North American News
Further USD strength requires Fed Funds futures market to start pricing in a 50 bps hike in March – SocGen
In the opinion of Kit Juckes, Chief Global FX Strategist at Société Générale, the Dollar’s bounce is fading, unless the Fed starts talking tough.
USD Index Price Analysis: Further upside in store
- The index treads water around the 104.00 region on Monday.
- Further advance could revisit the 2023 high near 105.60.
DXY trades within a tight range near Friday’s closing levels in the sub-104.00 zone.
The ongoing price action favours the continuation of the uptrend for the time being. Further bouts of strength are now expected to put a potential test of the 2023 top at 105.63 (January 6) back on the investors’ radar in the not-so-distant future.
In the longer run, while below the 200-day SMA at 106.44, the outlook for the index remains negative.
Commodities
Gold rises toward $1840s
- Gold price stages a recovery, reclaiming the $1840 area as it aims north.
- Last week’s US economic data and hawkish commentary continue to dampen market sentiment.
- Gold Price Forecast: It will face the 50-DMA as resistance, followed by the 20-DMA; otherwise, it could fall to $1800.
Gold price advances after hitting a six-week low at around $1819 and aims toward the 50-day Exponential Moving Average (EMA), above its opening price by 0.30%. At the time of writing, the XAU/USD is at $1845.82, bolstered by a soft US Dollar (USD) undermined by falling US Treasury bond yields.
Gold climbs to the $1840 mark on a US holiday
As the North American session begins, US equity futures are trading in the red, except for the Dow Jones. Monday’s trading session would be dull due to thin liquidity conditions, as the US remains a holiday in observance of President’s Day.
Last week’s economic data revealed in the United States (US) keeps traders nervous, as they had begun to price in a more aggressive Fed. Uncertainty of where the Federal Funds Rate (FFR) will peak triggered the second consecutive week in which US equities finished with losses. In addition, Fed Governor Bowman and Christopher Waller were the latest policymakers to emphasize the need to raise higher rates for longer as the US central bank battles to tame inflation.
Last Tuesday, the US economic calendar revealed that the Consumer Price Index (CPI) slowed faster than estimated. However, two days later, prices paid by producers, also known as PPI, came above estimates and the prior’s month data in the month-over-month figure, reigniting speculations that the Fed would continue to tighten monetary policy as rate cuts speculations begin to fade.
Reflection of this was the jump in US Treasury bond yields, which closed the last week at 3.822%, eight basis points (bps) above the previous week and underpinned the greenback. The US Dollar Index (DXY), a gauge of the buck’s value vs. a basket of six currencies, climbed above the 104.000 mark. Nevertheless, in the session, the DXY it’s sliding 0.03%, at 103.849.
Silver fails ahead of $22.00 mark, 100-day SMA support breakpoint
- Silver struggles to capitalize on its modest intraday gains to the $22.00 neighbourhood.
- The recent breakdown through key technical levels supports prospects for further losses.
- A sustained move above the $22.55-$22.60 area is needed to negate the bearish outlook.
Silver builds on Friday’s modest bounce from the $21.20-$21.15 area, or its lowest level since November 29 and attracts some buyers on the first day of a new week. The intraday uptick, however, lacks bullish conviction and fails just ahead of the $22.00 round-figure mark.
From a technical perspective, the said handle represents the 100-day Simple Moving Average (SMA) support breakpoint. This is followed by the 38.2% Fibonacci retracement level of the recent rally from October 2022, around the $22.15 region. Any subsequent move up is more likely to meet with a fresh supply and remain capped near the $22.55-$22.60 resistance zone.
The latter should act as a pivotal point, which if cleared decisively will negate any near-term bearish bias. The subsequent move up has the potential to lift the XAG/USD towards the $24.00 round-figure mark
en route to the $24.50 supply zone. Some follow-through buying will shift the bias back in favour of bullish traders and pave the way for additional gains.
On the flip side, the 50% Fibo. level, around the $21.35 area, seems to protect the immediate downside. This is followed by Friday’s swing low, around the $21.20-$20.15 region, nearing the 50% Fibo. level. A convincing break below the latter will be seen as a fresh trigger for bearish traders and make the XAG/USD vulnerable to weaken further below the $21.00 mark.
Given that technical indicators on the daily chart are holding deep in the negative territory, the white metal could eventually drop to 61.8% Fibo., around the $20.60 region. The downward trajectory could get extended further towards challenging the $20.00 psychological mark en route to the next relevant support near the $19.75-$19.70 horizontal zone.
EU News
European major indices end the session mixed
- UK FTSE 100 closes at a new record high
The major European indices are closing mixed.
A look at the closing levels shows:
- German DAX, flat
- France’s CAC -0.14%
- UK’s FTSE 100 +0.11%
- Spain’s Ibex -0.52%
- Italy’s FTSE MIB -0.4%
Goldman lifts terminal rate for ECB to 3.5%
- Forecast another 25 basis point hike in June
According to newswire sources, Goldman Sachs is raising its terminal rate for the ECB to 3.5% from 3.25% previously. They forecast another 25 base hike in June.
They say:
- continued labor market resilience at the aggregate level – combined with the structural pressures on wages – tilts the wrist toward a higher terminal ECB deposit rate than our 3.25 baseline
The ECB hiked rates to 3.0% when they announced their rate decision on February 2. At the time, ECBs Lagarde said that they intend to raise rates by 50 basis points at their next meeting and then monitor the path.
The ECB meets next on March 16.
Four days ago Lagarde said:
“In view of the underlying inflation pressures we intend to raise interest rates by another 50 basis points at our next meeting in March,”
Needless to say, Goldman is a little less hawkish than the ECB with their view.
Other News
Magnitude 6.3 earthquake hits Turkey/Syrian border
- The death toll from the earthquake two weeks ago is up to 47,000 and expected to rise
A reported 6.3 magnitude earthquake has hit the Turkey/Syrian border. This comes after the 7.8 magnitude earthquake that devastated the countries on February 6.
The death toll is currently at 47,000 and expected to rise even further as more than 345,000 apartments were destroyed and many people are still unaccounted for.
The World Health Organization (WHO) said that 26 million people need assistance. An estimated 1 million people are living in tents and temporary shelters in Turkey. A total of 80,000 injured people are in hospital. In Syria up to 5 million people may be homeless.
US president Biden makes surprise visit to Ukraine
- Biden arrives in Kyiv, his first visit since the Russia attacks almost a year ago
The surprise visit comes as he was travelling to Poland to meet president Andrzej Duda. There had been speculation earlier in the day that perhaps it was Biden to visit Ukraine, after rumours of an “important guest” arriving.
This is definitely no coincidence I would say, with top Chinese diplomat, Wang Yi, arriving in Moscow for a meeting with Russian officials – perhaps one with Putin.
Cryptocurrency News
FTT explodes by nearly 28% following FTX Japan’s announcement of crypto withdrawal resumption
- FTX Japan stated that customers could transfer their assets to their Liquid Japan account.
- On the other hand, FTX bankruptcy claims in the private OTC markets are going for as low as 15-20 on the dollar.
- FTT price noted an increase of 27.95% during the intra-day trading hours before tracing back to $1.763.
FTX saga took a turn for the good on Monday after one of its bankrupt entities announced the fulfillment of its commitment from weeks ago. While the John Ray-led company is still figuring out its customers’ recovery, the Japanese arm of FTX is on its way to reversing the customers’ losses.
FTX Japan to initiate withdrawals
After almost three months of shutting down withdrawals, FTX Japan announced that starting Tuesday, February 21, the company will resume the service. The Japanese establishment of the bankrupt crypto exchange was among the hundreds of companies that filed for bankruptcy after FTX’s collapse.
The management team of FTX Japan stated that customers would be able to withdraw their fiat and crypto assets using the platform Liquid Japan. The company announced its partnership with Liquid not too long after its bankruptcy back in November 2022.
Customers are required to have a Liquid Japan account which will be used for transferring their assets out of FTX assets. This can be done after the customers confirm their balance. Although FTX Japan stated there could be some hiccups during the withdrawals thanks to a large number of requests.
On the other hand, FTX bankruptcy claims are appearing on private over-the-counter markets now. These claims are going for as low as 15 to 20 cents on the dollar. The public accounts before these also valued FTX’s distressed assets at a similar price of 16 cents on the dollar.
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