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Market Update by Solidecn.com

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EURUSD, euro recovers at the end of the week

The European currency shows moderate growth against the US dollar during the Asian session, recovering from the predominantly "bearish" trading dynamics of recent days. EURUSD is trading slightly above the average Monday levels and is preparing to end the week with almost zero results.

The focus of the market is on the EU summit in Brussels, which is expected to continue the discussion of new packages of sanctions against the Russian economy today. In addition, the details of the implementation of the EU plan to phase out energy from the Russian Federation may be considered. The day before the President of the European Commission Ursula von der Leyen said that the EU is preparing such a plan with a possible date of 2027. The EU is also considering the possibility of centralized purchases of gas and other resources, which, according to von der Leyen, should have a positive impact on price stability.

Moderate support for the euro is provided by yesterday's optimistic macroeconomic statistics from Europe. Markit Manufacturing PMI in Germany in March declined from 58.4 to 57.6 points, which was better than market forecasts at the level of 55.8 points. The services sector also contracted less than expected: from 55.8 to 55 points, while the forecast was for a fall to 53.8 points. Markit PMI Composite in the euro area fell from 55.5 to 54.5 points, ahead of analysts' expectations at the level of 53.9 points.

Resistance levels: 1.1051, 1.11, 1.115, 1.1185.
Support levels: 1.1, 1.0957, 1.09, 1.086.

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AUDUSD, Australian dollar renews highs since November 2021

The Australian dollar continues to develop a confident uptrend paired with the US currency during trading in Asia, preparing to end the week with a noticeable increase. AUDUSD is trading near 0.752 and is updating local highs of November 2021.

The instrument is supported at the end of the week by the growth of corrective sentiment in favor of risky assets. The euro and the pound are strengthening in parallel against the US dollar, the decline of which was facilitated by the publication of weak data on the dynamics of Durable Goods Orders in the US the day before. In February, the indicator fell sharply by 2.2% after rising 1.6% a month earlier. Analysts had expected negative dynamics, but they hoped for a decline only by 0.5%. Durable Goods Orders excluding Defense fell 0.3% in February after rising 1.3% in January.

Statistics from Australia, published yesterday, also turned out to be worse than market expectations. Commonwealth Bank Services PMI rose from 57.4 to 57.9 points in March, while market forecasts suggested a sharp increase in the indicator to 62.7 points. Commonwealth Bank Manufacturing PMI over the same period strengthened from 57 to 57.3 points, with forecasts for growth to 59 points.

Bollinger Bands on the daily chart show a steady increase. The price range expands, freeing a path to new record highs for the "bulls". MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). Stochastic, having reached its highs has been in the horizontal plane for a long time, indicating the risks of the Australian dollar being overbought in the ultra-short term.

Resistance levels: 0.755, 0.76, 0.765, 0.77.
Support levels: 0.75, 0.744, 0.7366, 0.73.

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FTSE 100, UK stock market is strengthening

The British stock market was supported by yesterday's macroeconomic statistics, according to which the composite index of business activity for March was 59.7 points, which exceeds the analysts' forecast of 58.7 points. The index of business activity in the UK services sector rose to 61.0 points from 60.5 points earlier.

In addition, it is worth noting the period of stabilization in the UK bond market, where 10-year treasury securities were fixed in the region of the highs of the year at the level of 1.638%. In turn, the yield on 20-year conservative bonds reached 1.894%, which is somewhat inferior to 1.957% at the beginning of the week.

The growth leaders in the index are Polymetal International Plc. (+20.73%), Fresnillo Plc. (+5.73%), M&G Plc. (+2.45%).

Among the leaders of the decline are Next Plc. (-3.26%), Ferguson Plc. (-3.25%), Schroders Plc. (-3.14%).

Index quotes continue to trade within the global Expanding Formation pattern. Technical indicators are in a stable buy signal state: the range of EMA fluctuations on the Alligator indicator expands in the direction of growth, and the histogram of the AO oscillator is forming new ascending bars in the purchase zone.

Support levels: 7384, 7020.
Resistance levels: 7520, 7800.

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USDJPY, US dollar hits highs of the end of 2015

The US dollar continues its strong growth in the USDJPY pair during Asian trading, renewing all-time highs since December 2015 and testing 123 for a breakout. The "bulls" are further supported by a wave of risk aversion that is boosting demand for safe-haven currencies, as well as strong US Treasury yields, which hit a new two-year high of 2.5%, up more than 1 percentage point since early December.

In addition, the exchange rate of the trading instrument is strengthening against the backdrop of the aggressive rhetoric of the US Fed, aimed at combating a record inflation for 40 years, which reached 7.9% in annual terms in February. The regulator launched a cycle of the interest rate hike this month, and in May it may decide to adjust it immediately by 50 or even 75 basis points. It is also expected that in the near future the Fed will begin to reduce its own balance sheet, which, according to the latest estimates, reaches 9 trillion dollars.

The yen gained momentum after the Bank of Japan announced its readiness to purchase an unlimited number of 10-year bonds at 0.25%. The regulator continues to go against the main trend in terms of tightening monetary policy. Due to low inflation, the country's financial authorities have kept the short-term interest rate on commercial bank deposits at -0.1% per annum, and the target yield on ten-year government bonds is near zero. Macroeconomic statistics released last Friday in Japan pointed to the acceleration of inflation in the Tokyo region in March from 1.0% to 1.3%, while the forecast was 1.5%. According to the Bank of Japan Governor Haruhiko Kuroda, the growth rate of consumer prices may reach 2% in April or later, but this will not be the basis for an immediate reaction from officials.

Resistance levels: 123.5, 124, 124.5, 125.
Support levels: 122.42, 122, 121.4, 120.5.

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GBPUSD, correction before the speech of the Bank of England Governor

Traders remain concerned about the situation in Eastern Europe, and are also trying to assess how much the global economy will slow down, given the unprecedented sanctions restrictions against the Russian economy. Earlier, the United Kingdom, following the United States, announced a complete embargo on oil and gas supplies from Russia, sharply condemning the conduct of a special military operation on the territory of Ukraine. EU countries cannot yet completely abandon Russian energy resources, but are trying to find ways to reduce their dependence.

In the meantime, quotations on the commodity markets are once again showing strong growth after some correction, which has an extremely negative impact on global inflationary risks. According to a survey by The Sunday Times, 67% of UK citizens already face difficulties in paying for heating and electricity. In early February, the UK consumer electricity price cap was increased by 54% and from 1 April the monthly charge for each household could rise by 693 pounds a year.

Resistance levels: 1.32, 1.3250, 1.33, 1.335.
Support levels: 1.31, 1.305, 1.3, 1.296.

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USDCAD, in anticipation of additional growth drivers

The USDCAD pair tests the level of 1.2500 for a breakout, retreating from local lows of January 20, renewed last Friday, and waiting for additional growth drivers to appear.

The whole picture in the market changes slightly. Traders are still analyzing warning signs from Eastern Europe, trying to assess the prospects for global inflation and economic growth against a special military operation in Ukraine. Further escalation of the conflict significantly increases the demand for safe assets, but investors are increasingly giving their preference to the US currency, as the US Federal Reserve launched a cycle of raising interest rates. Also, as early as May, the rate growth rates may be increased, given the record inflation in the US and the relatively positive situation in the national labor market. The ‚Äúbulls‚ÄĚ are also supported by the escalation of tension between Russia and the West, the imposition of mirror economic sanctions by the states, and the lack of progress in ceasefire negotiations between representatives of the Russian and Ukrainian delegations. The next face-to-face round is scheduled for March 28‚Äď30. It will be held in Turkey.

The US macroeconomic statistics released on Friday were negative. Thus, the index of consumer confidence from the University of Michigan in March decreased from 59.7 to 59.4 points, while analysts did not expect changes. The pending home sales fell by 4.1% in February after falling by 5.8% in January. Analysts had expected positive dynamics at 1.0%. Meanwhile, the 10-year US Treasury yield rose by 5.4 basis points to its highest level since May 2019, around 2.54%, which pushed the US dollar index to a two-week high.

  • Resistance levels: 1.2558, 1.2600, 1.2650, 1.2700.
  • Support levels: 1.2450, 1.2400, 1.2335, 1.2300.

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Nasdaq 100, the influx of investors into the shares continues

The Nasdaq 100 index shows an uptrend, being at 14665. The US stock market continues to be supported locally by an increase in the number of retail investors trying to diversify their portfolios by directing their capital to assets that have lost the most value in order to escape high inflation.

Netflix Inc. announced a deal to acquire mobile game maker Boss Fight Entertainment as part of the service's strategy to create game content. It is worth noting that there is no information yet on which platforms the development will be carried out for, but experts note that the studio will not be re-profiled and will focus on mobile platforms. The details of the transaction are not disclosed. Earlier in March, Netflix Inc. announced the acquisition of Finnish mobile game developer Next Games for 72 million dollars.

Additional support for quotes of stock indices is provided by the bond market, which has been showing local growth since the opening of trading this week: popular 10-year US Treasuries added 2.48%, 20-year bonds rose by 1.54%, and short-term 3-month bonds were up 6.15% after Friday's close.

The index quotes have left the limits of the narrow downward channel and, having formed a full-fledged reversal, continue to grow. The technical indicators are in the buy signal they gave last week: the range of EMA fluctuations on the Alligator indicator is expanding in the direction of growth and the histogram of the AO oscillator is trading in the buy zone and forming ascending bars.

Support levels: 14410, 13020.
Resistance levels: 15070, 16410.

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Crude Oil, oil holds near 109

During the Asian session, quotations of Brent Crude Oil show restrained growth, trying to consolidate above the psychological level of 109.

Yesterday, the instrument was actively decreasing, which analysts attribute to fears of a sharp drop in demand for oil products from China. Since Monday, authorities in the city of Shanghai have announced the biggest lockdown since the start of the pandemic. In particular, almost half of the city will be closed for mass testing for COVID-19 for four days, after which the other half of the city will be closed for another four days. All city enterprises, except those that provide life support, will be sent to a remote mode of operation, and residents will not be able to leave their apartments even for grocery shopping.

Additional pressure on the quotes of Brent Crude Oil was provided by reports of new rocket attacks on oil facilities in Saudi Arabia. Today, in the context of a possible decrease or even a hypothetical cessation of Russian energy supplies, Saudi Arabia and the United Arab Emirates act as countries that can compensate for possible losses in the world market, but OPEC+ is not in a hurry to increase quotas for a monthly increase in production volumes. The cartel's next meeting should take place at the end of the month, and any hint of a change in current production plans could lead to noticeable fluctuations in quotes.

On Tuesday, markets are waiting for the publication of a report from the American Petroleum Institute (API) on the dynamics of "black gold" stocks for the week of March 25. The previous document reflected their decline by 4.28M barrels.

On the daily chart, Bollinger bands are trying to turn into a horizontal plane: the price range remains practically unchanged but remains quite spacious for the current level of activity in the market. MACD falls, keeping a strong sell signal. Stochastic demonstrates similar dynamics, indicating that the instrument may become oversold in the ultra-short term.

Resistance levels: 109, 112, 115.5, 118.32.
Support levels: 106, 102.8, 100, 96.5.

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AUDUSD, Australia's economy is recovering

The Australian currency continues to trade at stable levels around 0.7484 after the publication of positive macroeconomic statistics. This morning, the head of the Australian Bureau of Statistics, Ben James, said that the recovery of trade turnover is proceeding faster, which is also confirmed by data on retail sales, which added 1.8% in February. According to the official, the indicator reached such a high level for the second time in the history of observations after a sharp surge in November last year. In particular, significant growth was recorded in catering (+9.7%), clothing retail (+11.2%), and sales in department stores (+11.1%). At the same time, the retail food trade continues to experience difficulties, and the decline of 2.9% demonstrates this.

Meanwhile, Prime Minister Scott Morrison announced that the country's 2023 federal budget had set record funding for infrastructure projects, which will receive around 18B Australian dollars. The most significant funds will be spent on the construction of intermodal and cargo terminals in Melbourne (3.6B dollars) and the modernization and increase in the capacity of the railway network on the east coast of the continent (4.5B dollars). As expected, the Federal Parliament of Australia will consider the budget prepared by the country's government already today.

The price is moving within a wide side channel on the global chart, having reached the resistance line yesterday. Even though the technical indicators are in a buy signal, this level is quite solid, and the price may not break immediately. The most likely scenario would be a rollback of quotes and a full downward correction.

Resistance levels: 0.7540, 0.7750.
Support levels: 0.7442, 0.7165.

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USDCHF, Bank of Switzerland predicts high inflation for the whole year

After the National Bank of Switzerland published its interest rate decision and forecasts for the leading indicators for the near future, the USD/CHF pair is trading in an uptrend around 0.9341.

Thus, the regulator continued its loose monetary policy, leaving the interest rate expectedly at ‚Äď0.75%, while the inflation forecast was kept at 2.1% until the end of 2022. According to the agency, the influence of consumer prices is exerted by the conflict in Ukraine, which led to significant disruptions in the supply chains of goods, which to a greater extent affected the prices of petroleum products, on which the supply of other goods depends. The bank expects inflation to start to decline to 0.9% only by 2023, and until then, pressure on the economy will increase. Although the franc retains the status of a safe-haven currency, which will continue to support demand for it, the threat of foreign exchange intervention announced by the regulator is a strong factor holding back the growth of the exchange rate.

Against this background, the US dollar looks like a more stable asset, but important macroeconomic data will be published today. Firstly, the attention of investors is drawn to the publication of the report on consumer confidence from the Conference Board, the indicator of which may drop to 107.0 points from 110.5 points a month earlier. And secondly, today, JOLTS will present the February data on the number of vacancies in the national labor market. Analysts predict a decline in value to 11.000M from 11.263M a month earlier.

On the global chart of the asset, the price is moving within the global ascending channel, approaching the resistance line. Technical indicators remain in the state of a stable buy signal: fast EMAs on the Alligator indicator are above the signal line, and the AO oscillator histogram is trading in the buying zone.

Resistance levels: 0.9360, 0.9460.
Support levels: 0.9294, 0.9157.

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S&P 500, growth at the back of correction in the bond market

The S&P 500 index is correcting up against the backdrop of growth in the bond market, trading at around 4587. In the corporate segment, it is worth noting the increased activity in the shares of electric car manufacturer Tesla Inc. The company said it plans to seek permission from its shareholders for an additional share split in the form of dividends ranging from 2:1 to 3:1. The last time such a split was held in August 2020, when each shareholder received additional four securities for one already in hand.

The bond market continues active growth, which was clearly confirmed by yesterday's trading. The yield on 2-year US Treasury notes was fixed at 2.365%, well up from 1.553% at the last placement, the rate on 6-month notes was 1.050% versus 0.870% a month earlier, and the yield on 5-year treasury bills was fixed at 2.543% from 1.880% on the previous placement.

The index quotes are traded in a local uptrend, having overcome the resistance line of the descending channel the day before. Technical indicators have already reversed and issued a new buy signal: fast EMAs on the Alligator indicator crossed the signal line from below and the AO oscillator histogram moved into the buy zone, continuing to form ascending bars above the zero level.

Support levels: 4510, 4278.
Resistance levels: 4630, 4800.

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EURUSD: progress in negotiations between Russia and Ukraine pushes the price up

The European currency shows moderate growth against the US dollar during the Asian session, developing a strong "bullish" momentum formed the day before. EURUSD is testing 1.111 for a breakout and is located near the local highs of March 17.

The appearance of optimistic moods of investors was facilitated by the preliminary results of the meeting of the Russian and Ukrainian delegations, which ended in Turkey the day before. The parties announced significant breakthrough in the negotiations, which, in theory, could contribute to the de-escalation of the military conflict on the territory of Ukraine. Russian Defense Minister Sergei Shoigu also said that due to the transition of the current agreements into practice, the command decided to temporarily suspend the advance of troops in a number of areas. At the same time, it is noted that noticeable contradictions still remain between the parties, primarily on the territorial issue. Russia is expected to present its counter proposals today.

Another factor contributing to the growth of EUR/USD is the rally in eurozone bond yields. German 2-year Treasuries posted a substantial daily gain of 10 basis points for the first time since 2015. Continued positive dynamics will allow overcoming the key level of 0.0%.

In the meantime, market participants are waiting for the publication of a block of statistics on business sentiment in the euro area for March, as well as data on consumer inflation in Germany for the same period, which will be released today. Forecasts suggest a further increase in price pressure against the backdrop of a widespread decline in business confidence and activity. For example, the Gfk Consumer Confidence Survey for April in Germany released the day before fell from -8.5 to -15.5 points, which turned out to be significantly worse than market forecasts at the level of -12 points.

Bollinger Bands in D1 chart show moderate growth. The price range is slightly expanding, barely keeping up with the surge in "bullish" sentiment in recent days. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic is showing similar dynamics; however, the indicator line is already approaching its highs, indicating the risks of overbought EUR in the ultra-short term.

Resistance levels: 1.115, 1.1185, 1.122, 1.1255
Support levels: 1.11, 1.1051, 1.1, 1.0957.

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USDJPY, data on the labor market of Japan was positive

After more than a month of unsuccessful attempts to stop the fall, the Japanese currency finally approached the resistance level and significantly strengthened against the US dollar, which became the catalyst for the movement of quotes to the 121.88 area. The reason for the positive dynamics was the data from the Ministry of Internal Affairs and Communications of Japan on the state of the national labor market.

As the report showed, unemployment in the country in February fell to 2.7% from 2.8% a month earlier, while the price-adjusted forecast assumed that the value would remain around 2.8%. The total number of unemployed decreased by 30K to 1.88M, while the number of vacancies relative to applicants increased markedly with 121 open vacancies per 100 people, which contrasts with the previous result of 100/120.

However, the pressure on the yen continues to come from the decision of the Bank of Japan to purchase an unlimited number of 10-year government bonds at a rate of 0.25% after their yield jumped to a six-year high of 0.245%. Quotations are also negatively affected by rising commodity prices, which increase the country's trade deficit.

The quotes of the American currency reached annual highs, turned around and corrected down after US President Joe Biden, during a discussion of the draft budget for next year, called for adjusting its figure to 5.79T dollars, of which 813B is planned to be directed to financing the defense industry. This proposal caused bewilderment in the public since, in the context of a sharp increase in energy and food prices, it would be reasonable to increase the item of support for the population and the economy but not the defense budget.

The currency pair is moving within the global uptrend, correcting downwards. Technical indicators keep a stable buy signal, which has not yet reacted to the pair's decline. The EMA fluctuation range on the Alligator indicator is still quite wide, and the AO oscillator histogram is forming new up bars.

Resistance levels: 123.7, 126.3 | Support levels: 120.8, 117.3

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NZDUSD, trend replaced by an upward one

The NZDUSD pair is strengthening to the level of 0.6980, as under the influence of rapidly rising commodity prices, the export-oriented economy of New Zealand is showing growth. Optimism about the negotiations between the Russian and Ukrainian delegations, which took place yesterday in Turkey, allows investors to pay attention to risky assets, as well as euros and shares of European companies.

Meanwhile, the New Zealand economy is showing strong growth, as evidenced by the publication of updated data on construction permits for February: the indicator increased by 10.5% for the month, although in January the value was negative and amounted to -8.7%.

Thus, the NZD/USD pair changes the long-term trend to an upward one, breaking through the key resistance level of 0.6910. For the "bulls", new targets are opening in the area of 0.7055 and 0.7200, and the 0.6910 mark passes into the category of support levels and shifts to the area of 0.6885.

The mid-term trend in the NZDUSD pair has long been replaced by an upward one. As part of the growth last week, the bidders reached the target zone 3 (0.6963-0.6949), which buyers are trying to break out at the moment. If successful, the next will be target zone 4 (0.71030-0.7089). Key trend support: 0.6848-0.6834.

Resistance levels: 0.7055, 0.72 | Support levels: 0.6885, 0.6739, 0.665.
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EURUSD, the threat of cutting off gas supplies to the EU has decreased

Today is the deadline for transferring payments to rubles for Russian energy resources by "unfriendly" countries. The change in the settlement procedure was introduced since the foreign exchange reserves of the Central Bank of the Russian Federation were frozen by the EU countries after the start of a special military operation in Ukraine. After negative comments from EU leaders, investors feared that the Russian authorities might permanently cut off gas supplies. Still, tensions eased yesterday after German Chancellor Olaf Scholz and Italian Prime Minister Mario Draghi contacted Russian President Vladimir Putin to elaborate on the proposed calculation scheme. It was a signal that supplies would not stop, and the EU countries were ready to make contact.

The American currency has been declining for the second session in a row. This time, the reason for the negative dynamics was the report on the poor growth of the US economy. Analysts expected that Q4 GDP would increase by 7.1%, but the growth was only 6.9%. Additional pressure on the dollar was provided by poor Nonfarm Payrolls, which increased by only 455K, which is significantly lower than 486K a week earlier.

The asset moves within a wide downward channel and yesterday's local growth did not affect the general trend. Technical indicators maintain a global sell signal: fast EMAs on the Alligator indicator are below the signal line, while the AO oscillator histogram remains in the sell zone.

Resistance levels: 1.1226, 1.148 | Support levels: 1.1075, 1.0843

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USDCHF, the US dollar is recovering its positions

The US dollar shows moderate growth against the Swiss franc during the Asian session, recovering from a sharp decline the day before, which led to updating local lows from March 7. Investors are turning their attention back to the defensive asset as expectations decline for a peace deal between Russia and Ukraine that would bring about a final ceasefire. However, buyers are cautious ahead of the publication of a large block of US macroeconomic statistics at the end of the week. The focus is on the Friday's report on the labor market for March, which will re-evaluate the prospects for an earlier tightening of monetary policy by the US Federal Reserve during the May meeting. Earlier, the Chair of the regulator, Jerome Powell, did not rule out the possibility of raising the rate by 50 basis points at once in response to the continuing growth of inflationary pressure.

The macroeconomic statistics from the US and Switzerland published yesterday did not have a significant impact on the dynamics of the instrument. The index of economic expectations in Switzerland from the ZEW Institute in March showed a sharp decline from 9 to -27.8 points, which turned out to be significantly worse than market expectations of growth to 9.1 points. In turn, US data reflected a slight decline in GDP dynamics for Q4 2021 from 7% to 6.9%. In addition, the ADP Employment Change Report showed an increase of only 455K new jobs after an increase of 486K.

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On the D1 chart Bollinger Bands are reversing into the descending plane. The price range is expanding from below; however, it fails to catch the surge of the "bearish" sentiment at the moment. MACD is going down preserving a stable sell signal (located below the signal line). Stochastic keeps a downward direction but is located near its lows, which indicates the risks of oversold USD in the ultra-short term.

Resistance levels: 0.9250, 0.9300, 0.9341, 0.9381 | Support levels: 0.9219, 0.9200, 0.9175, 0.9148

 

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GBPUSD, the pound is pending new drivers

The British pound is losing ground against the US dollar during the morning session, again preparing to test 1.3100 for a breakdown. Expectations of an early conclusion of a peace agreement between Russia and Ukraine are noticeably declining as market participants state that there have been no significant changes after the negotiations, and fundamental contradictions still persist. The Russian Federation is reducing the number of its troops in one direction in order to strengthen it in another, and this, of course, does not lead to a ceasefire.

Demand for risky assets is also falling as April approaches, when new rules for paying for Russian gas come into force. If the mechanisms for paying for "blue fuel" in rubles do not work or the EU countries take a principled position, this may negatively affect supplies. It should be noted that the UK's dependence on resources from Russia is significantly lower than, for example, Germany's.

Today, investors are focused on the updated statistics on the dynamics of GDP in the UK for Q4 2021. According to current forecasts, the British economy will grow by 1% QoQ and 6.5% YoY. Meanwhile, the USD Index is trying to recover from a significant drop below 98.000, which caused "bullish" market sentiment, when face-to-face talks between the Russian and Ukrainian delegations in Turkey at the beginning of the week seemed to lead to a constructive result.

It is also worth noting the speech of the Deputy Governor of the Bank of England, Ben Broadbent, who said the day before that due to a jump in energy prices, the inflation rate in the country could reach almost 9%, which is more than four times the regulator's target of 2%. At the moment, the economic situation remains difficult, as it is influenced by several important factors at once: high inflation, weak domestic demand and production growth.

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Bollinger Bands on the daily chart are showing a slight uptrend with a reversal trend into the horizontal plane. The price range is actively narrowing, reflecting the emergence of multidirectional trading dynamics in the short term. MACD indicator tries to reverse to growth and to form a new buy signal (the histogram is about to consolidate above the signal line). Stochastic is showing similar dynamics, having reversed upwards near the level of "20" and signaling in favor of the development of the uptrend in the ultra-short term.

Resistance levels: 1.3200, 1.3250, 1.3300, 1.3350 | Support levels: 1.3100, 1.3050, 1.3000 1.2960

 

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EURUSD, euro is correcting at the end of the week

The European currency shows flat dynamics of trading against the US dollar during the Asian session, consolidating near 1.1060 and waiting for new drivers. The day before, the euro showed a sharp weakening against the US currency, which did not allow the instrument to consolidate on new local highs from March 1.

The return of "bearish" trend was due to the growth of negative sentiments regarding the impact of sanctions against Russia on the global and European economy in particular. Among other things, analysts are trying to assess the prospects for interruptions in gas supplies to the EU due to the introduction of a new mechanism for paying current and subsequent contracts in rubles. Many European countries have said they will not make concessions to Russia, which could lead to a potential cessation of exports by the Russian Federation.

The macroeconomic statistics from the EU published yesterday had only a minor impact on the dynamics of the instrument. Retail Sales in Germany rose by 0.3% in February, which was slightly worse than market expectations at the level of 0.5%. In annual terms, sales volumes slowed down from 10.4% to 7.0%, while experts expected a fall to 6.1%. At the same time, the German labor market in March showed very encouraging resilience on the eve of a new possible crisis. The Unemployment Change in the country fell by 18K, slowing down, however, after a decline of 33K.

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In the D1 chart, Bollinger Bands are reversing horizontally. The price range is almost unchanged, reflecting the development of flat dynamics of trading in the short term. MACD is growing preserving a weak buy signal (located above the signal line). Stochastic, having reached the level of "80", reversed into a descending plane, reacting to the appearance of corrective dynamics on the results of Thursday.

Resistance levels: 1.11, 1.115, 1.1185, 1.122 | Support levels: 1.1051, 1.1, 1.0957, 1.09

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USDCHF, rising inflation in Switzerland strengthens the franc

The strengthening of the Swiss franc was caused by outstripping inflation, which remained in the zero area for a long time. Today, renewed data on the consumer price index for March was released: the indicator rose by 0.6% MoM, higher than the forecast of 0.5%, and amounted to 2.4% YoY. It means that rising prices around the world are beginning to impact the Swiss economy, which in the future may lead to an increase in the interest rate. The procure.ch Manufacturing PMI was released today, showing the activity of purchasing managers in the manufacturing sector. The indicator reached 64.0 points, higher than the forecast of 60.5 points and the previous value of 62.6 points, which further supported the franc.

It is worth noting that Switzerland and the United States are at different stages of the economic cycle, and their central banks pursue different monetary policies. Switzerland maintains a negative interest rate of ‚Äď0.75%, which has not changed for seven years, and the US Federal Reserve has begun to tighten monetary policy, which implies a cycle of interest rate hikes in 2022. The US dollar is expected to strengthen in the long term, while the Swiss franc can maintain its position and remain neutral.

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The long-term trend is upwards, but now, a correction is developing, within which the asset tested the support area of 0.9205‚Äď0.9155. If buyers hold it, then the growth of the asset will continue to 0.9450.

As part of the medium-term downtrend, the instrument reached the target zone 2 (0.9216‚Äď0.9204), the breakdown of which will allow sellers to lower the price to the target zone 3 (0.9098‚Äď0.9087). Holding the target zone 2 may lead to a medium-term correction to the trend line 0.9326‚Äď0.9314.

Resistance levels: 0.9363, 0.9450, 0.9539 | Support levels: 0.9205, 0.9155, 0.9089, 0.9033

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