Global stocks markets ended on a strong bearish note on Friday after financial regulators shut down one of the leading lenders in the United States, the Silicon Valley Bank (SVB). Meanwhile, the most awaited US jobs report showed on Friday the US economy added 311,000 jobs in February, more than the consensus estimate of 225,000 but the unemployment rate rose from 3.4% to 3.6%.
This week all eyes will be on the US inflation data, which could reinforce expectations of a bigger rate hike later this month. The important economic events to watch are the European central bank rate decision, US retail sales, PPI and Michigan Consumer Sentiment Index for March.
On the earnings front, the companies scheduled to release their last quarter financial results this week will be Adobe, Xpeng and FedEx.
The precious metal opened with a gap up, increasing the price of the yellow metal to more than $1892 an ounce during the Asian session. The metal staged a decent recovery as Fed rate hike bets get scaled down. As of this writing, the precious metal is traded near $1882 an ounce. Gold price slumped to a fresh weekly low of $1809 during the first half of last week while the metal strongly rebounded back to above $1865 after the metal failed to break below the previous month's support. Moving ahead, the metal could continue to strengthen due to its status as a safe haven asset but the long-term direction of the gold price will depend on the US CPI data which will release on Tuesday.
On the upside, a hurdle can be noted near $1894 then the psychological resistance zone of $1900. A break and daily closing above the $1900 level shall trigger renewed buying interest, validating a rally towards the $1930 resistance zone. On the downside, the nearest support level is $1870 then $1862. If it breaks below $1860, it will head towards the next support level, located near $1850/44.
The US Dollar Index, a measure of the value of the greenback against a basket of weighted currencies remains under pressure for the fourth consecutive day. The recent selling pressure was fueled after the release of a mixed US employment report. As a result of the latest jobs data, dollar weakness ensued and markets now seem to be pricing in a smaller 50 basis point hike at the Fed's meeting next week. Some of the key data points expected to dictate this week's dollar movements include the US inflation report, which is due out on Tuesday and US retail sales and PPI data on Wednesday.
Although the medium and long-term trend is bearish, in the short term it seems that evidence is starting to emerge that a short-term recovery of the USD. On the upper side, the first resistance is located around 104.20, a break above this level will confirm a possible move to 104.50 and 104.70. On the downside, key support seems to have formed in the 103.60 area. A four-hour close below that area could be seen as a strong bearish shift and open the floor to an extended slide toward 103 (psychological level) and 102.60.
The currency pair reversed back to below 1.0670 from the fresh monthly highs. Looking ahead, it seems safe to assume that movement in the euro will remain highly volatile. The crucial ECB decision this week will be the key economic data points which could determine the next move for the common currency. The European Central Bank (ECB) is expected to take a hawkish stance, with another 50 bps rate hike on the cards.
This week, the first immediate support is near 1.0600 then good support is expected at the 1.0520 area, with this zone having held last week while further down, demand is also expected around 1.0480, which will act as the next area of support. On the flip side, the first immediate resistance level for the pair is 1.0730, then the stronger resistance is 1.0760, which is important to be stable above it for a continuing rise to 1.0800 and 1.0850 levels.
Dow Jones futures and other US indices managed to rebound from the early session lows during the European session on Monday after the UK authorities confirmed that HSBC bank agreed to rescue the Silicon Valley Bank’s (SVB) UK arm. While the stock futures struggle to extend their recent uptick pressured by worries about the health of the US financial system. This week, Dow should also closely monitor the release of the latest US CPI and retail sales numbers, looking for clues on future rate hikes by the central bank.
Technically the current price action signals suggest that a medium-term bearish trend remains intact. On the downside, if the bearish momentum continues the key support areas to watch are 31,600, if the index breaks below 31,600 it would open doors towards 31,200 and 30,900. On the upper side, however in case, if the pair manages to settle above 32,500, it will gain upside momentum and head towards the next resistance level at 32,800 and 33,100.
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