The USD Could Edge Lower
The weekend has been hectic, and while the future of Credit Suisse has received a lifeline, the wider banking decline continues to cause ripples in the market, which could lead to a systematic decline in Eurozone banks.
Today’s initial market reaction indicates that investors must still be reassured about things. If risk aversion continues, the USD is likely to drop back up. However, the Fed swap lines suggest that if risk appetite consolidates, the USD may edge lower this week.
The AUD/USD
At the time of press, the AUD/USD fails to capitalize on modest gains, retreating from a two-week high around the 0.6730 regions early Monday. However, the spot price managed to bounce off a daily low and trade just above the psychological price level of 0.6700.
A solid comeback in US equity futures is a key reason supporting the risk-sensitive AUD, and a fresh sell-off in the dollar has been triggered. However, as the modest recovery in global risk sentiment continues, a slide in US yields will exert some downward pressure on the greenback, which will be a positive development for the pair.
The GBP/USD pair
The sterling is also edging higher against the greenback and is targeting a level above the psychological level of 1.22000, and the momentum looks decent. The pound has found support from the many dips experienced in the last few days. It could consolidate the gains and head towards a 55-day moving average at the psychological price level of 1.2132. This movement could test major resistance levels at 1.2290 in the week.
XAU/USD
The price of the precious metal has been declining from its annual highs at $2000 due to lower demand, despite the spiking safe-haven demand as fears of contagion persist. Currently, the metal is trading at $1,976 per ounce, which fell by 0.3% on Monday.
However, gold is gaining some upsides from the fact that the markets no longer expect the Fed to continue raising the rates in the next meeting, with the odds of a 25 bps rate hike dropping from over 80% to the current 60%. If the Fed takes a dovish stance, we can expect the price of gold to experience tailwinds and grow in the coming days.
USD/JPY
This pair is expected to trade in a wide range, with the parameters between 132.50 and 134.50. The high of 133.83 dropped below a low of 131.55 before eventually bouncing back. However, the bounce back came amid oversold positions, suggesting that the USD will likely fall further in the coming days. Today, the USD is more likely to move sideways and fluctuate between 131.70 and 133.20.
The German Economy Q1 Predictions
According to a report by the Bundesbank on Monday, economic activity in Germany will likely decline in Q1. However, the report notes that the decline could be lower than that of Q4 in 2022. The report further notes that the inflation forecast will decline in March, with higher prices from the energy sector earlier being eliminated from the annual rate.
Despite this, the core rate stays resilient and could increase as the year progresses. The data will continue last month’s slum, and some analysts argue that this trend could go well into 2023.