2023 Market Forecast by Solid ECN

[SOLID ECN LLC]

DE30​

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

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

 

[SOLID ECN LLC]

US30
​

• European indices erased early losses and finished today's session higher, with Dax up 1.12% as investors continued to monitor risks to the European banking sector. Credit Suisse was purchased by its competitor UBS, and global central banks' took several actions to boost dollar liquidity.​
• ECB President Lagarde said that Eurozone banks have capital and liquidity levels well beyond their requirements. Without the tensions, policymakers would have indicated that additional hikes were required.​
• The government of French President Emmanuel Macron survived a no-confidence vote by nine votes​
• The Dow Jones and the S&P 500 gain 0.9% and 0.75% respectively while the Nasdaq is trading around the flatline despite lingering risks of the banking crisis. Traders now await the highly-anticipated 2-day FOMC meeting to kick off tomorrow.​
• First Republic Bank stock plunged 40.0%, extending recent heavy losses, after S&P downgraded the bank deeper into junk status and said the recent $30 billion cash infusion may not be enough to solve its liquidity problems. Buyers managed to erase some losses on news that JPMorgan Chase is advising First Republic Bank on strategic alternatives, one of which is capital raise which could dilute current shareholders. A sale of the bank is also taken into consideration.​
• OIL.WTI briefly dropped to $64.50 which was the lowest level since early December 2021, only to erase all of the losses in the evening as moods improved a bit. Natgas price fell 5.0% and is testing support at $2.22 as average US gas demand, including exports, is expected to fall to 108 bcfd this week from 116.9 bcfd last week due to milder weather.​
• Precious metals are trading higher amid a lower dollar. Gold jumped to one-year high at $2012 at the beginning of European trading as Credit Suisse bond write down fueled demand for safe haven assets. However almost all of the gains have been reversed later in the session. Silver pulled back from local resistance at $22.70.​
• The winner of today's FX session is the British pound, which strengthened over 0.8% against the dollar. GBPUSD pair managed to break above February 14 highs and now oscillate above the 1.2270 level.​
• The dollar index dropped below 103.5, extending losses for the 3rd session as investors anticipate that the Fed might not hike rates as much as previously thought because of the banking crises. Not long ago, a 50 bp hike was expected, while currently markets expect at 25 bp hike or even a pause of the tightening process.​
• Bitcoin pulled back from 9-month high at $28,500 and is currently testing local support at $28000. Nevertheless recent turmoil of the banking sector supports digital assets and as long as current sentiment prevails crypto bulls seem to have an advantage. The key support for the most popular cryptocurrency is located around the $25,000 mark and only a break below would point to resumption of downward move.​

USDJPY currency pair has been moving in a downtrend recently. Looking at the H1 interval, buyers launched a small upward correction. If the bullish momentum gains steam, EMA100 (blue line) should be treated as the nearest resistance. In case of break higher, upward impulse may accelerate towards crucial resistance around 133.30, which is marked with the upper limit of the 1:1 structure and 38.2% Fibonacci retracement.​

 

[SOLID ECN LLC]

S & P

Also news that JPMorgan CEO Jamie Dimon is leading discussions with other CEOs of other large US banks in an effort to provide further support, including potentially converting their $30 billion in deposits into a capital injection, only slightly calmed investors' nerves. According to Wall Street Journal, preliminary discussions have been focused on ways that the banks can boost the beleaguered banks capital. Also in play is a potential investment by the banks themselves.

Also according to CNBC, JPMorgan Chase is advising First Republic Bank on strategic alternatives, one of which is capital raise which could dilute current shareholders. A sale of the bank is also taken into consideration.

First Republic (FRC.US) stock has been in free fall recently. Last week alone, a troubled San Francisco-based lender lost nearly 70.0% of its market value. Sell-off accelerated in pre-market, however sellers failed to retest all-time low at $9.00 and buyers managed to erase some of the losses in the evening. Nevertheless, the main sentiment remains bearish and only a break above the local resistance zone around $42.25 could let to a bigger upward correction.​

 

[SOLID ECN LLC]

AUDUSD

Yesterday's trading on Wall Street and in Europe ended higher, making up for losses from earlier in the day initiated by the uncertainty surrounding the takeover of Credit Suisse by UBS. Better sentiment fueled Asian markets today. Stock exchanges in Japan are closed due to a national holiday.
​

• AUDUSD pair breaks back below the 0.6700 level. The case for a pause in the rate hike cycle by the RBA at its 4 April meeting has strengthened. According to the RBA minutes released today, the Board agreed to reconsider the case for pausing rate hikes and to closely examine incoming data from the economy.​
• The ECB's Holzmann is softening his previous calls for three consecutive 50 basis point rate hikes.​
• From the US, there was some news affecting the stock market. The US Treasury is looking at unlimited deposit guarantees (via the FDIC) if the banking crisis worsens.​
• On the political front, investors are looking at the Putin-Xi meeting in Moscow, which may bring new threads in the realm of the Ukraine conflict and other geopolitical-economic relations.​
• PIMCO lost $340 million on the redemption of Credit Suisse Bank's AT1 bond. Lawyers from Switzerland, the United States and the United Kingdom are talking to Credit Suisse's AT1 bondholders about possible legal action after up to $17 billion in losses related to the redemption.​
• Goldman Sachs commented on the current state of the equity market this way - "valuations don't look particularly attractive".​
• Bill Ackman, founder and hedge fund manager of Pershing Square Capital commented that the FOMC should consider holding off on rate hikes for tomorrow's Committee decision. Today marks the start of the Fed's two-day meeting in Washington.​
• Citi predicts a 25bp rate hike on Wednesday, and notes that the tone of the press conference will now be particularly important.​
• Citadel and Trafigura traders believe that the turmoil in the banking market is temporary and unlikely to cause far-reaching perturbations in the global economy. Demand for oil should strengthen.​

Quotations:
Futures in Europe point to a bullish opening to the session on the Old Continent. US contracts are also gaining, however the scale of the increases is minimal. On the FX market, the USD is currently performing best. NZD and AUD are the worst performers. Energy commodities are down, extending the wave of uncertainty in the economy. Gold and silver are correcting recent gains and recording slight declines. Bitcoin is currently losing 0.4 per cent and slipping towards $27,800.

The AUDUSD pair is currently trading in a structure bounded by important support and resistance levels. The upcoming FOMC decision and ongoing banking uncertainty could create additional volatility on the pair.​

 

[SOLID ECN LLC]

US500​

The key event of the month, the FOMC interest rate decision, is ahead of us. Although the Fed's decision is always referred to as the event of the month, tomorrow's decision will be even more closely scrutinized by the market due to the lingering specter of the banking crisis in the background. The mood on Wall Street is a veritable rollercoaster at the moment, but let us try to take a look at where the US500 benchmark has been moving and what might happen in the coming days.

As we can see on the chart of the US500 contracts on the D1 interval attached below, the instrument's quotations have been moving in a very interesting technical structure for almost 2 years. The US500 broke out above the long-term downtrend line and successfully defended its outer extension, which encouraged the bulls to rise. However, we are inexorably approaching the next limitation, namely the resistance set by the uptrend initiated in the last quarter of 2022.

What will happen next? To answer this question, we need to consider the factors that are shaping current market sentiment, namely tomorrow's FED decision and the specter of a banking crisis. At the moment, the money market is pricing in an 83.4% chance of a 25 basis point hike, which seems market neutral at the moment. However, the key factor will be Powell's comments after the meeting regarding the hike cycle in the context of banking uncertainty. The risk of worsening problems in the sector will go a long way to curbing the hawkish enthusiasm of the Fed, which, remember, is in an advanced stage of tightening and seeing positive developments in the economy, such as last week's good PPI inflation reading. Today, equity market sentiment was bolstered by further comments from the US Treasury, which was reported to be looking at providing unlimited deposit guarantees (via the FDIC) if the banking crisis worsens. In the event of a dovish FED, stock markets could eagerly extend the current upward momentum and break out above resistance near 4080 points. On the other hand, if the FED maintains a firm monetary stance, a downward impulse could be initiated towards support near 3870 points.​

 

[SOLID ECN LLC]

ZEW Sentiment Index Below Expectations​

• 10:00 am GMT - Germany, ZEW sentiment index for March. Actual: 13.0. Forecast: 15.0. Previously: 28,1​
• Current conditions: Actual: -46.5. Forecast: -44.3. Previously: -45.1​
• ZEW says the international financial markets are under strong pressure. Assessment of the earnings development of banks and insurance sector have deteriorated considerably.​

DE30 did not react to the below expectation reading of the ZEW index.​

 

[SOLID ECN LLC]

EURUSD

US home sales data for February was released at 2:00 pm GMT today and it turned out to be a massive beat. Data came in at 4.58 million, up from 4.00 million in January and significantly above 4.20 million expected by the market. The release trigger an uptick on equity markets with S&P 500 (US500) reaching a fresh daily high near 4,030 pts. USD, on the other hand, was muted with EURUSD barely moving in the first minutes following the release.

US home sales data for February was released at 2:00 pm GMT today and it turned out to be a massive beat. Data came in at 4.58 million, up from 4.00 million in January and significantly above 4.20 million expected by the market. The release trigger an uptick on equity markets with S&P 500 (US500) reaching a fresh daily high near 4,030 pts. USD, on the other hand, was muted with EURUSD barely moving in the first minutes following the release.​

 

[SOLID ECN LLC]

Oil​

Alexander Novak, Russian deputy prime minister for fuel energy complex, said that the 500k barrels per day oil output cut that was ordered for March will remain in force through June. Novak said that production has not been slashed by the announced half a million barrels yet but Russia is close to achieving this target cut.

Brent (OIL) and WTI (OIL.WTI) ticked higher on the news. Oil prices jumped around 1% after Novak's comments hit headlines.​

 

[SOLID ECN LLC]

GBPUSD​

Inflation Rate in the United Kingdom increased to 10.40% YoYin February from 10.10% in January, above market estimates of 9.9% YoY.

The largest upward contributions came from restaurants and cafes, food, and clothing, partially offset by downward contributions from recreational and cultural goods and services (particularly recording media), and motor fuels. Core CPI rose 6.20% in February over the same month in the previous year, well above analysts' estimates of 5.7%. Fresh data may suggest that the BoE may not necessarily be approaching the end of the tightening cycle. Tomorrow a 25 bp rate hike is expected.

GBPUSD is trading higher today and fresh CPI data provided more fuel for bulls. The currency pair is moving further away from support zone in the 1.2215 area.​

 

[SOLID ECN LLC]

JAP225​

• US indices finished yesterday's session higher amid expectations that the Fed will tighten policy less aggressively in the evening. S&P 500 added 1.30%, Dow Jones moved 0.98% higher and Nasdaq rose 1.58%. Russell outperformed and managed to finish 1.88% higher​
• Indices from Asia-Pacific traded higher today - Nikkei jumped 1.94%, S&P/ASX 200 moved 0.87% higher while Kospi and Nifty 50 rose 1.12% and 0.20% respectively​
• Indices from China traded 0.2-0.45% higher​
• DAX futures point to a lower opening of today's European cash session​
• ECB's Nagel said that policymakers have to be "even more stubborn" in inflation fight. In his opinion Eurozone banking system is resilient, not facing repeat of 2008​
• First Republic Bank could potentially receive government backing, according to Bloomberg​
• API report pointed to a 3.262 million barrel build in US oil inventories (exp. -1.448 mb)​
• RBC analysts believe that OPEC would intervene if oil prices dropped substantially.​
• Russia's Deputy Prime Minister Novak said that the country's current curtailed level of crude oil output would be in place through June 2023.​
• Commerzbank lowered its 2023 midyear Brent crude oil forecast to US$80 a barrel (from $95)​
• Cryptocurrencies are trading slightly higher today - Bitcoin gains 0.5%, Ethereum adds 0.4%​
• Energy commodities are lower - oil drops 1.0% while US natural gas prices fell over 2.6%​
• Precious metals little changed - silver rose 0.16%, gold trades 0.8% higher​
• AUD and NZD are the best performing major currencies while USD and CHF lag the most​

Nikkei (JAP225) was one of the best performing Asian indices today. Index returned to crucial resistance at 27200 pts, which is marked with previous price reactions and 23.6% Fibonacci retracement of the upward wave launched in March 2020.​