2023 Market Forecast by Solid ECN

[SOLID ECN LLC]

Markets ignore European PMI revisions

Revisions of European manufacturing PMI indices for March were released this morning. Spanish reading showed quite noticeable beat but releases from other countries, like France and Germany, were revisions and came in close to flash estimates. As a result, there was no major reaction to those on the market. EURUSD trades mostly flat on the day while European equity markets trade slightly higher on the day.

Manufacturing PMIs for March​

• Spain: 51.3 vs 50.1 expected​
• Italy: 51.1 vs 51.0 expected​
• France (final): 47.3 vs 47.7 first release​
• Germany (final): 44.7 vs 44.4 first release​
• Eurozone (final): 47.3 vs 47.1 first release​

While EURUSD has seen nearly no reaction to PMI releases, the pair saw some interesting moves earlier in the day and a pin bar pattern near an important price zone can be spotted on the daily chart.​

 

[SOLID ECN LLC]

Oil

OPEC+ members announced massive voluntary oil output cuts over the weekend, triggering a spike in oil prices at the beginning of new week's trade. A total cut of 1.157 million barrels was announced by 8 OPEC and non-OPEC countries. Those cuts will take effect from May and will remain in force until the year of the year. On top of that, Russia announced that its 500 thousand barrel output cut, which was set to end by the end of June 2023, will be extended until the end of 2023. This is a massive reduction in supply, amounting to more than 1% of global output, and it should not come as a surprise that oil prices jumped over 5% at the beginning of a new week. However, it should be noted that such massive oil output cuts may also hint that OPEC has some serious concerns about demand outlook. Having said that, this may not be bullish for oil prices in the long-term. OPEC+ Joint Minister Monitoring Committee is meeting today and will provide recommendations on policy. It was widely expected that recommendation will be for no change in the output but weekend announcements created uncertainty.

OPEC: 1,079k bpd​

• Saudi Arabia: 500k bpd​
• Iraq: 211k bpd​
• United Arab Emirates: 144k bpd​
• Kuwait: 128k bpd​
• Algeria: 48k bpd​
• Oman: 40k bpd​
• Gabon: 8k bpd​

OPEC+: 578k bpd​

• Kazakhstan: 78k bpd​
• Russia: extension of 500k bpd cut until end of the year (was set to end in June)​

Brent (OIL) launched this week's trading with a big bullish price gap but those gains started to be erased later on. Nevertheless, oil continues to trade around 5% higher on the day. A point to note, however, is that price did not manage to reach a key resistance zone in the $87 area, marked with previous price reactions and the upper limit of the Overbalance structure. This means that the outlook remains bearish and an attempt to fill the bullish price gap cannot be ruled out. The $80 area is the first support to watch in such a scenario.​

 

[SOLID ECN LLC]

Gold​

• OPEC+'s surprising decision to cut production has lifted oil prices. OIL.WTI quotations jumped above the $81 level.​
• Germany's DAX tested Friday's highs, but ultimately closed the day 0.3% lower. In turn, we saw slight increases in France, where the CAC40 added 0.32%, or the UK, the FTSE100 gained 0.54%.​
• Gold is doing quite well on Monday, with the precious metal's quotations rising less than 1% and approaching once again the $2,000 barrier, which should be seen as short-term resistance.​
• Treasury bonds are gaining on a wave of manufacturing ISM data, which eased concerns about lingering inflationary pressures in the U.S. and overshadowed the potential impact of OPEC+ oil production cuts on another jump in the economy's goods and services prices. U.S. TNOTE's and German BUND's are both gaining more than 0.3% in today's session.​
• US industrial activity indicators published today came in below expectations. Both the PMI and ISM readings showed that actuality in the sector is declining.​
• Looking at the forex market, we can observe weakness in the US currency. The EURUSD pair even managed to go above 1.0900, but we are seeing a slight pullback in the evening hours. Nevertheless, the main sentiment on the pair remains upward in the medium term.​
• The crypto market did not show any decisive direction today. The major digital currencies are trading mixed. In the evening hours, bitcoin remains in the regions of the reference level.​

GOLD quotes are currently testing resistance stemming from the line drawn after the recent tops. If pierced above, resistance at the $2,000 level may be tested. In turn, its crossing may lead to the generation of another upward wave.​

 

[SOLID ECN LLC]

Dogecoin - Chart of the Day​

Dogecoin saw massive moves yesterday in the evening, with the coin rallying around 30% in less than 2 hours. While other cryptocurrencies also saw some gains, none experienced as big a jump as Dogecoin. It should not come as a surprise as a trigger for the move higher was Dogecoin-specific. Elon Musk changed Twitter's logo to Shiba Inu dog, a 'logo' of Dogecoin and its supporters. The move triggered an instant rally in Dogecoin, sending it to the levels not seen since early-December 2022. Musk himself explained that he is simply delivering onto promise he made in a tweet some time ago that he will buy Twitter and change its logo to Dogecoin logo.

Taking a look at the Dogecoin chart at the D1 interval, we can see that the strong upward move launched yesterday in the evening is continuing today. While price erased some of initial gains yesterday, Dogecoin bulls regained ground today and are pushing the coin towards the 0.10 area. A point to note is that the price of cryptocurrency managed to break above a mid-term support zone in the 0.0890 area, marked with previous price reactions as well as the downward trendline. A break above this area brightened technical outlook for the bulls and a test of the resistance zone ranging below 0.11 handle cannot be ruled out in the coming days.​

 

[SOLID ECN LLC]

AUDNZD after RBA and before RBNZ​

Australian dollar is one of the worst performing G10 currencies after Reserve Bank of Australia announced its latest monetary policy decision earlier today. The RBA decided to pause the rate hike cycle and keep the main interest rate unchanged at 3.60%. While such a decision was expected, wording of the RBA statement was changed so that it no longer suggests that future rate hikes are certain. Having said that, today's weakening of AUD should not come as a surprise.

Traders will be offered rate decisions from another Antipodean central bank tomorrow at 3:00 am BST - Reserve Bank of New Zealand. In this case, the market expects rates to be increased by 25 basis points with the Official Cash Rate (OCR) jumping to 5.00%. A 25 basis point rate move is fully priced in by money markets. Economists also seem to be convinced that a 25 bp rate hike is the next move - out of 21 economists surveyed by Bloomberg, 19 expect a 25 bp rate hike, 1 expects a 50 bp rate hike and 1 expects no change. This would mark another slowdown in the pace of tightening after the Bank slowed from 75 bp rate hike to 50 bp rate hikes in February. Moreover, it may also hint that the 5.5% peak OCR rate in latest RBNZ forecasts may no longer be a base case scenario with expectations swinging towards a lower terminal rate. This will be the focus of RBNZ announcement tomorrow - how much higher will the rates go. Money markets currently see a rate peak near 5.25% in December 2023.

Taking a look a AUDNZD chart at H1 interval, we can see that the pair has been recently trading sideways. Dovish RBA decision today led to quite a steep drop on the pair. AUDNZD broke below the 1.0755 support zone and continued to move lower until it reached 1.0720 support zone (orange circle). This is an important support zone, marked with previous price reactions as well as 200-hour moving average (purple line). A break below it could pave the way for a test of recent lows in the 1.0680 area. However, a hawkish RBNZ may be needed for this scenario to materialize.​

 

[SOLID ECN LLC]

Morning Wrap - TNOTE​

• Wall Street indices ended yesterday's session mostly lower. Investor sentiment was weighed down primarily by macro data readings and comments from the Fed's Mester, which point to a slowdown in the US economy.​
• The S&P 500 fell 0.25%, the Dow Jones gained 0.24% and the Russell 2000 small-cap index lost 0.99%. The Nasdaq index of technology companies was the weakest performer, losing 1.07%.​
• With the specter of a global recession widening, US 10-year government bond yields are under particular scrutiny by investors, having fallen to their lowest level since September 2022 (3.29% zone). Currently, the money market sees a 48% chance of a 25 basis point hike by the Fed at its May meeting and a 52% chance of keeping rates unchanged.​
• Asia-Pacific indices traded mostly lower - the Nikkei fell 1.3%, the S&P/ASX 200 lost 0.4%, the Kospi lost 1.32% and the Nifty 50 traded 0.15% higher.​
• In the FX market, we are seeing capital outflows to safe haven currencies, i.e. the US dollar and the Japanese yen, among others. The EURUSD pair is recording slight declines and breaking out below the support zone at 1.09. At the moment, pairs linked to the currencies of the antipodes are recording the biggest declines.​
• China plans to cut tax burdens and fees totaling CNY1.8 billion for the corporate sector.​
• China's Caixin PMI index for services recorded an increase and came in at 57.8 (55 was expected, previously it was 55).​
• Former BOJ banker Kazuo Momma commented that the Yield Curve Control mechanism may be terminated this month.​
• China may ban exports of technology used to produce high-performance rare earth magnets.​
• Energy commodities are posting moderate declines this morning. WTI crude oil is losing 0.5%, while natural gas is down 0.4%.​
• Gold is slightly decelerating from its recent upward impulse and is currently consolidating in a zone near 2013 USD. UBS raised its target price for gold at the end of March (2024) to $2200 (previously $2100)​
• There is mixed sentiment in the cryptocurrency market. Bitcoin is currently losing nearly 0.5%, while Ethereum is down 1.16%. On the other hand, smaller projects such as Maker and Iota are gaining more than 3.5%.​

Weak macroeconomic data and in-between comments from Fed bankers, which indicate that given the high economic and systemic uncertainty, the rate hike cycle may be coming to an end, are bolstering sentiment in the debt market.​

 

[SOLID ECN LLC]

May ECB rate hike unsure after Lane comments

Lane, the ECB's chief economist gives a question mark on the May decision, pointing out that it will depend on inflation perpsectives, including the underlying ones. In view of this, Lane stresses that this is why the ECB does not give guidance for the next meeting and everything depends on the data and its outlook. On the other hand, he says that if the data performs as in the projections, May should bring a hike. However, it is unclear what kind. The market, on the other hand, is currently pricing that it should be a smaller hike, or 25 bps.

The EUR is not reacting to these reports, although we have seen slight increases on the pair in recent minutes. Further strong declines in US and European yields are progressing. U.S. yields are down 2.8 basis points today, and European yields are down 2.7 basis points.​

 

[SOLID ECN LLC]

USCAD drops after Candian jobs data beat​

The Canadian jobs report for March was released today at 1:30 pm BST. Report release was brought a day forward as Canada will be observing Good Friday tomorrow. Data turned out to be a huge positive surprise. Employment change turned out ot be much higher-than-expected with both full-time and part-time jobs showing decent increases. As a result, the unemployment rate avoided an expected uptick to 5.1% and stayed unchanged at 5.0% instead.

Canada, jobs report for March​

• Employment change: +34.7k vs +12.9k expected (+21.8k previously)​
• Unemployment rate: 5.0% vs 5.1% expected (5.0% previously)​
• Full-time employment: +18.8k vs +31.1k previously​
• Part-time employment: +15.9k vs -9.3k previously​

USDCAD climbed to the short-term resistance zone near 1.3490 prior to the release. However, the pair pulled back following better-than-expected data. A support zone near 1.3460 handle, marked with previous price reactions as well as the lower limit of the upward channel. However, bulls managed to defend the area and erased the majority of the drop in the first minutes following the release.​

 

[SOLID ECN LLC]

Bitcoin​

Cryptocurrencies are retreating from recent record highs as the sell-off on the Nasdaq gains strength and concerns around a slowing US economy have increased. A weakening consumer could mean lower risk appetite and a narrower range of potentially interested buyers of speculative assets. A recession would likely do nothing good for the crypto market. With its declining reaction in recent days, bitcoin has confirmed that its role as a recession or banking crisis hedging asset is still uncertain. Is the king of cryptocurrencies in for a trend change?

​

A change in the crypto trend?​

The on-chain market sentiment vector is pointing to levels close to greed, which could signal an impending correction. It's also worth noting that BTC's volatility has been drying up in recent days, which has historically heralded an imminent, sudden price movement.

Looking at the chart of BITCOIN on the D1 interval, we can see that the RSI indicator has risen since the beginning of the year, but since then it has been recording lower and lower levels, although the price of the largest cryptocurrency has been steadily rising. This phenomenon is called a bearish divergence, and it can signify the weakening strength of buyers and a change in the trend. The closest support level for declines is the 23.6 Fibonacci retracement of the upward wave initiated on March 11, when the cryptocurrency rebounded sharply amid the collapsing SVB.​

 

[SOLID ECN LLC]

EURUSD​

USD is trading slightly higher today but EURUSD remains above 1.09 mark and maintains the uptrend. The latest drop in US yields shows that USD still has room to drop. If NFP data shows sub-200k jobs gain, it would be a strong sign of the labor market cooling down. However, it will not be a sign of a crisis yet. Nevertheless, readings that are significantly below 200k would likely encourage the Fed to pause the rate hike cycle and not raise rates at the May meeting. On the other hand, should we once again see strong job gains and strong earnings growth, rate hike at the May meeting may be still in play.