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Markets are cautious ahead of the all-important Federal Reserve decision, despite rising US yields with major pairs clinging to round levels. The EU is getting closer to resuming vaccination with AstraZeneca, gold is back to the higher range and Bitcoin is moving higher.
Calm before the storm: The Federal Reserve is set to leave its policy unchanged but publish closely-watched forecasts for growth, inflation, employment and interest rates. Markets foresee an earlier increase in borrowing costs than the Fed and fear a bump up in inflation.
Federal Reserve Chair Jerome Powell will hold a press conference and will try to balance between acknowledging the vaccine and stimulus-led recovery without raising concerns of overheating and rate hikes
Ahead of the Fed, Tuesday’s US Retail Sales report for February showed a large drop of 3%, albeit on top of an upward-revised statistic for January. Moreover, the sharp drop was attributed to storms in the southern US.
Currencies: EUR/USD is hovering around 1.19, GBP/USD is trading near 1.39 and USD/JPY is at 109, all experiencing narrowing ranges. Gold is has surpassed $1,730, potentially reflecting speculation that the Fed remains dowvish.
Data: Final eurozone Consumer Price Index figures for February are set to confirm an increase in headline prices attributed to temporary factors. USD/CAD is trading around 1.24450 ahead of Canada’s release of inflation and crude oil inventories data.
EUR/USD is hovering around 1.19 and analysts at Credit Suisse continue to not only look for the pair to retest its 200-day average around 1.1840 but also to see a break lower for a fall to 1.1700/1.1695.
“EUR/USD is holding for now as looked for its 200-day average at 1.1840/35. We maintain our view though that recent strength has been corrective and we look for a retest and the break below 1.1835 for a deeper fall to the 38.2% retracement of the 2020/2021 uptrend at 1.1695, with a major floor looked for here.”
“Resistance at 1.1991/92 ideally continues to cap. Only back above 1.2113/21 would suggest the correction is over to reassert the broader uptrend.”
Open interest in Gold futures markets increased for the second session in a row on Tuesday, this time by around 6.2K contracts according to preliminary figures from CME Group. In the same line, volume advanced by nearly 8.7K contracts.
Gold faces initial hurdle at $1,760
Tuesday’s inconclusive price action in gold was amidst rising open interest and volume, allowing for further upside in the very near-term. That said, the next interim hurdle emerges at the February 19 low around $1,760 per ounce troy.
Cable remains in a consolidative mode and is likely to keep navigating the 1.3810-1.4020 range in the next weeks.
24-hour view: “Yesterday, we highlighted that GBP ‘could dip below 1.3850’ but we were of the view that ‘1.3810 is not expected to come under threat’. However, GBP briefly dropped to 1.3809 before snapping back up to end the day little changed at 1.3895 (-0.04%). The sharp bounce from the low appears to be running ahead of itself and GBP is unlikely to strengthen much further. GBP is more likely to consolidate and trade between 1.3840 and 1.3930.”
Next 1-3 weeks: “There is no change in our view from last Thursday (11 Mar, spot at 1.3930). As highlighted, GBP ‘has moved into a consolidation phase and is expected to trade between 1.3810 and 1.4020 for now’. Note that GBP dipped one pip below the bottom of the expected range (low of 1.3809) yesterday (16 Mar) before rebounding quickly.”
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