AUD climbs up with hotter inflation data

  • AUD/USD is holding higher above 0.7180 after Australian Inflation beats with 5.1%.
  • Hotter Inflation has raised the odds of a hawkish stance by the RBA in May.
  • Fears of China’s Covid-19 outbreak and Ukraine crisis creates a dismal market mood.

 

The Australian dollar got a lift on Wednesday as data showed inflation blew past all expectations last quarter, narrowing the odds on a rate rise as early as next week.

Australian Bureau of Statistics has reported the quarterly Consumer Price Index (CPI) at 2.1%, higher than the market consensus of 1.7% and the prior readout of 1.3%. A closely watched measure of core inflation, the trimmed mean, climbed a record 1.4% in the quarter, taking the annual pace to the highest since early 2009 at 3.7%.

The Reserve Bank of Australia (RBA) in its last monetary policy meeting in the first week of April announced to be data-dependent for a rate hike decision. The CPI took inflation above the RBA’s 2%-3% target band and ended years of undershooting, making it hard to justify keeping interest rates at emergency lows of 0.1%. Thus Investors brace hawkish stance from RBA.

However, The US dollar dominance keeps the further upside capped in the aussie pair. The US dollar continues to gain attention as global growth concerns and aggressive Fed rate hike bets spook investors favoring the safe haven – dollar.

The announcement by Fed chair Jerome Powell in his testimony at the International Monetary Fund (IMF) meeting that a 50 basis point (bps) interest rate hike is on the cards has improved the appeal for the safe-haven assets.

The Fear of China’s Covid -19 outbreak and Ukraine crisis weighs on the consumer sentiment and favors the safe haven dollar. The spread of the China Covid-19 outbreak from Shanghai to some districts of Beijing threatens to spur additional lockdowns, which consequently will disrupt the supply chain. Meanwhile, the Ukraine-Russia conflict escalated as Gazprom halted gas deliveries to Bulgaria, while Polish firm PGNIG said Russia would stop gas deliveries starting April 27th, according to Reuters.

AUD/USD 4 Hour Chart:

Support: 0.7082 (S1), 0.7044 (S2), 0.6971 (S3).

Resistance: 0.7194 (R1), 0.7267 (R2), 0.7305 (R3).

The Aussie remains favored with the upbeat CPI report, we expect a bullish trend for AUD/USD.

Dollar is trading high amidst dismal market mood

  • Cable remains downward pressured amidst disappointing data and Strong USD.
  • Dismal market mood and flight to safe-haven assets weighed on the GBP.
  • Signs of the UK economy is under stress from soaring inflation puts pressure on the GBP.

 

The British pound plummeted against the US dollar during Tuesday trading session due to the fears about the economic impact of China’s COVID-19 lockdowns and an aggressive pace of U.S. rate hikes sent investors rush towards safe- haven assets.

China’s Covid-19 outbreak over the last two weeks in Shanghai threatens to extend to Beijing, as reported by Reuters. Shanghai has now been under strict lockdown to fight COVID for about a month, and a Beijing official said late on Monday that a mass-testing campaign there will be expanded from the city’s most populous district to another 10 districts and one economic development area.

Meanwhile, Hawkish comments by various policymakers last week also raised the risks of aggressive interest rate policy tightening by global central banks. The most significant is of the US Fed, markets is pricing at half point rate hike at each of its next two meetings.

Additionally, Disappointing data further weighs on the cable. The Office for National Statistics reported on Friday that UK Retail Sales volumes fell 1.4% MoM in March and suggested that the expected consumption drag from high inflation might have arrived already. A worse than expected April’s Gfk Consumer Sentiment (at -38 ) kept the cable under pressure, hitting its lowest level since the Global Financial Crisis (GFC) of 2008. It is worth noting that a GfK Consumer Sentiment reading has preceded four of the last five recessions in the UK.

GBP/USD 4 Hour Chart:

Support: 1.2680 (S1), 1.2619 (S2), 1.2540 (S3).

Resistance: 1.2821 (R1), 1.2900 (R2), 1.2962 (R3).

Amidst all the catalysts weighing on the Pound, we expect a bearish trend for GBP/USD.

Gold drops amidst stronger USD

  • Gold hits over 2-week low on aggressive and hawkish Fed approach.
  • US Policymakers dictate that interest rate hike of 50 bps is going to feature in May.
  • China’s covid spread and Ukraine crisis hits the investors’ confidence, keeping the bullish sentiment around the US dollar.

 

Gold prices fell against the US dollar during Monday trading session amidst strong US dollar backed by aggressive and hawkish U.S. Federal Reserve approach to tightening monetary policy.

The risk off market sentiment due to China’s covid spread to Beijing, Ukraine crisis and concern bout aggressive Fed rate hikes favors the greenback at the bullion’s cost.

Fed chair Jerome Powell in his testimony at the International Monetary Fund (IMF) meeting on Thursday mentioned a 50 basis point (bps) interest rate hike on the cards. This has bolstered the possibility of an event of a jumbo rate hike announcement by the Fed in May monetary policy.

Additionally, He also reported that multi-decade high inflation in the US economy is demanding a quick pace for interest rate elevation, which raises expectation that the investors should brace for more than one 50 bps rate hike announcement by the Fed this year.

U.S. officials arrived in Kyiv late on Sunday and held talks with President Volodymyr Zelenskiy, an aide to the Ukrainian leader said, as Russia’s invasion entered a third month.

Harsh restrictions in China have also begun to spread to Beijing, where more than a dozen buildings have been locked down, as concern grows about the economic damage of the shutdown of Shanghai.

XAU/USD 4 Hour Chart:

Support: 1919.6 (S1), 1908.4 (S2), 1890.5 (S3).

Resistance: 1948.7 (R1), 1966.6 (R2), 1977.8 (R3).

The risk off market sentiment favors the greenback as it is backed by hawkish fed against the safe-haven gold, we expect a bearish trend for XAU/USD.

BTC/USD Weekly Forecast (25th April 2022 – 29th April 2022)

Fundamental view:

Bitcoin fell against the US dollar during this week due to the positive sentiment for the greenback. Bitcoin price continues to move sideways in an increasingly tightening trading range to the dismay of cryptocurrency investors. And the bearish sentiment across the space is among the most prominent in years which is potentially more bearish than the 2018 bear market.

The hawkish comments from the Fed policymakers especially Powell’s speech weighed on the Bitcoin as  investors trim risky assets in expectation of an aggressive stance from central banks to curb surging inflation. St. Louis Fed President James Bullard said that the Fed might want to consider 75 basis points rate hikes and also reiterated that the policy rate needs to rise to 3.5% by the end of the year to tame inflation. While speaking at the IMF Spring Meetings on Thursday, FOMC Chairman Powell reiterated that they are planning to get interest rates “expeditiously” to neutral. Powell also said that 50 bps rate increases will be on the table moving forward. Speaking about the state of the US economy, Powell noted that the US labor market was still very tight and that the economy was very strong.

The major economic events deciding the movement of the pair in the next week are Core Durable Goods Orders monthly report, CB Consumer Confidence Index at Apr 26, EIA Crude Oil Stocks Change at Apr 27, GDP quarterly report, Initial Jobless Claims at Apr 28, Employment Cost Index quarterly report and Michigan Consumer Sentiment at Apr 29 for US.

BTC/USD Weekly outlook:

Technical View:

Last week’s high was 0.59% higher than the previous week. Maintaining high at 42973.3 and low at 38570.5 showed a movement of 4403 pips.

In the upcoming week we expect BTC/USD to show a bearish trend. The Instrument is trading below the 200 Simple Moving Average and the MACD trades to the downside. Should 37727.4 proves to be unreliable support then the pair may fall further to 35947.6 and 33324.6 respectively whereas a solid breakout above 42130.2 will open a clear path upward to 44753.2 and then will further raise up to 46533.0. In H4 chart rising wedge pattern breakout favors prospects of a bearish trend. Bearish harami pattern constructs a bearish outlook for the pair in the upcoming week.

Preference
Sell: 39494.4 target at 35948.6 and stop loss at 42135.2

 

Alternate Scenario
Buy: 42135.2 target at 46532.9 and stop loss at 39494.4