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GBP/USD remained in a range of 1.19-1.24 in the first quarter of 2023. Economists at ANZ Bank expect the pair to edge higher toward 1.26 by the end of the year.

Higher interest rates are expected to be a feature of BoE meetings ahead

“While a recession may be avoided, UK inflation remains at multi-decade highs. Headline CPI in March was reported at 10.4%, with core CPI at 6.2%. Therefore, higher interest rates are expected to be a feature of BoE meetings ahead.”

“We think there is further upside and forecast GBP/USD to rise to 1.26 at end-2023.”

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Open interest in gold futures markets rose by nearly 2K contracts after three consecutive daily drops on Thursday according to preliminary readings from CME Group. Volume, instead, shrank for the fourth session in a row, now by around 53.1K contracts.

Gold remains focused on the $2000 mark and above

Thursday’s marked uptick in gold prices was on the back of increasing open interest and is supportive of the continuation of the upward bias in the very near term. In the meantime, the next hurdle of note for the precious metal emerges at the 2023 high at $2009 per ounce troy (March 20).

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International Monetary Fund (IMF) Japan Mission Chief Ranil Salgado said on Friday, “we do see a prospect and the potential of more flexibility a the long end of the curve under the Bank of Japan’s (BOJ) YCC policy.”

Additional quotes

“There are two-sided risks to Japan’s inflation, including upward surprises in the Shunto wage negotiations.”

“Downside risks to Japan’s inflation outlook are related to the global environment, financial shocks that raise prospects of a global recession.”

“Our advice to the BoJ is to consider allowing for greater flexibility at longer-end yields, allow lthe longer end of the curve to be more determined by market forces.”

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• Gold price bulls are in the market and eye the $2,000s.
• The Federal Reserve´s preferred inflation measure could be a catalyst on Friday.

Gold price has been buoyed in part by a weaker US Dollar and expectations for a fall in interest rates. The US Dollar index was down 0.4% at 102.20, raising the appeal of dollar-denominated gold prices. XAU/USD has traveled between a low of $1,955 and $1,984.36 on Thursday. 

Analysts at TD Securities argued that investor participation has remained muted despite little evidence of a boon from safe-haven demand in gold markets. ´´In reality, underwhelming CTA flows have weighed on the white metal’s performance, despite substantial buying activity in China,´´ the analysts explained.

´´Today, prices are surging overnight amid several large-scale CTA buying programs, as a drift lower in key trigger levels has finally kicked off significant algorithmic buying activity that should help the metal outperform, ´´ the analysts added further. 

Federal Reserve sentiment, key for Gold price

Meanwhile, with the Federal Reserve in mind, the February reading of personal consumption expenditures (PCE) on Friday, the  Fed’s preferred inflation gauge, will be released and could be a catalyst for the Gold price. January figures showed a sharp acceleration in consumer spending so the data will be closely eyed. 

´´Comments from Fed officials have been mixed with Jerome Powell indicating last week that the impact of the recent turmoil in the banking system could be the equivalent of 25bp of tightening,´´ analysts at ANZ Bank said. ´´However other Federal Reserve officials have pointed out that more tightening will be required if inflation risks persist.´´

Meanwhile, US data on Thursday showed that Jobless Claims last week rose more than expected from the week before indicating a cooling labor market, while fourth-quarter Gross Domestic Product growth was slightly lower at 2.6% compared with earlier estimates of 2.7%, both supporting the case for a softer Fed policy.

Gold price technical analysis

Gold price was testing the $1,980s resistance but the W-formation was a bearish pattern and this pulled on the Gold price. The gold price bulls have steppe din at neckline support and the price has rallied back into resistance. A pull back into the Fibonacci scale could be the next development before a move higher should the Gold price bulls stay committed with eyes on a restest in the $2,000s

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• Over the last two weeks, Cardano price has shot up significantly but is still far away from even establishing new 2023 highs.
• The improving market conditions for ADA could trigger a sell-off among the holders.
• The recent rallies from January and March have amplified the rate at which the altcoin is changing hands, suggesting restlessness and potential profit-taking.

Cardano price has had a disappointing run these last two weeks when compared to other major altcoins. However, following the lack of confidence in the asset has brought ADA investors to the point where they are looking to make gains anyhow, which in turn could prove to be harmful to the cryptocurrency.

ADA investors look to sell

The recent improvement in Cardano price has been a motivation for ADA holders to make recover the losses they have been bearing on their investment for a long time. After declining to the all-time low of $0.2404 towards the end of December 2022, ADA rallied by more than 72%. 

This triggered movement among the investors that had been dormant for a while. The ADA sitting in these addresses began changing hands, which is visible in the spike of the cryptocurrency’s velocity. 

Sitting at a nearly four-year high, the rising activity indicates that investors have been and might continue to sell their ADA to offset the losses witnessed in Q3 and Q4 last year.

Cardano velocity

This behavior could intensify going forward if the condition of the asset improves. The Market Value to Realized Value Ratio (MVRV) highlights that the average return on investments is improving, albeit being still negative. 

While over the short-term (30-day period), the demand has pushed the indicator into the positive zone above the neutral line, the macro timeframe suggests a while before it could happen. 

Cardano MVRV ratio

However, even minimal improving conditions may still be enough to trigger a sell-off among desperate investors, resulting in corrections.

Cardano price 11% rally or 19% crash

Trading at $0.3772, Cardano price is looking to attempt a breach of the critical resistance level at $0.3984, which also marks the 200-day Exponential Moving Average (EMA). Flipping this level into a support floor would push ADA toward the 2023 highs of $0.4206, marking an 11% rally. The Relative Strength Index (RSI) supports this narrative as sitting in the positive zone, Cardano has room for growth.

ADA/USD 1-day chart

Nevertheless, failure to breach or selling at the hands of investors could bring about a decline in Cardano price, leading to a retest of the critical support at $0.3527. Losing the same would invalidate the bullish thesis and result in a fall to March lows of $0.3014, causing a 19% crash.

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GBP/USD climbs above 1.23. Economists at ING expect the pair to enjoy further gains toward the key 1.2426 (December high) and 1.2500 resistances.

Bailey helping the Pound

“Bank of England Governor Andrew Bailey sounded relatively hawkish in his remarks yesterday. While saying that rates should not be taken to the 2008 peak, he stressed how the UK banking system is in a sound position and that inflation remains the key focus, and that further rate hikes are possible if inflationary pressures persist.”

“With BoE rate expectations now supported, we think GBP/USD can head towards the key 1.2426 (December high) and 1.2500 resistances on the back of USD weakness and policy divergence relatively soon.”

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• XAU/USD prices retreat as banking sector concerns ease.
• First Citizens Bancshares acquires failed Silicon Valley Bank’s assets.
• US Treasury bond yields rally amid renewed investor confidence.

XAU/USD rebounded after reaching a low of $1,944 on Monday, following a significant decline from the $2,000 mark on Friday. Gold prices dropped by more than 1% on Monday as concerns about a banking crisis eased, leading investors to shift from safe-haven assets like Gold to riskier assets like equities and crude oil.

The unwinding of Gold trades occurred after regional U.S. lender First Citizens BancShares acquired the failed Silicon Valley Bank (SVB) assets on Monday. First Citizens announced that it would assume $110 billion in assets, $56 billion in deposits, and $72 billion in loans while expanding its presence in California. The Federal Deposit Insurance Corporation (FDIC) retains around $90 billion in securities held for disposal. 

Additionally, Bloomberg reported that US regulators are considering expanding an emergency lending facility for banks in a way that would provide First Republic Bank (FRC) more time to strengthen its balance sheet.

These developments in the banking sector have increased risk appetite and fostered a sense of calm among investors. Consequently, US Treasury bond yields have sense in a relief rally. This new development encourages the Federal Reserve (Fed) to focus on the inflation outlook and consider moving forward with rate hikes if necessary.

Recent Fed commentary from members such as Kashkari (a voter), uber-hawk Bullard, and Fed Vice-Chair of Supervision Barr indicates that they prioritize inflation over the banking crisis. Fed officials appear relatively resilient regarding banking stress, asserting that the underlying fundamentals of the US banking system remain strong.

Monday’s rally in U.S. Treasury bond yields can be attributed to a relief rally, but it is too early to confirm it as a definitive shift in yields. Any further developments in the banking liquidity crisis could cause yields to fall and gold to reclaim the $2,000 mark again. All eyes will remain on the upcoming US Personal Consumption Expenditure (PCE) data release later this week. 

Levels to watch

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North Korean leader Kim Jong Un called for scaling up weapons-grade nuclear materials to increase the country’s nuclear arsenal, saying it should be fully ready to use the weapons at any time, state media KCNA said on Tuesday.

His remarks suggest he will continue provocative weapons tests in a pressure campaign to wrest concessions from the US and its allies. The parade on Monday night was to mark the 90th anniversary of North Korea’s army and was held as the country’s economy is battered by pandemic-related difficulties, punishing US-led sanctions and its own mismanagement.

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• Despite high US T-bond yields, EUR/USD rebounds after two consecutive days of losses.
• A risk-on impulse underpinned the Euro to the detriment of the US Dollar.
• EUR/USD Price Analysis: Triple bottom pattern remains in play as long as EUR/USD stays above 1.0759

EUR/USD snaps two straight days of losses and climbs after hitting a daily low of 1.0744 amidst a subdued session. Despite high US Treasury bond yields, risk-appetite improvement and a softer US Dollar (USD) opened the door for further Euro (EUR) upside. At the time of writing, the EUR/USD is trading at 1.0789 above its opening price.

US equity markets are mixed, with the Dow Jones and the S&P 500 rising while the Nasdaq tumbles. Market participants cheered First Citizens BancShare’s takeover of the Silicon Valley Bank (SVB), while US authorities are considering expanding emergency lending facilities to First Republic Bank.

Data-wise, the March US Dallas Fed Manufacturing Index plunged -15.7, more than February’s -13.5 collapse and worse than the -10.9 estimate. Delving into the data, the Production Index and the Employment component rose. New Orders declined, and the Price Index fell from 15.5 to 7.0.

US Treasury bond yields recovered, with 2s meandering around 4%, while the 10-year benchmark note rate sits at 3.515%, gaining thirteen basis points. The greenback has failed to capitalize on the US bond yields rise, with the US Dollar Index (DXY) sliding 0.19% at 102.915.

On the Eurozone (EU) front, European Central Bank (ECB) speakers are crossing the wires. Nagel acknowledged the increasing importance of taking a meeting-by-meeting approach, though he emphasized that the path of monetary policy normalization would continue. He added that QT would accelerate soon. On the flip side, ECB’s de Cos took a cautious approach due to high levels of uncertainty in the financial markets.

Of late, ECB’s board member Isabel Schnabel commented that she wanted to signal that further rate hikes were possible, according to people who know the matter.

EUR/USD Technical analysis

Technically speaking, the EUR/USD is neutral to upward biased, with a triple bottom staying in play as long as the EUR/USD remains above 1.0759. Oscillators are giving mixed signals. The Relative Strength Index (RSI) favors EUR/USD upside, while the Rate of Chance (RoC) suggests that buying pressure is waning. The path of least resistance is upwards; therefore, the EUR/USD first resistance would be 1.0800. Once broken, the EUR/USD’s next ceiling would be 1.0929, followed by the 1.1000 figure.

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European Central Bank (ECB) policymaker Mario Centeno said on Monday that the wage increase in the Eurozone is still compatible with the monetary policy and added that they are not observing and second round effect on wage-setting, as reported by Reuters.

“We haven’t seen a deanchoring inflation expectations,” Centeno further reiterated and noted that the ECB has the tools for “whatever-it-takes” action for banks.

Market reaction

EUR/USD continues to edge higher in the second half of the day on Monday and was last seen rising 0.3% on the day at 1.0790.

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