SVB’s collapse grips the markets

The dollar has been hit hard after SVB’s collapse, reversing course and erasing any gains gathered post Fed Chair Powell’s speech as investors rushed to assess the systemic risk of the fallout. NFP results on Friday showcased that the US labour market remains strong as 311k jobs were created, higher than the 205k expectation, yet the unemployment rate rose to 3.6%, above 3.4% of the market consensus. Nonetheless, the rate is considered low by historical standards. Even though the results from the employment report could have reasonably expected to reassure the market that the Fed is to continue head on with its inflation battle, SVB’s collapse led the market to quickly, outright dismiss the scenario for a 50 basis points hike in the March meeting, reversing the odds back to where they were prior to Fed Chair Powell’s speech. Currently the FFF implies a 92% probability for the Fed to proceed with a 25-basis points hike, while the rest is assigned to a no-hike scenario. Not surprisingly, gold made the most out the dollar’s fall and attracted heavy inflows from distressed investors who weighed the probabilities for a full-blown contagion from the SVB’s fallout. US stock markets ended the week sharply lower, in the reds, however, in today’s premarket session all three major indices are swiftly higher, lifted by reassuring comments from the Treasury Department, Fed and FDIC over the weekend, that SVB depositors will have access to their depositions today Monday.

USDIndex reversed course and fell sharply after SVB’s contagion fears. We hold a sideways bias for the index being confined between 104.10 (R1) resistance and 103.00 (S1) support levels, yet we note that the RSI indicator currently highlights bearish tendencies. Should the bears capitalize on the negative momentum, we may see the break of 103 (S1) level and the move closer to 101.90 (S2) level. Should the bulls take over, we may see the break above the 104.10 (R1) and the move near 105.30 (R2) level. XAU/USD rose sharply in response to the dollar’s weakness and yield’s retreat. We hold a bullish bias for the precious yet we note that the RSI indicator has exceeded the 70 overbought threshold and a correction may be due. Should the bulls reign, we may see the break above the 1885 (R1) and the move towards 1900 (R2). Should bears take over, we may see break below 1870 (S1) and the move towards 1855 (S2)

Other highlights for the day:

No major news releases for today.

As for the rest of the week

On Tuesday the key event for the day is the US yoy & mom CPI rates for February, alongside the Core CPI’s for the same period. We also note UK’s ILO Unemployment rate and Employment Change for January (HMRC Payrolls for February) and Canada’s Manufacturing Sales for January. On Wednesday the crucial event for the day is the US’s Retail Sales for February and the Final PPI Demand rate. We also note the release of BOJ’s meeting minutes for January, China’s Industrial Output and Retail Sales for February, the French Final HICP rate for February, alongside Eurozone’s Industrial Production for January and New Zealand’s GDP rate for Q4. On Thursday the main event is ECB’s interest rate decision and ECB’s President Lagarde speech after the March meeting. We also highlight Japan’s Exports and Imports rates alongside Australia’s Employment and Unemployment Rate, all for the month of February. We also note release of the US weekly initial jobless claims figure and the Philly Fed Business Index for March. On Friday we highlight Eurozone’s Final HICP print, Canada’s Producer Prices and the US Industrial Production rate all the month of February alongside the preliminary University of Michigan’s Sentiment and Expectations indices for March.           

USDIndex H4 Chart

Support: 103.00 (S1), 101.90 (S2), 100.70 (S3)

Resistance: 104.10 (R1), 105.30 (R2), 106.80 (R3)

XAU/USD H4 Chart

Support: 1870 (S1), 1855 (S2), 1840 (S3)

Resistance: 1885 (R1), 1900 (R2), 1915 (R3)

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