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Gold Settles Near 2,000 USD​

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Volatility remains highly elevated, especially in commodities.
Gold advanced 1% on Thursday, jumping back above the psychological 2,000 USD as the war in Ukraine and inflation concerns support the bullion.

Danske Bank said in a note that it does not expect the Russia-Ukraine conflict to spread to other countries and sees commodity prices broadly moderating over the next six months.

"We expect the Ukrainian and Russian leaders to agree on a truce eventually. However, we also believe that the Ukrainian government will be forced to painful concessions in the absence of direct military intervention by the West/NATO," it said.

Later today, the US CPI inflation for February is due, seen rising further to 7.9% yearly, while the core inflation is expected to accelerate to 6.4%. As a result, the Fed will be forced to raise rates faster as inflation rises, potentially moving beyond 10% on soaring commodities.

The short-term support could be seen at yesterday/today's lows near 1,975 USD. As long as the metal trades above that, the outlook seems bullish, likely targeting the current cycle highs at 2,060 USD.

However, if markets receive more optimistic news from the diplomatic talks between Russia and Ukraine, profit-taking could bring gold back toward 1,900 USD.​

 

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GBPUSD, consolidation near record lows​

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At the same time, activity on the market remains quite low ahead of the publication of a large block of the UK macroeconomic statistics. Today, traders focus on the January data on GDP and industrial production dynamics. It is assumed that the economy of the United Kingdom may show growth of 0.2% after declining by a similar amount last month. Also, during the day, there will be February estimates of GDP growth from the National Institute of Economic and Social Research (NIESR) and a forecast for the dynamics of consumer inflation. The United States will release the index of consumer confidence from the University of Michigan for March (preliminary forecasts suggest a drop in values from 62.8 to 61.3 points).

Resistance levels: 1.31, 1.315, 1.32, 1.325.
Support levels: 1.305, 1.3, 1.296, 1.29.​

 

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USDCHF, the US dollar ends the week with a strong rise​

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Thus, the regulator decided to keep the key interest rate unchanged at 0% but announced a more rapid curtailment of the current quantitative easing (QE) program. Key interest rates will remain at their current levels until inflation in the euro area reaches the target level of 2% (in February, the indicator showed an increase to 5.8% against 5.1% a month earlier, becoming a record for the entire history of observations). Therefore, cardinal changes should be expected already in the third quarter of this year. Also, the agency will reduce APP bond purchases to 30B euros in May and then to 20B euros in June, while PEPP asset buybacks will be slower than in the previous quarter and, as planned, completed by the end of March. Analysts believe that the current decisions of the European financial authorities are aimed at maintaining flexibility in the face of market uncertainty caused by the launch of a special military operation of Russian troops in Ukraine.

Support and resistance
Resistance levels: 0.93, 0.9341, 0.9372, 0.94.
Support levels: 0.9271, 0.925, 0.922, 0.92.​

 

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EURUSD, the euro is testing 1.09​

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The European currency shows mixed dynamics of trading against the US dollar during the Asian session, consolidating near 1.09 in anticipation of new movement drivers.

EURUSD ended last week's trading with an active two-day decline, which almost completely leveled the instrument's attempt to grow on Tuesday and Wednesday. Significant support for the euro was provided by the rhetoric of the European Central Bank (ECB), which announced the curtailment of the quantitative easing (QE) program sooner than expected. Asset purchases will be slowed down from 40 billion euros in April to 30 billion euros in May and to 20 billion euros in June, although earlier it was planned to gradually reduce from 40 billion euros to 20 billion euros by October. The "hawkish" rhetoric of European officials means that before the end of the year, the regulator will be able to get additional space to start a full-fledged tightening of monetary policy through an increase in interest rates, which will remain at current values until inflation reaches the target value of 2%.

In turn, pressure on the euro continues as the conflict escalates in Ukraine, where Russian troops continue to conduct a special military operation. Western countries are introducing more and more new sanctions against businesses and individuals. US authorities have already banned the import of oil, gas and other energy products from Russia, and Europe, in turn, being more dependent on Russian exports, is likely to act gradually. The European Commission has already presented a project for an accelerated phase-out of Russian energy carriers, under which the EU's need for gas from Russia will be reduced by two-thirds by the end of 2022. At the moment, the EU imports 90% of "blue fuel", about 45% of which is supplied by the Russian Federation.

Support and resistance
Bollinger Bands in D1 chart demonstrate active decrease. The price range is narrowing, reflecting the emergence of ambiguous dynamics of trading in the short term. MACD is declining keeping a weak sell signal. Stochastic shows more confident negative dynamics, but at the moment it is rapidly approaching its low, indicating the risks of EUR being oversold in the ultra-short term.

Resistance levels: 1.0957, 1.1, 1.1054, 1.11.
Support levels: 1.09, 1.086, 1.08, 1.0767.​

 

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NZDUSD, the instrument develops a corrective impetus​

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The New Zealand dollar starts the week with a slight decline against the US currency, trying to consolidate below the psychological support level at around 0.68.

The pressure on the position of the instrument is exerted by the continuing demand for safe assets as the geopolitical situation in Europe worsens. In addition, the market is alarmed by the sharp rise in energy prices around the world, as well as the likelihood of further deterioration of the situation as Western countries abandon Russian oil and gas. Additional support for the US currency is provided by the expectations of the launch of a cycle of tightening monetary policy by the US Federal Reserve this week. The regulator's meeting will take place on Wednesday, and current market forecasts suggest that the rate will be increased by 25 basis points.

Published on Friday, macroeconomic statistics from New Zealand and the US were mixed. Thus, the Manufacturing PMI of New Zealand in February showed a slight increase from 52.3 to 53.6 points, which fell short of analysts' forecasts at the level of 54.5 points. At the same time, the Food Price Index unexpectedly fell by 0.1% in February after rising by 2.7% in January. The market expected the index to slow down to 1.3%. Data from the US, in turn, disappointed investors with a noticeable drop in Consumer Confidence Index from the University of Michigan in March from 62.8 to 59.7 points, while the market expected a decline to only 61.4 points.

Support and resistance
Bollinger Bands on the daily chart show a weak increase: the price range is narrowing, reflecting the emergence of multidirectional dynamics in the short term. MACD is falling, keeping a fairly strong sell signal (the histogram is below the signal line). Stochastic shows an even more active decline, but is located in close proximity to its lows, which indicates the risks of the New Zealand dollar being oversold in the nearest time intervals.

Resistance levels: 0.6795, 0.684, 0.6866, 0.69.
Support levels: 0.6766, 0.6732, 0.67, 0.665.​

 

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GBPUSD, the downtrend increases

The British pound continues to decline, reacting to negative inflation statistics and increased geopolitical tensions in the world, currently trading around 1.303.

GBPUSD remains under pressure ahead of the Bank of England interest rate meeting scheduled for March 17, as well as a significant increase in consumer prices and energy tariffs, as a result of which households will be forced to reconsider their spending. Based on the latest data, official inflation in the United Kingdom for January was 5.5% in annual terms, the highest value in the last 30 years. According to a study by the analytical company Resolution Foundation, against the backdrop of negative dynamics, the additional average spending per household will increase by 1 thousand pounds in the next financial year.

The British pound may be supported by the fact that in January the national economy has been actively recovering over the past seven months, exceeding the figures before the start of the coronavirus pandemic: GDP rose by 0.8% from 0.2% in December, when the Omicron strain was spreading. Compared to February 2020, Manufacturing Production increased by 0.8%, with growth observed in all sectors of the economy. This data may push the Bank of England to raise interest rates to fight inflation, as a result of which GBP/USD may correct to the levels of 1.3200 and 1.3400 in the medium term.

Support and resistance
The long-term trend in GBP/USD is downward. Last week, market participants managed to fix the price below the support level of 1.3065, which allows considering new sales with the target of 1.2905. The level of 1.32 turns into resistance, and the trend boundary shifts to 1.3400.

As part of the medium-term downtrend, all targets were reached last week. At the moment, market participants are testing target zone 2 (1.306–1.3026), which currently acts as support and holding which will allow the rate to go into a correction with the maximum possible target in the area of key resistance at 1.3387–1.3353.

Resistance levels: 1.32, 1.34, 1.351.
Support levels: 1.2905, 1.272.​

 

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USDJPY, US dollar hits highs since 2017​

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The US dollar is developing an upward impetus against the Japanese yen in Asian trading, renewing record highs since January 2017.

Noticeable support for the instrument is provided by the meeting of the US Fed scheduled for Wednesday, within which a cycle of raising interest rates is likely to begin. Tomorrow, the rate could be adjusted by more than 25 basis points. US inflation reached a new 40-year high in February, with the CPI up from 0.6% to 0.8% on a monthly basis and from 7.5% to 7.9% on an annualized basis, according to data released last week. The increase in oil prices to the peak values of 2008 also contributes to the negative dynamics, which in the future will lead to a reduction in household spending on other goods.

The Bank of Japan in this sense is far behind not only the US Federal Reserve, but also the European Central Bank (ECB), preferring to refrain from reducing economic stimulus and believing that tightening monetary policy in the current environment can do more harm to the economy than good, which has significant pressure on the positions of the Japanese currency. However, the issue of inflation in the country is not so acute, and therefore the policy of the regulator is quite expected and sufficiently transparent.

Tomorrow, investors expect the publication of February data on the dynamics of Imports and Exports, as well as January statistics on Industrial Production from Japan. Export forecasts are quite optimistic and suggest a sharp rise of 21% in February after rising only 9.6% in the previous month. Imports over the same period may slow down from 39.6% to 28%, which should favorably affect the dynamics of the trade balance.

Support and resistance
Bollinger Bands on the daily chart show a steady increase. The price range is actively expanding, but it fails to catch the surge of "bullish" sentiment at the moment. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic, having approached its highs, is reversing into a horizontal plane, indicating significant risks of overbought USD in the ultra-short term.

Resistance levels: 118.43, 119, 119.5, 120.
Support levels: 118.00, 117.50, 117.00, 116.6.​

 

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Gold prices are actively corrected​

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Gold prices are developing a corrective downtrend during the morning session, updating local lows from March 4 and rapidly retreating from their record highs, the growth to which was provoked by Russia's special military operation in Ukraine. Now, the demand for risky assets is gradually recovering, as traders are counting on significant progress in the negotiation process and some stabilization of the global economy if, after a truce is reached, part of the blocking sanctions against the Russian Federation are lifted.

In turn, the development of "bearish" trend in the asset is supported by the strengthening of the US dollar on the eve of the US Federal Reserve meeting scheduled for Wednesday. Current market forecasts suggest a 25 basis point hike in interest rates, marking the welcome start of a monetary policy adjustment cycle. In the latest commentary by the Chairman of the department, Jerome Powell, he mentioned multiple increases in rates this year, taking into account rising inflation, which, in turn, will become a catalyst for strengthening the national currency. At the same time, the yield on 10-year US Treasuries has already risen by 13 basis points, hitting a 32-month high, and the UK gold rate has corrected to its highest level since 2018.

As for macroeconomic statistics from China, it turned out to be positive: Retail Sales in February increased by 6.7% after rising by 1.7% in the previous month, while analysts had expected a 3.0% increase.

Resistance levels: 1952, 1974, 2000, 2015.
Support levels: 1918, 1900, 1877, 1860.​

 

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Brent Crude Oil, quotes have renewed local lows​

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During the Asian session, Brent Crude Oil prices are falling, renewing local lows of the beginning of the month and testing the level of 99.00 for a breakdown. The instrument has lost 23% in value since March 7, after hitting a 14-year high at 139.13.

Investors are gradually returning to risk as the geopolitical situation somewhat stabilizes, but in general, the situation remains quite tense: Russian troops continue to conduct a special military operation on the territory of Ukraine for the third week already. Against this background, sanctions pressure on the Russian Federation from Western countries leads to increased risks for the global economy. Last week, the Russian authorities demanded from the United States guarantees that the economic restrictions imposed would not impede full-fledged trade, economic, and investment cooperation between Moscow and Tehran in the restoration of the agreement on the Iranian nuclear program. And yet, after a long period filled with exclusively negative reports, investors hope that significant progress will be made in the negotiations between the Russian and Ukrainian delegations.

The focus of the market is also on the decision of the US Federal Reserve on interest rates, which will be announced on Wednesday evening. Analysts forecast an increase of at least 25 basis points. Still, investors are also awaiting comments from the head of the regulator, Jerome Powell, who may announce specific steps and dates for adjusting monetary policy parameters to curb inflationary pressure in the country soon.

Also, traders monitor the further development of the coronavirus epidemic in China, the world's largest importer of crude oil and the second-largest consumer after the United States. So, the authorities decided to quarantine the city of Shenzhen amid an increase in the incidence of COVID-19 (60 cases of infection were detected). At the moment, all commercial organizations, except for food and fuel, are required to either suspend work or transfer employees to a remote mode.
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• Resistance levels: 102.8, 105, 108.18, 112.​
• Support levels: 100, 96, 93, 91.00.​

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USDCAD, Canadian dollar shows strength

The Canadian currency began the current week by strengthening against the backdrop of the publication of positive macroeconomic data. At the moment, USD/CAD continues to trade in a sideways trend around 1.2850.

According to published statistics, the Unemployment Rate in Canada fell to 5.5% in February from 6.5% a month earlier due to an increase in the Net Change in Employment by 336.6K after falling by 200.1K in January. In turn, the Participation Rate increased to 65.4% from 65.0% a month earlier. In addition, positive developments were noted in the 2021 Auto Sales report, which showed a 0.9% increase from the previous year, the first increase since 2017. Passenger car sales rose 6.1%, not seen since 2015. In general, all these data indicate that the Canadian economy is confidently emerging from the crisis caused by the coronavirus pandemic, and the national currency may continue to strengthen.

The US dollar, in turn, is trading at weekly opening levels ahead of the US Federal Reserve meeting. In addition to the interest rate decision, investors are also awaiting data on the Producer Price Index, which will be published tonight. According to the analysts' forecast, the monthly increase of the indicator could be 0.9%, and the annual growth could reach 10.0%, which is a positive signal for the US currency.

Support levels: 1.276, 1.2516.
Resistance levels: 1.289, 1.305.​