Daily Market Analysis From Forexmart

Hot forecast for GBP/USD on 06/04/2022

The pound stayed for a long time, and has demonstrated incredible stability. But yesterday everything changed, and it finally followed the single European currency. That is, to the downside. At the same time, it completely repeated the typical scenario for the last few days for the euro. The British currency stood still during the European session, and after the opening of the US one, it went down. But yesterday, both major European currencies had enough reasons to fall. Although to be precise, there is only one reason. The notorious energy carriers. Just at the opening of the US trading session, publications appeared in the media on the topic that the new block of European sanctions against Russia would include restrictions on coal supplies. We are not talking about a complete ban on imports. It is planned to reduce the volume of deliveries by about 4 billion euros, which is about a third of all coal supplies from Russia to Europe. Naturally, an extremely simple question immediately arises - how does Europe plan to compensate for the falling volumes. Moreover, Europe is already facing an unprecedented increase in fuel prices and inflation. There is no doubt that this decision, if of course it is made, will cause Europe the most serious damage. Including an even greater increase in inflation. The sanctions themselves should be adopted today or tomorrow. And if this issue is delayed, the pressure on the pound will only increase. Uncertainty scares investors the most. But in any case, at least today, the pound will remain under pressure.

The long-playing 1.3105/1.3180 horizontal channel for the GBPUSD pair was broken through on a downward trajectory. This led to speculation in the market, where the pound fell to the area of 1.3060. In fact, the bears tried to return the quote to the support level of 1.3000, playing a 100% corrective move.

The RSI technical instrument moves in the lower area of the 30/50 indicator in a four-hour period, which signals a high interest of traders in short positions.

The Alligator H4 indicator has a primary sell signal after a long intertwining between the moving MA lines. Alligator D1 is signaling a downward trend, MA moving lines are directed to the downside.

Expectations and prospects:

At the moment, the quote has slightly slowed down the downward movement, where the 1.3050/1.3060 area serves as a variable support. Keeping the price below these values is highly likely to lead to a further decline towards the support level of 1.3000. Until then, a rollback to the lower border of the passed flat is possible.

Comprehensive indicator analysis gives a sell signal in the short, intraday and medium term due to the rapid downward movement.

 

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Tips for beginner traders in EUR/USD and GBP/USD on April 13, 2022

Economic calendar for April 13
Data on the UK inflation were published today, which saw an acceleration in consumer price growth from 6.2% to 7.0% with a forecast of 6.7%. Such high inflation is damaging the economy, which is a negative factor for the pound sterling.

During the American trading session, the producer price index in the United States will be published, which is expected to grow from 10.0% to 10.6%. Rising prices will lead to further inflation, which is already at historical levels.

All this is a negative factor for the US economy.

Time targeting

US producer price index - 12:30 UTC

Trading plan for EUR/USD on April 13
In this situation, holding the price below the level of 1.0800 in a four-hour period will indicate a continuation of the trend. This may lead to a subsequent movement towards the local minimum of 2020.

An alternative scenario for the development of the market considers another slowdown in the downward move within 1.0800. This may lead to a temporary pullback, but not to a change in trading interests.

Trading plan for GBP/USD on April 13
The price stagnation within the deviation of the 1.3000 level will soon end. With a high degree of probability, it will become a lever for speculators in the upcoming acceleration in the market. It is worth considering that the signal of prolongation of the downward trend will be confirmed only after the price is kept below the value of 1.2950 in a four-hour period.

As for the upward development of the price, traders consider this scenario as a local rebound of the price from the support level of 1.3000. The signal for action will come from the market at the moment the price is held above the value of 1.3055. In the future, this move may lead to the 1.3105 mark, after which a price reversal is not excluded.

 

Hot forecast for EUR/USD on 14/04/2022

The single European currency showed a rather unexpected growth yesterday. Although it was insignificant, nonetheless. Moreover, the producer price index in the United States rose from 10.3% to 11.2%. But just a day earlier, a stronger than expected increase in inflation in the United States led to a rise in the dollar, as it finally convinced everyone that the Federal Reserve would actively raise the refinancing rate. The producer price index is a leading indicator for inflation, so it will continue to grow. Therefore, it is quite possible that by the end of this year the refinancing rate will be raised as much as 3.0%.

Producer Price Index (United States):

But the fact is that simultaneously with the release of these data, new forecasts for inflation in the UK were published. The Bank of England expects inflation to peak just in April, stopping at 7.2%. After that, it will gradually decrease. But investment banks think otherwise, and in their opinion, inflation will accelerate to 9.0%, which is quite different from the forecast of the Bank of England. Given the current inflationary dynamics, the forecast from the banking sector seems more realistic. And in this case, the Bank of England will have to react somehow. Of course, we are talking about a further increase in the refinancing rate. This was the reason for the pound's growth, which has already pulled the euro. This is clearly seen by the fact that the pound grew more actively than the euro.

Data on retail sales in the United States will be published today, the growth rate of which may slow down from 17.6% to 11.0%. However, this news will be ignored in principle, since European Central Bank President Christine Lagarde's press conference will begin at the same time. The main event of the day is the meeting of the Board of the ECB. Interest rates, of course, will remain unchanged, as will all other parameters of the monetary policy pursued by the central bank. Only subsequent comments are of interest. If, as before, nothing is said about plans to raise the refinancing rate, then the dollar will resume its growth. But if Lagarde at least hints at the possibility of an increase in interest rates before the end of this year, then in this case the euro will begin to grow actively.

Retail Sales (United States):

The EURUSD currency pair, after the control convergence with the support level of 1.0800, the volume of short positions has sharply decreased. This led to a local stagnation, and then to a price rebound by about 100 points. A comparative analysis of the two trading instruments EURUSD and GBPUSD showed the possibility of a positive correlation, where due to the sharp strengthening of the British currency, there could be a rush to buy the euro.

The technical instrument RSI H4 crossed the 50 middle line during the strengthening of the euro. This signal indicates a corrective move.

The Alligator H4 indicator has a primary intersection between the moving lines, which also allows for a corrective move. Alligator D1 indicates a downward trend, MA moving lines are directed to the downside.

Expectations and prospects:

In this situation, much will depend on the external background, in particular, the results of the ECB meeting. As for the technical levels, the 1.0940 coordinate variable on the bulls' way, which can play the role of resistance if the hype for long positions subsides. If the price stays above 1.0950, it is highly likely that the correction will continue to form towards the psychological level of 1.1000.

Complex indicator analysis gives a signal to buy in the short-term and intraday periods due to the rapid growth of the euro. Indicators in the medium term have a sell signal due to a downward trend.

 

Gold went into the shadow of a strong dollar

This week, the demand for safe-haven assets has increased significantly. Gold has benefited from another spike in US inflation. But it seems that bullion is starting to seriously lose to the more reliable dollar.

Yesterday's trading on the New York COMEX was the last one this week. Today, many US markets are closed due to the Good Friday holiday.

Gold finished the shortened working week with an increase. Since Monday, its quotes have increased by 1.5%. The main growth driver for the yellow asset was the statistics on consumer prices in the US for March.

Last month, inflation in America accelerated to 8.5% year on year. This is a new 40-year high. The last time the rate was at such a high level was in January 1982.

The record price increase not only increased the value of the precious metal, but also reinforced the Fed's intention to raise interest rates more sharply at its next meeting.

In March, the US central bank raised rates by 25 bp for the first time in four years. Now that inflationary pressures have increased, it is highly likely that the Fed's next move will be to raise the rate by 50 bps.

This version was confirmed on Thursday by New York Fed President John Williams. He said raising interest rates by half a percentage point in May would be a "smart option" for the US central bank.

The hawkish rhetoric of Fed officials has fueled US Treasury yields across the curve. This acted as fuel for the dollar.

Yesterday the greenback index jumped 0.5% against its main competitors. The currency broke through the psychologically important level of 100 points.

The steep dive of the euro also helped the greenback to strengthen. The EU currency fell sharply on the European Central Bank's dovish position. Yesterday, the ECB's meeting for monetary policy took place. The central bank decided to leave its course unchanged for the time being.

Another driver for the dollar was the release of the consumer sentiment index of the University of Michigan. In April, the indicator rose sharply to 65.7 from the March value of 59.4 points.

The powerful momentum that the greenback received had a negative impact on gold quotes. On Thursday, the asset fell 0.5%, or $9.80. The price dropped to $1,974.90. This is the first drop in the value of the precious metal in six trading sessions.

Recall that in the outgoing week, bullion tested a critical level on the way to $2,000. But, according to analysts, gold will not be able to break out of the current price range in the near future. The main obstacle is the dollar.

Now we are seeing strong bullish dynamics of the US currency. According to forecasts, it will continue in the short term. As long as the greenback index remains above 100, the yellow asset has almost no chance of approaching $2,000.

What can help gold?
In the foreseeable future, the gold market will continue to follow the rhetoric of the world's central banks, many of which are hawkish. The Bank of England's interest rate decision is particularly important now.

Tightening the policy of major central banks may lead to a weakening of the US currency. This is a favorable factor for the precious metal.

In addition to the fall of the dollar, bullion may receive support from geopolitics. Currently, most experts predict a further escalation of the military conflict in Eastern Europe.

This week, Russia threatened to deploy nuclear weapons and hypersonic missiles if Sweden and Finland join NATO. The comment came from the Deputy Chairman of the Security Council of the Russian Federation Dmitry Medvedev.

This happened just a day after US President Joe Biden announced that America would provide Kiev with additional firepower, including heavy artillery, worth $800 million.

If the situation in Ukraine continues to heat up, gold may come close to $2,000. However, traders should be prepared for the opposite situation.

The settlement of the conflict in Eastern Europe or the reduction of inflationary risks may lead to a significant drop in the value of the precious metal – up to $1,900.

 

Bitcoin (BTC) will not fall below $24,500

Bitcoin is declining for the second week in a row under the influence of the negative dynamics of the stock market. The main decline in BTC last week occurred on Monday against the backdrop of a noticeable drawdown in US stock indices.

The leaders of the world's largest crypto exchanges, interviewed by CNBC, said that they have recently noticed signs of a "crypto thaw", expressed in a changing attitude towards cryptocurrencies from governments.

The Central Bank of Portugal granted the bank the country's first license to work with crypto assets. Bison Bank has become the first bank in Portugal to offer custody and trading services for cryptocurrencies for large clients.

Tesla CEO Elon Musk said recently that he intends to buy Twitter. Cardano founder Hoskinson suggested that Musk join forces to create a decentralized social network if Twitter refuses the deal.

The 12th DOGE cryptocurrency will become the most used cryptocurrency for online payments, said Robinhood CEO Vlad Tenev. However, to do this, developers must increase the speed of transaction processing.

The Ministry of Finance of the Russian Federation finalized the draft law on mining and circulation of digital assets. The government of the Russian Federation submitted to the State Duma a draft law on the taxation of digital assets by three types of taxes.

The creator of the Stock-to-Flow (S2F) model PlanB believes that bitcoin will no longer fall to $24,500. His optimism regarding the asset remains unchanged. According to PlanB, BTC could reach $100,000 by the end of the year.

 

US stock market opens this week with decline

In the session on Monday, US stock indices dropped on the back of a record rise in the yield of the 10-year Treasury note.

As a result, all three major indices – the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite – sank by 0.1%, having settled at 34,411.69, 4,391.69, and 13,332.36 respectively.

The major outsiders among the DJIA companies were the securities of Walt Disney Co. (-2.1%), Honeywell International Inc. (-1.6%), and Home Depot Inc. (-1.4%). The best performers were Goldman Sachs Group Inc. (+2.7%) and Intel Corp. (+2.1%).

Bank of America Corp's shares rose by 3.4% on Monday. In the first quarter of the financial year, the bank's net profit fell by 12%. Despite this, the final earnings report exceeded analysts' expectations as the total revenue increased by 2%.

The Bank of New York Mellon securities dropped in value by 2.3% as the company's report showed a decline in profit for the first quarter. At the same time, earnings per share turned out to be higher than market forecasts.

Shares of the Chinese taxi aggregator Didi Global Inc. plunged by 18.5% yesterday after the company reported a 12.7% drop in revenue in the fourth quarter of 2021.

The share price of Natus Medical Inc., a developer, manufacturer, and supplier of screening devices, surged by 29%. As was reported earlier, Natus Medical is being acquired by investment company ArchiMed for $1.2 billion.

The value of Southwest Gas Holdings Inc. went up by 5.7% following the reports that the company is considering various scenarios for its future development, including a possible sale.

On Monday, the price of US government bonds continued to decline, while the yield of the 10-year Treasury bills increased by 4 basis points and soared to 2.861%. This was the highest closing rate since the end of 2018. So, the bond yield has gained more than half a percentage point since early April.

As a rule, a rise in US Treasury yield puts pressure on risk assets. This rule is especially evident in the case of tech stocks and consumer cyclical companies.

This week, markets will closely watch the steps of the US Federal Reserve who intends to increase the interest rate in the near future. The regulator is trying to cap running inflation and save the US economy from significant damage.

At the same time, investors believe that measures taken by the Fed are not enough to tackle inflation. They hope that at its next meetings in May and June, the US central bank will increase the benchmark rate by 0.5 percentage points. Last month, the Fed raised the rate by 0.25 percentage points to 0.25% -0.5%.

Recently, analysts at one of the world's largest investment banks, Goldman Sachs Group Inc., have warned that there is a 35% chance of a recession in the US in the next two years. Therefore, the US Federal Reserve should tighten its monetary policy to the extent where it will help reduce job openings without sharply rising unemployment.

Goldman Sachs notes that achieving a so-called "soft landing" may be tough because historically the gap between jobs and the labor force has narrowed significantly only during recessions.

In addition, market participants will closely monitor the financial reports of the country's leading corporations. Such popular investor choices as Netflix, Tesla, Johnson & Johnson, Snap, Twitter, and United Airlines will reveal their earnings reports this week.

The financial results of the US corporate giants will show how successfully these companies are coping with the permanently rising inflation.

 

USD/CAD: Loonie is confused by ups and downs and looks to the downside, then to the upside

The Canadian dollar started the week on the rise, and ends it in some confusion. After disappointing macro statistics and another round of inflation, the loonie significantly fell. However, the loonie is trying to "keep face" and is looking for ways out of this situation.

The Canadian dollar strengthened against the US dollar in the middle of the week, reaching 1.2584. However, after four days of growth, the USD/CAD pair showed a downward momentum, retreating from the local high at 1.2644. To date, the pair is struggling to hold its positions, but is determined to catch up. On Thursday, April 21, the USD/CAD pair traded at 1.2480, leaning to the downside and upside from time to time.

The "loonie" was tripped up by the growing inflation recorded in Canada. According to current data, consumer inflation in the country accelerated to 6.7% in March, exceeding forecasts. Recall that this figure was 5.7% in February. Against this background, the Bank of Canada is interested in raising interest rates above current levels. The central bank's immediate goals are to curb inflation without provoking a recession in the economy.

The pressure on the USD/CAD pair is exerted by the growing US currency. According to analysts, the resistance to the dollar is draining the loonies. In the future, the loonie will sink even more in relation to the greenback, however, it will strengthen against the euro.

The Canadian currency was supported by the increase in the key rate by the Bank of Canada (by 50 bp) recorded last week. In addition, the central bank announced the start of quantitative tightening in response to accelerating inflation.

The Canadian economy got a head start thanks to rising prices for commodities and energy. This contributes to the decisive actions of the Bank of Canada, aimed at normalizing monetary policy. The country's economy is on the winning side compared to other states that are importers of energy and hydrocarbons. In such a situation, the CAD receives tripartite support: from a significant influx of money into the country, from the growth of business activity and the potential tightening of the central bank's monetary policy.

According to experts, galloping inflation is a weighty argument for further tightening of monetary policy by the Bank of Canada. The implementation of such a scenario will strengthen the position of the Canadian dollar in the medium term. In such a situation, experts recommend holding short positions on the USD/CAD pair with a target of 1.2450.

 

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Gold to resume growth in near term

Gold closes this week with losses despite a great start. On Monday, the price shortly exceeded $2,000. Will gold develop an impressive rally again?

Since the beginning of the week, the precious metal has depreciated by 1.4%. Now it is on its way to the first weekly drop in 3 weeks.

The main factors that sent gold down from a 5-day high reached on Monday are the strengthening of the US dollar and the rise in US Treasury yield.

Both USD and Treasury yields advanced this week on expectations of a more aggressive approach from the Fed.

There have been some very tough comments by the Fed officials in recent days, and especially the recent statement made by the Fed Chair.

Speaking at a meeting of the International Monetary Fund, Jerome Powell made it clear that the regulator is set to raise interest rates by 50 basis points in May.

"Inflation is now much higher and the interest rate is more flexible. It is appropriate in my view to be moving a little more quickly," he said.

The hawkish tone of the Fed Chair weighed on the gold quotes. The precious metal closed yesterday's trading down by 0.4%, or $7.40, at $1,948.20. This is the lowest value in 2 weeks.

Silver futures for May also declined by 2.6%, or 65 cents, compared to the previous close. So, the price of silver fell to $24,621.

The precious metals market was also affected by the comments about the ECB policy made by EU officials.

In particular, Bundesbank President Joachim Nagel said that the regulator could raise interest rates as early as the beginning of the third quarter.

Now markets expect a rate hike by 20 basis points by July and by more than 70 basis points by the end of the year. If such a scenario comes true, the benchmark interest rate will be above zero for the first time since 2013. This will serve as a catalyst for the euro.

The tightening of the monetary policy of major central banks is a key negative factor for gold.

In addition, the geopolitical crisis is another driver for the value of gold. The aggravation of tensions between Russia and Ukraine allowed the asset to go slightly higher today.

At the time of writing, gold was up by 0.2% and was trading at $1,952.00.

On Wednesday, Moscow sent a draft peace agreement to Kyiv. However, there is no talk of an early ceasefire.

The US and its allies continue to supply Ukraine with weapons, including heavy artillery, so that its forces can repel Russian advances in the eastern part of the country.

The latest reports from the UK Defense Ministry suggest that Russia will try to conduct a quick and decisive fight in Ukraine before Victory Day.

Russia is seeking to demonstrate significant progress in Ukraine ahead of May 9, an important date for Moscow.

According to forecasts, a serious escalation of the conflict in this period may lead to additional sanctions against the Kremlin.

The next anti-Russian sanctions are likely to raise inflationary expectations, which will be a positive factor for gold.

Gold is expected to develop an uptrend ahead of Victory Day in Russia.