USD remains stable as the week is about to end

The USD edged higher yesterday against its counterparts, yet the overall sideways motion seems to continue as the greenback seems about to end a five-week winning streak. On a monetary level, the Fed’s hawkish intentions were on display once again yesterday as Fed Policymakers made relevant statements. Fed Board Governor Waller was reported stating that should data show remain “hot”, ie. show an excessively strong employment market, robust consumer demand and stubbornly persistent inflationary pressures. Then the bank’s terminal rate should be higher than the 5.1%-5.4% range. The statement highlighted the possibility of the Fed raising its interest rates beyond market expectations and keeping them at high levels for a prolonged period of time, which may provide additional support for the USD should the hawkish statements intensify further.  On the flip side, Atlanta Fed President Bostic reiterated his preference for a 25 basis points rate hike mentioning that he favoured “slow and steady“ rate hikes, easing the market worries for a possible overtightening of the Fed’s monetary policy and thus capping any gains of the USD.

Also, we highlight the steepening of the inversion of the US yield curve yesterday with the 2-year yield reaching levels last seen back in 2007, which tends to imply that the market prices in the possibility of recession rather sooner than later. Should the market’s expectations for a recession intensify we may see the USD gaining additional safe haven inflows and strengthen against its counterparts. It should be noted though that gold’s price remained relatively unchanged despite the strengthening of the USD, yet we tend to maintain the view that the negative correlation of the two trading instruments is to remain present. Also, it’s interesting to note that US stock markets were on the rise as an improved market sentiment tended to descend on the markets. Eurozone’s HICP rate accelerated despite expectations for a slowdown in February, yet the release failed to excite EUR traders as the market seemed to be prepared for the persistence of inflationary pressures in the Zone. Nevertheless, the release is expected to sharpen ECB’s hawkishness and thus could provide some support for the common currency should the statements of ECB officials be more confident and aggressive.

USD/JPY continued its upward motion towards the 138.15 (R1) resistance line yesterday. We expect the bullish outlook for the pair to remain as long as the USD/JPY’s price action remains above the upward trendline incepted since the 10^th of February. Should the upward movement be maintained, we may see USD/JPY breaking the 138.15 (R1) resistance line and aim for the higher grounds. On the flip side, for a bearish outlook we would require the pair to break the prementioned upward trendline, as well as the 134.80 (S1) support line clearly, enabling the pair to aim for the 131.40 (S2) support barrier.

EUR/USD bounced on the 1.0575 (S1) support line yesterday maintaining its sideways motion. We tend to keep our sideways bias intact for now, given that the RSI indicator reached the reading of 50. Should the bulls take over, we may see EUR/USD breaking the 1.0715 (S1) support line, aiming for higher grounds. Should the bears take over, we may see EUR/USD breaking the 1.0575 (S1) level and aim for the 1.0430 (S2) line.

Other highlights for the day:

During today’s European session, we note the release of Turkey’s CPI rates for February, Eurozone’s and UK’s final Services and composite PMI figures for the past month and Eurozone’s PPI rates for January, while on the monetary front, ECB’s De Guindos is scheduled to speak. In the American session, we highlight the US ISM non-manufacturing PMI figure for February, and note that Dallas Fed President Logan, Fed Board Governor Bowman and Richmond Fed President Barkin are scheduled to make statements. Also note that an easy-going Monday Asian session is expected as no major financial releases are due out, allowing fundamentals to take over.  

EUR/USD H4 Chart

Support: 1.0575 (S1), 1.0430 (S2), 1.0290 (S3)

Resistance: 1.0715 (R1), 1.0855 (R2), 1.1000 (R3)

USD/JPY H4 Chart

Support: 134.80 (S1), 131.40 (S2), 128.60 (S3)

Resistance: 138.15 (R1), 140.60 (R2), 143.80 (R3)

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