Forex FOREX PRO WEEKLY, March 20 - 24, 2023

Sive Morten

Special Consultant to the FPA
Just few days ago we thought that CPI should become primary information this week, but banking crisis, although it has started last Friday but mostly was developing this week overshadows all other events. Probably we get lack of space here if we would try to discuss and describe all crisis details, but in fact, it is not needed. Thus, today we try to consider only major points and make some preliminary conclusions. For perfectionist we acknowledge that it is impossible to see now real depth of the crisis iceberg. I would suggest that even Fed doesn't know all nuances in the depth of banking system and what particular place will be come thin in nearest 2-3 weeks. Thus, we also do not dare to say that we know where crisis will lead us and what will be in the end. We do not know. Now it seems that Fed makes good driving of the crisis, managing its well, and could try to nip it in the bud, but it is too complicated process and surprises could come from you're not expected. Besides, we suggest that here we have the political background as well.

Before we start digging in banking crisis, let's take a look at recent statistics across the Globe. Although now it takes the backseat, but it is temporal, and very soon everybody will turn back and start to catch new released numbers. Based on recent data we could say that structural crisis stands underway and brings now surprises - everything goes as it should to. Industrial production, GDP, manufacturing, retail sales, real estate market are slowing down, while inflation either stands stubborn or rising. This week there are few charts, still that are especially interesting. First is - collapse of foreign investments in China, which has more political background of US-China confrontation. Also pay attention to US regional data - it clearly shows difficult times.


Core Inflation in EU remains high for all history of observations, while Retail Sales remains vulnerable and unstable. Here is also two charts that I would like to show you, because they are specific. First is the food inflation in Germany:


THe Real Estate prices across the Globe:

And most important - take a look at US PPI all Commodity index. This is our favorite index to watch that reflects inflation processes in production by all commodities while popular PPI has some weights on different components. So, our PPI shows strong deflationary process:

And there is an opinion that there may already be degradation mechanisms associated with the decline of industry, aggregate demand and aggregate sales.
Because if it would be the opposite - we should get opposite other numbers as well - growth of GDP, Retail Sales, PMI, ISM etc., that we do not see now. So, everything goes as it should, no drastic changes in major crisis trend by far.


First is, let us to recommend you interesting article by Arthur Hayes. It is rather big, but it brings a lot of details on crisis and recent events. Also he makes forecasts. He is a big fan of crypto, so all his conclusions lead to idea - "spend fiat, by crypto". We have different opinion, Fed has initiated the crisis not to make crypto market happy. But this is off top and stands behind the scope of this report.

If we leave noise behind, here is what has happened this week:
  • The Fed put $300 billion on the balance sheet in less than a week. Most of it went to soft loans to banks ($164.8 billion).The rest was sent to close the hole on the deposits of two bankrupts.

Meanwhile, the "regional banking infection" has reached out to all sorts of dirty funds on derivatives.

Levinson's macro hedge fund Graticule will close after losses: this year the fund fell by more than 25%, most of the losses occurred after the collapse of the American SVB. Its rates tied to short-term bonds collapsed and erased multi-year profits, the people said, asking not to be named because the details are confidential. Why did this happen? It is enough to look at the chart of volatility of treasuries. The second largest jump in the bond market in the last 30+.
  • Janet Yellen calms down while banks are fleeing:
Speaking before the Senate Finance Committee on March 16, 2023, the Treasury Secretary defended the Biden administration and the Fed's response to the collapse of two American banks. Yellen's assurances about US banks are refuted by financial reality, as the largest American banks allocate $30 billion to rescue First Republic Bank." According to people briefed on the matter, U.S. regulators are willing to accept the prospect that the government will cover the losses of Silicon Valley Bank and Signature Bank if it helps to make the sale of bankrupt creditors."

  • And the "High spot" of the show - Bank Term Funding Program (BTFP), aka Bailout.
To keep it simple, Fed agrees to buy from banks US Treasuries and MBS securities by nominal (!!!) price for 1 year, but limits the issue date of these securities not earlier than March 12, 2023. The notional amount of these bonds is around $4.4 Trln - it is a size of a new QE. This is all that you need to know, actually. The Fed’s money is priced at the 1-year interest rate that is higher than long-term rate - banks, for the most part, accrue negative interest over the life of the loan. But it is incomparably better than recognize 30% balance bonds loss and become insolvent. Even though losses are bad, they get to exchange underwater bonds for 100% of their value.

The term of BTFP is 1 year - Advances will be made available to eligible borrowers for a term of up to one year and can be requested under the Program until at least March 11, 2024. But with high degree of certainty it will be extended.

Just to give you some clarity on the value of BTFP (if banks put all available bonds in collateral) - Potentially, the Fed would print $4.189 trillion in response COVID. Right off the bat, the Fed implicitly printed $4.4 trillion with the implementation of BTFP. JPMorgan expects that $2 trillion worth of securities will be brought to the Fed (at face value), which in general is not at all excluded. US Treasury also has provided funds, but in less volume. Now its account in the Fed has dropped to 277 Bln:

  • And the last but not least - QT is lost now. The US Treasury is drying liquidity, providing cash to stressed banks. The Fed's balance sheet jumped $297 billion, the biggest weekly gain since the pandemic. The United States is becoming more and more like China, where the Communist Party does not hesitate to periodically inject trillions of yuan (hundreds of billions of dollars) to support and even save a wide range of industries - from the banking system to raw materials and developers. Money, and not restructuring and complex reforms, is now flooding all the problems.

The result of all these efforts is a big liquidity boost of all US banking system. Banks have got 400+ Bln and deposits returned back to ~ 3.5 Trln level. In total, the banks together with the reverse repo again have $5.87 trillion - the last time they had so much at the end of 2021... in a week, we disposed of all the QT for more than a year.

Fed will use BTFP at full throttle. It was worth a couple of banks to fall and the Fed is here again with fresh dollars ... "toughens it up." Let's see how J. will comment on all this stuff on next week. As WSJ writes - in a new study, economists said they found 186 banks that may be prone to similar SVB risks. For now we could say that Fed's initial 300 Bln "pump" is successful. Nothing personal - just business, great deal for the banks. You give the Fed securities at face value, which are traded actually with 20-30% loss, and you get a 4.3-4.5% cash for a year – then it's a matter of imagination and courage. It is a double deuce - your balance is cleared from unrealized loss and you get a profit from provided cash...Nice.
The unrealized loss on bonds that were issued in the dollar system amounts to $4.8 trillion based on the Fed's data in the Z1 report. This is the difference between the nominal value to maturity and the market value at the time of the cutoff. This is the first assessment of a hole in the financial system in the mass media. The difference between the market valuation of bonds in Q4 2020 and Q4 2022 is almost $ 7.6 trillion – this is a record negative change in the entire history of the debt market.


It is a question of time, when other G7 central banks will follow the Fed. ECB tries to resist by far, while BoJ was making no pause and keep QE for two years now. It is not surprising that total Balance sheet of three major banks is growing. Why you would have to think about anti-crisis plans, saving banking sector, cutting expenses etc. - print, dump pump and be happy. This is new slogan.


First of all, we have to recognize that in the US there are two sides of political elite - Industrial and Financial. The Fed reserve had ability to choose, whom it would like to join and recent events cleary shows that the Fed is a darling of Financial group fo elite. But maybe be they always were and now just becomes offensive, showing its side. Because, Fed was always gravitating to dovish policy. QT speed constantly was lagging behind planned size:


We suggest that the crisis was intentionally planned by US financial authorities - Fed, US Treasury and FDIC with involving of "top five" banks (JPM, Citi, GS, BoFA, Wells Fargo) and totally managed to desirable targets (see below). The actual closure of SVB bank was announced in the middle of the working day (!!!). Which, as it is clear, significantly spun the panic. In addition, many sources have become clearly hysterical, having, by and large, no objective grounds for panic. Well, on Sunday, everything became clear, since the Fed received the "go-ahead" from the political authorities to resume the money printing.

In fact, today we can safely say that there was no threat to the US financial system, and the panic was deliberately inflated in order to stop the tightening of monetary policy. As soon as the permission was received on Sunday, the panic was quickly closed. However, there are still some problems, the main of which is budgetary. Especially given the need to raise the debt limit, without which there is very little money left in the Treasury accounts.

As for the EU, the situation there is absolutely similar. The fact that Credit Suisse, Credit Lyon, and Deutsche Bank have been breathing hard has been known for a long time, this is not a surprise to anyone. But under the well-pitched panic, the Swiss Bank was allowed to allocate more than 50 billion francs to support Credit Suisse, similar decisions will be made for other banks.

Taking into account the fact that there was a meeting of the ECB last week, which raised the rate by 0.5%, it can be assumed that the EU monetary authorities decided to continue their policy, in which the rate rises, but they give money to banks. As for the real sector, it seems that he is recommended to move to other regions …

It should be noted that with SVB bankruptcy there were a lot of projects related to big pharma and green energy have also been written off. By the way, the bank's management, which has been withdrawing its own money from it for several months, is likely to end up in probe (and jail), which is also useful for easing social tensions. Still, major US banks also could have problems. But — not today, probably.

So, the US financial elite group, via the Fed, US Treasury and FDIC activity has reached following targets:

  • In less than two weeks before the Fed meeting, create a market shock of sufficient force to, on the one hand, not destroy the system (a problematic regional bank was chosen for this), on the other hand, create room for the Fed to maneuver with the ability to deftly steer out of the previously announced rigid trajectory of the policy. In other words, to keep the trust and reputation of the Fed with a sharp change in the direction of monetary policy.
  • To restore debt refinancing through increased demand for bonds while disorienting investors and avoiding risk. The main problem in 2022, which in the conditions of negative real rates made it difficult to place corporate and government bonds.️
  • As a bonus. Create a redistribution of liquidity from small and medium-sized banks to large ones.
Political background we will discuss tomorrow in Gold report. This time, under the new BTFP program - 12 billion, another 147 billion were issued through the discount window and another 143 billion of a "secret" loan in cooperation with the FDIC - in one week! Tightening monetary policy? Commitment to fighting inflation? Never heard about it...

Should EUR rise in long term on the background of new US QE? Not necessary. EU has bigger banks' problem, higher inflation and lower rate (at least for now). They will start printing in the same manner as the Fed. Industrial sector leaves EU in favor of the US and other regions. Why EUR should start rising? Rock hard Fed guarantees could trigger demand for safe haven assets, making USD investments attractive again, and in conditions of global crisis exacerbating, hardly EUR will take the lead...

Monthly chart stands calm, keeping valid both bearish DiNapoli patterns - B&B "Sell" and "Stretch". Recent upside action looks just minor retracement back into bearish engulfing body. The only interesting thing here is price flirting with YPP. In nearest time it will be vital, the price action around it. Technically downside breakout of YPP should become strong point in favor of downside continuation.



Trend here remains bearish and EUR mostly stands in the same range. Appearing of DRPO "Sell" and stronger upside action is a rhetoric question. Obviously we keep this in mind, but still, the major task is to watch for clear bearish reversal signs on lower time frames.



On a daily chart, formally, trend remains bullish. But intraday charts shows that price action is very slow, choppy and lazy, which is not typical for bullish action or reversal. Besides, it is become visible bearish dynamic signs on the daily chart - trend is bullish but price action mostly stands flat. This stands in favor of downside action. Next week we probably should treat 1.04 area as the floor, because of daily Oversold level. Besides this is very strong technical support. Our downside target is the same - OP @1.0430


On 4H chart price is coming to strong K-resistance area. We also have bullish MACD divergence, which suggests action above 1.0750 top:

On 1H chart this week market perfectly worked out both patterns - initial B&B "Sell" and following AB-CD upside target. Both times downside reaction happened. All in all, it seems that next week our major task is to watch for exhausting of upside action, wherever it will happen. First area is current OP and 1.07 4H K-resistance level. If EUR will keep going higher - watching for XOP around 1.0744. But it seems that EUR should get tired earlier...
Hi Sive,
More brilliant analysis, thank you for your many hours of work putting this analysis together each week.
On the 4 hour chart you have said We also have bullish MACD divergence.
The chart appears to show higher lows based on the close even though the wicks show lower lows. Could you explain why this is divergence? I’m just a little confused.
Thanks, Matt
Hi Sive,
More brilliant analysis, thank you for your many hours of work putting this analysis together each week.
On the 4 hour chart you have said We also have bullish MACD divergence.
The chart appears to show higher lows based on the close even though the wicks show lower lows. Could you explain why this is divergence? I’m just a little confused.
Thanks, Matt
Hi Matthew,
we have lower lows on EUR chart and higher lows on MACD - this is bullish divergence. If you use different indicator, maybe there is no divergence. Sometimes it could be.
Morning guys,

We're living in interesting times. Now UBS Default spreads are at the Credit Suisse levels :). Nested doll. Who is next - SNB? :)

Markets are nervous and scare of uncertainty. That's why now we almost have no clear and bright trading setups anywhere. On EUR currency - lets keep up with our plan. Market is moving to 1H XOP.

In fact, it splits bullish and bearish context. Upside breakout with high certainty leads to erasing of daily AB-CD pattern and some upside continuation. If you're risky guy (or girl) you could try to take short position around XOP with stops above the top. But, this is more a gambling with the bet on coming Fed meeting. The major adv. of this position is very small risk. If you loose it, you loose just a bit. This is for those who are tired to sit on the hands :)))

Also I would like to show you some GBP things. First is on weekly chart. In short-term we could get bearish setup as price is coming to 5/8 FIb level and OB, which is actually DiNapoli bearish "Stretch" pattern. But in longer-term - take a look market is coiling around OP without strong pullback, forming bullish flag, it could be the sign of possible action to XOP. Hardly it stands without any fundamental news, but anyway...

And 2nd - take a look we could get weekly grabber this week... Keep an eye on it.

On 4H chart we have the same AB-CD that Viresh has mentioned above (on DXY), the OP is around 1.2410, which is agrees with weekly resistance area. CD leg is slowing, which is good. So, once it will be completed, let's keep an eye on patterns. around 1.2410-1.2450 area. Some healthy pullback could start.
Thanks Sive,
So divergence is not based on candle close?
Well, I'm not too scrupulous in terms of divergences, because mostly use it as secondary, additional pattern. So, I watch on lows/tops. But, I'm sure idea with close price is also popular, and probably you could use it if it works better.
Morning everybody,

So, markets are frustrated a bit and uncertain, don't knowing what to do with the bulk of liquidity from the Fed, coming by swap lines. So, they just follow the habit - put everything on markets. So dollar supply has increased which leads to lazy creep of stock markets and FX.

Meantime, as we've suggested, EUR is coming to 1.0805-1.0835 area that should clarify further direction. Upside breakout should let market to return back to the top. With coming Fed meeting, we do not see a lot of things to do - no clear patterns, no bearish signals.

On 4H chart, around daily "C" point top we also have 5/8 major resistance of 1.0835 area:

While on 1H chart 1.0827 is an 1.27 extension of recent collapse. So, technically this level is important:

With no clear trading setups and coming Fed statement we suggest that to wait is a best decision now.
Morning everybody,

So, JPow has testified. In two words - overall tone is dovish, with the same 0.25% but a lot of liquidity pumping back to markets. BTW, in EU now rumors tell (at least by bloomberg) that ECB is going to keep rate rising, following to Big brother example. But EU still keeps QT, so it could support EUR in short term.

Second - JP was a bit frustrated, it seems that as Fed as Treasury have very low confidence level that they really control situation. Now it seems more like they sit on a money pack without any plan and intend to plug the holes wherever they will appear, but they do not know whether cash will be enough to plug all of them.

Thus, we have upside reaction on markets but it is also not too strong. Still, from the technical point of view - upside action should continue. On daily chart we get clear signs of H&S failure, which means action above the head. And we could use upside extension here with 1.1170 target. I wouldn't be surprised if we get butterfly here:

Since daily EUR stands near Overbought, on 4H chart we could watch for pullback. Personally I like 1.0770-1.08 area around K-level. Healthy 3/8 pullback:

On 1H chart our upside 1.618 extension also is done. The major upside action (if it happens at all LOL) probably happens only next week. Personally I do not consider any short positions, but for real bearish fans - you could watch for patterns in the circle. Now it seems that H&S is most probable, but I prefer just to wait for pullback to predefined support area.

So… a few predictions from the banking movers from the end of 2022. When they want to buy a lot, someone has to sell a lot….
BoA is forecasting EUR/USD back to parity early in 2023:
Goldman Sachs is "skeptical that the Euro can durably rally":
JPMorgan target EUR/USD as low as 0.90 in the first half of 2023:
I hope you don't mind my statistics.:)