Market worries seem to persist

USD remained relatively stable against its counterparts yesterday, maybe rescued by safe-haven inflows. Also, the unexpected improvement of the consumer sentiment for March may have provided some support for the USD yesterday. Overall, should market worries intensify we may see the USD gaining additional support. Please note that the number of high-impact financial releases stemming from the US is low and thus may allow fundamentals to play a key role regarding the greenback’s direction. On the other hand, US stock markets were slightly in the reds as traders seemed to hesitate given the market worries for the US banking sector which resurfaced despite reassurances provided by Fed Board Governor Barr that US banks are sound and resilient. It’s interesting that Fed’s Barr blamed the fallout of SVB on bad management rather than any systemic reason as he called it a ‘textbook case of mismanagement’. Also, we highlight that Ali Baba’s share price got a boost yesterday as the company announced a break up of its operations into six entities which on a wider level may signal that Beijing’s crackdown on tech companies may be nearing an end. Gold’s price tended to be on the rise yesterday breaking the negative correlation with the USD despite US yields remaining stable. Should US yields start rising given the market worries we may see the shiny metal’s price weakening, while a possible strengthening of the USD may intensify a bearish effect for gold. On the commodities front, WTI’s price edged higher yesterday after a substantial jump on Monday, as the API weekly crude oil inventories figure showed that US inventories dropped in the past week in a clear sign that demand levels out-performed oil production, while worries over reduced supply from Iraq’s Kurdistan region tend to provide an additional boost. In Europe, we note that we have a number of factors puzzling EUR traders. On a fundamental level, we note that violent protests in France are still ongoing, while additional unrest is being placed in the Eurozone by strikes staged in Germany which paralyzed the country. Overall the ongoing social unrest tends to weigh on the EUR as uncertainty grows. Please also note that three major banks, BNP Paribas, Societe Generale and HSBC may be charged by French authorities after searches in their Paris offices over the dividend tax fraud scheme, which tends to add more uncertainty for Europe’s banking sector. On a monetary level, we note that ECB’s easing on its aggressive hawkish stance that could also weigh on EUR somewhat, should it maintained by ECB policymakers in their coming statements.

USD/JPY edged higher yet remained well in the boundaries set by the 132.85 (R1) and the 129.75 (S1) levels. We tend to maintain our bias for a sideways motion, yet we note that the RSI indicator has risen above the reading of 50, implying a build-up of bullish tendencies. Please note that the price action has reached the upper Bollinger band that may slow down the bulls somewhat. For a bullish outlook though we would require a clear break of the 132.85 (R1) line, which may pave the way for the 135.15 (R2) resistance level. Should the bears take over we may see USD/JPY reversing course breaking the 129.75 (S1) support line and aim for the 127.55 (S2) level.

EUR/USD was in an upwards movement yet seems to have hit a ceiling on the 1.0855 (R1) resistance line. Given that the pair was unable to break the upper boundary of its wide sideways motion we tend to maintain our sideways bias for now. On the other hand, we note that the RSI indicator remained stable at relatively high levels, yet below 70,k which may allow the pair to take another swing at the R1. Should the pair find substantial additional buying orders along its path we may see it breaking the 1.0855 (R1) resistance line and aim for the 1.1000 (R2) level. Should a selling interest be expressed, we may see the pair reversing course, and aiming if not breaching the 1.0695 (S1) support line.

Other highlights for the day:

During today’s early European session, we note the release of Germany’s GfK Consumer sentiment for April, France’s consumer confidence for March, and later on we highlight from the Czech Republic CNB’s interest rate decision while in the American session, we note the release of EIA weekly crude oil inventories figure. As for speakers we note UK Finance Minister Hunt, Fed Board Governor Barr’s testimony, BoE’s Mann and ECB Schnabel.  

EUR/USD H4 Chart

Support: 1.0695 (S1), 1.0530 (S2), 1.0430 (S3)

Resistance: 1.0855 (R1), 1.1000 (R2), 1.1140 (R3)

USD/JPY H4 Chart

Support: 129.75 (S1), 127.55 (S2), 125.05 (S3)

Resistance: 132.85 (R1), 135.15 (R2), 137.90 (R3)

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This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

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