MARKET UPDATE:
Credit Suisse loses 25% and crashes the market.
Last night, as the share price of Swiss multinational Credit Suisse plummeted by almost 25% in a single trading session, concerns about contagion in the banking sector came true. Though not to the extent that some investors may have anticipated earlier in the day, American stock indices suffered, with the Dow ending the day down 0.87%, the S&P down 0.7%, and the Nasdaq only managing to finish in the black. On hearing the news, Haven Gold and the USD rose, while the Euro and Swiss fell.
ECB Important Rate Decision
As the European Central Bank is ready to announce its most recent rate decision, the timing of yesterday’s market turbulence could not have been worse. At the start of yesterday’s session, we would have been confidently talking about a rate hike but chances of that dropped dramatically during the day, from 90% chance of a 50bp hike down to 20% by the close. It would be a shock to the market if we see 25bps or even no change, but these are once again unprecedented times for both traders and indeed central banks, so be prepared for more moves in the single currency in the days ahead.
Another Day of Market Chaos Upcoming?
Looking ahead to the rest of the trading day, anticipate once more that investors will be examining each new news on the banking industry. In terms of economic data releases, the Asian session already saw an unexpectedly positive outcome for Australian employment numbers. The regular weekly US employment claims numbers come out later in the day, and the critical ECB rate announcement with its accompanying statement and press conference comes right after.
What does it mean for the Asian Session?
The rebound of risky assets is likely to be constrained by lingering worries about the risks of contagion from the American financial industry. More banks, even those outside the US, might report problems if history is any indication. In this case, it is very likely that investors will seek “safe haven” in the Swiss Franc, Japanese Yen, and gold.
How does it affect the US and European Sessions?
The European Central Bank’s monetary policy actions could eclipse the American Unemployment Claims statistics (ECB). Yet, it is anticipated that news about the banking sector crisis would have a significant impact on the Euro’s steady recovery against the US dollar.
The Dollar Index (DXY)
today’s major news events
Unemployment Claims
What can we anticipate from DXY right now?
In comparison to the 211K result from the previous week, the predicted number of jobless claims at the time is 205K. A rise in the US dollar could result from improved labour market conditions if the prediction comes true.
Central Bank Notes:
The Committee plans to keep raising the federal funds rate target range to 4.5-4.75% to bring inflation back to 2%.
To accomplish its objectives, the Committee will keep an eye on new facts and change the direction of monetary policy as necessary.
The decision to increase the target range was endorsed by a majority vote of the Committee.
The following meeting is scheduled on March 23, 2023.
24 Hours from Now Bias
Weak Bullish
The Australian Dollar (AUD)
Key news events today
Employment Change
Unemployment Rate
What can we expect from AUD today?
Employment Change (forecasted 49.7K, previous -11.5K) and Unemployment Rate (forecasted 3.6%, prior 3.7%) are two upcoming data releases from the Australian Bureau of Statistics. While disappointing statistics may put downward pressure on the AUD, more robust employment data may support it.
Central Bank Notes:
- Cash rate raised by 25 basis points to 3.60%.
- Board prioritises returning inflation to target, with a likely need for further monetary policy tightening.
- Board to closely monitor the global economy, household spending trends, inflation and labour market outlook when assessing interest rate increases.
- Next meeting on 4 April 2023
Next 24 Hours Bias
Weak Bearish
The Kiwi Dollar (NZD)
Key news events today
GDP q/q
What can we expect from NZD today?
The quarterly GDP data for New Zealand revealed a 0.6% loss, which was less than the expected -0.2% decline and the prior 1.7% expansion. The statistics could result in a more dovish or less aggressive monetary policy from the RBNZ and lower investor confidence.
Central Bank Notes:
- Monetary Policy Committee increased the OCR from 4.25% to 4.75%
- Higher interest rates are needed to reduce inflation and support employment sustainably
- Severe storms in North Island will increase inflation and disrupt production.
- Next meeting is on 5 April 2023
Next 24 Hours Bias
Bearish
The Euro (EUR)
Key news events today
Main Refinancing Rate
Monetary Policy Statement
ECB Press Conference
What can we expect from EUR today?
The ECB will likely boost the Main Refinancing Rate to 3.50%, up from the previous 3.00%. Yet, the most recent scandals involving Credit Suisse and the American financial industry may result in a lower increase than anticipated.
Additionally, any indications of dovishness in the Monetary Policy Statement could have a negative effect on the value of the Euro; the press conference that follows the declaration of the interest rate and the release of the policy statement will offer additional details on the ECB’s decision-making procedure.
Central Bank Notes:
- Main Refinancing Rate is currently at 3.00%
- ECB Governing Council to continue raising interest rates and reducing holdings of securities
- Future policy decisions to be data-dependent
- Next meeting on 16 March 2023
Next 24 Hours Bias
Weak Bearish
Global Markets:
Asian Stock Markets: Nikkei down 0.80%, Shanghai Composite down 1.12%, Hang Seng down 1.71%, ASX down 1.46%
European equities, the DAX futures up 0.54%, CAC 40 up 0.62%, FTSE up 0.65%.
US Stock Market: Dow jones down 0.87%, S&P 500 down at 0.75%, Nasdaq 100 up at 0.05%.
Commodities: Gold at $1924.60 (-0.35%), Silver at $21.96 (+0.33%), Brent Oil at $73.97 (+0.38%), WTI Oil at $67.75 (+0.21%)
News & Data:
- (USD) Core Retail Sales m/m -0.10% vs -0.10% expected
- (USD) Core PPI m/m 0.00% vs 0.40% expected
- (EUR) Industrial Production m/m 0.70% vs 0.30% expected
- (AUD) Unemployment Rate 3.50% vs 3.60% expected
- (AUD) Employment Change 64.6K vs 49.7K expected
- (CNY) Unemployment Rate 5.60% vs 5.30% expected
Technical Outlook
GBPUSD
The price of the pound presently could move between the first support level at 1.1927 and the first resistance level at 1.2139 on the GBP/USD chart.
An overlap support level at 1.1927 acts as the first support level and could offer the price significant support if it declines. Moreover, there is an overlap support level at 1.2010 that coincides with a 50% Fibonacci retracement, serving as an intermediate support level.
The initial resistance level, however, which is at 1.2139, is an overlap resistance level. Price may move upward towards the second resistance level at 1.2208 if it were to break through this level.
EURUSD
The bullish momentum on the EUR/USD chart suggests that a bullish bounce off the first support level at 1.0525 and upwards towards the first resistance level at 1.0687 is possible.
A multi-swing low support at 1.0525, the initial support level, may offer the price substantial support if it declines. Further bolstering the optimistic scenario, the price is currently contained within the bullish Ichi Moku cloud, which frequently signals that it may bounce from there.
Price might rise to the first resistance level at 1.0687, which is an overlap resistance level, if it were to bounce off the first support.
A second resistance level that overlaps the first one and coincides with a 50% Fibonacci retracement is seen at 1.0779. More upside potential might be opened if the price were to break through this level.
The RSI is also showing positive divergence in relation to price, indicating that a bounce may take place shortly and maybe adding to the bullish picture.
AUDUSD
With potential for a bearish response off the first resistance level at 0.6694 and a drop to the first support level at 0.6565, the AUD/USD chart is currently displaying bearish momentum.
The first support level, located at 0.6565, is a multi-swing low support level that could offer the price substantial support if it declines.
The first resistance level, which is at 0.6694 and coincides with a 61.80% Fibonacci retracement, is an overlap resistance level in contrast. Also, it is directly underneath the bearish Ichi Moku cloud, which typically denotes that the price may turn around from that point. Price may fall to the first support level at 0.6565 if it responds negatively from this level.
USDJPY
With potential for a positive bounce off the first support level at 132.73 and a move up to the first resistance level at 134.98, the USD/JPY chart is now trending upward.
An overlap support level at 132.73 is the initial level of support, and if the price dips below it, it can offer the market considerable support. The second support level, which is likewise an overlap support level, is located at 130.56.
Price may potentially drop to the second support level at 130.58, which is also an overlap support level, if it were to dip below the first support level.
However, the first resistance level, which is located at 135.18 and coincides with a 50% Fibonacci retracement, is an overlap resistance level. Price might perhaps move upward into the second resistance level at 137.02, which is a multi-swing high resistance level, if it were to break through this level.
S&P 500
With potential for a bearish continuation towards the first support level at 3850, the US500 chart is displaying bearish momentum.
The first support level, which is located at 3850 and is a multi-swing low support level, may offer the price substantial support if it declines.
Price might fall to the second support level at 3762, which is also a swing low support level, if it were to breach the first support level.
There is also a first resistance level at 3930, which is an overlap resistance level. If the price were to react bearishly off this level, it could potentially pave the way for further downside potential. Additionally, the first resistance level is right below the bearish Ichi Moku cloud, which usually suggests that the price might reverse from there. Furthermore, the price is testing a descending trend line which acts as resistance, adding to the potential resistance at this level.
BRENT CRUDE OIL
Price is currently overlapping at our first resistance level, which is 75.06. Price might move up to our second resistance level at 76.50 if it were to break through this level.
Our first support level is at 73.20, and our second support level is at 71.40.
SILVER
Price is currently overlapping at our first resistance level, which is 21.97. Price might move up to our second resistance level at 22.61 if it were to break through this level.
Our first support level is at 21.28, and our second support level is at 20.50.
BITCOIN
The present bearish momentum on the BTC/USD chart suggests the possibility of a bearish continuation towards the first support level at 23857. This level is an overlap support that falls on a 38.20% Fibonacci retracement, which might offer the price of the asset solid support if it declines.
Price might drop to the second support level at 22747, which is also a support level that overlaps with the first one and falls inside a 50% Fibonacci retracement, if it were to drop below the first support level.
There is a first resistance level at 25151, which is an overlap resistance level. If the price were to react bearishly off this level, it could potentially pave the way for further downside potential.
