Is the USD Expected to Complete the Standard "Five Sub-Waves Rising" Structure?

Summary:

After the Federal Reserve chairman gave testimony in the Senate, the U.S Dollar Index (USDX) tested close to its highest level since early December of 106.00. For now, volatility should remain high and the risk balance in the market is expected to continue to tilt upwards. The focus of today's market will be on testimony 2.0 (the chairman of the Fed testifies in the House of Representatives). Meanwhile, the U.S. ADP employment change in February will be seen as a new driver.

BUY USDX

Close Time

CLOSED

105.722

Entry Price

107.120

104.000

103.178 -0.074 -0.07%

172.2

Pips

Loss

104.000

103.998

Exit Price

105.722

Entry Price

107.120

Fundamentals

Fed chairman Powell successfully impacted the market in yesterday's Senate testimony. Powell not only said that the policy interest rate will eventually reach a higher peak when the economic performance is better than expected, but he also said that if the data proved this, he was willing to reassess the acceleration of the rate hike and return to the 50-basis-point increment.

It is worth noting that Powell stressed that "so far, there is little sign of deflation in the core service categories excluding housing", which indicates that the Fed is worried about the potential inflationary pressure. Powell also said a weaker labor market was needed, and although wage growth had slowed slightly in recent months, it was still uncomfortably high relative to the trend growth in productivity and the 2% inflation target.

Although Powell's semi-annual testimony almost repeated the previous repeated, the market still responded strongly, and there was a large sell-off in financial markets. As the market now prefers a 50-basis-point rate hike in March to the 25-basis-point rate hike that was deemed finalized a few weeks ago.

The market currently expects policy interest rates to peak at around 5.60% later this year. The slope between 10-year and 2-year Treasury Securities yields has now reversed by more than -100 basis points, the highest level since 1981, underscoring the continued sharp decline in bond markets.

The testimony of U.S. Federal Reserve Chairman Powell on Tuesday showed that it is risky to bet that the USD has peaked. Powell said that the terminal interest rate may eventually be higher than previously expected, and the pace of interest rate increase may be accelerated, suggesting that the Fed may reopen the door to a 50-basis-point rate hike. This is a reminder to investors.

As Fed officials enter a period of silence starting on Saturday, U.S. data releases in the next few trading days will be extremely important for the short end of the USD curve, as this could shape the Fed's trajectory. While Friday's non-farm payrolls naturally became a bright spot, Powell's testimony 2.0 later today, U.S. ADP jobs for February, and JOLTS job vacancy data could also prove to be extremely important.

The market currently expects ADP jobs to increase by 195,000 in February, up from 106,000 in January. Powell will then give testimony. If the ADP report shows private sector employment growth of more than 200,000, it will reaffirm the prospect of "high-interest rates for a longer period", supporting the USD and depressing the U.S. Treasury Securities. But the data will only put pressure on expectations if they fall into a shrinking range. The negative employment growth may benefit the stock market and emerging market currencies. Admittedly, the near-expected data released on Wednesday may be ignored by investors, who may still be digesting Powell's remarks and focusing on Friday's non-farm payrolls data, waiting to see the February and January data corrections.

USDX: Is the USD Expected to Complete the Standard "Five Sub-Waves Rising" Structure?_1

Technical Analysis

The USDX hovered around its December 2022 high, with the Asian session continuing to rise to a daily high of 105.90 on Wednesday. As we said before, betting that the USD has peaked is risky.

The USDX closed yesterday below the 50% Fibonacci retracement of 110.9-108.81, the third round of downward adjustments after pushing the USD to open a major adjustment in early December. However, after yesterday's sharp rise in prices, they stagnated at that level; So, will the USD stop after rising sharply from the bottom of 108.81? We do not think so.

Judging from the wave pattern cycle, solid Wave 2 and Wave 4 are the key factors to promote the formation of the 5 sub-waves. Although the period is relatively long, from the morphological structure, the 4th wave often moves in a triangular adjustment pattern. (The figure meets our expectations)

Overall, although the period of Wave 3 is relatively prolonged and some of the rising momenta are consumed, from the structural point of view, solid Wave 2 and Wave 4 are expected to promote the formation of the structure of 5 sub-waves. It is recommended to buy in at the lows.

Trading Recommendations

Trading direction: Long

Entry price: 105.37

Target price: 107.12

Stop loss: 104.00

Deadline: 2023-03-22 23:55:00

Support: 105.37, 104.72, 104.12

Resistance: 105.37, 105.92, 106.66

Risk Warnings and Investment Disclaimers

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Serious Short-Term Overbought Suggests Possible Retracement

King Ten

Forex

Summary:

USD may continue to be strong in the near term, but its strength will fade in the medium- to long- term according to the economic fundamentals.

SELL USDX

Close Time

CLOSED

105.708

Entry Price

103.800

107.800

103.178 -0.074 -0.07%

26.6

Pips

Profit

103.800

105.442

Exit Price

105.708

Entry Price

107.800

Fundamentals

Last night, on the first day of congressional hearings, Powell said that if the overall data suggest the need to accelerate tightening, the Fed will be ready to accelerate interest rate hikes. Also, the historical record warns against premature easing of policy, and the Fed will maintain it till the end. Inflation is still well above the target of 2%, and this target will not be changed. Besides, inflationary pressure is higher than expected at the last meeting and the inflation of the key inflation indicator (core service) failed to ease. Influenced by Powell's over-expected hawkishness, the probability of a 50bps Fed rate hike in March rose from 24% to 70%, with rates peaking 17bps higher, from 5.47% to 5.64%. The inverse spread on US 2y-10y treasury bonds also broke through 100bps. The bigger the inverse spread, the greater the degree of monetary tightening, as well as greater economic pressure. The US has never succeeded in escaping from a recession when the inverse spread exceeds 100bp, so what happens this time? Many may say that a tight labor market will help the US economy's "soft landing", but for the last 40 years, US recessions have followed a tight labor market. Currently, this round of US monetary tightening is at a 40-year high, and the US economy may not escape recession.

In general, USD may not be strong soon, but its strength will fade in the medium to long term according to the economic fundamentals. Additionally, there are too many investors turning towards a tightening expectation, causing a crowdy situation in bulls. Meanwhile, profits-taking orders, or medium- to long-term short positions will significantly restrict USD from surging up, and there will be limited space above.

Technical Analysis

Regarding the hourly chart, the SMAs are divergent, with the 5-day SMA standing on the 10-day and 20-day SMAs, indicating a short-term bullish pattern. Nevertheless, USD tends to stabilize and form a round top after the oversold with the MACD indicator plummeting to the overbought zone, demonstrating a strong momentum for a retracement. Therefore, it is recommended for aggressive traders to go short properly in the short term. USDX: Serious Short-Term Overbought Suggests Possible Retracement _1

USDX: Serious Short-Term Overbought Suggests Possible Retracement _1

Trading Recommendations

Trading direction: Short

Entry price: 105.800

Target price: 103.800

Stop loss: 107.800

Support: 104.000/102.600

Resistance: 107.200/109.500

Risk Warnings and Investment Disclaimers

Strong Dollar Rally Weighs on Oil Price

King Ten

Commodity

Summary:

The probability of a favorable trend is already high, and an over-expected decline is instead a chance to open long positions.

BUY WTI

Close Time

CLOSED

77.641

Entry Price

80.500

74.500

74.855 -0.241 -0.32%

314.1

Pips

Loss

74.500

Exit Price

77.641

Entry Price

80.500

Fundamentals

On the macro front, Powell said on the first day of the Congress Hearing yesterday that the Fed will be ready to accelerate the pace of rate hikes if the overall data suggest the need to accelerate tightening; the historical record warns against premature easing of policy and the Fed will stick to it; inflation is still well above the target of 2% and this target is not being considered for change; inflationary pressures are higher than expected at the last meeting and there are few signs of a slowdown in the key inflation indicator - core service inflation.

On the demand side, the IEA lately reported that oil consumption in India and other countries in the Asia-Pacific region is increasing as borders reopen, fueling global oil demand to a record 101.9 million barrels per day this year and potentially bringing the market into a supply shortage in the second half of the year. Meanwhile, the aviation industry is recovering, driving the use of jet fuel. Demand for oil has also rebounded in the U.S. and Europe. Goldman Sachs says China's reopening will boost global spare capacity, and the oil price will rise to $100 a barrel in the fourth quarter as inventories fall and money supply stabilizes.

On the supply side, Russia plans to reduce oil exports from its western ports by up 25% in March, exceeding its previously announced production cut of 500,000 bpd.

Overall, at the macro level, Powell's speech at the Senate Hearing last night was very hawkish, and it may mean that he was already aware in advance that the non-farm payrolls data in February was good and released signals to the market, which was to be announced last Friday after all. The probability of a 50bps rate hike by the Fed in March rises from 24% to 70%, with rates peaking up 17bps, from 5.47% to 5.64%. The market has shown risk aversion, and the dollar index has followed the trend of pulling up 1.5 from the low to above 105.6, which may continue to dominate the market in the short term and drag down the oil price. But simultaneously we also see in the fundamentals of the oil market, China's economic upturn has boosted oil demand recovery, and the oil price is oscillating more, difficult to appear a large long-term decline. As this time the dollar was suppressed beyond expectation, it might be an opportunity for the bulls to open positions.

Technical Analysis

From the hourly chart, the 5-day SMA breaks upwards above the 10-day SMA. The oil price is also currently above the 5-day and 10-day SMAs, with a short-term trend of stabilization after overselling. In addition, the MACD indicator falls to the oversold area, with supreme momentum for a rebound in the short term. Aggressive traders can choose the opportunity to buy at the bottom in the short term. WTI: Strong Dollar Rally Weighs on Oil Price_1

WTI: Strong Dollar Rally Weighs on Oil Price_1

Trading Recommendations

Trading direction: Long

Entry price: 77.500

Target price: 80.500

Stop loss: 74.500

Support: 75.000/72.000

Resistance: 80.500/82.500

Risk Warnings and Investment Disclaimers

Dollar bullish trend leads to a major drop in forex pairs, but NZDUSD sees a sell-off after Powell's speech

Warren Takunda

Forex

Summary:

While the dollar's bullish trend has led to a major drop in some forex pairs, the NZDUSD saw a sell-off after Powell's speech. We are now waiting for a retest of either area of structure to look for potential sells to the downside.

SELL NZDUSD

Close Time

CLOSED

0.61500

Entry Price

0.60000

0.62000

0.60941 -0.00009 -0.01%

35.4

Pips

Profit

0.60000

0.61146

Exit Price

0.61500

Entry Price

0.62000

Dollar bullish trend leads to a major drop in forex pairs, but NZDUSD sees a sell-off after Powell's speech_1

The dollar has been pushing bullish lately, resulting in a major drop in pairs such as EU, GU, NU, and AU. However, the NZDUSD saw a sell-off earlier after Powell's speech, leading to a clean, clear break of H4 support. Now, traders are waiting for a retest of either area of structure to look for potential sells to the downside. While a deep dive underneath the buy zone is not expected, accumulation and stops hit below it before reversing could occur.

When calling tops and bottoms, it's important to note that this does not mean that price will trend up or down for eternity from there. Rather, these are setups that traders can confidently add size into or have a wider stop. While there is no guarantee of what the market will do, backtesting has shown that when these levels are generated, a reversal usually follows. Sometimes it happens instantly, while other times it takes a few days.

It's important for traders to exercise caution when entering trades based on these levels, especially in the first 1-3 levels. While there is potential for profit, there is also risk involved. Therefore, traders should consider their risk tolerance and employ proper risk management techniques to mitigate potential losses.

TRADE RECOMMENDATION

SELL NZDUSD

ENTRY PRICE : 0.61500

STOPLOSS : 0.6200

TAKE PROFIT : 0.6000

Risk Warnings and Investment Disclaimers

More Bearish Price Action Expected to Confirm the Downside

Warren Takunda

Forex

Summary:

Traders should keep a close eye on the GBPJPY pair, as it continues to show signs of weakness. While there is potential for short-term swings, the overall bias is to short, with opportunities to enter at bargain prices using retracement levels. With a well-planned strategy, traders can capitalize on the expected bearish price action and potentially profit from the downside in GBPJPY.

SELL GBPJPY

Close Time

CLOSED

163.000

Entry Price

161.000

163.700

187.523 -0.135 -0.07%

70.0

Pips

Loss

161.000

163.706

Exit Price

163.000

Entry Price

163.700

GBPJPY: More Bearish Price Action Expected to Confirm the Downside_1

The GBPJPY pair has been in focus lately as it continues to show signs of weakness. In the latest developments, we can expect more bearish price action to confirm the downside. One of the reasons for this is the ascending channel reversal, which is occurring within the larger correction that is correcting the previous bearish impulse phase.

As we can see from the charts, the price has already started its bearish move from the top of the structure and has formed a continuation correction to break out of the ascending channel. This suggests that more downside is expected in the near future. Therefore, traders should wait for more bearish continuation corrections on the lower time frame to confirm more drops.

Another indication of the bearishness in GBPJPY is the recent breakdown of 61.8% retracement support. If this breakdown persists, we should see the price reach 161.00. Given the bearishness in the dailies, our main bias is to short. However, it's important to note that the pair experienced a swing of more than 1% yesterday from the high to the low. Therefore, it's prudent to wait for a good bargain for entry.

One potential strategy for entering a short position is to use fibs. 162.95 is the 50% retracement of yesterday's bearish leg, and 163.15 is the 61.8%. These levels could provide a bargain entry for shorts, with a stop loss at 163.20 when the 61.8% retracement is violated.

TRADE RECOMMENDATION

SELL GBPJPY

ENTRY 163.00

STOPLOSS: 163.700

TAKE PROFIT: 161.00

Risk Warnings and Investment Disclaimers

Unsatisfactory Technical Outlook Weakens Market Buying Willingness

Eva Chen

Forex Central Bank Economic

Summary:

The GBPUSD fell sharply from a four-day high as new USD buying emerged. Bears need to fall below the 200-day SMA to support further downside prospects. Investors will look for some meaningful momentum during the New York session (the semi-annual testimony of Fed chairman Powell).

SELL GBPUSD

Close Time

CLOSED

1.19808

Entry Price

1.17000

1.21500

1.26273 +0.00020 +0.01%

105.0

Pips

Profit

1.17000

1.18758

Exit Price

1.19808

Entry Price

1.21500

Fundamentals

The GBPUSD faced some new selling pressure after rising to the range of 1.2065 in the day and continued to fall during the European session. The GBPUSD fell below the psychological barrier of 1.2000 in the last hour and was under the pressure of new USD buying.

At present, the market is increasingly accepting the fact that the Federal Reserve will stick to its hawkish stance and keep higher interest rates for a longer period, which has become the key factor that continues to push up the USD. Beyond that, the imminent risk of a recession seems to be further favoring the USD's relative safe-haven position, as traders repositioned some of the trades of U.S. Federal Reserve Chairman Powell ahead of the Senate Banking Committee's semi-annual testimony.

In his testimony, Federal Reserve Chairman Powell may warn that this year's strong economic activity may cause the Federal Reserve to raise interest rates more than they expected. Powell had previously said that he would carefully study the data before the March meeting and that the Fed would certainly do so if interest rates needed to be higher than expected in December. Since he made the above remarks, various economic data of the U.S. have been very heated. Investors will carefully analyze Powell's wording this evening and next, looking for clues that the Fed will raise interest rates by 25 basis points in March as markets expected, or that the Fed is willing to raise rates by 50 basis points.

Trading in the GBP was relatively flat this week as the market struggled to find a catalyst in the UK that could push the GBP beyond its recent range. The market had previously expressed doubts about any progress on the Windsor Framework and the role of the GBP as a driver. After the remarks made by Bank of England (BOE) Governor Bailey and Chief Economist Pill last week, the market believed that the remarks made by other BOE officials this week had little impact on the pricing of the tightening cycle of the BOE in the market. Markets expect the EURGBP to fluctuate between 0.8800 and 0.8900, while the GBPUSD will rebound on the back of significant events and data in the U.S.

Compared with the BOE, the European Central Bank (ECB) looks more decisive in raising interest rates, which makes the GBP more vulnerable to the EUR. In addition, a survey of corporate CFOs by the BOE's decision-making team shows that companies are now expected to raise prices and wages at a slower pace, which helps monetary policy become more cautious.

We still believe that the BOE will raise interest rates by 25 basis points on March 23, but it seems too radical to expect another 50 basis points later. Unstable risk sentiment could also hit the GBP harder than the EUR.

GBPUSD: Unsatisfactory Technical Outlook Weakens Market Buying Willingness_1

Technical Analysis

For the GBPUSD from a broader perspective, the market has witnessed two-way price fluctuations over the last four weeks or so, constituting a rectangle formation in the 1D timeframe. The lower end of the trading range coincides with the depth of the technically significant 200-day SMA. Bearish trading needs to wait for a convincing break of the above support, currently around the 1.1910 range, before a new choice of direction can be kicked off.

A break below this range could make the GBPUSD more vulnerable. Further declines will accelerate the fall to year-to-date lows near the 1.1840 range hit in January. Some subsequent sales will form a double-top pattern around the 1.2445-1.2450 range and pave the way for further declines.

On the other hand, intraday highs near the 1.2065 range now appear to be a direct obstacle for bulls to regain the threshold of 1.2100. Any subsequent rally could attract new buyers and be blocked near the 50-day SMA of 1.2135-1.2140. In other words, if the GBPUSD continues to strengthen on its 50-day SMA, it could push the GBPUSD up to the threshold of 1.2200, leaving it in suspense near its February 14 high of 1.2265-1.2270.

Overall, although the GBPUSD has formed support around 1.1976 during the day, the technical prospect of the GBPUSD is not optimistic, and only the closing price above 1.2065 may strengthen the market purchase willingness. It is recommended to sell at the highs and buy at the lows.

Trading Recommendations

Trading direction: Short

Entry price: 1.2020

Target price: 1.1700

Stop loss: 1.2150

Deadline: 2023-03-21 23:55:00

Support: 1.1910, 1.1845, 1.1767

Resistance: 1.2164, 1.2148, 1.2191

Risk Warnings and Investment Disclaimers

RBA's Interest Rate Decision Causes AUD to Drop, but Interest Rate Hikes May Not Be Over

Warren Takunda

Forex

Summary:

While the RBA's interest rate decision has caused the AUD to drop, it does not necessarily mean that interest rate hikes in Australia are over. The market is currently in a downward trend, and traders should carefully monitor economic data and market trends

SELL AUDUSD

Close Time

CLOSED

0.67200

Entry Price

0.65500

0.67800

0.66121 +0.00049 +0.07%

9.4

Pips

Profit

0.65500

0.67106

Exit Price

0.67200

Entry Price

0.67800

AUDUSD: RBA's Interest Rate Decision Causes AUD to Drop, but Interest Rate Hikes May Not Be Over_1

The recent decision made by the Reserve Bank of Australia (RBA) about interest rates has caused the Australian dollar (AUD) to decrease in value. However, Antje Praefcke, an FX Analyst at Commerzbank, warns against assuming that this is the end of interest rate hikes in Australia.

The RBA is still planning to raise interest rates further, but they are taking a cautious approach and will be closely monitoring economic data before making any more decisions. While the market has reacted to the RBA's statement by selling AUD, it may not necessarily mean that the interest rate cycle is over.

The market has been moving down from resistance and has failed to update its highs. It has broken through support levels and formed a range, with bearish momentum suggesting that it may fall below the range zone. The current downward trend of the market suggests a pullback to the confluence zone and a move downward, with the 0.65500 support level being a likely target.

If the price is able to pull back and retest the previous level of support for resistance, we may be looking to enter a short position from that area. This will depend on how the market reacts to the support level and whether it continues to follow the current downward trend.

TRADE RECOMMENDATION

SELL AUDUSD

ENTRY PRICE: 0.67200

STOPLOSS: 0.67800

TAKE PROFIT : 0.65500

Risk Warnings and Investment Disclaimers

Eva Chen

Analyst

Master of Economics, 8 years in the financial industry, CFA holder, joined HSBC (Hong Kong) Bank in 2013 after graduating from the University of California, USA in the Investment Research and Markets Department. With years of financial market experience and trading experience, having provided excellent investment advice to many brokerages, entity derivatives importers and clients in Greater China.

Ranking

Articles

836

Win Rate

69.20%

P/L Ratio

0.56

Focus on

WTI, XAUUSD, GBPUSD

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Is the USD Expected to Complete the Standard "Five Sub-Waves Rising" Structure?

Fundamentals

Technical Analysis

Trading Recommendations

Serious Short-Term Overbought Suggests Possible Retracement

Fundamentals

Technical Analysis

Trading Recommendations

Strong Dollar Rally Weighs on Oil Price

Fundamentals

Technical Analysis

Trading Recommendations

Dollar bullish trend leads to a major drop in forex pairs, but NZDUSD sees a sell-off after Powell's speech

TRADE RECOMMENDATION

More Bearish Price Action Expected to Confirm the Downside

TRADE RECOMMENDATION

Unsatisfactory Technical Outlook Weakens Market Buying Willingness

Fundamentals

Technical Analysis

Trading Recommendations

RBA's Interest Rate Decision Causes AUD to Drop, but Interest Rate Hikes May Not Be Over

TRADE RECOMMENDATION

Risk Disclosure