Forex Fundamental Analysis March 19 ~ 24, 2023

We have several high-impact releases scheduled for the week. Based on fundamental analysis, there are serious implications in the medium to long-term market; therefore, we recommend caution above profits.

Tradable news events of the week:

The Consumer Price Index (CPI) measure of inflation, often called the “CA CPI,” is an indicator published by Statistics Canada. It provides information about Canada’s overall cost of living based on a fixed basket of goods and services in each province, territory, and urban center. They measure the index monthly over 12 months and can provide valuable insights into consumer price changes.

The Consumer Price Index (CPI) measure of inflation, often called the “UK CPI,” is an indicator published by the Office for National Statistics. It provides information about the overall cost of living across the United Kingdom based on a fixed basket of goods and services in each region. They measure the index year-on-year over 12 months and can provide valuable insights into consumer price changes.

The Federal Open Market Committee (FOMC) Federal Funds Rate is the rate at which depository institutions lend their excess reserves to other depository institutions overnight. The Board of Governors of the Federal Reserve System sets the Federal Funds Rate as a tool to influence the economy. Changes in the Federal Funds Rate will cause changes in inflation, the number of jobs available, and other economic conditions. Changes in this rate can have ripple effects throughout the world’s economies.

The Swiss National Bank (SNB) Policy Rate is the benchmark interest rate set by the SNB to help shape economic policy. The central bank’s governing board usually sets it after a vote. The rate helps to influence inflation, employment, and other economic indicators. Therefore, changes in this rate can have ripple effects throughout the world’s economies. In addition, we know the total number of votes for or against a proposed change in the rate as the Vote Count, and a split vote count may signal bias in future policy decisions.

The U.K. Bank of England (BOE) Official Bank Rate is the main interU.K.t rate set by the BOE to influence economic conditions and control inflation. This rate is closely watched by investors, central banks, and governments worldwide as changes can have a ripple effect on the global economy. In addition, the Bank Rate is used to determine a range of other rates, including those offered by banks and lenders to borrowers.

Weekly Forex Fundamental Analysis Summary

This week on Wall Street was like a roller coaster ride! Although U.S. consumer prices were higher than expected and the EuropeU.S. central bank raised interest rates by 50 basis points, it still couldn’t compete with the chaos caused by an intensifying global banking crisis.

On Sunday, the Fed, FDIC, and Treasury released a joint statement that guaranteed all deposits at Silicon Valley Bank were safe and those of every other bank in America. Many believe this step was necessary to quell rising public fears, and Congress should now declare an explicit deposit backstop to put this potential crisis out for good.

Shareholders of First Republic were undoubtedly distressed as their stock teetered near the brink – until an infusion of 30 billion dollars from big U.S. banks relieved them. But, unfortunately, it also shook credit U.S.isse when its biggest shareholder, Saudi National Bank, declared that it would not be offering additional aid despite its plummeting share value.

U.S. Treasury yields quickly fell, particularly the 2-yeaU.S.yield, as traders bet a Fed rate hike above 5% was unlikely to remain for an extended period.

Tuesday’s consumer price index was mostly in line with predictions, suggesting that the Federal Reserve will likely raise interest rates by a quarter point next week. Despite recent banking issues, the 0.5% rise in core services ex-housing data, its strongest peak since September, strongly supported Chair Powell’s call for higher rates.

The report was not worrying enough to eliminate the “one-and-done” narrative that took off during the banking turmoil. Most other economic data pointed to a more deflating outlook, which could give leeway for Fed officials to pause earlier than they have suggested.

Despite the Swiss National Bank’s attempt to steady liquidity with a CHF50B line of credit by Wednesday, banking panic persisted into Friday’s options expiration. —more drastic measures needed to be taken for stability and security to return.

As they had shown, ECB amplified their rates by a whopping 50 basis points despite the financial industry’s instability. So while their statement seemed downbeat, it did not suggest further rate movements, which was included in previous statements.

The Federal Reserve and European Central Bank benchmark rate expectations experienced a dramatic decrease. In barely seven days, two-year American yields declined more than one hundred basis points to below 4%. Gold prices, cryptocurrencies, and large-cap growth stocks showed remarkable resilience compared to other markets.

The Federal Reserve reported that banks borrowed a staggering amount of $152.9 billion in the past week, an increase from the previous week’s total of $4.6B. Nearly $11.9 billion was borrowed through the newly established Bank Term Funding Program (BTFP) in merely three days. This number will surely keep increasing as more people realize this option!

Despite the relentless hardships imposed upon banks, last week was a success for both S&P and Nasdaq w, with respective gains of 1.4% and 4.4%, whereas DJIA experienced an insignificant drop of 0.2%.

Forex Sentiment Forecast

If there is ever a week, Forex traders should sit on the sidelines, and this would be it. With two CPI reports and three Interest Rates scheduled, we can expect extreme market volatility with surprises, so technical, fundamental, or sentiment trading no longer works as it should.

The U.S. dollar continues to face pressure against other major currencies, meaning selling remains the dominant trend in current market conditions.

With EURUSD and GBPUSD failing to break out of their range against the greenback, these major pairs could be ideal opportunities for selling on a rally – especially when news is bearish towards the Dollar. Yet, there is still a risk appetite.

The same can be said for the New Zealand and Australian Dollar; however, unless there’s a purpose to trading these two currencies, it is advisable to keep your distance.

If the U.S. Dollar persists in experiencing an onslaught, the Canadian Dollar could strengthen in response. However, following recent market movements that detached USDCAD from other majors, we may see a downward correction in USDCAD shortly afterward.

JPY remains resilient due to the risk-averse sentiment, but the medium-term JPY short might still resume, so in the meantime, I’m more comfortable buying JPY pairs (EURJPY, GBPJPY) on the dip.