2023 Market Forecast by Solidecn

[SOLIDECN]

US30​

• European indices erased early losses and finished today's session higher, with Dax up 1.12% as investors continued to monitor risks to the European banking sector. Credit Suisse was purchased by its competitor UBS, and global central banks' took several actions to boost dollar liquidity.​
• ECB President Lagarde said that Eurozone banks have capital and liquidity levels well beyond their requirements. Without the tensions, policymakers would have indicated that additional hikes were required.​
• The government of French President Emmanuel Macron survived a no-confidence vote by nine votes​
• The Dow Jones and the S&P 500 gain 0.9% and 0.75% respectively while the Nasdaq is trading around the flatline despite lingering risks of the banking crisis. Traders now await the highly-anticipated 2-day FOMC meeting to kick off tomorrow.​
• First Republic Bank stock plunged 40.0%, extending recent heavy losses, after S&P downgraded the bank deeper into junk status and said the recent $30 billion cash infusion may not be enough to solve its liquidity problems. Buyers managed to erase some losses on news that JPMorgan Chase is advising First Republic Bank on strategic alternatives, one of which is capital raise which could dilute current shareholders. A sale of the bank is also taken into consideration.​
• OIL.WTI briefly dropped to $64.50 which was the lowest level since early December 2021, only to erase all of the losses in the evening as moods improved a bit. Natgas price fell 5.0% and is testing support at $2.22 as average US gas demand, including exports, is expected to fall to 108 bcfd this week from 116.9 bcfd last week due to milder weather.​
• Precious metals are trading higher amid a lower dollar. Gold jumped to one-year high at $2012 at the beginning of European trading as Credit Suisse bond write down fueled demand for safe haven assets. However almost all of the gains have been reversed later in the session. Silver pulled back from local resistance at $22.70.​
• The winner of today's FX session is the British pound, which strengthened over 0.8% against the dollar. GBPUSD pair managed to break above February 14 highs and now oscillate above the 1.2270 level.​
• The dollar index dropped below 103.5, extending losses for the 3rd session as investors anticipate that the Fed might not hike rates as much as previously thought because of the banking crises. Not long ago, a 50 bp hike was expected, while currently markets expect at 25 bp hike or even a pause of the tightening process.​
• Bitcoin pulled back from 9-month high at $28,500 and is currently testing local support at $28000. Nevertheless recent turmoil of the banking sector supports digital assets and as long as current sentiment prevails crypto bulls seem to have an advantage. The key support for the most popular cryptocurrency is located around the $25,000 mark and only a break below would point to resumption of downward move.​

USDJPY currency pair has been moving in a downtrend recently. Looking at the H1 interval, buyers launched a small upward correction. If the bullish momentum gains steam, EMA100 (blue line) should be treated as the nearest resistance. In case of break higher, upward impulse may accelerate towards crucial resistance around 133.30, which is marked with the upper limit of the 1:1 structure and 38.2% Fibonacci retracement.​

 

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S & P​

Also news that JPMorgan CEO Jamie Dimon is leading discussions with other CEOs of other large US banks in an effort to provide further support, including potentially converting their $30 billion in deposits into a capital injection, only slightly calmed investors' nerves. According to Wall Street Journal, preliminary discussions have been focused on ways that the banks can boost the beleaguered banks capital. Also in play is a potential investment by the banks themselves.

Also according to CNBC, JPMorgan Chase is advising First Republic Bank on strategic alternatives, one of which is capital raise which could dilute current shareholders. A sale of the bank is also taken into consideration.

First Republic (FRC.US) stock has been in free fall recently. Last week alone, a troubled San Francisco-based lender lost nearly 70.0% of its market value. Sell-off accelerated in pre-market, however sellers failed to retest all-time low at $9.00 and buyers managed to erase some of the losses in the evening. Nevertheless, the main sentiment remains bearish and only a break above the local resistance zone around $42.25 could let to a bigger upward correction.​

 

[SOLIDECN]

AUDUSD​

Yesterday's trading on Wall Street and in Europe ended higher, making up for losses from earlier in the day initiated by the uncertainty surrounding the takeover of Credit Suisse by UBS. Better sentiment fueled Asian markets today. Stock exchanges in Japan are closed due to a national holiday.​

• AUDUSD pair breaks back below the 0.6700 level. The case for a pause in the rate hike cycle by the RBA at its 4 April meeting has strengthened. According to the RBA minutes released today, the Board agreed to reconsider the case for pausing rate hikes and to closely examine incoming data from the economy.​
• The ECB's Holzmann is softening his previous calls for three consecutive 50 basis point rate hikes.​
• From the US, there was some news affecting the stock market. The US Treasury is looking at unlimited deposit guarantees (via the FDIC) if the banking crisis worsens.​
• On the political front, investors are looking at the Putin-Xi meeting in Moscow, which may bring new threads in the realm of the Ukraine conflict and other geopolitical-economic relations.​
• PIMCO lost $340 million on the redemption of Credit Suisse Bank's AT1 bond. Lawyers from Switzerland, the United States and the United Kingdom are talking to Credit Suisse's AT1 bondholders about possible legal action after up to $17 billion in losses related to the redemption.​
• Goldman Sachs commented on the current state of the equity market this way - "valuations don't look particularly attractive".​
• Bill Ackman, founder and hedge fund manager of Pershing Square Capital commented that the FOMC should consider holding off on rate hikes for tomorrow's Committee decision. Today marks the start of the Fed's two-day meeting in Washington.​
• Citi predicts a 25bp rate hike on Wednesday, and notes that the tone of the press conference will now be particularly important.​
• Citadel and Trafigura traders believe that the turmoil in the banking market is temporary and unlikely to cause far-reaching perturbations in the global economy. Demand for oil should strengthen.​

​

Quotations:​

Futures in Europe point to a bullish opening to the session on the Old Continent. US contracts are also gaining, however the scale of the increases is minimal. On the FX market, the USD is currently performing best. NZD and AUD are the worst performers. Energy commodities are down, extending the wave of uncertainty in the economy. Gold and silver are correcting recent gains and recording slight declines. Bitcoin is currently losing 0.4 per cent and slipping towards $27,800.

The AUDUSD pair is currently trading in a structure bounded by important support and resistance levels. The upcoming FOMC decision and ongoing banking uncertainty could create additional volatility on the pair.​

 

[SOLIDECN]

US500​

The key event of the month, the FOMC interest rate decision, is ahead of us. Although the Fed's decision is always referred to as the event of the month, tomorrow's decision will be even more closely scrutinized by the market due to the lingering spectre of the banking crisis in the background. The mood on Wall Street is a veritable rollercoaster at the moment, but let us try to take a look at where the US500 benchmark has been moving and what might happen in the coming days.

As we can see on the chart of the US500 contracts on the D1 interval attached below, the instrument's quotations have been moving in a very interesting technical structure for almost 2 years. The US500 broke out above the long-term downtrend line and successfully defended its outer extension, which encouraged the bulls to rise. However, we are inexorably approaching the next limitation, namely the resistance set by the uptrend initiated in the last quarter of 2022.

What will happen next? To answer this question, we need to consider the factors that are shaping current market sentiment, namely tomorrow's FED decision and the specter of a banking crisis. At the moment, the money market is pricing in an 83.4% chance of a 25 basis point hike, which seems market neutral at the moment. However, the key factor will be Powell's comments after the meeting regarding the hike cycle in the context of banking uncertainty. The risk of worsening problems in the sector will go a long way to curbing the hawkish enthusiasm of the Fed, which, remember, is in an advanced stage of tightening and seeing positive developments in the economy, such as last week's good PPI inflation reading. Today, equity market sentiment was bolstered by further comments from the US Treasury, which was reported to be looking at providing unlimited deposit guarantees (via the FDIC) if the banking crisis worsens. In the event of a dovish FED, stock markets could eagerly extend the current upward momentum and break out above resistance near 4080 points. On the other hand, if the FED maintains a firm monetary stance, a downward impulse could be initiated towards support near 3870 points.​

 

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ZEW Sentiment Index Below Expectations​

• 10:00 am GMT - Germany, ZEW sentiment index for March. Actual: 13.0. Forecast: 15.0. Previously: 28,1​
• Current conditions: Actual: -46.5. Forecast: -44.3. Previously: -45.1​
• ZEW says the international financial markets are under strong pressure. Assessment of the earnings development of banks and insurance sector have deteriorated considerably.​

DE30 did not react to the below expectation reading of the ZEW index.​

 

[SOLIDECN]

USDCAD​

12:30 am GMT - Canada, CPI inflation report for February. ​

• Headline. Actual: 5.2% YoY. Forecast: 5.4% YoY. Previously: 5.9% YoY​
• MoM. Actual: 0.4%. Forecast: 0.6%. Previously: 0,5%​
• Core. Actual: 4.7% YoY. Forecast: 4.8% YoY. Previously: 5.0% YoY​
• Core MoM. Actual: 0,5%. Previously: 0,3%​

The USDCAD pair gained slightly shortly after Canada's CPI inflation reading.​

 

[SOLIDECN]

EURUSD​

US home sales data for February was released at 2:00 pm GMT today and it turned out to be a massive beat. Data came in at 4.58 million, up from 4.00 million in January and significantly above 4.20 million expected by the market. The release trigger an uptick on equity markets with S&P 500 (US500) reaching a fresh daily high near 4,030 pts. USD, on the other hand, was muted with EURUSD barely moving in the first minutes following the release.

US home sales data for February was released at 2:00 pm GMT today and it turned out to be a massive beat. Data came in at 4.58 million, up from 4.00 million in January and significantly above 4.20 million expected by the market. The release trigger an uptick on equity markets with S&P 500 (US500) reaching a fresh daily high near 4,030 pts. USD, on the other hand, was muted with EURUSD barely moving in the first minutes following the release.​

 

[SOLIDECN]

Oil​

Alexander Novak, Russian deputy prime minister for fuel energy complex, said that the 500k barrels per day oil output cut that was ordered for March will remain in force through June. Novak said that production has not been slashed by the announced half a million barrels yet but Russia is close to achieving this target cut.

Brent (OIL) and WTI (OIL.WTI) ticked higher on the news. Oil prices jumped around 1% after Novak's comments hit headlines.​

 

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GBPUSD​

Inflation Rate in the United Kingdom increased to 10.40% YoYin February from 10.10% in January, above market estimates of 9.9% YoY.

The largest upward contributions came from restaurants and cafes, food, and clothing, partially offset by downward contributions from recreational and cultural goods and services (particularly recording media), and motor fuels. Core CPI rose 6.20% in February over the same month in the previous year, well above analysts' estimates of 5.7%. Fresh data may suggest that the BoE may not necessarily be approaching the end of the tightening cycle. Tomorrow a 25 bp rate hike is expected.

GBPUSD is trading higher today and fresh CPI data provided more fuel for bulls. The currency pair is moving further away from support zone in the 1.2215 area.​

 

[SOLIDECN]

JAP225​

• US indices finished yesterday's session higher amid expectations that the Fed will tighten policy less aggressively in the evening. S&P 500 added 1.30%, Dow Jones moved 0.98% higher and Nasdaq rose 1.58%. Russell outperformed and managed to finish 1.88% higher​
• Indices from Asia-Pacific traded higher today - Nikkei jumped 1.94%, S&P/ASX 200 moved 0.87% higher while Kospi and Nifty 50 rose 1.12% and 0.20% respectively​
• Indices from China traded 0.2-0.45% higher​
• DAX futures point to a lower opening of today's European cash session​
• ECB's Nagel said that policymakers have to be "even more stubborn" in inflation fight. In his opinion Eurozone banking system is resilient, not facing repeat of 2008​
• First Republic Bank could potentially receive government backing, according to Bloomberg​
• API report pointed to a 3.262 million barrel build in US oil inventories (exp. -1.448 mb)​
• RBC analysts believe that OPEC would intervene if oil prices dropped substantially.​
• Russia's Deputy Prime Minister Novak said that the country's current curtailed level of crude oil output would be in place through June 2023.​
• Commerzbank lowered its 2023 midyear Brent crude oil forecast to US$80 a barrel (from $95)​
• Cryptocurrencies are trading slightly higher today - Bitcoin gains 0.5%, Ethereum adds 0.4%​
• Energy commodities are lower - oil drops 1.0% while US natural gas prices fell over 2.6%​
• Precious metals little changed - silver rose 0.16%, gold trades 0.8% higher​
• AUD and NZD are the best performing major currencies while USD and CHF lag the most​

Nikkei (JAP225) was one of the best performing Asian indices today. Index returned to crucial resistance at 27200 pts, which is marked with previous price reactions and 23.6% Fibonacci retracement of the upward wave launched in March 2020.​

 

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EURUSD​

The most popular currency moved higher on Wednesday morning following a set of hawkish comments from ECB President Lagarde. In her opinion policymakers are neither committed to raise further nor are yet finished with hiking rates. ECB does not see clear evidence that underlying inflation is trending downwards. The underlying inflation dynamics remain strong. Lagarde emphasized that the ECB is ready to act and provide liquidity support.

EURUSD jumped above major resistance at 1.0765 following Lagarde comments, which paves the way towards net key resistance at 1.0900. This level coincides with 50.0% Fibonacci retracement of the downward wave started in June 2021.​

 

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Oil​

Publication of report from the US Department of Energy caused some moves on the oil market. Crude inventories jumped unexpectedly while gasoline and distillate stockpiles dropped more than expected.​

• Oil inventories: +1.117mb vs -1.565 mb expected (API: +3.262 mb)​
• Gasoline inventories: -6.4 mb vs -1.677 mb (API: -1.09 mb)​
• Distillate inventories: -3.313 mb vs -1.5 mb (API: -1.84 mb)​
• Oil inventories at Cushing, Oklahoma: - 1.063 million barrels vs -1.558 million barrels previously​

WTI Crude Oil (OIL.WTI) price bounced off local upward trendline and is testing resistance at $70.15.​

 

[SOLIDECN]

EURUSD​

• The Fed decision was as usual the most important macro event of the day. Federal Reserve decided to raise rates by 25 basis points as expected.​
• The Fed left the QT programme unchanged, but kept the forward rate forecast at 5.1% unchanged.​
• The Fed's change in communication is linked to problems in the banking sector. The Fed acknowledges that the tightening of credit conditions acts as a tightening of monetary conditions.​
• But reducing interest rates this year is not probable and more interest hikes from the Fed may be appropriate;​
• However, the Fed rules out interest rate cuts this year. The Fed believes that current policy is appropriate. This could mean a final hike in May;​
• In the Fed's view, current liquidity measures are sufficient. The banking system is resilient and there is no widespread problem in the system​
• In response, we saw a marked weakening of the US dollar. EURUSD rose to the 1.0900 level. In contrast, we saw strong gains on Wall Street. The US100 clearly broke through 13000 points and the US500 breached 4050 points​
• Crude oil stocks rose by 1.12 million brk on expectations of a decline of 1.4 million brk. Oil gained more than 2 per cent today, making up for recent losses in oil due to uncertainty. WTI returns above $70 per barrel​
• OPEC+ is not expected to consider major oil production cuts, despite recent strong price falls​
• UK inflation came in higher than expected at 10.4%, resulting in a marked strengthening of the pound since the start of today's session​
• A weaker dollar in the wake of the Fed's actions caused gold prices to rebound towards US$1,970 per ounce​
• The euro received support from rumours that the ECB is thought to believe that recent stability measures for the banking sector should provide a basis for further hikes. Lagarde, on the other hand, spoke of the ECB not being compelled to both hike and cut or keep rates unchanged.​

EURUSD tested the 1.0900 area against expectations of a near-term hike in the US. Source: xStation5​

 

[SOLIDECN]

US30​

The dynamic declines on Wall Street initiated during the latter part of today's session were abruptly reversed by US Treasury Secretary Janet Yellen, who stated that she would provide additional deposit support if needed. Yellen added that anti-contagion tools may be applied again. Strong actions are to be taken to ensure deposits are safe. Stock indices rebounded dynamically after the new statement.

 

[SOLIDECN]

BTC Retests 9-Month Highs​

Cryptocurrencies are gaining along with the major indices on Wall Street. Concerns about the banking crisis have eased somewhat, with investors finally taking a positive view of Fed Chairman Powell's comments yesterday. The rally continues despite news of an investigation into Justin Sun, the creator of the Tron blockchain, and subsequent fines targeting celebrities who promoted his cryptocurrency. The largest crypto exchange in the US, Coinbase (COIN.US), has received a so-called Wells notice evidencing possible enforcement and irregularities identified by the SEC regarding the assets and services offered on the platform.​

• The SEC maintains that all cryptocurrencies except Bitcoin are securities, while the Coinbase exchange has announced a confrontation with the regulator in court. At the time of Binance US's acquisition of the assets of bankrupt Voyager, a judge dismissed the SEC's request to halt the transaction;​
• He pointed to the unclear regulation of the industry and the incompatibility of the SEC and CFTC regulators towards what cryptocurrencies de facto are. The industry read the position as a possible preliminary precedent for wins against the SEC in other court cases. However, the bullish sentiment faded somewhat after a broader announcement from the US Securities Exchange Commission, which warned against the crypto market;​
• SEC maintains that entities that offer cryptocurrency trading may not be operating in accordance with US law. Despite these comments, shares of the Coinbase (COIN.US) exchange managed to erase some of the losses, although still losing nearly 11%. A general increase in risk appetite is supporting the quotations of the largest cryptocurrency.​

Bitcoin, M30 interval. The price of the main cryptocurrency rebounded from the 23.6 Fibonacci retracement of the upward wave started on 10 March and the SMA100 and SMA200 averages. It has thus resumed the bullish momentum and is testing the previous resistance near 28,500 USD. Overcoming 28,800 USD could open the way for the bulls to rally towards 30,000 USD.​

 

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EURUSD​

France, PMI indices for March.​

• Manufacturing. Actual: 47.7. Expected: 48; Previous: 47.4​
• Services. Actual: 55.5. Expected: 52.4 Previous: 53.1​

Germany, PMI indices for March.​

• Manufacturing. Actual: 44.4. Expected: 47 Previous: 46.3​
• Services. Actual: 53.9. Expected: 51.0 Previous: 50.9​

Although industrial data remain under pressure, the Composite index surprises the consensus on the upside. Let's remember that services are responsible for most of Europe's GDP.

The EURUSD pair extends declines after a reading of PMI data from major EU economies. The combined reading for the Eurozone will be known at 10:00 am GMT.​

 

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DE 30​

• Indices from Asia-Pacific launched new week's trading mixed - Nikkei traded 0.4% higher, S&P/ASX 200 moved 0.1% higher, Kospi dropped 0.2% and Nifty 50 added 0.2%. Indices from China traded 0.2-0.8% lower​
• Major European and US index futures are trading over 1% above Friday's cash closing prices​
• DAX futures trade almost 300 points, or around 2%, above Friday's cash close while S&P 500 futures 50 points higher, or around 1.2%​
• Silicon Valley Bank was sold to First Citizens with around $72 billion worth of assets being purchased at a $16.5 billion discount as part of the deal. All deposits assumed by First Citizens will be insured by FDIC up to the insurance limit​
• First Citizens will also receive a line of credit from FDIC for unforseen liquidity events​
• Russian President Putin announced that Russia will station tactical nuclear weapons in Belarus in response to Western countries increasing military support to Ukraine, especially UK providing Ukraine with depleted uranium ammunition​
• ECB Schnabel noted that headline inflation began to fall, but core gauges are more sticky. She said that financial stress have so far been limited mainly to financial markets​
• Fed Kashkari said that ongoing banking sector stress could bring the US closer to recession by triggering a credit crunch. However, he has noted that deposit outflow from smaller US banks have slowed and that confidence is being restored​
• According to Reuters report, Russia is considering extending limits of fertilizer exports by another six months, until November​
• Riksbank Governor Thedeen said that inflation is developing worse than it was previously thought and that another rate hike in April may be needed​
• Cryptocurrencies are trading higher at the beginning of a new week - Bitcoin gains 1.4%, Ethereum trades 1.3% higher and Ripple jumps 1.7%. Dogecoin lags and drops 0.2%​
• Energy commodities trade mixed - oil gains 0.6% while US natural gas prices drop 1.2%​
• Precious metals are pulling back - gold drops 0.3%, silver trades 0.8% lower while platinum and palladium dip around 0.1% each​
• EUR and AUD are the best performing major currencies while JPY and NZD lag the most​

Futures markets point to a positive opening of a new week in Europe with German DAX futures (DE30) trading almost 300 points above Friday's cash close. Index is attempting to break above a mid-term resistance in the 15,250 pts area.​

 

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BTC​

The largest cryptocurrency has fallen below $28,000 on a wave of general risk asset aversion on exchanges and news from the Binance exchange. Ethereum and smaller projects are also losing ground. The downward movement accelerated after the largest cryptocurrency exchange announced that it had temporarily halted spot cryptocurrency trading on the platform, for as yet unexplained technical reasons.

Bitcoin, H1 interval. The price has failed to overcome the $28 800 level and has formed a bearish double peak formation. The potential scope of the correction may stop at the SMA200 (red line) or at the level of the 23.6 Fibonacci retracement of the upward wave initiated on 10 March, i.e. at the level of $26 700, which also coincides with the decline after the Fed decision. A potential retracement deeper could foreshadow that sellers would want to test the 38.2 Fibo retracement at $24,000.

Ethereum, H1 interval. In the event of a deepening correction on Ethereum, key support is located in the region of $1710 -$1694.​

 

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EURUSD Economic Calendar​

European indices gain at the beginning of a new week​

• DE30 tests 15,300 pts area​
• German Ifo index for March in the calendar​

European stock markets launched today's cash trading session higher with German DE30 testing 15,300 pts area in the first minutes of trade. Upbeat moods can be seen all across the Old Continent and on other financial markets as well with cryptocurrencies trading higher and oil advancing. GBP and AUD are the best performing G10 currencies while USD and JPY lag the most.

Economic calendar for the day ahead is rather light with just two noteworthy survey data prints scheduled. First, traders will be offered the German Ifo index for March, which is expected to stay mostly unchanged. Secondly, the Dallas Fed index for March will be released and it is expected to swing to negative. Nevertheless, this report rarely moves the markets. However, a number of ECB speakers as well as BoE Governor Bailey and Fed Jefferson are scheduled to speak throughout the day and it may lead to some FX volatility. Things get more interesting in the second half of the week with releases of flash CPI data from Europe.
​

• 9:00 am BST - Germany, Ifo index for March. Expected: 91.0. Previous: 91.1​
• 3:30 pm BST - US, Dallas Fed index for March. Expected: -5.0. Previous: 2.0​

Central bankers' speeches​

• 8:30 am BST - ECB De Cos​
• 9:00 am BST - ECB Simkus​
• 9:30 am BST - ECB Nagel​
• 3:40 pm BST - ECB Elderson​
• 4:00 pm BST - ECB Centeno​
• 5:00 pm BST - ECB Schnabel​
• 7:00 pm BST - BoE Governor Bailey​
• 11:00 pm BST - Fed Jefferson​

Key events in the later part of the week

Tuesday​

• 3:00 pm BST - US, Conference Board consumer confidence for March​
• 9:40 pm BST - API report on US oil inventories​

Wednesday​

• 3:30 pm BST - US, DOE report on oil inventories​

Thursday​

• 8:00 am BST - Spain, CPI inflation for March​
• 1:00 pm BST - Germany, CPI inflation for March​
• 1:30 pm BST - US, GDP report for Q4 (revision)​
• 3:30 pm GMT - US, EIA report on natural gas storage​

Friday​

• 2:00 am BST - China, official PMIs for March​
• 7:45 am BST - France, CPI inflation for March​
• 10:00 am BST - Euro area, CPI inflation for March​
• 1:30 pm BST - US, PCE inflation for February​
• 3:00 pm BST- US, University of Michigan consumer sentiment for March (final)​

 

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NOVN.CH​

The shares of Swiss company Novartis (NOVN.CH) are gaining more than 5 per cent early in today's session on the back of successful clinical trials of the drug Kisqali, which helps in the fight against breast cancer.

As detailed studies have shown, the drug can prevent recurrence in a broad population and extends life expectancy for patients facing cancer. As Jefferies analysts added - "The data suggest that the treatment can reduce the risk of the cancer returning after several years without a negative change in quality of life. The broad patient population that could benefit from the drug opens up a market of nearly $6bn for Novartis."

Positive trial results are likely to benefit the company's financial performance and increase consensus over the longer term.

The company's shares are currently testing a zone of resistance defined by the confluence of the 50-, 100- and 200-day exponential moving averages.​