Wed, Feb 28, 2024

XAUUSD Analysis

XAUUSD Gold price is moving in the Descending triangle pattern and the market has reached the lower high area of the pattern.

With the FED expected to maintain current rates at tomorrow’s meeting, gold prices will likely appreciate in relation to the US dollar.

Although gold suggests that the short-term upward trend will continue, there will not be much of a push until midweek, when the most important economic data for this week is scheduled to be released. The FOMC rate decision and the committee’s updated quarterly forecasts, which can shed light on its views on inflation, growth, and interest rates, are the main points of interest for the markets. Based on the Fed funds futures market (99%), the FOMC is almost certain to leave rates unchanged. The committee will continue to use a data-dependent approach, allowing previous interest rate increases to trickle down to the real economy.

XAGUSD Analysis

XAGUSD Silver price is moving in an Ascending channel and the market has rebounded from the higher low area of the channel

XAGUSD Silver price is moving in an Ascending channel and the market has rebounded from the higher low area of the channel.

Following the announcement, the revised numbers, and the press conference, gold is probably going to respond to the US dollar’s value and US Treasury yields. In order to maximise flexibility in the event that inflation rises even further, the Fed is unlikely to change their estimates of the terminal interest rate. The Fed faces additional challenges as a result of the recent spike in oil prices, chiefly the resurgence of inflation concerns. The 200-day simple moving average is being tested as the gold price moves higher modestly to begin the week. Gold has demonstrated a propensity to form narrower ranges, with lower highs and higher lows. The most immediate level of resistance is $1937, which is roughly where trendline resistance is located. The swing low at $1901 is followed by support at $1915. US Treasury yields have been gradually rising as investors anticipate the Fed to keep its tight policy in place for an extended period of time. As a result, in the days before the Fed, the upside of gold might face pressure. Although the Bank of Japan is not expected to move, other central banks including the Bank of England and the Bank of Japan are scheduled to make interest rate decisions. The markets are leaning towards a 25 basis point hike on Thursday.

USDCHF Analysis

USDCHF is moving in an Ascending channel and the market has reached the higher high area of the channel

USDCHF is moving in an Ascending channel and the market has reached the higher high area of the channel.

This week, the SNB will meet to decide on monetary policy. A 25 basis point rate hike is generally anticipated because this year’s inflation increased to 1.6%, below the SNB’s target of 2%.

Tuesday’s early Asian trading hours see the USD/CHF pair trading sideways near 0.8970. Although there has been some follow-through selling, the US Dollar Index (DXY), which compares the value of the USD against six other major currencies, is still above 105.10. Ahead of the Federal Reserve (Fed) and Swiss National Bank (SNB) announcements on interest rate policy on Wednesday and Thursday, respectively, markets would rather remain idle.  It is widely anticipated that the Federal Reserve (Fed) will pause interest rates when it announces the outcome of its two-day monetary policy meeting on Wednesday. With 99% chance of holding rates steady, the markets do not anticipate any surprises from the Fed. However, the CME Fedwatch Tool indicates that the likelihood of its November meeting fell below 30%. This might therefore cause the US Dollar to weaken versus its competitors and act as a drag on the USD/CHF pair. Market participants will be closely observing the press conference held by Federal Reserve Chairman Jerome Powell, as it may offer insights into the trajectory of interest rates in the future. Regarding Switzerland, it is anticipated that on Thursday, the Swiss National Bank (SNB) will increase additional interest rates by 25 basis points (bps), from 1.75% to 2%. Since the country’s most recent inflation report indicated a 1.6% YoY increase, which is still below the 2% target, the Swiss central bank is expected to maintain its strict stance in order to maintain price stability.

Swiss nation bank shows more accommodative policy settings and no change in policy settings keeps interest rates unchanged at 0.75.

In addition, Chinese Vice President Han Zheng and US Secretary of State Antony Blinken met on Monday during the UN General Assembly. According to the US State Department, the conversation was “a candid and constructive discussion.” Investors will be monitoring the news stories about the US-China relationship. However, the renewed US-China trade war tension could help the traditional safe-haven currency CHF and act as a headwind for the USD/CHF exchange rate. The US Housing Starts, US Building Permits, and Swiss Trade Balance will be released later in the day. Ahead of the SNB meeting on Thursday, market participants will be closely watching the Fed’s interest rate decision on Wednesday. These occurrences might cause market turbulence and provide a distinct direction for the USD/CHF pair.

EURUSD Analysis

EURUSD is moving in the Descending channel and the market has rebounded from the lower low area of the channel

EURUSD is moving in the Descending channel and the market has rebounded from the lower low area of the channel.

Ville Roy, a member of the ECB Governing Council, stated that rate hikes are a treatment for inflation, and the ECB can use a rate-cutting tool once inflation reaches the 2% target.

EU Bank Meeting

Francois Villeroy de Galhau, a member of the European Central Bank’s (ECB) Governing Council, declared on Tuesday that the “ECB will maintain its rate at 4 pct for a sufficiently long time, as it is an efficient remedy.” Interest rates are the sickness that inflation is, and the medication is starting to take effect. The ECB rate is currently at a favourable level, so patience is advised. The ECB rate can be lowered once inflation returns to close to 2. Right now, the ECB is not in a position where rate cuts are possible.

NZDUSD Analysis

NZDUSD is moving in the Descending channel and the market has reached the lower high area of the channel

NZDUSD is moving in the Descending channel and the market has reached the lower high area of the channel.

This week’s scheduled events include the NZ Trade Balance figures and the NZD Q2 GDP, which is predicted to decline by 0.10%.

The GDP – gross domestic product of New Zealand is highlighted. Quarter-on-quarter data for the tiny Antipodean economy last showed a pitiful 0.1% decrease, so traders in New Zealand should keep a watch on the revised numbers for the second quarter of 2023. To complete this week’s Oceania economic data docket, NZ trade balance figures and Australia’s Purchasing Manager Index (PMI) data will be released on Thursday.

GBPCHF Analysis

GBPCHF is moving in the Box pattern and the market has reached the support area of the pattern

GBPCHF is moving in the Box pattern and the market has reached the support area of the pattern.

At this week’s meeting, the Bank of England is expected to raise the rate by 25 basis points, which would bring it to its highest level since 2007 at 5.50%.

The British Pound (GBP) is still performing relatively poorly as the likelihood of the Bank of England (BoE) tightening policy more aggressively is decreasing.  Recent testimony from BoE Governor Andrew Bailey to lawmakers indicated that the bank is now “much nearer” to ending its current cycle of interest rate hikes. This could put pressure on the BoE to halt its rate-hiking cycle, along with signs that the UK labour market is cooling and reviving recession fears. After that, all eyes will be on Thursday’s crucial BoE decision. It is almost a given that the UK central bank will increase its benchmark interest rates by 25 basis points to 5.5%, which would be the highest since 2007. On the other hand, financial markets believe that the trend of rising borrowing costs since December 2021 is coming to an end. This could keep undermining the Streling.

AUDUSD Analysis

AUDUSD is moving in an Ascending channel and the market has rebounded from the higher low area of the channel

AUDUSD is moving in an Ascending channel and the market has rebounded from the higher low area of the channel.

The RBA meeting minutes released today indicate that a data-based rate hike of an additional 25 basis points this year is feasible. The Australian dollar is currently primarily driven by China’s weak economy, and additional rate hikes by the RBA will push the country’s economy into recession.

Australian Currency AUD in a Piggy bank

Since the release of the RBA’s meeting minutes today, the Australian dollar has managed to maintain its strength above 64 cents. The notes provided more detail than the monetary policy statement’s commentary, which was made public on September 5th, the day of the rate decision. At the meeting, the RBA decided to keep rates at 4.10%, and the interest rate market is giving this cycle’s potential for more hikes just a low probability. The third quarter CPI, which is anticipated to be released on October 25th, seems to be the key statistic that could influence the RBA’s monetary policy decisions. Since the pandemic lows near zero, the Federal Reserve has raised rates by 525 basis points (bps), while the RBA has raised rates by 400 bps. The members considered two options for monetary policy at this meeting: raising the cash rate target by a further 25 basis points; or holding the cash rate target steady, according to the RBA board’s perspective published today.

AUDCHF Analysis

AUDCHF is moving in an Ascending channel and the market has reached the higher high area of the channel

AUDCHF is moving in an Ascending channel and the market has reached the higher high area of the channel.

After considering the two options, members concluded that the case for maintaining the current cash rate target was stronger at this meeting, they continued. Overall, it seems that the two primary opposing factors are China’s ongoing high domestic inflation and worries about the country’s economic future. The accompanying statement at the time of the monetary policy decision highlighted household consumption, the risks associated with services inflation, the uncertainty surrounding the laggard effects of tighter policy, and the economic outlook for China given its real estate sector issues. The minutes went into further detail on each of these topics.

Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks, the meeting statement said, in line with today’s release. This week, Governor Philip Lowe passed the reins to Michelle Bullock, and the meeting marked his final one as leader. Ms. Bullock joined the organisation in 1985 and has served as the Deputy Governor of the bank since April 2022. She is known for being a preeminent economist in her own right. Most people see the appointment as a gradual change in leadership. Her recent statements suggest that her strategy is comparable to that of her forebears. The probability of additional tightening by the RBA and the Fed during this cycle is minimal, according to interest rate markets. Future movements in the Australian dollar may be influenced by changes in the central banks’ differing monetary policies.

CADCHF Analysis

CADCHF has broken the Box pattern in upside

CADCHF has broken the Box pattern in upside.

According to Commerzbank economists, Canada’s inflation rate is expected to reverse in the August reading, and if the CPI increased, interest rates were anticipated to be raised by the Bank of Canada.

Today is when Canadian inflation data for August are supposed to be released. Commerzbank economists examine the potential effects of the CPI report on the CAD. There are worries that inflation may surprise positively. If so, this will rekindle talk of a fuel rate hike, which could help the CAD. The market is probably going to be hesitant to take a firm stance leading up to the Fed decision on Wednesday since it is unclear what surprises the Fed decision might hold. A relatively more hawkish BoC might be able to help the CAD if there were any indications that the US central bank’s rate might have peaked.

AUDJPY Analysis

AUDJPY has broken the Descending triangle pattern in upside

AUDJPY has broken the Descending triangle pattern in upside.

According to Bank of Japan officials, inflation is rising. As a result, there is now a greater chance of upside; altering the monetary policy settings can have both positive and negative effects.

Bloomberg said on Tuesday, citing people with knowledge of the situation, that Bank of Japan (BoJ) officials believe that, given the market’s response, Governor Kazuo Ueda’s recent remarks in an interview with the Yomiuri newspaper were misinterpreted. Overall, his remarks suggest that officials’ perception that they must consider both positive and negative risks when determining whether to make policy adjustments has not changed much. Additionally, BoJ officials admit that inflation is still high, necessitating their close observation of upside risks for the time being.

Japan Bank of Japan Head Office Building in Tokyo

In previous meetings, Governor of the Bank of Japan Ueda stated that negative interest rates will soon come to an end if wages and inflation rates reach our target. The Bank of Japan’s policy settings this week are therefore more anticipated.

Although central bank governor Kazuo Ueda recently stated that the BoJ may end its negative interest rate policy by the end of the year, traders will be on the lookout for any accompanying post-decision commentary. The BoJ will leave rates unchanged.


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