Stocks Staging Strong Rebound, Euro Follows, as Sentiment Improves

Market overviews

Risk sentiment seemed to have improved drastically today. There are talks that both Russia and Ukraine are softening their tone, which might give an exit for Russia abandoning the invasion eventually. Germany DAX is leading major European indexes higher with more than 5% rebound. US futures also point to higher open. Both gold and oil dip too. In the currency markets, Euro is currently the strongest one for the day, followed by Aussie and then Kiwi. Yen is the worst performer followed by Dollar and Swiss Franc.

Technically, attention will be paid to how US stocks close today, particularly the volatile NASDAQ. A close above 13837.58 resistance would definitely be a positive sign. Further break of 55 day EMA in the coming days would suggest that correction from 162122 (or at least this falling leg of the corrective pattern) has completed, and turn near term outlook bullish for stronger rebound. Such development would also be reflected in the currency markets with sustainable rebound in Euro. However, failing to break through 13837.58 will keep status quo, at least for now, and indicate that risk sentiment remains fragile.

In Europe, at the time of writing, FTSE is up 1.64%. DAX is up 5.24%. CAC is up 4.73%. Germany 10-year yield is up 0.0721 at 0.187. Earlier in Asia, Nikkei dropped -0.30%. Hong Kong HSI dropped -0.67%. China Shanghai SSE dropped -1.13%. Singapore Strait Times rose 1.48%. Japan 10-year JGB yield rose 0.0121 to 0.167.

Gold back pressing 2k as rally lost momentum ahead of record high

Gold dips notably today, after failing to break through 2074.84 record high earlier. With the depth of the retreat, more corrective trading is now likely for the near term. While gold cold gyrate below 2000 handle, downside should be contained by 1960.83 support to bring another rally. Decisive break of 2074.84 will pave to way to next medium term target at 61.8% projection of 1160.17 to 2074.84 from 1682.60 at 2247.86.

However, break of 1960.83 support will delay the bullish case. Gold could then be in correction to rise from 1682.60 (the preferred case), or it’s starting a third leg of the corrective pattern from 2074.84 (less preferred case). But both ways, Gold could have a test on 1877.80 support before setting on the next move.

Bitcoin extending triangle consolidation, back at 42k

Bitcoin is back at 42k handle over risk sentiment improves. Currently, price action from 33000 are seen as developing into a corrective pattern, probably in form of a triangle. Thus, upside of the current rebound should be limited by 45313 resistance. Eventually, larger decline from 68986 is still expected to resume through 33000 at a later stage. Nevertheless, firm break of 45313 will dampen this view and argue that the trend might be reversing.

RBA Lowe: A rate hike this year is plausible

RBA Governor Philip Lowe reiterated in a speech that Australia has the “scope to wait and assess incoming information” before working on interest rates.

He highlighted two issues that policymakers are “paying close attention to”. The first is the “persistence of supply-side price shocks” and the extent of impact from Russia’s invasion of Ukraine. Secondly, that’s “how labor costs in Australia evolve”.

He noted that “given the outlook, though, it is plausible that the cash rate will be increased later this year.” There is both a risk to “waiting too long” and “moving too early”. But Low finished with the point that “it is only possible to achieve a sustained period of low unemployment if inflation remains low and stable”. And, “recent developments in Europe have added to the complexities here.”

Australia Westpac consumer sentiment dropped to 96.6 in Mar, worst since Sep 2020

Australia Westpac consumer sentiment index dropped -4.2% to 96.6 in March, down from 100.8. That’s the worst reading since September 2020, which was also the last time thee index was below the 100-level.

Westpac said: “The latest monthly fall comes as no surprise. The war in Ukraine; the floods in south- east Queensland and Northern NSW; ongoing concerns about inflation and higher interest rates were all likely to impact confidence, although the size of the decline is still notable.”

Westpac maintained the view that the first RBA rate hike in the tightening cycle will start on August 2, following two more inflations reports of Q1 and Q2.

China PPI slowed to 8.8% yoy in Feb, CPI unchanged at 0.9% yoy

China PPI slowed from 9.1% yoy to 8.8% yoy in February, above expectation of 0.8% yoy. Senior National Bureau of Statistics statistician Dong Lijuan said, PPI was “affected by the increased commodity prices globally such as crude oil and non-ferrous metals”.

CPI was unchanged at 0.9% yoy, above expectation of 0.8% yoy. affected by the Chinese New Year holiday and the fluctuation of international energy prices, CPI saw a bigger month on month increase,” added Dong after CPI rose by 0.6 per cent month on month.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0849; (P) 1.0903; (R1) 1.0958; More…

EUR/USD’s recovery from 1.0805 extends higher today but outlook is unchanged. Intraday bias stays neutral first. While stronger recovery cannot be ruled out, upside should be limited by 1.1120 support turned resistance to bring down trend resumption. On the downside, firm break of 61.8% projection of 1.2265 to 1.1120 from 1.1494 at 1.0786 will pave they way to 100% projection at 1.0349 next. However, strong break of 1.1120 will bring stronger rebound back to 1.1494 structural resistance instead.

In the bigger picture, the decline from 1.2348 (2021 high) is expected to continue as long as 1.1494 resistance holds. Firm break of 1.0635 (2020 low) will raise the chance of long term down trend resumption and target a retest on 1.0339 (2017 low) next. Nevertheless, break of 1.1494 will maintain medium term neutral outlook, and extend range trading first.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
21:45 NZD Manufacturing Sales Q4 12.00% -2.20%
23:30 AUD Westpac Consumer Confidence Mar -4.20% -1.30%
23:50 JPY GDP Q/Q Q4 F 1.10% 1.40% 1.30%
23:50 JPY GDP Deflator Y/Y Q4 F -1.30% -1.30% -1.30%
23:50 JPY Money Supply M2+CD Y/Y Feb 3.60% 3.50% 3.60%
01:30 CNY CPI Y/Y Feb 0.90% 0.80% 0.90%
01:30 CNY PPI Y/Y Feb 8.80% 8.70% 9.10%
06:00 JPY Machine Tool Orders Y/Y Feb 31.60% 61.40%
09:00 EUR Italy Industrial Output M/M Jan -3.40% 0.00% -1.00%
15:30 USD Crude Oil Inventories -1.1M -2.6M