In this article, we have covered the highlights of global market news about the GBP/USD, NZD/USD, USD/CAD and USD/JPY.
GBP/USD corrects to close to 1.2249 as USD Index tries to rebound, and Fed policy is in the news.
In the Asian session, the GBP/USD pair saw a corrective move to close to 1.2250. The US Dollar Index (DXY) has demonstrated a recovery move, which has coincided with Cable’s corrective move. The Dollar Index has reached an intraday high of 103.43 as investors anticipate increasing pre-Federal Reserve (Fed) concerns. Yet, the Fed’s probabilities for a consistent monetary stance are increasing, favoring the positive bias for Cable.
Investors anticipate that Fed chair Jerome Powell will keep the focus on the mounting stress in the United States following the failure of three mid-size commercial banks in a single week and ignore the issue of persistent inflation, which is why S&P 500 futures are holding nominal gains added during the Asian session.
Returns on US government bonds are being withheld, and inflationary pressures may increase due to the banking sector’s cash infusion to rescue First Republic Bank. The yield on the US 10-year Treasury has decreased to about 3.5%.
The Bank of England’s (BoE) pronouncement of monetary policy and the UK’s inflation figures will likely impact the Pound Sterling this week in the UK.
On Thursday, Wednesday’s Consumer Price Index (CPI) report will follow the BoE’s interest rate announcement. Estimates predict that the annual headline CPI will decrease from the previous report of 10.1% to 9.8%. While the 5.8% level of the core CPI, which excludes the cost of food and oil, would not change.
NZD/USD Market Analysis: Bears maintain control inside the rising wedge, 0.6190 in focus
After revisiting the monthly peak, sellers of the NZD/USD pair assaulted the round number of 0.6200 during a two-day downturn. Nonetheless, during the early hours of Tuesday in Europe, the Kiwi pair remains inside a two-week-old rising wedge bearish chart pattern.
NZD/USD sellers remain upbeat despite the rising wedge, bearish MACD indications, and recurrent failures to overcome an upward-sloping resistance line from February 20.
Nonetheless, 0.6190 is highlighted as a problematic resistance level for the bears by the 100-SMA, the mentioned wedge’s bottom line, and the 23.6% Fibonacci retracement of the pair’s February-March decline.
One cannot rule out the possibility of a decline toward the hypothetical objective around the 0.6000 psychological magnets if the quotation successfully violates the 0.6190 support confluence.
The 0.6100 level and the monthly low of 0.6084 may serve as stopgaps throughout the predicted slide.
Recovery advances, however, could first attempt to reach the 38.2% Fibonacci retracement level of 0.6257 before confronting the aforementioned monthly resistance line, which is now approaching 0.6275 as of the time of the press.
Even so, if the quotation maintains above the top line of the wedge above, now around 0.6300, sellers of the NZD/USD pair will remain optimistic.
Overall, NZD/USD is still on the bear’s radar, although additional weakness for the pair depends on a fall of 0.6190.
USD/CAD: Weaker oil and a stronger US dollar tempt Loonie buyers ahead of BoC inflation.
To continue the early Asian session recovery from a one-week low going into Tuesday’s European session, USD/CAD takes up bids to renew the daily peak around 1.3690. In doing so, the Loonie pair supports the recent US Dollar rebound ahead of the country’s essential inflation statistics for February while also applauding the declining price of WTI crude oil, Canada’s primary export earner.
WTI falls below the 24-month low established the day before, holding lower ground at the intraday bottom, around $67.20. The US Dollar’s recovery and looming concerns about the banking sector’s consequences put pressure on the price of black gold.
Nonetheless, the US Dollar Index (DXY) recovered from its lowest point since early February, established the day before, and broke a three-day slump. It was moderately bid at approximately 103.40 at the time of publication. To entice buyers, the US dollar index against the six most essential currencies monitors the late-Monday rebound in US Treasury bond rates and the hawkish Fed wagers.
Although the policymakers’ attempts to control the banking crisis combined with the UBS-Credit Suisse agreement to weigh on the US Dollar and previously favored the USD/CAD bears, the market’s uncertainty over the most recent steps to defend the bank depositors appears to be challenging the risk-on stance.
It should be noted that the US 10-year and two-year Treasury bond rates returned from the lowest levels since September 2022 on Monday, but the bond prices remain unchanged after the previous day’s recovery from a multi-day low. Also, the likelihood of a 0.25% Fed rate increase on Wednesday is now 75%, according to CME’s FedWatch tool, up from 65% last week.
The USD/JPY is holding steady around 131.00 as the market awaits the Fed’s next move.
Tuesday’s Asian session sees USD/JPY circling the 131.00 level while maintaining its negative slant.
Despite the Monday increase in US Treasury (UST) bond rates, USD/JPY did not considerably benefit. This is due to the weak global banking industry, as several commercial banks failed last week. As a result, investors raced to buy UST bonds, which decreased rates.
Unsurprisingly, the US Dollar continues to be under pressure since USD/JPY closely tracks the direction of the UST yield. In addition to the Fed’s discount window, the Federal Reserve earlier this week resumed swap lines to provide US Dollar liquidity to central banks in need. The market has overflowed with US Dollar liquidity due to this quick move, which has caused a broad weakening.
Caution is urged as the market approaches Wednesday’s FOMC meeting. A rise in borrowing prices might aggravate current problems in the already stressed global financial sector. The market expects the Fed to raise interest rates by 25 basis points (bps).
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