. Fundamental Analysis Report With Charting Trends- 24 March 2023

FUNDAMENTAL ANALYSIS REPORT WITH CHARTING TRENDS – 24 MARCH 2023

FUNDAMENTAL ANALYSIS REPORT WITH CHARTING TRENDS – 24 MARCH 2023

24 Mar 2023

MARKET UPDATE:

Markets Regroup Following Fed Update

Yesterday saw a mixed day on the international stock markets as traders assessed the most recent Federal Reserve Bank report. After increases from the Bank of England and the Swiss National Bank, European markets mainly closed in the red; however, US markets were more upbeat, with the Nasdaq ending the day up 1%, the S&P 0.3%, and the Dow 0.23%. The dollar’s post-fed decline slowed down a little bit as it gained some of the ground it had previously lost against the major currencies and US Treasury yields established a temporary base.

Despite market unrest, central banks raise their rates.

Despite the turbulence that markets have been going through recently because of some very major problems in the banking industry, we witnessed three different rate hikes yesterday from central banks. The FOMC and MPC raised 25bps in the US and UK, respectively, and the SNB added 50bps in Switzerland, all of which met expectations. The signals from all of them were similar: inflation is still a major issue, which is why there have been movements, but there is some hope that the recent market shocks would help the central banks with some of their tasks. Investors will now pay closer attention to the data coming out of each jurisdiction in the upcoming months to determine if the predicted decreases happen or if central banks need to resume the tightening cycle.

The trading week is still ongoing.

Although there has been a lot of new material for investors to process this week, there are still three significant trading sessions left, and the markets are still expected to experience further volatility. With no major data releases scheduled, Asian markets are expected to be relatively quiet today. However, there are PMI data releases scheduled for both the US and the European market, and even if these statistics won’t have been affected by recent market events, traders will still be paying close attention to them as we approach the weekend and times of lower liquidity.

What happened in the Asian session?

According to market predictions, the Japanese National Core CPI y/y decreased from the prior reading of 4.2% to 3.1%. The Flash Manufacturing PMI increased from 47.7 to 48.6, which is somewhat better than the anticipated value of 48.2. The JPY could be negatively or neutrally impacted by the varied economic data releases.

In the most recent UK GfK Consumer Confidence data release, the index increased from the prior reading of -36 to -35 (expected -38). This indicates a change in the consumer’s view for the better, which may help the GBP.

What does it mean for Europe & US Sessions?

Volatility will be there for the sessions through the end of the week due to the flurry of PMI announcements from France, Germany, the UK, and the US. Starting on Sunday, Switzerland, Europe, and the UK will observe daylight saving time.

The Dollar Index (DXY)

Key news events today

Flash Manufacturing PMI

Flash Services PMI

What can we expect from DXY today?

While the Services PMI is expected to be 50.3 (previously 50.6), indicating a slight slowdown, the US Flash Manufacturing PMI forecast of 47.0 (prior 47.3) predicts a contraction. If the PMIs come in above forecasts, the USD will likely come under pressure.

Central Bank Notes:

  • The US banking system is sound and resilient, but recent developments may result in tighter credit conditions for households and businesses.
  • The Federal Reserve has raised the target range for the federal funds rate to 4-3/4 to 5 percent, committed to returning inflation to its 2 percent objective.
  • In determining the extent of future increases in the target range, the Committee will consider various factors, including the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and economic and financial developments.
  • Next meeting is on 3 May 2023

Next 24 Hours Bias

Mixed

The Japanese Yen (JPY)

Key news events today

National Core CPI y/y

What can we expect from JPY today?

The yen may decline if the National Core CPI y/y (forecast 3.1%, prior 4.2%) is lower than anticipated. A higher-than-expected Flash Manufacturing PMI (anticipated 48.2, prior 47.7), on the other hand, would marginally strengthen the yen because any figure under 50 denotes a sectoral decline.  

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

French Flash Manufacturing PMI

French Flash Services PMI

German Flash Manufacturing PMI

German Flash Services PMI

What can we expect from EUR today?

During the Euro Summit, where chiefs of state from the European Union countries discuss the economic and financial situation and policy coordination in Brussels, mixed expectations for the French and German PMIs could result in a day of consolidation for the Euro.

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 Canadian Dollar (CAD)

Key news events today

No major news events.

Core Retail Sales m/m

Retail Sales m/m

What can we expect from CAD today?

Core retail sales and retail sales in Canada are anticipated to rise. In comparison to the previous fall of -0.6%, the predicted gain for Core Retail Sales m/m is 0.6%. Like this, a 0.7% growth in retail sales is anticipated, which is a little more than the 0.5% growth that was seen previously. The CAD may increase if the actual data confirmed the expected data, signaling a more robust retail sector and potential economic development.  

Central Bank Notes:

  • Bank of Canada maintains its target for the overnight rate at 4.5%
  • Inflation eased in January, but price increases for food and shelter remain high
  • BOC is prepared to increase the policy rate further to return inflation to the 2% target.
  • Next meeting on 12 April 2023

Next 24 Hours Bias

Bullish

Global Markets:

Asian Stock Markets: Nikkei is down 0.13%, Shanghai Composite is down 0.64%, Hang Seng is down 0.67%, ASX is down 0.19%

European equities, the DAX futures down 0.71%, CAC 40 down 0.83%, and FTSE down 0.84%.

US Stock Market: Dow jones up 0.15%, S&P 500 is up at 0.23%, and Nasdaq 100 up at 1.01%.                    

Commodities: Gold at $1984.84 (-0.40%), Silver at $23.04 (0.02%), Brent Oil at $74.69 (-1.66%), WTI Oil at $68.67 (-1.86%)

News & Data:

  • (USD) Core Durable Goods Orders (MoM) (Feb) Forecast 0.2%, previous at 0.8% at 18:00
  • (CAD) Core Retail Sales (MoM) (Jan) Forecast 0.6%, Previous –0.6% at 18:00
  • (GBP) Retail Sales (MoM) (Feb) Actual 1.2%, Forecast 0.2%, Previous 0.5% at 12:30 
  • (EUR) German Manufacturing PMI (Mar) Actual 44.4, Forecast 47.0, Previous 46.3 at 14:00
  • (EUR) EU Leaders Summit at 15:30

Technical Outlook

GBPUSD

Currently, the GBP/USD chart exhibits a strong and confident negative momentum. A probable bearish continuation might lead to the first support at 1.2194, which coincides with a 23.60% Fibonacci retracement and is a strong overlap support level. As an overlap support level and 38.20% Fibonacci retracement, the second support level at 1.2045 is also a strong level of support.

The first resistance level, which is an overlap resistance and is located at a 127% Fibonacci extension, is on the resistance side and is at 1.0925. 1.2440, a swing high resistance level and a 161.80% Fibonacci extension, serves as another intermediate resistance level.

It’s important to note that the RSI is showing negative divergence versus price, indicating that a turn may be on the horizon. This strengthens the chart’s bearish bias and enhances the possibility of a bearish continuation in the direction of the first support level.

EURUSD

The overall momentum is now bearish when examining the EUR/USD chart, suggesting that prices may decline more soon. A possible bearish continuation in the direction of the first support level at 1.0768 exists.

The first support level, which overlaps with a 38.20% Fibonacci retracement level, is a significant level of support. Another strong degree of support is the overlap support at the second support level, which is at 1.0694.

The first resistance level, which is an overlap resistance and corresponds with a 78.60% Fibonacci retracement level on the resistance side, is located at 1.0925. At 1.1027, a swing-high resistance level, there is also an intermediate resistance level.

AUDUSD

The first support level at 0.6640 is the area of likely continuation for the current bearish momentum on the AUD/USD chart. This level is a sturdy support level due to its strong overlap support and alignment with the 61.80% Fibonacci retracement. If price were to breach the first support, there is also a multi-swing low support at 0.6564 that might act as a second support level.

The overlap resistance level at 0.6709 is the first resistance level on the resistance side. A 38.20% Fibonacci retracement and the second resistance level at 0.6789 make this level of resistance quite potent.

It’s crucial to keep in mind that the chart’s overall momentum is negative, suggesting that there may be an additional decline. While a break of the first resistance could result in a climb toward the second resistance level, a break of the first support could cause a decline toward the second support level.

USDJPY

Low confidence and lackluster momentum characterize USD/JPY. The price is below a significant declining trend line, indicating that bearish momentum is expected, which is one of the elements causing the momentum.

Price might likely decline towards the second support at 128.10 if it were to break through the first support at 130.39. The first support level is a strong level because it overlaps with a Fibonacci retracement of 78.60% and lines up with it. The second support level, on the other hand, is a multi-swing low support level.

On the resistance side, the first resistance level, an overlap resistance, is at 132.81. At 134.55, another overlap resistance level, there is also an intermediate resistance level.

It is challenging to forecast whether the price will break above or below these levels because the general momentum is weak, and the confidence level is low. To make an informed choice, we must pay particular attention to how the price responds around these levels.

S&P 500

The US500 chart currently displays a neutral momentum because it is above a key ascending trend line that suggests additional bullish momentum and below a major descending trend line that suggests additional negative momentum. The first support level at 3923 and the first resistance level at 3969 represent potential price ranges.

A 50% Fibonacci retracement lines up with the initial support level at 3923, which is an overlap support and a strong level for purchasing interest. The price might potentially fall towards the second support level at 3848, which is multi-swing low support and has kept prices up in the past, if it were to break through this level.

The initial resistance level, which is located at 3969, is an overlap level of resistance. Price might likely experience selling pressure at this level if it were to rise from its current level. Price may move upward towards the second resistance level at 4042, which is also an overlap resistance level, if it were to overcome this resistance.

WTI CRUDE OIL

The price of WTI is presently moving lower on the chart, and it may continue to go lower towards the first support level at 67.11. This support level, which is overlap support, can generate a lot of interest from buyers. The second support level at 64.35, which is a swing low support and has held prices up in the past, might be reached if price breaks through this level.

The initial resistance level on the resistance side is at 70.28, a pullback resistance level that lines up with a 38.20% Fibonacci retracement. Price could experience selling pressure at this level if it were to rise from its current level. The second resistance level at 73.46, which is a pullback barrier level and has a 50% Fibonacci retracement lined up with it, might be reached by price if it were to overcome this obstacle.

Between the present price and the first resistance level, there is also an intermediate barrier at 69.75, which can act as a small roadblock before prices test the first obstacle.

GOLD

A bearish momentum is currently seen on the XAU/USD chart. Price may respond negatively and fall towards the first support level at 1957 after testing the first resistance level at 2007 in that direction. This degree of support, which is overlap support, has in the past kept prices steady. Price might fall further towards the second support level at 1933, which is also an overlap support level if it were to breach this level.

The initial resistance level on the side of resistance is located at 2007. An extension of the Fibonacci sequence measuring 127% lines up with this level, which is a swing high resistance. Price could experience selling pressure at this level if it were to rise from its current level. In case the price drops from the current level, there is also an intermediate support level at 1982 that might serve as pullback support. In case the price drops from the current level, there is also an intermediate support level at 1982 that might serve as pullback support.

ETHEREUM

The price of ETH/USD may make a bearish response off the first resistance level at 1844.14 and decline towards the first support level at 1719.84 as the chart of ETH/USD now exhibits a bearish momentum. Overlap support with a 23.60% Fibonacci retracement lines up with this support level. Price may decline lower if it breaches this level, possibly towards the second support level at 1583.45, which is also overlaps support and lines up with a 50% Fibonacci retracement.

The initial resistance level on the resistance side is at 1844.14 and is a high resistance level with multiple swings. Price could experience selling pressure at this level if it were to rise from its current level. Price might move upward towards the second resistance level at 1950.25, which is a swing-high resistance level, if it were to overcome this barrier.