Mixed signals

BY Janne Muta

|March 24, 2023

Markets sent mixed signals yesterday. Dow stocks seesawed back and forth in a rather directionless trading day while Nasdaq gained. The yield-sensitive technology stocks traded higher as investors believed the Fed can’t keep hiking rates and risk further panic and bank runs. Bonds didn’t gain much supporting the dollar. As a result, EURUSD created a bearish shooting star candle (indicates momentum loss). This didn’t slow down the gold bulls though as they see the potential end of tightening as a reason to prepare for higher inflation. During times of high inflation gold has traditionally acted as a hedge against rising prices.

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The BOE hiked by 25 bp as expected so there was no significant market reaction in Cable. The central bank did indicate earlier that it might pause the hikes, but a sudden pickup in inflation in February forced the BOE to increase the borrowing costs at least once more. Andrew Bailey the BOE governor said, “We believe that inflation will begin to fall quite rapidly before the summer, but as yesterday’s release for February showed, we need to see that happening”.

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Lower high in NAS

NAS trades near a recent daily swing high. If the market starts breaking supports it could lead to a formation of bearish double-top formation. Yesterday’s high created a lower swing high in the 4h chart and so the risk of the market breaking below 12 543 has increased. If the level breaks a move down to 12 400 looks likely. A decisive break above yesterday’s high would probably open a way to 13 200 or so.

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Gold trades near recent highs

Gold trades near recent highs and has started to react lower. This is likely due to the strength of the USD. The nearest support is at 1966. If it’s violated the 1934 level probably gets tested. On the other hand, above 2010 gold could trade to 2030.

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Bearish shooting star in the daily EURUSD chart

EURUSD turned bearish after a strong rally. The market has retraced back to 1.0760 but I don’t think the market can turn bullish here (the probabilities of a new uptrend starting from here are low) as the market has just turned bearish. If the 1.0760 is broken decisively, EURUSD probably trades down to 1.0724.

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USDZAR trades near to a support area

USDZAR trades higher from a daily support area. If the market can rally decisively above the 18.20 level, a move to 18.60 could be in the cards. Below 18.00 a move to 17.70 level looks likely.

The Next Main Risk Events

  • GBP Flash Manufacturing PMI
  • GBP Flash Services PMI
  • CAD Core Retail Sales m/m
  • CAD Retail Sales m/m
  • USD Core Durable Goods Orders m/m
  • USD Durable Goods Orders m/m
  • USD Flash Manufacturing PMI
  • USD Flash Services PMI

For more information and details see the TIOmarkets economic calendar.

Trade Safe!

Janne Muta
Chief Market Analyst

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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