibo. level. The XAG/USD might then turn vulnerable to accelerate the slide towards the $20.55-$20.50 intermediate support en route to the $20.00 psychological mark. The downward trajectory could get extended further and drag spot prices to the next relevant support near the $19.60 region.

Silver 4-hour chart

Key levels to watch

CME Group’s flash data for crude oil futures markets noted traders increased their open interest positions for the third straight session on Friday, now by around 6.6K contracts. In the same line, volume resumed the uptrend and rose by around 309.4K contracts.

WTI: A drop to $60.00 now appears likely

Friday’s strong pullback in prices of the barrel of the WTI was in tandem with increasing open interest and volume. Against that, the continuation of the current decline looks the most likely scenario in the very near term and with the immediate target at the key $60.00 mark.

Here is what you need to know on Monday, March 20:

Financial markets started the new week on a cautious note despite the weekend's encouraging headlines regarding the global liquidity issues. Eurostat will release January Trade Balance data later in the session and Germany's Bundesbank will publish its monthly report. European Central Bank (ECB) President Christine Lagarde will testify before the Committee on Economic and Monetary Affairs (ECON) of the European Parliament in Brussels at 14 GMT.

Late Sunday, Swiss authorities persuaded UBS Group AG to buy Credit Suisse Group AG in the next step to try and stop the spread of the banking crisis. UBS will reportedly pay 3 $3.23 billion for Credit Suisse and assume up to $5.4 billion in losses in a deal that is expected to close by the end of 2023.

Meanwhile, the Federal Reserve (Fed) announced that it will offer daily swaps to the Bank of Canada (BoC), the Bank of Japan (BoJ), the Swiss National Bank (SNB) and the European Central Bank (ECB) to ensure they have enough liquidity to continue operations. "The network of swap lines among these central banks is a set of available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets," the Fed said in a statement published on Sunday.

Despite these developments, US stock index futures were last seen losing between 0.7% and 1% on the day. The benchmark 10-year US Treasury bond yield is down more than 3% on the day at 3.3% and the US Dollar Index trades modestly lower on the day below 104.00.

Although EUR/USD opened with a bullish gap and rose above 1.0700 to start the week, it lost its traction and retreated toward 1.0650 in the early European morning. The data from Germany revealed that the Producer Price Index (PPI) declined by 0.3% on a monthly basis in February following January's 1.2% decrease. 

GBP/USD touched its highest level since mid-February above 1.2220 in the Asian session on Monday. The pair, however, reversed its direction and declined below 1.2200, retracing the majority of its daily gains in the process. 

Following Friday's impressive upsurge, Gold price continues to push higher early Monday amid falling global yields. As of writing, XAU/USD was trading at its highest level since April slightly above $1,990.

With the Japanese Yen benefiting from souring market mood, USD/JPY came under bearish pressure and was last seen trading deep in negative territory at around 131.00.

Bitcoin extended its rally over the weekend and advanced beyond $28,000 for the first time since June. Early Monday, BTC/USD is staging a downward correction and was last seen losing 1% on the day at $27,800. Despite having struggled to find direction over the weekend, Ethereum gained more than 10% last week. ETH/USD stays relatively quiet early Monday and fluctuates at around $1,770. 

Week ahead: March Mayhem continues with Fed, but cryptos emerge victorious

Gold price retreats from 11-month highs before challenging $2,000, FXStreet’s Dhwani Mehta reports.

Immediate support is seen at the February high of $1,960

“The immediate support for Gold price is now seen at the February high of $1,960, below which the psychological $1,950 level will be put to test.”

“On the flip side, Gold buyers need to take out the multi-month high at $1,991 in order to aim for the $2,000 threshold. Acceptance above the latter is critical to resuming the recent uptrend toward the $2,050 static support.” 

• USD/CAD picks up bids to refresh intraday high, reverses week-start pullback.
• One-week-old symmetrical triangle restricts immediate moves of the Loonie pair.
• 100-SMA adds strength to 1.3685 support confluence, 50-SMA guards immediate upside.
• MACD, RSI (14) line suggest a slower grind towards the north.

USD/CAD reverses the early Asian session losses as it prints mild gains around 1.3735 during early Monday morning in Europe. In doing so, the Loonie pair defends the previous day’s recovery moves inside a one-week-old symmetrical triangle.

That said, the quote’s latest rebound could be linked to the failure to break the 1.3685 support confluence encompassing the 100-bar Simple Moving Average (SMA) and lower line of the stated triangle.

Adding strength to the recovery moves is the steady RSI (14) and a lack of bearish MACD signals.

As a result, the Loonie pair is all set to poke the 50-SMA hurdle of 1.3750. However, the stated triangle’s top line, close to 1.3765, will be crucial to watch afterward.

Should the quote manage to remain firmer past 1.3765, the monthly high of 1.3861 could act as a buffer before fueling the USD/CAD price towards the previous yearly top of 1.3977 and then to the 1.4000 psychological magnet.

On the flip side, a clear break of the 1.3685 support confluence becomes necessary to convince USD/CAD bears.

Even so, multiple supports near 1.3650, marked during late February and early March, can test the Loonie pair sellers before giving them control.

Following that, a south run towards the 61.8% Fibonacci retracement level of February-March upside, near 1.3490 can’t be ruled out.

Overall, USD/CAD remains on the bull’s radar even if the run-up appears slow.

USD/CAD: Four-hour chart

Trend: Further upside expected

“France should avoid recession,” European Central Bank (ECB) Governing Council member and Bank of France head Francois Villeroy de Galhau said on Monday, adding that the “French banks are solid.”

“Regulation of French and European banks is better than that in United States,” Villeroy added.

Market reaction

Amid a renewed risk-aversion wave, EUR/USD is erasing early gains to trade flat at 1.0660, as of writing.  

• The index starts the new week slightly on the defensive.
• The Fed is expected to raise rates by 25 bps later in the week.
• Short-term Bill Auctions will be the only releases in the docket.

The greenback, in terms of the USD Index (DXY), struggles for direction around the 103.80 at the beginning of the week.

USD Index cautious ahead of Fed

The index keeps the bearish note for the third session in a row on Monday, all against the backdrop of the generalized side-lined trade in the global markets as well as further downside in US yields across the curve.

In the meantime, markets are expected to maintain the prudence, and thus the consolidative mood, ahead of the FOMC event on March 22, when the Fed is expected to hike the Fed Funds Target Range by 25 bps.

On the latter, CME Group’s FedWatch Tool currently sees the probability of that scenario around 56%.

In the docket, the only release of note will be a 3-month/6-month Bill Auctions later in the NA session.

What to look for around USD

The index remains under pressure and keeps the trade in the sub-104.00 region amidst a broad-based range bound theme in the rest of the markets.

The risk aversion derived from banking jitters appears diminished and supports the selling bias in the dollar amidst firmer conviction among investors of a 25 bps rate hike by the Federal Reserve at the next meeting on March 22.

So far, reinvigorated bets of a Fed’s pivot in the short-term horizon could keep the price action around the dollar somewhat depressed. However, the still elevated inflation and the resilience of the US economy should continue to play against that view.

Key events in the US this week: Existing Home Sales (Tuesday) – MBA Mortgage Applications, FOMC Interest Rate Decision, Powell press conference (Wednesday) – Initial Jobless Claims, Chicago Fed National Activity Index, New Home Sales (Thursday) – Durable Goods Orders, Advanced PMIs (Friday).

Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Persistent narrative for a Fed’s tighter-for-longer stance. Terminal rates near 5.5%? Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is retreating 0.03% at 103.83 and the breakdown of 103.48 (monthly low March 13) would open the door to 102.58 (weekly low February 14) and finally 100.82 (2023 low February 2). On the other hand, the next hurdle emerges at 105.88 (2023 high March 8) seconded by 106.64 (200-day SMA) and then 107.19 (weekly high November 30 2022).

• EUR/USD breaks 21-DMA as bullish momentum continues amid a steady US Dollar.
• Banking turmoil weighs on US Treasury yields, boosting EUR/USD toward crucial levels.
• EUR/USD looks to regain 1.0700, as the market awaits directional clues from the FOMC meeting.

EUR/USD broke the 21-Daily Moving Average (DMA) on the previous trading day and the bullish momentum remains intact in the new week. The pair received a boost from a softer US Dollar led by falling US Treasury bond yields.

The banking turmoil is persistently hammering the global yields, especially the US Treasury yields. On the other side, reintroducing the swap line on a daily basis by global central banks will likely ease liquidity concerns, putting downward pressure on the safe-haven US Dollar. Therefore, the EUR/USD pair’s bullish bias is likely to remain intact.

The near-term support is seen at a trio point, a combination of multi-tested resistance at 1.0750 with a descending trend line starting from February's high at 1.1022 pegged with a 50-Daily Moving Average (DMA). A break above which will likely lead the EUR/USD toward February's high around the 1.1000 key psychological level.

Any downside fall will likely remain capped by the 21-DMA, sitting just above the previous day's closing point at the 1.0600 level. The last line of support will be a multi-month low at the 1.0520 level.

The Relative Strength Index (RSI) signals a higher high, suggesting more room for the upside.

The FOMC will be the key event this week, which will likely produce more directional clues for the pair. In the meantime, the EUR/USD price action will likely be muted.

EUR/USD: Daily chart

• Gold price picks up bids to reverse the early-day losses within one-week-old bullish channel.
• Global central banks’ moves to infuse US Dollar liquidity, UBS-Credit Suisse deal earlier favored risk-on mood.
• Details of efforts to push back fears from banking sector fallout appear less lucrative amid hawkish central bank bias.
• Woes for Credit Suisse bondholders, cautious mood ahead of top-tier data/events weigh on sentiment.

Gold price (XAU/USD) ticks up to $1,993 as it renews the yearly high during Monday’s European session, reversing the Asian session’s losses amid fresh challenges to the risk appetite. It’s worth noting that the metal rose the most on a daily, as well as on a weekly, basis in the last amid broad weakness of the US Treasury bond yields and the US Dollar.

The latest run-up of the yellow metal could be linked to the fears of banking sector rout despite the efforts of the major central banks and private banks. Also challenging the sentiment are the fears of more rate hikes, as well as negative results of a deal between Credit Suisse and UBS.

That said, news surrounding the major central banks’ coordinated efforts to fuel the market’s liquidity joined the headlines suggesting the UBS takeover of the troubled Credit Suisse to underpin the recovery in the sentiment during the early Asian session.

Though, the details of the UBS-Credit Suisse deal suggest losses for the Credit Suisse AT1 bondholders, which in turn probed the weak-start optimism. On the same line are the interest rate futures that suggest the upcoming hawkish actions from the key central bank. It should be noted that the fears of more banking sector fallout also weigh on the US Treasury bond yields and allow the Gold price to remain firmer.

Against this backdrop, the S&P 500 Futures reverse the week-start gains while the US 10-year and two-year Treasury bond yield retreat towards multi-day lows marked the previous day. It’s worth noting that United States two-year Treasury bond yields marked the biggest weekly loss in three years while the 10-year counterpart dropped the most since early January.

Looking forward, risk catalysts and the bond market moves could entertain the Gold traders ahead of the monetary policy meetings of the Federal Reserve (Fed), Swiss National Bank (SNB) and the Bank of England (BoE). Also important to watch will be the March month’s first readings of activity numbers for the major economies.

Gold price technical analysis

Gold buyers took a breather during early Monday as the RSI (14) turned overbought. The pullback moves, however, failed to break the previous resistance line from March 13, close to $1,965 by the press time.

In doing so, the XAU/USD remains inside a one-week-old bullish trend channel amid upbeat MACD signals.

As a result, the metal’s upside toward refreshing the Year-To-Date high can’t be ruled out.

However, the stated bullish channel’s top line and the April 2022 high, respectively near $1,996 and $1,998, will precede the $2,000 psychological magnet to challenge the Gold buyers.

Following that, a run-up towards the previous yearly peak surrounding $2,070 can’t be ruled out.

Alternatively, pullback moves need validation from the $1,965 but the Gold seller may feel relived only if the XAU/USD price remains bearish past the $1,942-40 support confluence, encompassing the aforementioned channel’s lower line and the 50-Hour Moving Average (HMA).

Gold price: Hourly chart

Trend: Limited upside expected

Considering advanced prints from CME Group for gold futures markets, open interest rose for the second session in a row on Friday, this time by nearly 19K contracts. Volume followed suit and went up by around 137.1K contracts, partially offsetting the previous decline.

Gold now looks at $2000

Prices of gold rose sharply at the end of last week amidst rising open interest and volume, which is suggestive that extra gains remain well on the cards in the very near term. That said, the yellow metal now targets the key $2000 barrier per ounce troy. Of note, however, is that the current overbought condition of the precious metal could, in the meantime, trigger a corrective decline.

• GBP/USD is facing barricades in recapturing the round-level resistance of 1.2200.
• Federal Reserve is expected to hike rates further by 25 bps to continue weighing on sticky inflationary pressures.
• A steady monetary policy is expected from the Bank of England despite the Silicon Valley Bank collapse.
• GBP/USD has witnessed a solid upside move after testing the breakout zone of the Falling Channel pattern.

GBP/USD is doing some serious attempts for recapturing the round-level resistance of 1.2200 in the early European session. The major is oscillating in a narrow range of 1.2168-1.2203. The Cable is struggling to deliver decisive action and is showing a subdued performance as investors are awaiting interest rate decisions by the Federal Reserve (Fed) and the Bank of England (BoE), which will be announced on Wednesday and Thursday respectively.

S&P500 futures are displaying sheer volatility. The 500-US stocks basket has surrendered its entire gains generated in early Asia. It seems that UBS’s rescue plan for Credit Suisse has failed to cheer market participants. Credit Suisse shareholders were deprived of a vote on the deal and will receive one share in UBS for every 22.48 shares they own, valuing the bank at $3.15bn (£2.6bn), as reported by BBC News. Various central banks have come forward to provide liquidity assistance to rescue the second-largest Swiss bank in order to revive the confidence of consumers.

The announcement of liquidity assistance to revive the 164-year-old bank has impacted demand for US government bonds. The 10-year US Treasury yields have scaled above 3.42% as higher liquidity flush could propel inflationary pressures again.

Key event of the week- Federal Reserve policy

The whole arena would go through nail-biting moments as the Federal Reserve (Fed) would announce its March monetary policy in times when fears of banking turmoil are deepening sharply. It seems unrealistic that Fed chair Jerome Powell would undermine the potential banking meltdown and will only focus on bringing down the stubborn inflation. Federal Reserve policymakers are delighted with the fact that January’s inflation data was a one-time blip as February’s inflation indicators displayed the continuation of inflation softening.

Therefore, the Federal Reserve would be relieved even if it announces second 25 basis points (bps) interest rate hike. In a recent poll by Reuters, 76 of 82 economists believe that the US Federal Reserve would raise its policy rate by 25 basis points to the range of 4.75-5% following the March Federal Open Market Committee (FOMC) meeting.

BoE to choose from a dismal economic outlook and double-digit inflation

Unlike other economies, the United Kingdom has been facing issues with a dismal economic outlook, political instability along with persistent inflationary pressures. Bank of England Governor Andrew Bailey remained in a fix last year in choosing between growth and inflation. Shortages of labor and higher food inflation have remained major supporters of rampant inflation.

No doubt, the Bank of England has been restricting its monetary policy to bring down the galloping inflation. The interest rate has already reached 4%. However, fresh concerns of the global banking fiasco are expected to add to more troubles for the Bank of England policymakers. Therefore, the street is not convinced about further rate hikes for now.

Analysts at Rabobank also see a quarter-point rate increase and warn that such a scenario is not fully priced in the interest market, “which indicates that the chance of a hold has increased following the collapse of Silicon Valley Bank (SVB).” A 25 bps rate hike by BoE Governor Andrew Bailey would push rates to 4.25%.

The action from the Pound Sterling would not be restricted to the monetary policy from the Bank of England. Wednesday’s Consumer Price Index (CPI) data is going to drive the Bank of England’s decision-making ahead. As per the estimates, the annual headline CPI is expected to trim to 9.8% from the former release of 10.1%. While the core CPI that excludes oil and food prices would remain steady at 5.8%.

GBP/USD technical outlook

GBP/USD has witnessed a solid upside move after testing the breakout zone of the Falling Channel chart pattern formed on a daily scale. The Cable is approaching the horizontal resistance plotted from December 14 high at 1.2447. The 20-period Exponential Moving Average (EMA) at 1.2080 is providing cushion to the Pound Sterling bulls.

The Relative Strength Index (RSI) (14) is gearing to shift into the bullish range of 60.00-80.00, which will trigger the upside momentum.

• NZD/USD remains depressed around intraday low as it snaps two-day winning streak.
• Bullish MACD signals, 200-EMA and nearby rising trend line keeps buyers hopeful unless breaking 0.6180 support.
• One-month-old ascending resistance line challenges Kiwi pair’s immediate upside.

NZD/USD prints the first daily loss in three as bears flirt with the 0.6250 level heading into Monday’s European session. In doing so, the Kiwi pair reverses from an upward-sloping resistance line from late February while dropping toward the 200-bar Exponential Moving Average (EMA).

Even if the one-month-long ascending trend line resistance challenges NZD/USD bulls near 0.6285, the pair’s sustained trading beyond the key EMA joins the bullish MACD signals to keep buyers hopeful.

That said, a one-week-old upward-sloping support line, close to 0.6175 at the latest, also restricts the short-term downside of the NZD/USD pair, in addition to the 200-EMA level surrounding 0.6240.

In a case where the Kiwi pair drops below 0.6175, the odds of witnessing a slump toward the monthly low near 0.6085 can’t be ruled out.

On the flip side, a clear upside break of the stated resistance line, near 0.6285 at the latest, will need validation from the 0.6300 round figure to propel the quote towards the tops marked during early February near 0.6390.

Following that, a run-up toward the Year-To-Date (YTD) high of nearly 0.6540 can’t be ruled out.

To sum up, NZD/USD remains on the bull’s radar despite the latest failure to cross the short-term resistance line.

NZD/USD: Four-hour chart

Trend: Further upside expected

• WTI slides below $67 as global banking turmoil overshadows central banks' liquidity efforts.
• OPEC in trouble as falling prices persist: Can coordination among oil-exporting nations stabilize the market?
• Oil prices could hit the $60 mark if the banking crisis continues to unfold.  

West Texas Intermediate (WTI) price fell below the $67 mark despite reassurance from major central banks. A likely case of banking contagion is unfolding. Credit Suisse fell apart. Later on, UBS was urged to acquire the troubled bank.

WTI does not catch a break, and the heavy downfall suggests intense pessimism among investors, as oil prices often serve as a growth barometer.

During the weekend, the Federal Reserve (Fed) opened its swap line from Monday onward until April. It's a channel through which other central banks obtain US Dollars on short-term maturity in exchange for local currency. Subsequently, this excess USD reserve is accessed by commercial banks to facilitate business operations.

Oil prices are reflecting global growth concerns amid adversity led by banking turmoil. Some reports suggest that two European commercial banks are under scrutiny for possible contagion.

On the Organization of the Petroleum Exporting Countries (OPEC) front, falling prices, despite all efforts from the said group, are causing trouble for OPEC. Earlier, some comments from Iraq’s Prime Minister Mohammed Shia al-Sudani and OPEC Secretary General Haitham Al Ghais stressed the need to coordinate among oil-exporting nations to ensure prices do not fluctuate and impact both exporter and consumer countries.

A continuous deterioration in the global banking sector could lead the WTI price to approach the $60 mark.

Levels to watch

• USD/JPY is likely to drag further amid the strengthening appeal for the Japanese Yen.
• It seems that forward anxiety ahead of the Fed’s monetary policy is missing from the market.
• Declining 10-EMA at 132.35 indicates that the downside momentum is extremely strong.

The USD/JPY pair has corrected sharply below 132.00 in the Asian session. The appeal for the Japanese Yen as a safe-haven has improved amid potential fears of global banking turmoil led by rising interest rates by western central banks.

S&P500 futures have turned negative after surrendering significant gains generated in the early morning session, portraying extremely negative market sentiment, despite UBS rescuing Credit Suisse. Bloomberg reported Finma Chief Urban Angehrn says US regulators support the UBS deal to buy Credit Suisse for $3.3 billion.

The US Dollar Index (DXY) is struggling to sustain above the 103.80 resistance. It seems that forward anxiety ahead of the Federal Reserve’s (Fed) monetary policy is missing from the market.

USD/JPY is declining toward the 61.8% Fibonacci retracement (placed from January 16 low at 127.22 to March 08 high at 137.91) at 131.30 on a four-hour scale.

The declining 10-period Exponential Moving Average (EMA) at 132.35 indicates that the downside momentum is extremely strong.

Adding to that, the Relative Strength Index (RSI) (14) has slipped into the bearish range of 20.00-40.00, which promises weakness further.

It seems that the downside pressure would continue if the asset will surrender last week’s low at 131.55. An occurrence of the same would drag the asset toward January 23 high around 130.89 followed by February 10 low at 129.80.

In an alternate scenario, a break above the 38.2% Fibo retracement at 133.83 would strengthen the US Dollar bulls. This might drive the asset toward March 15 high at 135.11 and February 28 low at 135.73.

USD/JPY four-hour chart

• EUR/GBP prints four-day downtrend despite recent inaction.
• Optimism surrounding UK’s output, housing market jostles with the hawkish ECB talks.
• Market’s failure to keep the week-start optimism adds strength to the pair’s sluggish moves.
• Speech from ECB’s Lagarde, key UK data and BoE Monetary Policy Meeting eyed for clear directions.

EUR/GBP holds lower ground near 0.8760, fading the last week’s bounce off a three-month low, as traders await this week’s key catalysts with mixed feelings during early Monday. Even so, the cross-currency pair remains down for the fourth consecutive day by the press time.

Market sentiment improved earlier in the day and allowed the EUR/GBP pair to remain on the bear’s radar. Among the key catalysts, news surrounding the major central banks’ coordinated efforts to fuel the market’s liquidity joined the headlines suggesting the UBS takeover of the troubled Credit Suisse to underpin the recovery in the sentiment.

Alternatively, the details of the UBS-Credit Suisse deal suggest losses for the Credit Suisse AT1 bondholders, which in turn probed the weak-start optimism and challenged the EUR/GBP pair sellers as well.

It should be noted that the recent headlines from the Financial Times (FT) suggesting even bets on the Bank of England’s (BoE) further rate hikes also probe the EUR/GBP bears. On the same line could be the hawkish calls from the European Central Bank (ECB) officials.

Previously, headlines from Reuters favored the British Pound (GBP) as it quotes the Property portal Rightmove Survey while saying, “The average price of homes coming on the market in Britain stabilized in March and activity is picking up towards more normal pre-pandemic levels after last year's "mini-budget" upheaval.”

Elsewhere, Trade body Make UK and accountants BDO said their quarterly gauge of manufacturing output rose to +21 in the first quarter from +5 - the highest balance level since early last year, when it rose to +24, reported Reuters. The news also stated that Britain's manufacturing output bounced back in the first three months of 2023, chiming with other measures of the economy that improved, but firms expect the sector to contract as inflationary pressures persist.

On the other hand, ECB President Christine Lagarde said, “The central bank hopes the Swiss-brokered rescue of Credit Suisse will restore calm in financial markets.”

On Friday, multiple European Central Bank (ECB) officials crossed wires to convince markets of the soundness of the bloc’s banks, as well as defend the ECB’s hawkish monetary policy stance. Firstly, Governing Council member Madis Muller said, “Banking uncertainty complicates communication,” while adding that the latest inflation forecasts assume more rate hikes. Following him was ECB Board member Francois Villeroy de Galhau who said that the French and European banks are 'very solid'. Furthermore, ECB policymaker Peter Kazimir said that there is a need to continue with rate hikes while Governing Council Member Gediminas Šimkus backed the hawkish bias while saying, “The terminal rate hasn't been reached yet.”

Looking forward, ECB President Lagarde is up for a speech and can entertain EUR/GBP traders. Though, major attention will be given to this week’s UK inflation data and the BoE monetary policy meeting details for clear directions.

Technical analysis

A clear downside break of convergence of the 100-DMA and a three-month-old ascending trend line, around 0.8775 by the press time, directs EUR/GBP bears towards the monthly low surrounding 0.8720 at the latest. 

• Asian stocks have continued their downside journey amid deepening fears of banking turmoil.
• UBS-Credit Suisse deal failed to provide a cushion to Asian equities.
• An unchanged monetary policy by the PBoC has impacted the oil price.

Markets in the Asian domain witnessed an intense sell-off on Monday. The week started with the downside bias observed last week backed by a potential global banking meltdown. S&P500 futures generated significant gains in early Asia, however, fears of global banking turmoil activated sellers to trigger shorts. It seems that rallies are being capitalized as selling opportunities, which indicates a dismal market mood.

The US Dollar Index (DXY) is displaying a lackluster performance around 103.80. It seems that the market is preparing the fresh ground for action ahead of the interest rate policy by the Federal Reserve (Fed).

At the press time, Japan’s Nikkei225 tumbled 1.06%, ChinaA50 remained choppy, Hang Seng plunged 2.61%, and Nifty50 dropped 1.07%.

The UBS-Credit Suisse deal has failed to provide support to Asian stocks. Sky News reported that under the takeover UBS will pay 3bn Swiss francs (£2.6bn) to acquire Credit Suisse. And, it has agreed to assume up to 5bn francs (£4.4bn) in losses, and 100bn Swiss francs (£88.5bn) in liquidity assistance will be available to both banks.

Chinese equities remained sideways despite the interest rate decision announcement by the People’s Bank of China (PBoC). The central bank kept the one-year and five-year Loan Prime Rate (LPR) steady at 3.65% and 4.30% respectively. Contrary to the unchanged interest rate decision, the street was anticipating further expansion in the monetary policy stance.

The economy in China is on a track for economic recovery after a prolonged lockdown due to the epidemic. Therefore, a heavy stimulus is required to spurt the growth rate and support the vulnerable real estate market.

On the oil front, the oil price has faced pressure as PBoC maintained status-quo on interest rates. The world is betting largely on economic recovery in China, which would fuel up the oil demand. It is worth noting that China is the largest importer of oil and an absence of expansionary monetary policy announcement by the PBoC impacted oil price.

• USD/MXN picks up bids to extend the previous day’s rebound from 50-DMA.
• 11-week-old descending trend line challenges Mexican Peso pair buyers.
• 100-DMA, double tops around 19.20 also challenge the upside moves.
• Oscillators are well in support of bulls even as multiple hurdles test the north run.

USD/MXN grinds near intraday high of 18.96 as bulls poke the key resistance line during early Monday. In doing so, the Mexican Peso (MXN) pair remains firmer for the second consecutive day while extending previous day’s rebound from the 50-DMA.

In addition to the pair’s recovery from the 50-DMA, bullish MACD signals and upbeat RSI (14), not overbought, also favor the USD/MXN pair buyers.

However, a clear upside break of the stated resistance line, near 19.00 at the latest, becomes necessary for the USD/MXN bulls to keep the reins.

Following that, the 61.8% Fibonacci retracement level of the pair’s downturn from December 2022 to March 2023, close to 19.15, will precede the double tops around 19.20 to challenge the buyers.

Furthermore, the previous monthly high surrounding 19.30 act as an extra filter towards the north.

On the contrary, pullback moves remain elusive unless the USD/MXN price remains beyond the 50-DMA support of near 18.60.

Even if the pair drops below 18.60, the late February swing high near 18.50 can act as a buffer ahead of directing the bears towards the multi-month low marked earlier in March near 17.90.

Overall, USD/MXN is likely to recovery but the road towards the north appears long and bumpy.

USD/MXN: Daily chart

Trend: Further upside expected

• AUD/USD retreats from early gains as liquidity concerns persist despite central banks' efforts.
• Investors are cautious despite the swap line, as two more European banks are on the radar.
• All eyes are on the Fed and their expected 25 bps rate hike.

AUD/USD risk proximity took a leg higher in early Asian trading but retraced after hitting the 0.6730 mark. It is currently trading unchanged.. In the early Asian hours, risk appetite expanded along with some high beta currencies on the back of coordinated efforts from major central banks on the liquidity crunch.

Last week we saw many commercial banks starting to fall one by one, with Credit Suisse being among the largest. Swiss authorities urged UBS to acquire the troubled Credit Suisse during the weekend. At the same time, other major central banks like the Federal Reserve (Fed), Bank of England (BoE), European Central Bank (ECB), and Swiss National Bank (SNB) took coordinated efforts to alleviate the liquidity crisis.

The Fed has opened its swap line to supply US Dollars to some major central banks to ease any liquidity drain on the US Dollar front, as it is the world reserve currency. The Bank of Japan (BoJ) remains isolated from this dollar bidding program, citing no financial stress evidence yet.

That being said, two European commercial banks are under scrutiny for liquidity contagion, which could be a possible reason for investors to become cautious despite the swap line.

On the other side, the People's Bank of China (PBoC) kept its benchmark rate unchanged as they had already cut the Reserve Requirement Ratio (RRR) by 25 bps on Friday. The consistent easing from PBoC is widening the yield differential with others and is likely to keep capital outflows intact.

Some earlier comments from Reserve Bank of Australia (RBA) Assistant Governor Christopher Kent stated that the bank would consider financial conditions for the next policy meeting but downplayed the current scenario by saying it's just a small number of poorly managed banks.

All eyes are set on the FOMC meeting if they are still to deliver a 25 basis point (bps) rate hike, and if yes, what will be the forward guidance? The most likely scenario could be a done deal, but be ready for any surprise.

Levels to watch

• USD/CAD is hovering near day's high around 1.3720 amid anxiety among investors as they await Fed policy.
• US equities are facing severe heat led by deepening fears of global banking turmoil.
• Oil price has corrected to near $66.30 as the PBoC maintains the status quo.

The USD/CAD pair has printed a fresh intraday high at 1.3725 in the Asian session. The upside in the Loonie asset has been fueled by a recovery move from the US Dollar Index (DXY) and a corrective move in the oil price. Soaring anxiety among investors ahead of the interest rate decision by the Federal Reserve (Fed) is improving USD Index’s appeal.

The USD Index has recovered to 103.87 and is gathering strength to extend its recovery above the immediate resistance of 104.00. Meanwhile, S&P500 futures have surrendered the majority of their gains earned in the early Tokyo session. This portrays that the risk aversion theme is extremely solid and investors are using rallies for building more shorts.

US equities are facing severe heat led by deepening fears of global banking turmoil and anxiety among investors ahead of Fed policy. In a recent poll by Reuters, 76 of 82 economists believe that the US Federal Reserve (Fed) would raise its policy rate by 25 basis points (bps) to the range of 4.75-5% following the March Federal Open Market Committee (FOMC) meeting.

Meanwhile, the Canadian Dollar is dancing to the tunes of the inflation data, which will release on Tuesday. As per the consensus, the monthly headline Consumer Price Index (CPI) is expected to accelerate by 0.4%, lower than the former release of 0.5%. This might drag the annual headline CPI further to 5.5%. Also, the annual core CPI is expected to trim to 4.6% from the former release of 5.0%.

Investors should be aware of the fact that Bank of Canada (BoC) Governor Tiff Macklem has already held interest rates steady at 4.5%. BoC Macklem considers the current monetary policy as restrictive enough to scale down price pressures.

On the oil front, oil price has corrected to near $66.30 as the People’s Bank of China (PBoC) kept the interest rate policy unchanged. The street was anticipating an expansionary policy to infuse more liquidity into the economy. It is worth noting that Canada is a leading exporter of oil to the United States and lower the oil price might impact the Canadian Dollar further.

• USD/INR prints three-day downtrend even as bears struggle to keep the reins of late.
• Major central banks’ join effort to tame liquidity crunch, UBS-Credit Suisse deal favor risk-on mood.
• Chatters over the loss of Credit Suisse AT1 bondholders, anxiety ahead of Fed policy meeting probe optimists.

USD/INR remains depressed during a three-day downtrend, mildly offered near 82.50 amid early Monday morning, as the key week begins with baking sector optimism. However, details of the key risk-positive headlines appear fishy and have probed the market’s risk-on mood, which in turn keeps the Indian Rupee (INR) pair sellers hopeful.

Earlier in the day, news surrounding the major central banks’ coordinated efforts to fuel the market’s liquidity joined the headlines suggesting the UBS takeover of the troubled Credit Suisse to underpin the recovery in the sentiment.

The same favored the US Treasury bond yields to rebound after the two-year yields dropped the most since 2020 in the last week.

However, headlines from the Bank of Japan (BoJ) suggesting it had no bids for US Dollar liquidity infusion joined the news signaling losses of the Credit Suisse AT1 bond holders probe the risk profile and the yields of late. With this, the market sentiment remains mildly bid but the US Dollar struggles to defend the latest gains while Asian currencies are paring the intraday losses.

Elsewhere, downbeat prices of WTI crude oil also weigh on the USD/INR pair due to India’s reliance on Oil imports and record Currency Account Deficit. That said, the black gold seesaws around the lowest levels since December 2021, marked the previous day.

Amid these plays, the S&P 500 Futures print mild gains while struggling to reverse the previous day’s pullback from a one-week high around 3,970 whereas the US benchmark Treasury bond yields pause the previous week’s fall. That said, the US 10-year Treasury bond yields rose two basis points (bps) to 3.49% while the two-year counterpart also adds three bps to print a 3.93% coupon at the latest.

Moving on, banking sector updates will be crucial for the USD/INR pair traders to watch for clear directions. Also important will be Wednesday’s Federal Open Market Committee (FOMC) monetary policy meeting announcement, as well as the preliminary readings of the March month PMIs.

Technical analysis

Although a five-month-old descending resistance line challenges USD/INR bulls around 82.85, the bears have limited downside to track as a convergence of the 100-DMA and 50-DMA puts a floor under the prices near 82.15-10.

• Gold price has corrected to near $1,970.00 as investors are getting anxious about the Fed policy.
• Safe-haven appeal for Gold has been trimmed as UBS promised to rescue Credit Suisse.
•  Gold bulls are experiencing a momentum loss and are expected to deliver a mean reversion to near the 20-EMA.

Gold price (XAU/USD) corrected to near $1,970.00 after UBS announced the Credit Suisse rescue plan. The precious metal is gauging a cushion around the $1,970.00 support, however, further correction looks possible.

Investors should be aware of the fact that the market participants were pumping funds into the yellow metal to safeguard themselves from the volatility associated with a potential banking fiasco. A buyout deal by UBS has trimmed fears of global banking turmoil. The buyout deal has sent a signal that central banks are prepared to provide assistance to commercial banks in order to retrieve the confidence of investors.

The US Dollar Index (DXY) is demonstrating a back-and-forth action around 103.80 as the market is preparing for the interest rate decision by the Federal Reserve (Fed), which is scheduled for Wednesday. Analysts at Danske Bank see Fed chair Jerome Powell raising rates by 25 basis points (bps) despite recent turmoil amid banking sector jitters.

Bulk morning gains generated by the S&P500 futures are halved now, portraying that the UBS-Credit Suisse deal is not sufficient enough to deal with the global banking jitters. Negative market sentiment would stay for a period of time as the banking mess is still to show true colors. Meanwhile, the UBS-Credit Suisse deal has trimmed demand for US government bonds, which were being considered as safe-haven. This has pushed the 10-year US Treasury yields higher to 3.46%.

Gold technical analysis

Gold price delivered a stalwart rally after a breakout of the Symmetrical Triangle chart pattern on an hourly scale. A breakout in the aforementioned chart pattern is followed by heavy volume and wide ticks. After a perpendicular rally, Gold bulls are experiencing a momentum loss and are expected to deliver a mean-reversion to near the 20-period Exponential Moving Average (EMA) at $1,964.00.

The Relative Strength Index (RSI) (14) is oscillating in the bullish range of 60.00-80.00, which indicates that the upside momentum is extremely solid.

Gold hourly chart

• GBP/USD retreats from five-week high, stays mildly bid during three-day uptrend.
• 61.8% Fibonacci retracement, two-month-old resistance line challenge Cable buyers.
• Oscillators suggest receding strength in upside momentum but bears need validation from 100-EMA to retake control.

GBP/USD bulls take a breather around a five-week high, recently declining to 1.2185 as it reverses from the key resistance line during early Monday. Even so, the Cable pair remains mildly bid while printing a three-day winning streak.

That said, a downward-sloping resistance line from late January, around 1.2210 by the press time, appears a tough nut to crack for the GBP/USD pair buyers amid nearly overbought RSI (14) and mildly bullish MACD signals.

Also acting as an upside hurdle is the 61.8% Fibonacci retracement level of the quote’s fall from late January to early March, around the 1.2200 round figure.

It should be noted that the mid-February top surrounding 1.2270 appears the last defense of the GBP/USD bears, a break of which could propel the Cable price towards the 2023 top marked in January around 1.2450.

On the flip side, the 50% Fibonacci retracement level of 1.2125 could lure intraday sellers of the GBP/USD pair but a convergence of the 50-EMA and one-week-old ascending support line, near 1.2085, appears a tough nut to crack for the bears to retake control.

Also acting as an important support is the 100-EMA level surrounding 1.2060, a break of which won’t hesitate to challenge multiple lows marked during late February, around 1.1930-20.

Overall, GBP/USD is likely to witness a pullback but the bears are far from retaking control.

GBP/USD: Four-hour chart

Trend: Pullback expected

• EUR/USD grinds higher during three-day winning streak, mildly bid of late.
• US Two-year Treasury bond yields pare the biggest weekly loss in three years and trigger US Dollar rebound.
• Major central banks’ joint actions to infuse US Dollar liquidity, UBS-Credit Suisse deal favor risk-on mood.
• ECB’s Lagarde should defend policymakers’ hawkish bias to keep Euro buyers on the table, Fed’s 0.25% rate hike appears given.

EUR/USD prints mild gains around 1.0680 as the key week begins on a positive note. That said, the major currency pair prints a three-day uptrend amid early Monday morning in Europe as joint efforts from the major central banks to avoid a liquidity crunch join the UBS-Credit Suisse deal to favor the market’s risk profile, as well as underpin the recovery in the US Treasury bond yields and the US Dollar. It’s worth observing, however, that the hawkish comments from the European Central Bank (ECB) officials seem to defend the Euro buyers of late.

While reacting to the Swiss National Bank’s (SNB) efforts to defend Credit Suisse, European Central Bank (ECB) President Christine Lagarde said that the central bank hopes the Swiss-brokered rescue of Credit Suisse will restore calm in financial markets.

Before that, multiple European Central Bank (ECB) officials crossed wires on Friday to convince markets of the soundness of the bloc’s banks, as well as defend the ECB’s hawkish monetary policy stance. Firstly, Governing Council member Madis Muller said, “Banking uncertainty complicates communication,” while adding that the latest inflation forecasts assume more rate hikes. Following him was ECB Board member Francois Villeroy de Galhau who said that the French and European banks are 'very solid'.

Furthermore, ECB policymaker Peter Kazimir said that there is a need to continue with rate hikes while Governing Council Member Gediminas Šimkus backed the hawkish bias while saying, “The terminal rate hasn't been reached yet.”

On the other hand, the downbeat US Dollar data and Treasury bond yields propelled the EUR/USD previously. That said, US Consumer Confidence per the University of Michigan's (UoM) Consumer Confidence Index dropped to 63.4 for March versus 67.0 expected and prior. The details suggest that the year-ahead inflation expectations receded from 4.1% in February to 3.8%, the lowest reading since April 2021, while the 5-year counterpart dropped to 2.8% from 2.9% previous reading. Furthermore, US Industrial Production remained unchanged in February versus 0.2% expected and January's 0.3% (revised from 0%) expansion.

Elsewhere, the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, and Swiss National Bank are all up for announcing joint actions to provide more liquidity via standing US dollar liquidity swap line arrangements. Furthermore, Sky News reported the news of the UBS-Credit Suisse takeover on Sunday evening while stating that UBS will pay 3 billion Swiss francs (£2.6bn) to acquire Credit Suisse.

Against this backdrop, the S&P 500 Futures print mild gains while reversing the previous day’s pullback from a one-week high around 3,970 whereas the US benchmark Treasury bond yields recover. That said, the US 10-year Treasury bond yields rise six basis points (bps) to 3.49% while the two-year counterpart also adds five bps to print a 3.93% coupon at the latest. It’s worth noting that United States two-year Treasury bond yields marked the biggest weekly loss in three years while the 10-year counterpart dropped the most since early January.

Moving ahead, EUR/USD traders should pay attention to ECB President Lagarde’s speech for immediate directions. However, Wednesday’s Federal Open Market Committee (FOMC) monetary policy meeting announcement is this week’s crucial event as Fed’s 0.25% rate hike is already given. Also important are the preliminary readings of the March month PMIs. Above all, risk catalysts and the United States Treasury bond yields will be the key for Euro pair traders to watch for clear directions.

Technical analysis

A daily closing beyond the 50-DMA hurdle surrounding 1.0730 becomes necessary for the EUR/USD bull’s conviction. On the other hand, the major currency pair’s pullback remains elusive unless the quote stays beyond the 100-DMA, close to 1.0575 at the latest.

Japanese Chief Cabinet Secretary Hirokazu Matsuno says Japan's financial system is stable as a whole.

“Central banks swiftly ramped up efforts as risk-aversive moves seen in markets,” Matsuno added.

Market reaction

At the time of writing, USD/JPY is retreating from daily highs of 132.65, still adding 0.35% on the day.

• USD/CHF faces downward pressure as global liquidity efforts flood market with US Dollars.
• Swap lines are reintroduced as central banks coordinate to ease financial conditions.
• SNB rate decision in focus after Credit Suisse turmoil. 

USD/CHF is looking to retest the 0.9250 mark as the market is flooded with US Dollars. The coordinated effort from central banks to ramp up liquidity across the globe is likely to put downward pressure on the US Dollar.

The Federal Reserve (Fed) has opened the swap line for some major banks to gain access to the US Dollars. And some reports suggest that UBS is likely to acquire Credit Suisse that  should ease the financial conditions in Switzerland. This development could l be positive for CHF, therefore downside bias remains intact for USD/CHF.

Upon breaking the closest support seen at the 0.9250 mark, the pair could retrace the Credit Suisse-led gain starting from the 0.9141 mark.

We have seen a strong downside run from the US Dollar on the first instance of the swap line during COVID, so this might be the same case again.

The ultimate destination for the pair will be 0.9100 if everything remains calm and composed.

Any upside gains are likely to remain capped between the 50-Day Moving Average (DMA) and the 21-DMA. The downward-sloping trendline starting from the March high at 0.9431 coincides with the 21-DMA, posing a strong case for the downside for USD/CHF.

The lower highs on the Relative Strength Index (RSI) signal more room for the downside.

The Swiss National Bank (SNB) rate decision is on Thursday, with the expectation of a 50 basis point (bps) hike. Despite Credit Suisse's situation, will they be able to deliver the same? This will be important to watch for USD/CHF's next direction.

USD/CHF: Daily timeframe

In a joint statement on Sunday, US Federal Reserve Chair Powell and Treasury Secretary Yellen said that “the US banking system's capital and liquidity positions are robust and the financial system is resilient.”

Additional takeaways

"We welcome the announcements by the Swiss authorities today to support financial stability.”

“The capital and liquidity positions of the US banking system are strong, and the US financial system is resilient.”

“We have been in close contact with our international counterparts to support their implementation."

Shortly after Powell and Yellen came out with the joint statement, European Central Bank (ECB) President Christine Lagarde said that the central bank hopes the Swiss-brokered rescue of Credit Suisse will restore calm in financial markets.”

“The ECB remains ready to support Eurozone banks with loans if needed,” Lagarde added.

Related reads

• US Dollar Index: Joint central bank efforts tease DXY bulls below 104.00 ahead of Fed
• BOJ board sees the need to maintain easy policy

• Volatility remains elevated in financial markets.
• NZD/USD bears are in the market and testing structure.

NZD/USD is meeting a prior area of support on the hourly charts as the bears move in from the session´s highs near 0.6280. NZD/USD has traveled between there and 0.6245 so far. 

Volatility remains elevated and there is news from the weekend that UBS is said to take over Credit Suisse in a deal aimed at stemming what was fast becoming a global crisis of confidence. Credit Suisse, the 167-year-old embattled lender had been brought to the brink of financial calamity last week, despite securing a $54bn (£44bn) credit line from Switzerland's central bank.

´´Financial instability and bank wobbles remain the focus, and it’s hard to see that going away any time soon, so expect ongoing volatility,´´ analysts at ANZ Bank said.´´On the one hand, New Zealand seems remote from all this (that’s a positive) and the issue of getting inflation back to target is just as (if not more) pressing here than elsewhere. But equally, markets remain fearful of NZ’s wide current account deficit and other imbalances, and of what impact a likely Fed hike this week may bring (likely a stronger USD if the Fed contains contagion fears while hiking).´´

NZD/USD technical analysis

NZD/USD is on the backside of the trend which leaves a bearish bias for the week ahead while below 0.6280. 

• Market sentiment improves amid receding fears of liquidity crunch, 2008 financial crisis.
• Five major central banks join the Fed to infuse US Dollar liquidity via swaps, UBS eyes Credit Suisse take over.
• S&P 500 Futures print mild gains, Treasury bond yields recover after the worst week in many months.
• Multiple central bank meetings, PMIs and banking sector update are the key catalysts to watch for fresh impulse.

After a week full of risk aversion, the market sentiment improves during early Monday as weekend headlines suggest positive developments to ward off the looming fears of liquidity crisis and banking sector fallout. It should, however, be noted that the cautious mood ahead of this week’s top-tier central bank meetings and activity data seems to probe the optimists.

As a result, the S&P 500 Futures print mild gains while reversing the previous day’s pullback from a one-week high around 3,970 whereas the US benchmark Treasury bond yields recover. That said, the US 10-year Treasury bond yields rise six basis points (bps) to 3.49% while the two-year counterpart also adds five bps to print a 3.93% coupon at the latest. It’s worth noting that United States two-year Treasury bond yields marked the biggest weekly loss in three years while the 10-year counterpart dropped the most since early January.

While tracing the major catalysts, the UBS-Credit Suisse deal and the major central banks’ joint efforts to infuse the market liquidity seem to gain major attention.

Sky News reported the news of the UBS-Credit Suisse takeover on Sunday evening while stating that UBS will pay 3 billion Swiss francs (£2.6bn) to acquire Credit Suisse. The news further adds that UBS has agreed to assume up to 5 billion Francs (£4.4bn) in losses, and 100 billion Swiss Francs (£88.5bn) in liquidity assistance will be available to both banks.

On the other hand, the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, and Swiss National Bank are all up for announcing joint actions to provide more liquidity via standing US dollar liquidity swap line arrangements.

Additionally favoring the market’s risk-on mood could be comments from an anonymous US Official suggesting no major challenges for the US banks. On the same line is the news quoting the US Federal Deposit Insurance Corporation (FDIC) as it mentioned that the deposits of Signature Bridge Bank will be assumed by a subsidiary of New York Community Bancorporation.

Furthermore, Japan’s readiness for a two trillion worth stimulus package to avoid deflation and the rebound in the UK manufacturing production also allow the traders to lick their wounds after a downbeat weekly performance.

However, the fears ahead of this week’s monetary policy announcements from the Federal Reserve (Fed), the Bank of England (BoE) and the Swiss National Bank (SNB), probe the optimists. Additionally testing the risk-on mood could be the pre-data anxiety ahead of March’s preliminary PMIs.

Looking ahead, the market sentiment may remain fragile as the top-tier data/events are up for publishing. Also challenging the risk profile is the trader’s doubts about the banking sector despite the major policymakers’ efforts.

• USD/CNH has not shown any major action on PBoC’s steady monetary policy.
• An expansionary monetary policy was expected to spurt the economic recovery in China.
• Investors have cheered the UBS-Credit Suisse deal and are supporting risk-sensitive assets.

The USD/CNH pair has not shown a significant move despite the monetary policy announcement by the People’s Bank of China (PBoC). The PBoC has announced an unchanged interest rate policy despite the demand for higher stimulus to spurt the economic recovery. The central bank has kept the one-year and five-year Loan Prime Rate (LPR) steady at 3.65% and 4.30% respectively.

Contrary to the unchanged interest rate decision, the street was anticipating further expansion in the monetary policy stance.

Economist at UOB Group suggests that the PBoC could reduce the Loan Prime Rate (LPR) at its next meeting on March 20. They further added, “With the need for further support measures toward the real economy and for 5Y loan prime rate (LPR) to fall further to boost demand for homes, we see the possibility for the 1Y LPR to fall to 3.55% and 5Y LPR to 4.20% in Mar, following the National People’s Congress (NPC).”

Meanwhile, the US Dollar Index (DXY) is facing barricades in attempting a recovery as the expectations of a less-hawkish monetary policy announcement by the Federal Reserve (Fed) are accelerating. As per the CME Fedwatch tool, more than 77% odds are in favor of a 25 basis point (bps) interest rate hike on Wednesday. An interest rate decision of 25 bps would push interest rates to 4.75-5.00%.

S&P500 futures are reviving firmly as investors have cheered the rescue plan for Credit Suisse. UBS Group has agreed to buy Credit Suisse. Sky News reported that under the takeover UBS will pay 3bn Swiss francs (£2.6bn) to acquire Credit Suisse. And, it has agreed to assume up to 5bn francs (£4.4bn) in losses, and 100bn Swiss francs (£88.5bn) in liquidity assistance will be available to both banks.

• USD/JPY rebounds from five-week low, grinds near intraday high of late.
• BoJ Summary of Opinions suggests board members saw the need to maintain ultra-loose monetary policy.
• Coordinated central bank efforts to infuse US Dollar liquidity, UBS-Credit Suisse deal propel yields after last week’s heavy fall.
• Fed’s reaction to banking crisis becomes crucial for clear directions.

USD/JPY consolidates the biggest weekly loss since January while bouncing off a five-week low to 132.50 during early Monday. In doing so, the yen pair tracks the recovery in the US Treasury bond yields to begin the key week on a firmer footing after marking a three-week losing streak in the last.

That said, the US 10-year Treasury bond yields rise six basis points (bps) to 3.49% while the two-year counterpart also adds five bps to print a 3.93% coupon at the latest. It’s worth noting that United States two-year Treasury bond yields marked the biggest weekly loss in three years while the 10-year counterpart dropped the most since early January.

As per the latest Bank of Japan (BoJ) Summary of Opinions, the board members saw the need to maintain the ultra-loose monetary policy for now, even as some warned of the need to scrutinize its side effects such as deteriorating market functions.

Also read: BOJ board sees the need to maintain easy policy

Adding strength to the USD/JPY rebound could be the news shares by Yomiuri saying that the Japanese government eyes efforts worth two trillion Yen to defend the economy from slipping back into the deflation zone.

Apart from the likely continuation of the BoJ’s ultra-easy monetary policy, the news suggesting the global central banks’ joint efforts to boost the US Dollar liquidity and the UBS-Credit Suisse deal also allowed the USD/JPY to recover.

The Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, and Swiss National Bank are all up for announcing joint actions to provide more liquidity via standing US dollar liquidity swap line arrangements. Further, Sky News reported the news of the UBS-Credit Suisse takeover on Sunday evening while stating that UBS will pay 3 billion Swiss francs (£2.6bn) to acquire Credit Suisse. The news further adds that UBS has agreed to assume up to 5 billion Francs (£4.4bn) in losses, and 100 billion Swiss Francs (£88.5bn) in liquidity assistance will be available to both banks.

On the same line were the comments from the US Federal Deposit Insurance Corporation (FDIC) mentioning that the deposits of Signature Bridge Bank will be assumed by a subsidiary of New York Community Bancorporation.

Amid these plays, S&P 500 Futures reverse the previous day’s losses with 0.60% intraday gains around 3,970.

Moving forward, the bond market moves will be crucial for the USD/JPY pair traders to watch. Additionally important will be Federal Reserve (Fed) action. It should be noted that the Fed is up for a 0.25% rate hike on Wednesday but the rate lift isn’t crucial as it’s mostly priced in. More important is the Fed’s outlook on the banking sector and the US economy, as well as the rate hike trajectory, moving forward.

Technical analysis

Despite the latest rebound, a daily closing beyond the 50-DMA hurdle surrounding 132.50 becomes necessary for the USD/JPY bulls to retake control. Until then, the Yen pair sellers keep eyes on a nine-week-old upward-sloping support line, near 130.40 by the press time.

In recent trade today, the People’s Bank of China (PBOC) set the yuan at 6.8694 vs. the estimate of 6.8701. 

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day's closing level and quotations taken from the inter-bank dealer.

The People´s Bank of China has set the 1-year loan prime rate at 3.65% vs 3.65% a month earlier.
    
Also, the PBoC set the 5-year loan prime rate at 4.30% vs 4.30% a month earlier.

Meanwhile, on Friday the PBoC said it would cut the amount of cash that banks must hold as reserves for the first time this year to help keep liquidity ample and support a nascent economic recovery. The PBoC said it would cut the reserve requirement ratio (RRR) for all banks, except those that have implemented a 5% reserve ratio, by 25 basis points (bps), effective March 27.

• AUD/USD bulls are in the market and eye 0.6750. 
• Bullish structure is forming on the lower time frames.

As per AUD/USD´s prior analysis, AUD/USD Price Analysis: Bulls eye a break into the 0.67s, the bulls are making their way up and there is a focus on a bullish extension while on the front side of the trendline.

AUD/USD prior analysis

H1 chart

´´The bulls stepped in again on the correction in resistance which leaves a bullish bias for the open for an additional test in the 0.67s.´´

AUD/USD update

The bulls have scored a fresh high at the start of the week and the focus is on the potential support structure and trendline support. A break of the highs opens risk to 0.6750.

• EUR/GBP is oscillating near 0.8750 ahead of BoE policy and UK inflation.
• BoE’s Bailey could go for a steady policy to safeguard the economy from potential banking turmoil.
• A power-pack action in the cross looks missing despite the headline of UOB infusing life into Credit Suisse.

The EUR/GBP pair is displaying a lackluster performance around 0.8750 in the Asian session. The cross has turned sideways as investors are shifting their focus towards the release of the interest rates decision by the Bank of England (BOE) and the United Kingdom’s Consumer Price Index (CPI) this week.

A power-pack action in the cross looks missing despite the headline of UOB infusing life into Credit Suisse. Credit Suisse shareholders were deprived of a vote on the deal and will receive one share in UBS for every 22.48 shares they own, valuing the bank at $3.15bn (£2.6bn), as reported by BBC News. The Swiss National Bank (SNB) said the deal was the best way to restore confidence in financial markets and to manage risks to the economy. Also, the BoE said it welcomed the "comprehensive set of actions".

For the interest rate decision, the street is of the view that BoE Governor Andrew Bailey could give a dismal outlook amid the banking turmoil jitters as the first priority.

Analysts at Rabobank also see a 25 basis point (bps) rate hike and warn that such a case is not fully priced in the interest market. A 25 bps rate hike by BoE Governor Andrew Bailey would push rates to 4.25%.

Before that, Wednesday’s UK inflation data will be keenly watched. As per the estimates, the annual headline CPI is expected to trim to 9.8% from the former release of 10.1%. While the core CPI that excludes oil and food prices would remain steady at 5.8%. It should be aware of the fact the stronger food inflation and a labor shortage are behind UK’s stubborn inflation.

On the Eurozone front, after a 50 bps interest rate hike by the European Central Bank (ECB) last week, ECB Governing Council Gediminas Šimkus said on Friday, “the terminal rate hasn't been reached yet.” Eurozone inflation is extremely stubborn and needs more rates for further softening.

• GBP/JPY rallies as central banks tackle liquidity crisis with coordinated efforts.
• Swap lines reintroduced: Major central banks unite to address global liquidity concerns.
• Eyes on Bank of England, 25 bps one and done?

GBP/JPY marched higher in early Asian hours on Monday as the Japanese Yen demand faded on the back of growing optimism on the liquidity front. The risk sentiment got a boost on Monday due to a globalized effort to tame last week's liquidity crisis.

To reestablish confidence in the financial system, some major central banks, including the Bank of Japan (BoJ) and Bank of England (BoE), have made a coordinated effort to dilute the banking ecosystem across the globe with US Dollars. The swap line has been introduced for this purpose.

The main resource for this swap line is the Federal Reserve (Fed), which the Fed will lend US Dollars to other central banks in exchange for local currency as a short-term loan. The swap line will begin from Monday until April.

On Sunday, the Bank of England said it welcomed the actions by the Swiss authorities to merge Credit Suisse with UBS Group and also emphasized that the UK banking system is well-capitalized and funded. The BoE rate decision is on Thursday, and it will be important to see their forward guidance. This may be the last rate hike from the BoE amid the ongoing liquidity crisis.

The Bank of Japan's March meeting Summary of Opinions released earlier highlights nothing new, as the bank has remained on an ultra-easing monetary stance for decades. Adding to this, Japanese Finance Minister Shunichi Suzuki said on Monday he was closely watching market moves after a weekend rescue deal for Credit Suisse Group

It is also important to watch how this week unfolds on the liquidity front, citing some earlier reports stating that two European banks are under scrutiny. Therefore, the upside gains in GBP/JPY are likely to remain vulnerable.

Levels to watch

• Silver price renews intraday low while taking a U-turn from the highest levels in 1.5 months.
• Overbought RSI allows XAG/USD sellers to sneak in from six-week-old horizontal resistance.
• Ascending support line from March 10, 200-EMA put a floor under the Silver price.

Silver price (XAG/USD) takes offers to renew intraday low near $22.40 as it reverses from the highest levels since early February as the Fed week begins.

In doing so, the bright metal reverses from the horizontal area comprising multiple tops marked since February 03, around $22.60.

It’s worth noting that the overbought conditions of the RSI (14) also help the XAG/USD to pare recent gains near the multi-day high.

However, bullish MACD signals and the metal’s sustained trading above the key supports keep the Silver buyers hopeful.

Among the immediate crucial support is a one-week-old ascending trend line, around $21.90, as well as the 200-bar Exponential Moving Average (EMA) surrounding $21.65.

It should be observed that the early month swing high near $21.30 and the $21.00 round figure can act as additional downside filters for the XAG/USD bears to watch before targeting the monthly low of $19.90.

Meanwhile, the Silver price run-up beyond the aforementioned resistance line surrounding $22.60 needs validation from the 61.8% Fibonacci retracement level of the metal’s February-March downside, near $22.85.

Following that, a run-up toward the Year-To-Date (YTD) high surrounding $24.65 can’t be ruled out.

Overall, the Silver price is likely to decline but the bears have a long way to ride before retaking control.

Silver price: Four-hour chart

Trend: Further downside expected

• GBP/USD is building strength for shifting the business above 1.2200 amid the risk-on mood.
• The Fed would look for a 25 bps rate hike just to maintain pressure on stubborn inflation.
• A steady BoE policy is in anticipation following the SVB collapse.

The GBP/USD pair is gathering strength is shifting its auction above the round-level resistance of 1.2200 in the Asian session. The Cable has found support as the appeal for the US Dollar Index (DXY) is declining amid rising expectations of a less-hawkish monetary policy by the Federal Reserve (Fed).

S&P500 futures are showing significant gains in the Asian session as UOB has confirmed a buyout for Credit Suisse. This has improved the risk appetite of the market participants as investors’ confidence is getting restored. Sky News reported that under the takeover UBS will pay 3bn Swiss francs (£2.6bn) to acquire Credit Suisse. And, it has agreed to assume up to 5bn francs (£4.4bn) in losses, and 100bn Swiss francs (£88.5bn) in liquidity assistance will be available to both banks.

The USD Index is observing a restrictive upside around 103.80 as banking shakedown in the United States has faded hawkish guidance delivered by Fed chair Jerome Powell, a few weeks back. Inflation has dropped and the requirement of providing assistance to commercial banks is favoring the need for a lower interest rate hike, just to maintain pressure on stubborn inflation.

Analysts at Danske Bank see the Fed raising rates by 25 basis points (bps) despite recent turmoil amid banking sector jitters.

On the United Kingdom front, investors are awaiting the interest rate decision by the Bank of England (BoE), scheduled for Thursday. Analysts at Rabobank also see a quarter-point rate increase and warn that such a scenario is not fully priced in the interest market, “which indicates that the chance of a hold has increased following the collapse of Silicon Valley Bank (SVB).” A 25 bps rate hike by BoE Governor Andrew Bailey would push rates to 4.25%.

But before that, UK inflation data will be keenly watched. Annual headline Consumer Price Index (CPI) data is expected to decline to 9.8% from double-digit figures.

• Gold price reverses from the highest levels in 2023 after posting a notable jump.
• Joint central bank actions to propel US Dollar liquidity, UBS-Credit Suisse deal enable United States Treasury bond yields to recover.
• Federal Reserve’s reaction to banking sector turmoil will be crucial for the Gold price.
• XAU/USD traders should also observe preliminary readings of March month Purchasing Managers’ Index.

Gold price (XAU/USD) takes offers from the Year-To-Date (YTD) high while targeting the previous resistance surrounding $1,960, near $1,976 by the press time of early Monday in Asia. In doing so, the precious metal pares the recent losses after posting the biggest daily and weekly jump in three years in the last.

The latest recovery in the United States Treasury bond yields, backed by hopes of more liquidity in the market, seems to have underpinned the US Dollar rebound and weighs on the Gold price. Also challenging the XAU/USD bulls is traders’ anxiety as the key week comprising the Federal Reserve (Fed) monetary policy announcements begins. That said, the yellow metal’s previous fall could be linked to a slump in the bond coupons across the board amid fears of the return of the 2008 financial market crisis.

Gold price swiftly reacts to Treasury bond yields’ moves

Gold price drops on the latest recovery in the United States Treasury bond yields amid news suggesting no liquidity crunch moving ahead. That said, Sky News reported the news of the UBS-Credit Suisse takeover on Sunday evening while stating that UBS will pay 3 billion Swiss francs (£2.6bn) to acquire Credit Suisse. The news further adds that UBS has agreed to assume up to 5 billion Francs (£4.4bn) in losses, and 100 billion Swiss Francs (£88.5bn) in liquidity assistance will be available to both banks.

On the same line were the comments from the US Federal Deposit Insurance Corporation (FDIC) mentioning that the deposits of Signature Bridge Bank will be assumed by a subsidiary of New York Community Bancorporation. Furthermore, the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, and Swiss National Bank are all up for announcing joint actions to provide more liquidity via standing US dollar liquidity swap line arrangements. It should be noted that the previously downbeat Treasury bond yields could be linked to the trader’s rush to risk safety amid the market’s turmoil, as well as hopes of interest rate cuts from major central banks late in 2023.

Talking about the market turmoil, the early challenges to the banking sector emanating from the Silicon Valley Bank (SVB) and Signature Bank joined the Credit Suisse saga, as well as the First Republic Bank, to highlight a full-blown Déjà vu for the 2008 crisis. The same joined downbeat US data to shift traders’ attention toward the Treasury bonds and Gold to safeguard their investments amid volatile markets.

During the last week, the US Consumer Price Index (CPI) for February matched 6.0% YoY market expectations versus 6.4% prior while the Retail Sales also marked -0.4% MoM figure versus -0.3% expected and 3.2% previous readings. Further, US Consumer Confidence per the University of Michigan's (UoM) Consumer Confidence Index dropped to 63.4 for March versus 67.0 expected and prior. The details suggest that the year-ahead inflation expectations receded from 4.1% in February to 3.8%, the lowest reading since April 2021, while the 5-year counterpart dropped to 2.8% from 2.9% previous reading. Furthermore, US Industrial Production remained unchanged in February versus 0.2% expected and January's 0.3% (revised from 0%) expansion.

In addition to the downbeat US data, mixed statistics from China, the world’s second-largest economy, also raised market fears and allowed the Gold price to remain firmer. It should be noted that the stocks in Europe and Asia portrayed a risk-off mood but those in the US gained in the last week.

That said, United States two-year Treasury bond yields marked the biggest weekly loss in three years while the 10-year counterpart dropped the most since early January. However, the latest readings suggest that the US 10-year Treasury bond yields rose four basis points (bps) to 3.47% while the two-year counterpart rises to 3.98%.

Given the latest action in the bond markets, Gold traders should closely watch yields for better directions.

Federal Reserve could make or break XAU/USD

While the recent hopes of more liquidity in the market seemed to have weighed on the Gold price, the metal isn’t out of the woods as traders remain cautious over the banking sector crisis. Also challenging the XAU/USD traders are the multiple central banks' decisions, including the US Federal Reserve (Fed), lying ahead.

It should be noted that the Fed is up for a 0.25% rate hike on Wednesday but the rate lift isn’t crucial as it’s mostly priced in. More important is the Fed’s outlook on the banking sector and the US economy, as well as the rate hike trajectory, moving forward. Should the US central bank sounds cautious on future rate hikes, or pauses the current one, the odds of a rally in the Gold price can’t be ruled out. However, hawkish comments from the Fed won’t hesitate to trigger the XAU/USD’s slump.

Other central banks, PMIs and banking sector updates are important too

Apart from the Federal Reserve, monetary policy meetings of the Swiss National Bank and Bank of England (BoE) will also be important for Gold traders to watch as the central bank’s outlook for the latest banking sector fallout becomes crucial. Also important are the preliminary readings of the March month PMIs. Above all, risk catalysts and the United States Treasury bond yields will be the key for Gold traders to watch for clear directions.

Also read: Gold Price Weekly Forecast: $2,000 back in crosshairs amid market turmoil

Gold price technical analysis

Gold price refreshed the YTD high on Friday, after successfully crossing February’s peak surrounding $1,960.

The upside momentum, however, lacked support from the Relative Strength Index (RSI), placed at 14, as the line touched the overbought territory and poked XAU/USD bulls afterward.

Also challenging the Gold price upside are multiple resistances between $1,996 and the $2,000 threshold, comprising an ascending trend line from August 2022 and an area including levels marked during March and April of 2022.

Even if the Gold price crosses the $2,000 hurdle, the 61.8% Fibonacci Expansion (FE) of the metal’s run-up from November 2022 to February 2023, around $2,017, could act as the last defense of the XAU/USD bears.

That said, a clear upside break of $2,017 won’t hesitate to challenge Gold buyers targeting the previous yearly top of $2,070.

On the flip side, Gold sellers aim for the previous monthly top surrounding $1,960, a daily closing below the same can trigger a short-term downside of the metal.

In that case, the $1,900 threshold and the 50-DMA support of around $1,880 could gain the market’s attention.

It’s worth noting, however, that the 100-DMA level near $1,824 and the $1,800 round figure act as strong supports for the Gold price.

Overall, Gold buyers are likely to occupy the driver’s seat but the road towards the north appears bumpy unless crossing the $2,017 hurdle.

Gold price: Daily chart

Trend: Limited upside expected

The Bank of Japan´s Summary of Opinions has been published. 

Reuters reports that the board members saw the need to maintain ultra-loose monetary policy for now, even as some warned of the need to scrutinize its side effects such as deteriorating market functions, a summary of opinions at their March policy meeting showed on Monday.

"Japan's economy is showing signs of achieving a positive cycle. But any tweak to monetary policy must be examined and discussed carefully given the impact on markets and various economic entities," one of the members was quoted as saying in the summary.

About the MPS

This report includes the BOJ's projection for inflation and economic growth. It is scheduled 8 times per year, about 10 days after the Monetary Policy Statement is released.

• AUD/JPY rises on central banks' coordinated liquidity-boost effort.
• The swap line is the new lifeline amid liquidity concerns.
• Market optimism grows as the central banks tackle turmoil. 

AUD/JPY took a bounce during early Asian hours in the wake of weekend optimism on the liquidity front. The risk proxy is up around 0.35% as of now, which is helped by the globalized effort from the top central banks to ease some liquidity severity.

During the weekend, the Federal Reserve (Fed), European Central Bank (ECB), Bank of England (BoE), Bank of Japan (BoJ), and Swiss National Bank (SNB) all came together to provide a liquidity lifeline known as "swap line" for those commercial banks who are struggling with any sort of liquidity issue. The market cheered this and high beta currencies surged, due to how quickly they addressed the issue and took action.

This is the second instance of the introduction of the swap line, which was first introduced during the COVID pandemic.  It is an operation by which the central bank provides US Dollar liquidity to commercial banks on a shorter maturity; this time it is up to seven days. This helps these commercial banks smoothen their day-to-day operations.

Some earlier comments came from Reserve Bank of Australia Assistant Governor Kent, and he is probably the first central banker who stated to take into account this liquidity-led financial turmoil while addressing the interest rate decision.

A few central bank rate decisions are due this week and It's important to see what are their official stance on this issue. The first in line is the People's Bank of China (PBoC). The said bank is on the easing side, contrary to others, and may surprise the market by taking some extra measures if the underlying situation requires it.

On the Japanese front, more financial aid in the form of subsidies is likely to be injected into the economy to combat the higher prices. That said, the temporary subsidy for regional revitalization is expected to add 700 billion Japanese yen.

Levels to watch

• AUD/NZD pops in the Tokyo open to test 1.0700.
• The RBA and RBNZ are in focus with RBA minutes and RBNZ MPS coming up.

AUD/NZD is higher in Tokyo, correcting up from the lows of 1.0673 and reaching into the 1.07s again. Given the robustness of much of last week’s data flow, markets are pricing in a move from the Reserve Bank of Australia.

´´For the RBA we suspect the major consideration in assessing the balance of the domestic fundamentals (which in our view support the case for further tightening) versus developments offshore, will be the potential for spill-over into the real economy,´´ analysts at ANZ Bank said. 

Reserve Bank of Australia (RBA) Assistant Governor Christopher Kent spoke today and said the full impact of increases in interest rates was taking longer to filter through to the economy due to a higher share of fixed-rate mortgages and the savings amassed by households during the pandemic.

Meanwhile, a reflection of the robustness in the domestic data was the February labour force survey, which showed a strong gain in employment and a fall in the unemployment rate back to 3.5%. 

´´An increase in the unemployment rate would likely help return inflation to the RBA’s target band. As our chart of the week suggests (acknowledging inflation dynamics are more complex and such curves are not stable over time), an unemployment rate in the low to mid 4’s would be more consistent with the inflation target than one in the mid 3’s,´´ the analysts at ANZ Bank argued. ´´Such an Unemployment Rate would still be lower than that which prevailed pre-pandemic.´´

 Minutes of the RBA´s March Monetary Policy Meeting will be released this week. 

Meanwhile, financial market risks are currently in focus, with the fallout from Silicon Valley Bank’s failure in the US causing immense volatility in global wholesale interest rates in recent days. ´´All else equal, now that rates are (almost certainly) in restricted territory, this reminder of global fragility tilts the scales towards 25bp from the RBNZ in April (already our forecast, but we previously saw the hurdle to 50bp as extremely low),´´ the analysts at ANZ said noting the RBNZ MPS coming up on March 24. 

• US Dollar Index picks up bids to snap two-day losing streak, mildly bid of late.
• Five key central banks to join Fed in infusing US Dollar liquidity via currency swaps.
• UBS-Credit Suisse deal also enables Treasury bond yields to stabilize after rocky week.
• Fed Chair Powell’s comments on banking sector fallouts, PMIs for March will be crucial for clear directions.

US Dollar Index (DXY) cheers the weekend news suggesting more liquidity in the market while tracing the recovery in the Treasury bond yields to snap a two-day downtrend near 103.80 as the key week begins. In doing so, the greenback’s gauge versus the six major currencies cheers the hopes of more US Dollar-linked liquidity, as well as easing fears from the latest banking sector fallouts, ahead of Wednesday’s key Federal Open Market Committee (FOMC) monetary policy meeting.

During the weekend, Sky News reported the news of the UBS-Credit Suisse takeover on Sunday evening while stating that UBS will pay 3 billion Swiss francs (£2.6bn) to acquire Credit Suisse. The news further adds that UBS has agreed to assume up to 5 billion Francs (£4.4bn) in losses, and 100 billion Swiss Francs (£88.5bn) in liquidity assistance will be available to both banks.

On the same line were the comments from the US Federal Deposit Insurance Corporation (FDIC) mentioning that the deposits of Signature Bridge Bank will be assumed by a subsidiary of New York Community Bancorporation.

Furthermore, the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, and Swiss National Bank are all up for announcing joint actions to provide more liquidity via standing US dollar liquidity swap line arrangements.

The news also contributes to the market’s hopes of more liquidity and allows the US Treasury bond yields to pare the last week’s heavy losses. That said, the US two-year Treasury bond yields dropped the most in three years in the last week. That said, the US 10-year Treasury bond yields rose four basis points (bps) to 3.47% at the latest while S&P 500 Futures also rise 0.70% intraday even after a downbeat Wall Street closing.

In the last week, the banking sector rout drowned the market sentiment but the US Dollar and the Swiss Franc had to fall amid downbeat Treasury bond yields, as well as the SNB’s role in defending Credit Suisse. It should be noted that the downbeat US data added strength to the greenback’s south run.

That said, the US Consumer Price Index (CPI) for February matched 6.0% YoY market expectations versus 6.4% prior while the Retail Sales also marked -0.4% MoM figure versus -0.3% expected and 3.2% previous readings. Further, US Consumer Confidence per the University of Michigan's (UoM) Consumer Confidence Index dropped to 63.4 for March versus 67.0 expected and prior. The details suggest that the year-ahead inflation expectations receded from 4.1% in February to 3.8%, the lowest reading since April 2021, while the 5-year counterpart dropped to 2.8% from 2.9% previous reading. Furthermore, US Industrial Production remained unchanged in February versus the 0.2% expected and January's 0.3% (revised from 0%) expansion.

Moving on, risk catalysts will be more important for the US Dollar Index traders ahead of Wednesday’s FOMC decision. Additionally, preliminary readings of the US March month S&P Global PMIs will also be important for DXY traders to watch for fresh impulse.

Technical analysis

US Dollar Index remains sidelined between an ascending support line from the mid-February and a one-week-old descending resistance line, respectively near 103.60 and 104.40.

• EUR/USD has sensed a cushion around 1.0670 amid an improvement in investors’ risk appetite.
• The Fed is expected to remain steady or hike interest rates by 25 bps on order to maintain pressure on inflation.
• EUR/USD is auctioning in a Bullish Pennant chart pattern that indicates an upside momentum.

The EUR/USD pair has found a cushion around 1.0670 in the early Tokyo session. The major currency pair is expected to recapture the round-level resistance of 1.0700 as investors are quite confident about a less-hawkish interest rate decision by the Federal Reserve (Fed), scheduled for Wednesday. Considering the declining trend in the United States inflation and banking debacle, the Fed is expected to remain steady or hike interest rates by 25 basis points (bps) on order to maintain pressure on inflation.

The US Dollar Index (DXY) is defending the 103.60 cushion, however, the downside seems favored as investors’ risk appetite is improving. S&P500 futures are showing strong recovery in early Asia after a battered Friday as the headline of UBS taking over Credit Suisse is infusing confidence among the market participants.

Sky News reported that under the takeover UBS will pay 3bn Swiss francs (£2.6bn) to acquire Credit Suisse. And, it has agreed to assume up to 5bn francs (£4.4bn) in losses, and 100bn Swiss francs (£88.5bn) in liquidity assistance will be available to both banks.

EUR/USD is auctioning in a Bullish Pennant chart pattern, which indicates that the asset is in upside momentum. Usually, the aforementioned chart pattern delivers a bearish reversal after reaching a point where the upside momentum gets exhausted.

A bull cross, represented by the 20-and 50-period Exponential Moving Averages (EMAs) at 1.0630, indicates more upside ahead.

The Relative Strength Index (RSI) (14) is working hard for a confident shift into the bullish range of 60.00-80.00, which would strengthen the Euro.

For an upside move, a decisive break above the round-level resistance of 1.0700 will drive the asset toward the horizontal resistance plotted from March 15 high at 1.0760 and February 14 high at 1.0804.

On the flip side, a downside break below March 17 low at 1.0612 would drag the shared currency pair toward March 16 low at 1.0551, followed by March 15 low at 1.0516.

EUR/USD hourly chart

• WTI portrays corrective bounce from the lowest levels since December 2021.
• Oversold RSI favors recovery but convergence of 10-DMA, previous support line from late 2021 probe buyers.
• 19-month-old ascending support line lures sellers amid bearish MACD signals.

WTI crude oil picks up bids to consolidate recent losses around $67.15 during Monday’s Asian session. In doing so, the black gold bounces off the 15-month low marked the previous day amid oversold RSI conditions.

However, the energy benchmark remains well below the previous key support confluence comprising the 10-DMA and an upward-sloping support line from December 2021, now resistance near $71.20-30.

It should be noted, however, that the latest rebound could aim for $70.00.

That said, a horizontal area comprising multiple levels marked since early January, around $72.70, appears the key hurdle for the WTI bulls to cross to retake control.

Following that, the mid-month high of around $77.55 could lure the WTI crude oil buyers.

Alternatively, a fresh downside could aim for the latest bottom surrounding $65.45 before aiming for the December 2021 low of around $62.30.

It’s worth mentioning that an upward-sloping trend line from August 2021, around 62.30, also appears the key downside filter to watch for the Oil bears.

Should the quote remains bearish past $62.30, a slump towards the August 2021 bottom of $61.80, as well as to the $60.00 round figure, can’t be ruled out.

WTI: Daily chart

Trend: Further downside expected  

• USD/CHF prints mild gains after two-day losing streak, grinds higher of late.
• Market sentiment dwindles as UBS-Credit Suisse deal struggle to please traders amid fears of more banking fallouts.
• Fed’s 0.25% rate hike appears given but SNB may surprise markets.
• Preliminary readings of March PMIs, baking sector headlines also appear important for fresh impulse.

USD/CHF struggles to defend the first daily gains in three as it seesaws around 0.9270 during early Monday morning in Asia. It should be noted that the Swiss Franc (CHF) pair posted the first weekly gain in the last three even as the US Dollar marked broad losses.

The reason could be linked to the speculations surrounding the Swiss National Bank’s (SNB) refrain from tighter monetary policy measures amid the latest Credit Suisse fallout. However, the news that the UBS is up for buying the troubled Credit Suisse also offered a sigh of relief to the market sentiment and helps the US Treasury bond yields to recover, which in turn allows the USD/CHF to remain mildly bid.

On the contrary, news shared by Reuters suggesting two more banks are struggling in Europe seemed to have also favored the USD/CHF bulls. On the same line could be the market’s cautious mood ahead of the key monetary policy meeting of the US Federal Reserve (Fed) and the Swiss National Bank (SNB).

The banking sector rout drowned the market sentiment in the last week but the US Dollar and the Swiss Franc had to fall amid downbeat Treasury bond yields, as well as the SNB’s role in defending the Credit Suisse. It should be noted that the downbeat US data added strength to the greenback’s south-run the previous week.

During the last week, the US Consumer Price Index (CPI) for February matched 6.0% YoY market expectations versus 6.4% prior while the Retail Sales also marked -0.4% MoM figure versus -0.3% expected and 3.2% previous readings. Further, US Consumer Confidence per the University of Michigan's (UoM) Consumer Confidence Index dropped to 63.4 for March versus 67.0 expected and prior. The details suggest that the year-ahead inflation expectations receded from 4.1% in February to 3.8%, the lowest reading since April 2021, while the 5-year counterpart dropped to 2.8% from 2.9% previous reading. Furthermore, US Industrial Production remained unchanged in February versus 0.2% expected and January's 0.3% (revised from 0%) expansion.

Against this backdrop, Wall Street closed with losses and the US two-year Treasury bond yields dropped the most in three years.

Moving forward, a light calendar could restrict USD/CHF moves on Monday but the bulls are likely to keep the reins amid hopes of that the SNB may cite the banking sector fallout to disappoint markets. That said, the Fed is expected to announce 0.25% rate hike while the SNB is up for another 0.50% increase in the benchmark rate during their upcoming monetary policy meetings on Wednesday and Thursday respectively.

Technical analysis

Sustained bounces off the 50-DMA, close to 0.9260 at the latest, could help USD/CHF to challenge a one-week-old descending resistance line, around 0.9295 by the press time.

• NZD/USD is struggling in extending its upside above 0.6280 ahead of the PBoC policy.
• To provide assistance to the economic recovery agenda, PBoC might remain dovish on interest rates.
• Rising expectations for a steady monetary policy by the Fed are restoring the confidence of investors in US equities.

The NZD/USD pair is facing barriers in extending its upside above the immediate resistance of 0.6280 in the early Asian session. The Kiwi asset is expected to remain on the tenterhooks as investors are awaiting the release of the interest rate decision by the People’s Bank of China (PBoC) for further action.

To provide assistance to the economic recovery agenda in the Chinese economy, PBoC might remain dovish on interest rates. Economist at UOB Group suggests that the PBoC could reduce the Loan Prime Rate (LPR) at its next meeting on March 20. They further added, “With the need for further support measures toward the real economy and for 5Y loan prime rate (LPR) to fall further to boost demand for homes, we see the possibility for the 1Y LPR to fall to 3.55% and 5Y LPR to 4.20% in Mar, following the National People’s Congress (NPC).”

It is worth noting that New Zealand is one of the leading trading partners of China and a dovish policy by the PBoC would also be supportive of the New Zealand Dollar.

Meanwhile, the position of NZ current account deficit is impacting its long-term worthiness. Data released last week showed that the current account deficit blew out to 8.9% of Gross Domestic Product (GDP) in 2022 as the nation imported more goods and services than it exported. While S&P had forecast the deficit would be 6.7% in June last year and ease to 5.8% by mid-2023.

Bloomberg reported, "New Zealand’s credit grades with S&P Global Ratings could come under pressure if the nation’s current account deficit remains too big."

S&P500 futures are showing decent gains in the early Tokyo session after settling last week with significant losses, portraying a minor optimism in the overall risk-aversion theme. Rising expectations for a steady monetary policy by the Federal Reserve (Fed) are restoring the confidence of investors in United States equities. The US Dollar Index (DXY) has also attempted a recovery move from 103.65, however, the upside looks capped led by the banking sector’s debacle.

• USD/JPY bulls cheer as UBS set to take over Credit Suisse.
• Global central banks unite to offer liquidity via US Dollar swap lines.
• Two major banks in Europe are examining scenarios of contagion.  

USD/JPY looks to consolidate just above the 131.50 mark amid a jittery environment fueled by the Credit Suisse fallout during the weekend. Finally, Credit Suisse is going to be taken over by UBS as the Swiss authorities persuaded the latter on Sunday to make a bid for a takeover.

The news came just after some of the world's top central banks started to offer daily loans in US dollars to their banks to reduce any stress in the financial system.

In this globally coordinated response, the Federal Reserve (Fed) has also stepped in along with the Bank of Canada (BoC), Bank of Japan (BoJ), Swiss National Bank (SNB), and the European Central Bank (ECB).

The liquidity injection will be done through swap lines, where central banks can offer US Dollar operations with seven-day maturity. The emergency swap line was first introduced during the COVID pandemic to ease US Dollar availability.

Prior to this joint effort, the Fed had already opened the discount window for commercial banks, and the banks have borrowed nearly $164 billion amid this liquidity crisis. As a result, we have seen a slight spike in the Fed balance sheet despite the ongoing Quantitative Tightening (QT) program. One can attribute this as a mini version of QE, which is contrary to the ongoing QT. We have seen the same scenario with the BoE a while ago during the pension fund crisis.

It seems contagion in the global banking sectors is not looking to be tamed yet, citing some Reuters reports. At least two major banks in Europe are examining scenarios of contagion in the region's banking sector and are looking to the Federal Reserve and the ECB for stronger signals of support.

It's important to note how the Fed will address this entire situation in their upcoming FOMC meeting this week and whether are they able to deliver the expected 25 basis point rate hike.

Levels to watch

“At least two major banks in Europe are examining scenarios of contagion in the region's banking sector and are looking to the Federal Reserve and the ECB for stronger signals of support,” two senior executives close to the discussions told Reuters.

“The fallout from the crisis of confidence in Credit Suisse Group AG and the failure of two U.S. banks could ripple through the financial system next week, the two executives separately told Reuters on Sunday,” reported Reuters.

The news also quotes the two anonymous people saying that the two banks have held their internal deliberations on how soon the European Central Bank should weigh in to highlight banks' resilience, specifically their capital and liquidity positions, per Reuters.

Key quotes

Market implications

The news joins the pre-Fed anxiety to tame the market’s risk-on mood, which in turn allows the risk-barometer pair AUD/USD to grind higher past 0.6700, around 0.6715 by the press time.

Also read: AUD/USD grinds higher past 0.6700 on Credit Suisse news, comments from RBA’s Kent, Fed eyed

• USD/CAD is expressing volatility contraction ahead of Fed inflation and Canada’s inflation.
• The USD Index has corrected further to 103.65 as the Fed is expected to go light on interest rates.
• A 40.00-60.00 range oscillation by the RSI (14) indicates that investors are awaiting a fresh trigger for further action.

The USD/CAD pair has found a cushion around 1.3700 after a marginal correction in the Asian session. The Loonie asset is showing an expression of volatility contraction as investors are awaiting the release of Canada’s Consumer Price Index (CPI) data and the interest rate decision by the Federal Reserve (Fed), which will release on Tuesday and Wednesday respectively.

The option for an unchanged monetary policy decision by the Federal Reserve (Fed) is gaining the limelight as banking shakedown in the United States has impacted the confidence of investors dramatically.

Meanwhile, the US Dollar Index (DXY) has corrected further to 103.65 as the Fed is expected to go light on interest rates. S&P500 futures have shown a recovery move after a bearish Friday’s settlement, however, investors’ risk appetite for US equities is extremely weak.

On the Canadian Dollar front, investors are awaiting Tuesday’s Canada inflation data. As per the consensus, the headline Consumer Price Index (CPI) is expected to accelerate by 0.4%, lower than the former release of 0.5%. This might drag the annual headline CPI further to 5.5%. Also, the annual core CPI is expected to trim to 4.6% from the former release of 5.0%.

USD/CAD is auctioning in a Symmetrical Triangle chart pattern on an hourly scale, which indicates a sheer volatility contraction followed by an expansion in the same. The downward-sloping trendline of the chart pattern is plotted from March 10 high at 1.3862 while the upward-sloping trendline is placed from March 14 low at 1.3657.

Overlapping 20-period Exponential Moving Average (EMA) at 1.3724 with the asset price indicates a consolidation ahead.

Adding to that, a 40.00-60.00 range oscillation by the Relative Strength Index (RSI) (14) indicates that investors are awaiting a new trigger for further action.

A decisive breakdown of March 14 low at 1.3652 would drag the loonie asset toward March 07 low at 1.3600, followed by March 03 low at 1.3555.

In an alternate scenario, a confident recovery above March 14 high at 1.3773 would drive the major toward March 09 high at 1.3835 and the round-level resistance at 1.3900.

USD/CAD hourly chart

• AUD/USD cheers risk-on mood, cautiously optimistic comments from RBA’s Kent.
• RBA’s Kent conveys soundness of Aussie banks, defends rate hike moves.
• Hopes that UBS buyout of Credit Suisse could tame bond market rout favor the sentiment.
• RBA Meeting Minutes, preliminary PMIs for March and FOMC Meeting are the week’s key events to watch for clear directions.

AUD/USD remains mildly bid above 0.6700, around 0.6715 by the press time, as upbeat comments from the Reserve Bank of Australia (RBA) Official joins the market’s cautious optimism over the UBS-Credit Suisse deal during early Monday. However, fears of more banking sector rout and anxiety ahead of this week’s top-tier data/events probe the Aussie pair buyers of late.

Christopher Kent, Assistant Governor (Financial Markets), gave a speech on "Long and Variable Monetary Policy Lags" at the KangaNews Debt Capital Market Summit, in Sydney, early Monday morning in Asia-Pacific. The policymaker initially followed the suit of global central bankers while trying to rule out fears of the US and European banking sector fallout. More importantly, RBA’s Kent said that RBA is very conscious of the challenges facing borrowers from rapid rate rises.

Also read: RBA’s Kent: Australian banks are unquestionably strong

Apart from the cautious optimism spread by comments from RBA’s Kent, news that the UBS is up for buying the troubled Credit Suisse also offered a sigh of relief to the market sentiment and propelled the risk-barometer AUD/USD pair.

It should, however, be noted that the news shares by Reuters suggesting two more banks are struggling in Europe seemed to have poked the AUD/USD bulls. On the same line could be the market’s cautious mood ahead of the key Federal Reserve (Fed) Monetary Policy meeting.

During the last week, the fallout of the US and European banks propelled the market’s move towards the US bond and Gold, which in turn drowned the US Dollar while fuelling the AUD/USD prices. In addition to the downbeat yields, the US Dollar also had to bear the burden of downbeat US inflation and Retail Sales data.

On Friday, US Consumer Confidence per the University of Michigan's (UoM) Consumer Confidence Index dropped to 63.4 for March versus 67.0 expected and prior. The details suggest that the year-ahead inflation expectations receded from 4.1% in February to 3.8%, the lowest reading since April 2021, while the 5-year counterpart dropped to 2.8% from 2.9% previous reading. Furthermore, US Industrial Production remained unchanged in February versus 0.2% expected and January's 0.3% (revised from 0%) expansion.

Amid these plays, Wall Street closed with losses and the US two-year Treasury bond yields dropped the most in three years.

Having witnessed the initial market reaction to comments from RBA’s Kent, AUD/USD traders may have to rely on the risk catalysts amid a light calendar on Monday, as well as a cautious mood ahead of the key Federal Open Market Committee (FOMC) monetary policy meeting. It's worth noting that Tuesday’s RBA Meeting Minutes and Thursday’s preliminary readings of Australia’s March month S&P Global PMIs will also be important to observe for fresh impulse.

Technical analysis

A clear upside break of six-week-old descending resistance line, now immediate support around 0.6630, directs AUD/USD buyers towards the 200-DMA hurdle of near 0.6765.

“US regulators were in touch with Swiss counterparts on UBS-Credit Suisse deal,” said an anonymous US Official during Sunday per Reuters.

Additional comments

Market sentiment remains fragile

The news fails to improve market’s mood, even if the traders begin the key week on a firmer footing after weekend news of the UBS-Credit Suisse deal. The reason could be linked to Reuters’ headlines suggesting more banking fallouts in Europe.

Also read: UBS to take over Credit Suisse

“Capital, liquidity positions well above APRA’s regulatory requirements,” said Christopher Kent, Reserve Bank of Australia’s (RBA) Assistant Governor (Financial Markets).

“Reserve Bank of Australia (RBA) Assistant Governor Christopher Kent also said the full impact of increases in interest rates was taking longer to filter through to the economy due to a higher share of fixed-rate mortgages and the savings amassed by households during the pandemic,” reported Reuters.

More comments

AUD/USD retreats from intraday high

Despite the positive comments, AUD/USD pares intraday gains as it drops from near the daily top surrounding 0.6720 to 0.6705 by the press time.

• Gold price has printed a fresh 11-month high at $1,988.33 as it is being treated as a safe-haven amid the banking fiasco.
• Fed policymakers are tied to go extremely hawkish as they are required to restore investors’ confidence.
• Gold price is further approaching the horizontal resistance plotted around $2,070.54.

Gold price (XAU/USD) printed a fresh 11-month high at $1,988.33 on Friday. The precious metal is approaching the psychological resistance of $2,000.00 and is expected to test soon as the odds of an unchanged interest rate policy by the Federal Reserve (Fed) have accelerated dramatically.

The odds of a steady monetary policy have got more limelight as January’s inflation data has resulted in a one-time blip, February’s Consumer Price Index (CPI) has shown that it is in a declining trend, and now Fed policymakers have a responsibility of restoring investors’ confidence in the United States economy after the commercial banks’ fiasco.

As per the CME Fedwatch tool, investors are now expecting the possibility of an unchanged monetary policy with 38% chances while the rest are favoring a 25 basis point (bps) interest rate hike by Fed chair Jerome Powell to 4.75-5.00%.

S&P500 futures were heavily beaten on Friday as investors are worried about banking sector turmoil. In times of banking shakedown, investors are considering Gold as a safe-haven asset. The US Dollar Index (DXY) found intermediate support around 103.65, however further downside looks solid as Fed policymakers are tied to go extremely hawkish in the interest rate decision to be delivered on Wednesday.

In a recent poll by Reuters, 76 of 82 economists believe that the US Federal Reserve (Fed) would raise its policy rate by 25 basis points to the range of 4.75-5% following the March FOMC meeting

Gold technical analysis

Gold price has delivered a breakout of the horizontal resistance plotted from the February 02 high at $1,959.80, which has turned support on a daily scale. The asset is riding the Bollinger Bands (20,2), which indicates a sheer strength in the Gold bulls.

The precious metal is further approaching the horizontal resistance plotted from the 08 March 2022 high at $2,070.54.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in the bullish range of 60.00-80.00, which indicates that the upside momentum is extremely solid.

Gold daily scale

• GBP/USD bulls move in at the start of the week. 
• Markets look ahead to this week´s BoE and Fed. 

The US Dollar fell on Friday sending GBP/USD to test 1.22 the figure although further declines in the shares of Credit Suisse and First Republic Bank rattled markets and weighed on the pair later in the day. However,  UBS is said to take over Credit Suisse in a deal aimed at stemming what was fast becoming a global crisis of confidence which is putting a bid back into the pair. GBP/USD is up by some 0.2% and trading back in the 1.22s.

The UBS and  Credit Suisse deal is expected to be closed by the end of this year. Colm Kelleher, chairman of UBS Group, said the agreement "represents enormous opportunities". He also said that his bank's long-term aim would be to downsize Credit Suisse's investment banking business and align it with the "conservative risk culture" of UBS.

Meanwhile, markets will look ahead to this week´s events in the Federal Reserve and Bank of England interest rate decisions. The BoE is expected to hike by 25bp on 23 March bringing it to 4.25%.

´´Markets are currently pricing around 15bp for the meeting, thus close to an equal implied probability for an increase of 25bp in the Bank Rate and an unchanged decision,´´ analysts at  Danske Bank said. ´´While the latest UK economic data releases, in our view, still support a 25bp hike on Thursday, we acknowledge that the probability of the BoE keeping the policy rate unchanged has risen considerably amid rising systemic risk fears. This risk is only supported by what we consider to be a fairly cautious Monetary Policy Committee (MPC).´´

As for the Fed, analysts at TD Securities expect a 25bp rate hike, taking the Fed Funds rate to 4.75%-5.00%. ´´Post-meeting communication is likely to emphasize that the Fed is not done yet in terms of tightening (also reflected in a slightly more hawkish dot plot), with officials also flagging the more uncertain economic environment, resulting in an even larger emphasis on data dependence.´´