. Fundamental Analysis Report With Charting Trends- 22 March 2023

FUNDAMENTAL ANALYSIS REPORT WITH CHARTING TRENDS – 22 MARCH 2023

FUNDAMENTAL ANALYSIS REPORT WITH CHARTING TRENDS – 22 MARCH 2023

22 Mar 2023

MARKET UPDATE:

World Markets Rise as Investors Fear a Fall

Yesterday, the stock markets enjoyed significant gains as investors re-entered the equity market after brushing off recent failures in the banking industry.

The US markets capitalised on a positive start to the day in Asia and Europe, with the Dow up 0.98%, the S&P up 1.3%, and the Nasdaq up 1.6%, all three major indices showing large gains at the closing. Treasury rates increased somewhat while the dollar fell for the day but largely held within ranges for the month.

Fed Targets Markets

As investors get ready for what is likely to be the most anticipated Fed rate announcement in history—well, maybe not history, but it is highly important—expect the global markets to stay largely quiet for the bulk of the day’s trading sessions. With a 25-bps hike now fully supported by the market and priced in at an 85% likelihood, anything less than this will cause dramatic swings in the price of financial goods. Since the beginning of the month, market turbulence has caused a significant shift in what the market expects the Fed to do, and expectations for rate hikes have fallen as precipitously as some bank equities. If the anticipated 25 basis points materialise, the statement and press conference will have a bigger market impact. If the Fed maintains its recent stance, look for the currency and rates to surge once more.

The calm before the Fed Storm

The economic data schedule is doing little to refute the idea that most markets will have a calm day before we enter the US session. The Asian session is anticipated to follow the lead of a robust US session while keeping cautious in advance of the Fed. The Asian session is predicted to be extremely quiet with few releases scheduled. The most recent CPI statistics from the UK are scheduled to be released at the beginning of the London session. Expectations are still high, and the y/y number is predicted to be 9.9%; this comes one day before the next BOE Rate meeting. The highly anticipated announcement, statement, and press conference regarding the Fed Rate, however, takes place towards the close of the US session.

What happened in the US session?

The most recent Canadian CPI data show that the CAD is in a difficult situation due to inflationary pressures and decreasing inflation. A lower-than-anticipated CPI m/m might weaken the CAD and delay interest rate increases. In addition, slower Trimmed CPI y/y and higher-than-anticipated Median CPI y/y should provide support, pointing to a more stable inflationary environment.

What does it mean for the Asian Session?

The recovery rally following the resolution of the financial crisis is anticipated to enter a phase of consolidation during the session with little to no new data. Before the crucial Fed decisions later in the day, all eyes need to be at rest.

The Dollar Index (DXY)

Key news events today

FOMC Economic Projections

FOMC Statement

Federal Funds Rate

FOMC Press Conference

What can we expect from DXY today?

Given the continuous turmoil in the banking industry, it is expected that the Federal Reserve would raise the Federal Funds Rate by 25 basis points. As a result, it is anticipated that the FOMC Statement’s tenor and the subsequent press conference with Chair Jerome Powell would lead to market turbulence. The Fed’s updates on its outlook for monetary policy and any clues as to how it intends to handle the current economic situation will be eagerly watched by traders.

Central Bank Notes:

  • The Committee has raised the federal funds rate target range to 4.5-4.75% and plans to continue increasing it to return inflation to 2%
  • The Committee will monitor incoming information and adjust the stance of monetary policy as appropriate to achieve its goals
  • A majority vote from the Committee supported the decision to raise the target range
  • Next meeting is on 23 March 2023

Next 24 Hours Bias

Mixed

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The JPY’s price direction is anticipated to be driven by the movement of its safe-haven equivalent, the US Dollar, as there are no significant JPY-related news events today.

Central Bank Notes:

  • The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2% 
  • Japan’s economy is expected to recover gradually
  • The bank will not hesitate to take additional easing measures if necessary
  • Next meeting is on 27 April 2023 

Next 24 Hours Bias

Mixed

The Euro (EUR)

Key news events today

ECB President Lagarde Speaks

What can we expect from EUR today?

Concerns over the prolonged conflict in Europe and the high inflation rate were raised by ECB President Lagarde. The ECB staff’s predictions, which have been updated, are for growth of 1.0% in 2023. Moreover, the current escalation of financial market tensions suggests even more uncertainty regarding the fundamental estimates of inflation and growth.

Central Bank Notes:

  • ECB raised interest rates by 50 basis points to ensure the 2% inflation target is met
  • Inflation is projected to average 5.3% in 2023, with growth at 1%, and underlying price pressures remain strong
  • The bank will continue to monitor market tensions closely and will be data-dependent in its policy rate decisions
  • Next meeting on 4 May 2023

Next 24 Hours Bias

Mixed

The Pound (GBP)

Key news events today

CPI y/y

What can we expect from GBP today?

The anticipated CPI year-over-year for the UK is 9.9%, little under the earlier estimate of 10.1%. Even if inflation in the UK is still quite high compared to earlier levels, it is likely starting to diminish if the actual CPI year-over-year value meets or falls below the predicted value. This can lead to a decline in demand for GBP as it might imply that the BoE will stop raising interest rates.

Central Bank Notes:

  • MPC voted to increase Bank Rate by 0.5 percentage points to 4%
  • Near-term data developments are crucial in assessing how quickly external and domestic inflationary pressures will abate
  • MPC’s updated projections show CPI inflation falling back sharply from its current level
  • Next meeting on 23 March 2023 

Next 24 Hours Bias

Weak Bearish

Global Markets:

Asian Stock Markets: Nikkei up 1.93%, Shanghai Composite up 0.49%, Hang Seng up 1.73%, ASX up 0.87%

European equities, the DAX futures up 0.26%, CAC 40 down 0.04%, FTSE down 0.22%.

US Stock Market: Dow jones up 0.98%, S&P 500 up at 1.30%, Nasdaq 100 up at 1.58%.                    

Commodities: Gold at $1944.04 (0.25%), Silver at $22.47 (0.54%), Brent Oil at $75.14 (-0.25%), WTI Oil at $69.45 (-0.26%)

News & Data:

  • (USD) Fed Interest Rate Decision Forecast 5.00%, Previous 4.75% at 23:30
  • (CAD) Crude oil Inventories Forecast –1.565M, Previous 1.550M at 20:00
  • (GBP) CPI (YoY) (Feb) at 12:30
  • (EUR) ECB President Lagarde Speaks at 14:15
  • (USD) FOMC Economic Projections at 23:30

Technical Outlook

GBPUSD

With potential for a bullish bounce off the first support level at 1.2194 and a move towards the first resistance level at 1.2287, the GBP/USD chart is now showing bullish momentum. The chart’s overall momentum is positive, and a distinct ascending trend line shows that momentum is still moving upward.

The first support level at 1.2194 is an overlap support and a strong level of support because a 23.6% Fibonacci retracement lines up with it. With an overlap support, the second support level at 1.2045 also features a 50% Fibonacci retracement.

Regarding resistance, the first resistance level at 1.2287 is an additional overlap level and offers a decent chance for prices to change course. If prices move past the first resistance level, the second resistance level at 1.2440, a multi-swing high resistance level, may offer more resistance.

EURUSD

The chart’s overall momentum is bearish.

Given the price’s present bearish trend, it’s possible that it may react negatively to the first resistance level, falling instead towards the first support level.

A significant overlap support level at 1.0694 serves as the first support level. Price could reach the second support level at 1.0523, a multi-swing low support level, if it drops below this level.

The 50% Fibonacci retracement level and the initial resistance level, both at 1.0768, are important overlap resistance levels. Price might potentially move towards the second resistance level at 1.0925, another significant overlap resistance level, if it were to break through this level.

AUDUSD

According to the research, the AUD/USD chart is displaying positive momentum, which is being attributed to the price’s breakout over a declining resistance line, which suggests the possibility of a bullish rise. The initial support level, a strong overlap support, is at 0.6646. The second level of support is a multi-swing low support at 0.6562. The initial resistance level is located at 0.6725 and is a strong overlap resistance as it falls on a 23.60% Fibonacci retracement. The second resistance level is at 0.6771, which also coincides with a 38.20% Fibonacci retracement and is another overlap barrier level.

The AUD/USD could make a bullish move in the direction of the first resistance level around 0.6725. Price may move higher towards the second resistance level at 0.6785 if it can overcome this obstacle.

USDJPY

While it is currently above a significant ascending trend line on the USD/JPY chart, further bullish momentum may be observed. Price may move up to the second resistance level if it surpasses the first resistance level.

The first level of support is around 130.82, which is a strong overlap support and lines up with a 78.60% Fibonacci retracement. The price had previously rebounded off the second support level, a multi-swing low support at 128.10, numerous times.

The first resistance level, which is an overlap resistance level at 132.81, lines up with a 23.60% Fibonacci retracement. The second resistance level is located at 134.55 and coincides with a 61.80% Fibonacci retracement. It is an overlap resistance level.

It’s important to note that the RSI is showing bullish divergence relative to price, indicating that a bounce could happen shortly.

DOW JONES

The DJ30 chart is now trending downward, and there is a chance that the first resistance will work as a catalyst for a downward reaction and a decline towards the first support. The chart’s overall trend indicates that prices may continue to decline soon.

The first support level, which is a strong overlap support level, is located at 32309. The next support level, which is a multi-swing low support level, would be at 31504 if prices were to break through this level.

The overlap resistance level at 32546, which also coincides with a 50% Fibonacci retracement, is the first resistance on the resistance side. The following resistance level, which is also an overlap resistance level, would be at 32960, if prices were to break through this level.

WTI CRUDE OIL

Recently, there has been a bearish momentum in WTI crude oil. The first barrier at 70.28 may trigger a bearish reaction in the market, which could then cause it to fall to the first support at 67.02. Due to its status as a multi-swing low support level, the second support level at 64.35 is also anticipated to function as a support.

A 50% Fibonacci retracement level is the second resistance level, which is located at 73.32. The first resistance level, which is located at 70.28, is an overlap resistance. A second intermediate resistance level is located at 69.75.

Prices are anticipated to respond negatively off the first resistance level and decline in direction of the first support level, with the overall momentum of the chart being bearish.

GOLD

The initial support level at $1933 and the first resistance level at $1957 may serve as the foundation for a bullish recovery in gold. 

A potential strong support level is the $1933 level, which is an overlap support and coincides with the 38.20% Fibonacci retracement. 

Gold may have a problem if it reaches the $1957 level because it is also an overlap resistance. 

The next level of resistance, a swing high level, comes at $2007.

Gold could potentially fall to the $1911 support level, which is also an overlap support and coincides with the 50% Fibonacci retracement, if it is unable to maintain above the $1933 support level. 

If this level is broken, further downward momentum can develop.

BITCOIN

The BTC/USD chart’s overall momentum is bearish, with the possibility of a bearish response off the first barrier and a decline to the first support. The overlap support level at 26560 serves as the first support level and falls on the 23.60% Fibonacci retracement. The second level of support is at 25215, which also overlaps with the 38.20% Fibonacci retracement and is a support level.

On the other hand, the first resistance level, which is an overlap resistance, is located at 28334. The second resistance level, which is a swing high resistance, is located at 31662. Price might move up towards the second resistance level if it were to pass past the first resistance level.

Moreover, the RSI is showing negative divergence from the price, indicating that a reversal may be imminent.