2023 Market Forecast by Solid ECN

Gold

Precious metals gain amid increase in risk-aversion and pullback in US yields

Strong upward move launched on the gold market on March 8, 2023 is continuing at the beginning of a new week. Risk-off moods can be spotted on the financial markets at the beginning of a new week and it is providing support for safe haven assets, like for example gold. UBS will buy troubled Swiss lender, Credit Suisse, in a government-brokered deal. However, this failed to ease market concerns as the deal will include write down of Credit Suisse's AT1 bonds and this may turn out to be a hit to banks and other institutions with exposure to Credit Suisse. Apart from that, Fed and 5 other central banks (ECB, BoJ, BoE, BoC and SNB) will switch from weekly to daily USD swap auctions in order to boost USD liquidity. US yields pulled back providing even more support for precious metals.



As a result of those market moves, gold is trading over 1% higher on the day. Gold price climbed above $2,000 per ounce this morning, reaching the highest level since March 2022.

EURUSD

Euro continues to recover against the dollar at the beginning of this week, after a sharp crash in the last week - that was motivated by the worries around Credit Suisse that put the European banking sector under pressure and heavily penalized the euro.

Daily Time Frame EUR/USD

• On the daily chart, we can see that the price is once again testing the upper limit of the range, close to 1.0695.
• This will be a decisive zone for the price to understand the next momentum in the currency pair.

Dollar Index Daily Time Frame

• On the dollar index chart, we can see that the bullish movement slowed down after the price tested the 50 period exponential moving average (EMA).
• As long as the price remains below this zone, we should expect the bearish movement to continue over the next few sessions.

• USD index, Daily time frame chart.
• JPY leads the gains this trading session.

BTC

• Weaker sentiment on stock exchanges did not prevent cryptocurrencies from rising
• The correlation of the price of BTC with the major indices has dropped noticeably recently
• Bitcoin price is approaching overbought levels and 61.8 Fibonacci retracement

The recent weakness of banks has caused capital to flow into cryptocurrencies for two reasons. The main beneficiary of the rally - decentralized Bitcoin - is not directly dependent on the centralized financial sector. Second, in the face of escalating bank problems, the chances of a Federal Reserve pivot have increased. Since the collapse of SVB, the Fed has already hinted twice at supporting market liquidity, which investors have taken as a positive prognosticator. It's still unpredictable which way the crisis will unfold but its hold on UBS's takeover of Credit Suisse coupled with a potentially dovish Fed could provide a catalyst for upside for risk assets.

On Wednesday at 8 pm GMT, markets will see if indeed Jerome Powell will be willing to go easy on Wall Street and change to a more dovish stance. If investors sense that the Fed is softening under the pressure of systemic concerns, the rally in cryptocurrencies is likely to be prolonged. At the same time, it is difficult to imagine the price of BTC continuing to rise if the scale of the current crisis were to increase significantly.



The price drop following the collapse of the SVB bank did not last long. Bitcoin surprised the markets and has since risen nearly 30%.



The largest of the cryptocurrencies has had one of its best weeks in the past few years, with the price rising more than 20%



The inverted head-and-shoulders formation pattern may herald bullish attempt to btrak the main psychological resistance level of $30,000.



Markets see more than 43% chance that the Federal Reserve will not raise interest rates on Wednesday. Just two weeks ago, the markets saw a 50bp hike as a chance. That's a drastic change.



The amount of stored BTC in the so-called 'cold wallets' of the largest BTC holders of so-called whales (above 1,000 BTC) is at levels last seen in mid-2020. This may indicate that if the BTC price maintains momentum, the amount of BTC in whale portfolios will increase again. For the moment, however, the amount of cryptocurrency in the whales' wallets continues to fall, which could indicate their sending BTC to exchanges and continued risk aversion among the largest holders. A change in this trend would be a sign of the growing strength of the largest of cryptocurrencies.

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Bitcoin, D1 interval. The price has approached $28,700, which coincides with the 61.8 Fibonacci abolition of the upward wave initiated in the spring of 2020. The RSI indicator indicates an overbought level signaling a possible correction.

AUDUSD

Yesterday's trading on Wall Street and in Europe ended higher, making up for losses from earlier in the day initiated by the uncertainty surrounding the takeover of Credit Suisse by UBS. Better sentiment fueled Asian markets today. Stock exchanges in Japan are closed due to a national holiday.

• AUDUSD pair breaks back below the 0.6700 level. The case for a pause in the rate hike cycle by the RBA at its 4 April meeting has strengthened. According to the RBA minutes released today, the Board agreed to reconsider the case for pausing rate hikes and to closely examine incoming data from the economy.
• The ECB's Holzmann is softening his previous calls for three consecutive 50 basis point rate hikes.
• From the US, there was some news affecting the stock market. The US Treasury is looking at unlimited deposit guarantees (via the FDIC) if the banking crisis worsens.
• On the political front, investors are looking at the Putin-Xi meeting in Moscow, which may bring new threads in the realm of the Ukraine conflict and other geopolitical-economic relations.
• PIMCO lost $340 million on the redemption of Credit Suisse Bank's AT1 bond. Lawyers from Switzerland, the United States and the United Kingdom are talking to Credit Suisse's AT1 bondholders about possible legal action after up to $17 billion in losses related to the redemption.
• Goldman Sachs commented on the current state of the equity market this way - "valuations don't look particularly attractive".
• Bill Ackman, founder and hedge fund manager of Pershing Square Capital commented that the FOMC should consider holding off on rate hikes for tomorrow's Committee decision. Today marks the start of the Fed's two-day meeting in Washington. 
• Citi predicts a 25bp rate hike on Wednesday, and notes that the tone of the press conference will now be particularly important.
• Citadel and Trafigura traders believe that the turmoil in the banking market is temporary and unlikely to cause far-reaching perturbations in the global economy. Demand for oil should strengthen.

Quotations:
Futures in Europe point to a bullish opening to the session on the Old Continent. US contracts are also gaining, however the scale of the increases is minimal. On the FX market, the USD is currently performing best. NZD and AUD are the worst performers. Energy commodities are down, extending the wave of uncertainty in the economy. Gold and silver are correcting recent gains and recording slight declines. Bitcoin is currently losing 0.4 per cent and slipping towards $27,800.



The AUDUSD pair is currently trading in a structure bounded by important support and resistance levels. The upcoming FOMC decision and ongoing banking uncertainty could create additional volatility on the pair.

ZEW Sentiment Index Below Expectations

• 10:00 am GMT - Germany, ZEW sentiment index for March. Actual: 13.0. Forecast: 15.0. Previously: 28,1
• Current conditions: Actual: -46.5. Forecast: -44.3. Previously: -45.1
• ZEW says the international financial markets are under strong pressure. Assessment of the earnings development of banks and insurance sector have deteriorated considerably.

DE30 did not react to the below expectation reading of the ZEW index.

Oil

Alexander Novak, Russian deputy prime minister for fuel energy complex, said that the 500k barrels per day oil output cut that was ordered for March will remain in force through June. Novak said that production has not been slashed by the announced half a million barrels yet but Russia is close to achieving this target cut.



Brent (OIL) and WTI (OIL.WTI) ticked higher on the news. Oil prices jumped around 1% after Novak's comments hit headlines.

JAP225

• US indices finished yesterday's session higher amid expectations that the Fed will tighten policy less aggressively in the evening. S&P 500 added 1.30%, Dow Jones moved 0.98% higher and Nasdaq rose 1.58%. Russell  outperformed and managed to finish 1.88% higher
• Indices from Asia-Pacific traded higher today - Nikkei jumped 1.94%, S&P/ASX 200 moved 0.87% higher while Kospi and Nifty 50 rose 1.12% and 0.20% respectively
• Indices from China traded 0.2-0.45% higher
• DAX futures point to a lower opening of today's European cash session
• ECB's Nagel said that policymakers have to be "even more stubborn" in inflation fight. In his opinion Eurozone banking system is resilient, not facing repeat of 2008
• First Republic Bank could potentially receive government backing, according to Bloomberg
• API report pointed to a 3.262 million barrel build in US oil inventories (exp. -1.448 mb)
• RBC analysts believe that OPEC would intervene if oil prices dropped substantially.
• Russia's Deputy Prime Minister Novak said that the country's current curtailed level of crude oil output would be in place through June 2023.
• Commerzbank lowered its 2023 midyear Brent crude oil forecast to US$80 a barrel (from $95)
• Cryptocurrencies are trading slightly higher today - Bitcoin gains 0.5%, Ethereum adds 0.4%
• Energy commodities are lower - oil drops 1.0% while US natural gas prices fell over 2.6%
• Precious metals little changed - silver rose 0.16%, gold trades 0.8% higher
• AUD and NZD are the best performing major currencies while USD and CHF lag the most

Nikkei (JAP225) was one of the best performing Asian indices today. Index returned to crucial resistance at 27200 pts, which is marked with previous price reactions and 23.6% Fibonacci retracement of the upward wave launched in March 2020.