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Economist at UOB Group Lee Sue Ann sees the RBNZ raising the OCR by 25 bps at the April 5 event ahead of a potential pause in the next months.
“We now think the RBNZ will have to dial back on further rate hikes, especially in light of the looming policy-induced recession and surging migration domestically.”
“We are pencilling in a 25bps hike in the OCR to 5.00%, after which we expect a pause in the current tightening cycle.”
The AUD/USD pair has slipped below 0.6770 as the Reserve Bank of Australia (RBA) has broken the policy-tightening spell after hiking rates straight 10 times. RBA Governor Philip Lowe has kept the Official Cash Rate (OCR) unchanged at 3.6%. The street was divided over the interest rate decision as Australia’s monthly Consumer Price Index (CPI) indicator has already conveyed that inflation has softened quickly in the past two months to 6.8% from the peak of 8.4% registered in December. It seems that RBA Governor Philip Lowe is highly optimistic about further softening in Australian inflation.
On Monday, the Australian Dollar remained in action after the release of the downbeat Caixin Manufacturing PMI data. The economic data has landed at 50.0, lower than the consensus of 51.7 and the former release of 51.5. The Chinese economy is struggling in reviving growth despite dismantling pandemic controls and favoring monetary and non-monetary measures. It is worth noting that Australia is the leading trading partner of China and weak manufacturing activities have a severe impact on the Australian Dollar.
Meanwhile, the US Dollar Index (DXY) is facing barricades after a recovery move to near 102.20. The upside in the USD Index looks capped as investors are anticipating an early pause in the Federal Reserve’s (Fed) policy-tightening spell. Deepening fears of a recession in the United States economy led by five straight ISM Manufacturing PMI contractions are advocating for a pause in the restrictive monetary policy regime.
This week, the US Automatic Data Processing (ADP) Employment Change (March) data will be keenly watched, which is scheduled for Wednesday. The economic data is seen lower at 205K vs. the prior release of 242K. Fewer additions of fresh labor could add to indicators favoring a pause in the rate-hiking spell.
USD/JPY slides to 132.20 while extending the week-start reversal from the highest level in a fortnight. That said, the Yen pair’s latest losses could be linked to the downbeat US Treasury bond yields, as well as softer data, not to forget upbeat comments from Japan Prime Minister Fumio Kishida.
After assuring the stability of the financial system at home, Japan PM Kishida pledged more investment to please the Yen pair sellers. “It is necessary to speed up private investment through green transformation bonds to promote decarbonization domestically,” said Japan PM Kishida.
Talking about the yields, the US 10-year Treasury bond yields dropped in the last four consecutive days to 3.42% at the latest while the two-year counterpart marked a two-day downtrend in the last to 3.97%.
Softer US PMIs joined the market’s lack of inflation fears from the OPEC+ supply cuts and the resulting Oil price run-up to weigh on the yields. That said, the US ISM Manufacturing PMI dropped to the lowest levels since May 2020 in March, to 46.3 versus 47.5 expected and 47.7 prior. On the same line, the final readings of March’s S&P Global Manufacturing PMI eased to 49.2 compared to 49.3 initial estimations.
At home, Japan’s Tankan Large Manufacturing Index for the first quarter (Q1) of 2023, a closely observed output guide by the Bank of Japan (BoJ), eased to 1.0 from 7.0 previous readings and 3.0 expected. On the other hand, Japan’s Jibun Bank Manufacturing PMI for March improved to 49.2 from 48.6 previous. However, the below-50 figure suggests a contraction in private manufacturing activities.
It should be noted that the downbeat Fed calls also weigh on the yield and the USD/JPY prices. As per the latest read, the CME’s FedWatch Tool marked nearly 43% market bets on the Fed’s 0.25% rate hike in May, versus 52% expected on Friday.
Amid these plays, Wall Street closed mixed and the yields were down while the US Dollar Index (DXY) dropped the most in a fortnight the previous day to test the lowest levels in two months. Further, the S&P 500 Futures struggle for clear directions.
Moving forward, USDJPY may pare recent losses amid a light calendar but downbeat yields and inflation fears, led by the OPEC+ surprise, may weigh on the Yen pair ahead of this week’s key US jobs report, up for publishing on Friday.
A U-turn from the 100-DMA, around 133.75 by the press time, directs USD/JPY towards an ascending support line from mid-January, close to 130.70 at the latest.
Ripple price (XRP) has investors jittered after the remittance token lost the bullish momentum seen in March. Three days into April, XRP has lost some of the gains made last month, with fingers pointed at US attorney John Deaton who hinted at an extended wait for a summary judgment by Judge Analisa Torres.
There is no deadline of today for her to rule. The decision could come out within the next hour or it could take another 30-60 days. Based on previous cases, Judge Torres has issued her ruling on summary judgment within a couple months of her Daubert/Experts’ decision.
— John E Deaton (@JohnEDeaton1) March 31, 2023
Nevertheless, Deaton remains pro-XRP and has likened the altcoin to a cockroach capable of surviving a nuclear bomb. He has also lauded Ripple price for holding above $0.510, saying it has the best risk/reward ratio.
At the time of writing, Ripple price is testing the critical support level at $0.507 a the bullish momentum displayed during the March rally fades. This comes after investors anticipated a summary judgment during late March or early April, but Ripple’s legal representative hinted at a prolonged wait.
If XRP bulls reduce their buying momentum, Ripple price could soon lose the immediate support at $0.507, opening the drains for further declines. The southbound move could see the remittance token retrace to the $0.477 support level, last tested on March 28.
In highly desperate cases, XRP traders hedging their holdings to avoid further losses could see Ripple price revisit the $0.443 support level. This would denote a 13% decline from the current price.
XRP/USDT 1-day chart
Conversely, if sidelined investors jump in at current levels, Ripple price could reclaim its bullish trajectory. An increase in buying pressure from the current price of $0.508 could see the altcoin break past the immediate psychological barricade around $0.517 to confront the next hurdle at $0.531. A decisive flip of this resistance into support would invalidate the bearish thesis.
In highly bullish cases, Ripple price could tag the $0.558 resistance level and continue its March uptrend. Such a move would constitute a 10% climb and would require that XRP display a ‘cockroach-like resilience’ to survive the prolonged wait and regulatory clampdown, among other narratives in the crypto market.
The EUR/USD rose further following the release of US Economic data and printed a fresh daily high at 1.0916. It then pulled back to 1.0885. The US Dollar is under pressure amid lower yields and risk appetite.
The US Dollar Index is falling 0.50% and is about to test last week’s lows near 102.00. The US 10-year dropped to 3.41%, the lowest level in a week. The lower gained momentum after the release of the US ISM Manufacturing report.
Data showed that economic activity in the US manufacturing sector continued to contract with the ISM Manufacturing PMI falling to 46.3 from 47.7 in February, below the market consensus of 47.5. Ahead of the ADP and the NFP, the Employment index fell to 46.9 from 49.1. A different report showed Construction Spending declined by 0.1% in February.
European Central Bank Robert Holzmann said a half-point hike is still on the cards for May. According to him, it the central bank slows down rate hikes to 25 bps it would be hard to go back.
The EUR/USD approached the 1.0925/30 key resistance area. That zone capped the upside during the last two weeks. A break higher would strengthen the outlook for the Euro. A failure could clear the way for a bearish correction. Support levels might be located at 1.0855 and 1.0815.
The JPY is back as the “safe haven” of choice, as recent “risk off” periods have been associated with falling US yields. If banking-related anxiety does not intensify, this would point to a weaker JPY over the near term, but economists at HSBC believe local factors should provide support for the JPY later in the year.
“If banking-related anxiety does not intensify, this would point to a weaker JPY against ‘risk on’ currencies over the near term. However, it may be possible for local news to get some traction in the JPY. If the news flow on Japanese wages remains favourable, then this could counter some JPY downside. As such, we expect USD/JPY to move largely sideways in the weeks ahead.”
“Beyond the near-term movements, the rationale supporting the JPY’s appreciation later in the year remains intact. For example, compared to early January, more Japan economists now think that the Bank of Japan (BoJ) will modify its yield curve control (YCC) policy this year. Japan’s trade deficit widened to a record level in January 2023, but this was likely exacerbated by holiday-related distortions and a lagged pass-through of lower oil prices. Subsequent numbers should be better.”
USD/MXN struggles to push back the bears as it seesaws around the 18.00 round figure headlines into Monday’s European session.
In doing so, the Mexican Peso (MXN) pair pokes a one-week-old descending resistance line while staying inside a fortnight-long falling wedge bullish chart pattern.
It’s worth noting that the overbought RSI (14) and the recently bullish MACD signals tease short-term USD/MXN buyers. However, the aforementioned resistance line, close to 18.05 by the press time, precedes the stated wedge’s top line, near 18.15 at the latest, restricting the short-term upside of the pair.
In a case where the USD/MXN pair remains firmer past 18.15, the 200-SMA level of 18.40 can act as the last check for the bulls on their way to achieving the theoretical target of the falling wedge breakout, namely around 19.40.
That said, the previous monthly high of 19.23 also acts as an extra filter towards the north.
On the other hand, the falling wedge’s lower line near 17.94 puts a floor under the USD/MXN price ahead of the previous monthly low, also the lowest level since September 2017, close to 17.89.
In a case where USD/MXN remains bearish past 17.89, the July 2017 low near 17.45 may lure the bears.
Overall, USD/MXN stays inside a bullish chart pattern but the buyers need validation from 18.15 to retake the control.
Trend: Limited downside expected
AUD/USD struggles to overcome intraday losses as the latest statistics from China and Australia join sour sentiment during early Monday. That said, the Aussie pair holds lower ground near 0.6665 by the press time amid fears of RBA’s dovish hike and softer US data surrounding activities and employment.
That said, China’s Caixin Manufacturing PMI for March drops to 50.0 from 51.6 prior and 51.7 market forecasts.
Further, Australia’s TD Securities Inflation eased to 0.3% MoM and 5.7% YoY for March versus 0.4% and 6.3% respective priors, which in turn joins the previous week’s downbeat inflation and Retail Sales figures from the Pacific major to strengthen the dovish bias for the Reserve Bank of Australia’s (RBA) next move.
Earlier in the day, news surrounding the OPEC+ output cut weighed on the sentiment and the AUD/USD prices as less energy output suggests a further increase in the Oil price and more pressure on Inflation.
It’s worth observing that the CME’s FedWatch Tool recently suggests an increase in the hawkish bias for the Federal Reserve’s (Fed) 0.25% rate hike in May, versus less than 50% chances supporting the event seems in the last week., which in turn weigh on the AUD/USD prices.
Given the risk-off mood and mixed signals, AUD/USD pair may remain pressured around the short-term key support line. However, Monday’s US ISM PMI and Tuesday’s RBA Interest Rate Decision will be the key event for the Aussie pair traders to watch for clear directions.
Also read: AUD/USD approaches 0.6670 key support with eyes on RBA, US NFP
Recently steady RSI (14) and bullish MACD signals join a three-week-old ascending support line to challenge AUD/USD bears near 0.6670, a break of which can direct AUD/USD bears towards the previous monthly low surrounding 0.6560. Meanwhile, recovery remains elusive unless crossing the 200-DMA hurdle of near 0.6750 by the press time.
USD/CAD ended Friday near flat but the Canadian Dollar edged lower against its US counterpart although it held near its strongest level in more than five weeks. The pair fell from a high of 1.3564 to a low of 1.3507 while the Canadian Dollar was supported by domestic data that pointed to stronger economic growth in the first quarter than the Bank of Canada has projected.
The Canadian economy expanded 0.5% in January, eclipsing the 0.3% increase economists had expected, while preliminary data for February showed Gross Domestic Product advancing by a further 0.3%. Meanwhile, slower US consumer spending growth boosted hopes the Federal Reserve would be less aggressive in hiking interest rates. The latest Personal Consumption Expenditure price index (PCE) also showed inflation is starting to slow in the US. The core price index lifted just 0.3% in February from 0.6% in January. Core inflation is now at 4.6% YoY and the headline level at 5.0% YoY. Personal income increased by 0.3% (from 0.6% in January) while personal spending dropped to 0.2% (from 2.0%).
Meanwhile, the price of oil, one of Canada’s major exports, rose to the highest in three weeks on Friday touching $75.68 as a high in the spot market. The weekend news, OPEC producers announce voluntary oil output cuts, is anticipated to lift the price of oil which would be expected to be supportive of CAD.
Bitcoin has emerged as one of the assets with the highest yield for holders in 2023. With BTC dominance on the rise, analysts are bullish on the digital asset’s comeback to the $35,000 level.
Experts believe the January 2022 support at $32,000 could get re-tested in April, and set a minimum target of $35,000 for Bitcoin price. A range of on-chain metrics support the bullish thesis for Bitcoin.
Also read: Why Vitalik Buterin is bullish on ZK coins
Jackis, a trader and crypto analyst, identified a “cup and handle” formation on Bitcoin’s one-day price chart. While the “cup and handle” formation is not a classical chart pattern, Jackis argues that fitting the current BTC structure in it sets a target of $35,000 for Bitcoin price.
The analyst believes a clean break above the $32,500 high would set BTC up for a rally to the $35,000 target.
BTC/USD 1D price chart
The cup and handle formation is an indicator that displays the movement of an asset’s price in cup form, followed by a downtrend, a handle formation. When the handle formation is complete, it is typically followed by a new all-time high in the asset’s price.
Bitcoin supply redistribution to retail investors holding between 0.1 to 10 BTC is considered a bullish signal. Accumulation of the asset by retail investors is a bullish sign. While large wallet investors and whales are engaging in profit taking, there is a redistribution of the asset to retail investors.
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BTC accumulation by retail investors
The supply of Bitcoin on exchanges has consistently declined since March 30, based on data from the crypto intelligence tracker Santiment. A decrease in BTC supply on exchanges is bullish as it reduces the volume of Bitcoin available for sale, a reduction in selling pressure on the asset.
Interestingly, the timeline coincides with the decline in whale transactions, greater than $100,000 worth of BTC.
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BTC supply on exchanges, whale transaction count and Bitcoin price
Crypto analyst and YouTuber Jason Pizzino believes that the largest asset by market capitalization is following a Wyckoff accumulation pattern. This is a pattern that lasts four phases and the analyst believes we are in the accumulation phase in BTC. This implies the asset is forming the base for a bull market.
Pizzino believes April is the month conducive to BTC testing its January 2022 support at $32,000. In his recent YouTube video, Pizzino was quoted as saying:
…I think April may be the month that we come up to test the $30,000 and the low $30,000 area, so about $32,000, which is previous lows and support of January 2022… That is going to be a key area.
If Pizzino’s thesis is validated, Bitcoin could test the January 2022 support and conquer the level in its uptrend to the $35,000 bullish target.