Fed Powell’s speech favors Dollar

  • Dollar gains some ground with Fed Powell’s comments portrayed that central bank would take a more aggressive monetary policy path.
  • ECB President Largade noted “Ukraine war would have growth consequences in the Euro area.”
  • Ukraine war jitters weigh on market sentiment and creates negative prospect for Euro.

 

Euro drops against the US dollar during Tuesday Asian trading session due to escalating Ukraine war jitters and Powell’s hawksih comments.

Federal Reserve Chief Jerome Powell spoke at NABE annual conference that the Fed would take the “necessary steps” to tame inflation towards the bank’s target of 2%, even if it needs to hike rates more than 25 basis points at a meeting or meeting. Moreover, Powell also said that “if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”

On the other hand, few ECB speakers also crossed wires on Monday. Vice President Luis de Guindos said that inflation is to stay firm longer than seen before. Meanwhile, ECB’s Klaus Knot said that a hike this year is “realistic”. In the same line was the comment from ECB’s Holzmann, who said that a rate rise could send a clear message that the ECB is committed to tackling inflation, even before ending the QE. ECB’s President Madame Lagarde said that bottlenecks, energy, and food were pushing short-term inflation and added that the Ukraine war would have growth consequences in the Euro area.

Escalating Russia – Ukraine jitters seems to undermine the euro. Recently, Ukraine President Volodymyr Zelenskyy said that no immediate decision is possible on occupied Ukrainian territory per Interfax. Moreover US President Joe Biden also cited fears of a cyberattack against the US.

Economists at Commerzbank noted that the market is likely to see the fact that Russian offensive operations are only happening in selected areas, whereas the Russian invaders are largely starting to dig in defensive positions. I think many market participants regard this as a signal for a prolonged war.”

“The longer the war continues the more likely it becomes that the real economic and inflationary effects above all for the eurozone will be significant. And that is why that prospect is negative for EUR/USD.”

EUR/USD 4 Hour Chart:

Support: 1.0995 (S1), 1.0972 (S2), 1.0935 (S3).

Resistance: 1.1056 (R1), 1.1093 (R2), 1.1116 (R3).

Fed Powell’s speech and Ukraine jitters weigh on the Euro and we expect a bearish trend for EUR/USD.

AUD trades high ahead of PBOC

  • The People’s Bank of China meet the market expectations to keep the benchmark interest rates unchanged.
  • Ukraine rejection of Russian demand to surrender port city in exchange for safe passage weigh on the market sentiment.
  • RBA’s Philip Lowe speech will be the major catalyst in directing the pair, traders will also keep an eye on Ukraine headlines.

 

Australian dollar edges higher against the American dollar during Monday trading session. The Aussie pair cheers the the People’s Bank of China’s (PBOC) inaction and  softer US dollar. However the market sentiment remains sour due to Ukraine crisis and china covid update.

The People’s Bank of China’s (PBOC) kept its policy rate unchanged at 3.7% despite a resurgence of Covid-19 in the Chinese economy. Australia, a leading exporter to China will find some support if PBoC reduces their rates. Moving ahead, Market will focus on interest rate decision from the People’s Bank of China (PBoC) due on Thursday.

Talking about the Ukraine crisis, Russia demanded that Ukrainians put down their arms and raise white flags on Monday in exchange for safe passage out of town. As a response, Ukraine angrily rejected the offer, which came hours after officials said Russian forces had bombed an art school that was sheltering some 400 people. While the fight for control of the strategically important city remained intense, Western governments and analysts see the broader conflict shifting to a war of attrition.

China’s risisng covid cases also hampers the market sentiment. Average number of new infections reported each day in Mainland China rises by more than 1,900 over the last 3 weeks, 40% of its previous peak.

Moving on, the speech from the Reserve Bank of Australia (RBA)’s Governor Philip Lowe will the key catalyst for directing the quote. The speech from the RBA’s Chair Philip Lowe will guide the investors about the likely monetary policy action from the RBA in April.

AUD/USD 4 Hour Chart:

Support: 0.7376 (S1), 0.7339 (S2), 0.7319 (S3).

Resistance: 0.7433 (R1), 0.7454 (R2), 0.7491 (R3).

The commodity linked currency trades high amidst the sour market sentiment; we expect a bullish trend for AUD/USD.

BTC/USD Weekly Forecast (21st March 2022 – 25th March 2022)

Fundamental view:

Bitcoin edged higher against the US dollar during the trading course of the week. Headlines of Russia- Ukraine crisis dominated the financial markets, but it did not show any peace talks progress. However, during the first half, Optimism over a probable truce between the wto helped the Bitcoin. Market sentiment was sour on Thursday  after officials from both sides reported no significant progress on the negotiations. US Secretary of State Antony Blinken said that Russia may be contemplating a chemical-weapons attack late Thursday. Traders also turned cautious, as US President Joe Biden met with his Chinese counterpart Xi Jinping on Friday to discuss Ukraine. Fed’s rate hike also weighed on the Bitcoin.

On the other hand, comments from some well-known celebrities favored the Bitcoin. The famous author of the best-selling book Rich Dad Poor Dad, Robert Kiyosaki, has predicted the end of the U.S. dollar. Furthermore, he said that the Russian-Ukraine war has given rise to crypto as “a safer haven asset than government fake fiat money.” Meanwhile, Galaxy Digital CEO Mike Novogratz says bitcoin is a great alternative and a lifeline to people in countries with poor stewardship of the economy. He expects the price of the cryptocurrency to hit $500K. “We see an adoption cycle that accelerates… going viral everywhere,” he said.

The major economic events deciding the movement of the pair in the next week are Fed Chair Powell Speech at Mar 21, EIA Crude Oil Stocks Change at Mar 23, Core Durable Goods Orders monthly report, Initial Jobless Claims at Mar 24, Michigan Consumer Sentiment and Fed Governor Waller Speech at Mar 25 for US.

BTC/USD Weekly outlook:

Technical View:

Last week’s high was 0.59% lower than the previous week. Maintaining high at 42317.5 and low at 37582.5 showed a movement of 4735 pips.

In the upcoming week we expect BTC/USD to show a bullish trend. The Instrument is trading above the 200 Simple Moving Average and the MACD trades to the upside. A solid breakout above 43558.4 may open a clean path towards 45305.4 and may take a way up to 48293.4. Should 38823.4 prove to be unreliable support, the BTCUSD may sink downwards 35835.4 and 34088.4 respectively.  In H4 chart cup and handle pattern formation favors prospects of a bullish trend. Bullish Harami pattern constructs a bullish outlook for the pair in the upcoming week.

 Preference
Buy: 41777.2 target at 46500.4 and stop loss at 38818.8

 

Alternate Scenario
Sell: 38818.8 target at 34089.5 and stop loss at 41777.2

XAU/USD Weekly Forecast (21st March 2022 – 25th March 2022)

Fundamental view:

Gold dropped against the greenback during the trading course of the week. The yellow metal started this week under significant bearish pressure with the optimisms of truce between Russia and Ukraine, However the market sentiment became sour on Thursday which helped the gold. Russia and Ukraine both rejected reports claiming that they were moving closer to a peace agreement. Later in the day, Reuters reported that there still was a very big gap between the positions of Ukraine and Russia. Moreover, the week closed with increased fears of a possible nuclear attack and concerns about the effect of the war on global growth and inflation.

US Federal Reserve monetary policy decision also acted as a major catalyst in driving the market which helped the US dollar. The Fed has increased fund rate by 25 basis points to 0.50% for the first time since 2018 and meet the market expectation, the bank has hinted at seven rate hikes in 2022, that is, one at each remaining monetary policy meeting, and affirmed the commitment to start reducing its $9 Trillion balance sheet after their next meeting. 

The major economic events deciding the movement of the pair in the next week are Fed Chair Powell Speech at Mar 21, EIA Crude Oil Stocks Change at Mar 23, Core Durable Goods Orders monthly report, Initial Jobless Claims at Mar 24, Michigan Consumer Sentiment and Fed Governor Waller Speech at Mar 25 for US.

XAU/USD Weekly outlook:

Technical View:

Last week’s high was 4.03% lower than the previous week. Maintaining high at 1990.0 and low at 1894.6 showed a movement of 954 pips.

In the upcoming week we expect XAU/USD to show a bullish trend. The Instrument is trading above the 200 Simple Moving Average and the MACD trades to the downside. A solid breakout above 1976.1 may open a clean path towards 2030.7 and may take a way up to 2071.5. Should 1880.7 prove to be unreliable support, the XAUUSD may sink downwards 1840.0 and 1785.4 respectively. In H4 chart falling wedge pattern breakout favors prospects of a bullish trend. Also to be doji formation exerts the expectation of uptrend for the pair.

Preference
Buy: 1920.5 target at 1995.7 and stop loss at 1875.4

 

Alternate Scenario
Sell: 1875.4 target at 1811.8 and stop loss at 1920.5