It’s only a matter of time before something ugly happens to cause more selling and panic in the markets overall.

Gold markets initially tried to rally on Tuesday but then turned around to show scenes of exhaustion yet again. As long as interest rates continue to be very strong in the United States, it puts a bit of a drag on the gold market. Furthermore, there’s a lot of concern out there about getting liquid, and some traders will sell gold in order to pay for other positions that they are suddenly in trouble with.

From a technical analysis standpoint, we are threatening a major support level in the form of an uptrend line, and of course the $1800 level was right here as well. In other words, there are a couple of different reasons to think that perhaps buyers may show up in this general vicinity. If we were to break down here, then it’s likely that the market will open up into a new flood of selling, possibly sending this market down to the $1750 level. When you look at this chart, it’s obvious that we are trying to break through this support level, and I do think that we have further to go. In fact, we have formed a massive “H pattern”, which is generally a very bad sign.

If we get a breakdown at this point, it’s likely that it will be rather ugly. On the other hand, if we were to turn around and show signs of bullish pressure, then it’s not until we break above the $1880 level that we could see any real follow-through. There is the possibility that we bounce here to stay in the overall range, and right now we have not managed to break down, but really at this point, one would have to think that it’s only a matter of time before something ugly happens to cause more selling and panic in the markets overall.

If we were to turn around and break above the 50-day EMA, it’s possible that we could take off to reach the $1920 level, followed by the $2000 level, but that seems to be very unlikely. Ultimately, we would need to see a massive change in the interest rate markets, which at this point does not look to be very likely. I believe it is a scenario where we will continue to see sellers come in on rallies.

Despite three consecutive trading sessions, during which the price of the USD/JPY was subjected to sell-offs, it moved towards the support level 126.92 and settled around 127.20 at the time of writing the analysis. The selling came after the currency pair gained towards the 129.40 resistance level, the highest for the currency pair in 20 years. The recent performance so far, the USD/JPY pair has not come out of its upward trend, which is still supported by strong expectations for the future of raising US interest rates during the year 2022 to face the fiercest global inflation waves caused by the epidemic and recently the Russian / Ukrainian war.

Despite expectations of a US interest rate hike. US 10-year Treasury yields are close to 3% — a level not seen since late 2018. But short-term yields are rising faster with the two-year US yield gaining 33 basis points over the past week compared to the 10-year increase of 18 basis points. And all of this because market rates are raised by 50 basis points by the Federal Reserve at every meeting in 2022.

These moves have flattened the 2-year 10-year bond curve in the US, with the result that our recession model once again sets a 50% chance of a recession in the next 12 months. Accordingly, it seems that the stocks have noticed a noticeable weakness.

Meanwhile, the Fed’s recession model, which uses the 3m10y portion of the yield curve, continues to give only a 2% probability of a recession. Macro Hive has presented two models for predicting a US recession using the slope of the yield curve. When the long-term returns begin to fall towards or below the short-term returns, the curve flattens or reverses.

This often predicted a recession in subsequent months.

One of the models from the Fed is based on the 3m 10h curve and the second is our modified version based on the 2x10h curve. The two years could better reflect expectations for Fed increases in the coming years.

On the economic side: US consumer confidence slipped slightly in April but remains elevated even as inflation continues to cloud their optimism for the rest of the year. Accordingly, the Conference Board said yesterday that the US Consumer Confidence Index – which takes into account consumers’ assessment of current conditions and their expectations for the future – fell to 107.3 in April, from 107.6 in March. The Business Research Group’s Current Situation Index, which measures consumers’ assessment of current business and business conditions, also fell modestly this month to 152.6 from 153.8 in March.

The expectations index, which is based on consumers’ six-month expectations for income, business and the labor market, rose to a reading of 77.2 in April from a reading of 76.7 in March. It settled at 80.8 in February and remains a weak spot in the survey. Commenting on the performance, Lynn Franco, senior director of economic indicators at the Conference Board, said: “Buy intentions have generally fallen from recent levels as interest rates started to rise.” Meanwhile, concerns about inflation eased from an all-time high in March but remained elevated.

Franco added that inflation and the war in Ukraine will continue to erode confidence and may further reduce consumer spending this year.

Despite the recent sell-offs, the general trend of the USD/JPY currency pair is still bullish, and there will be no break out of the descending channel below without the currency pair moving towards the support levels 125.00 and 122.20. On the other hand, the resistance 128.20 will remain important to reach the psychological peak 130.00.

The discrepancy in the economic performance and the future of raising interest rates from global central banks will remain factors that support the upward trend of the currency pair.

Today, the USD/JPY pair will be affected by risk sentiment.

Today’s recommendation on the lira against the dollar

– Risk 0.50%.

– The purchase order on Tuesday has been activated and the deal is still being traded

– None of the buy or sell transactions of yesterday were activated

Best buy entry points

Entering a buy position with a direct order from 14.62 . levels

– Set a stop loss point to close the lowest support levels 14.36.

– Move the stop loss to the entry area and continue to profit as the price moves by 50 pips.

Close half of the contracts with a profit equal to 75 pips and leave the rest of the contracts until the strong resistance levels at 14.85.

Best selling entry points

Entering a short position with a pending order from 14.86 . levels

– The best points for setting the stop loss are closing the highest levels of 14.98.

– Move the stop loss to the entry area and continue to profit as the price moves by 50 pips.

Close half of the contracts with a profit equal to 75 pips and leave the rest of the contracts until the support levels 14.40

The lira fell during early trading today, Thursday. Where investors followed a report issued by Bloomberg Agency, which includes some analysts’ opinions, the report mentioned expectations of fixing the interest rate by the Turkish Central Bank during the next meeting. Despite the emphasis that most of the central banks in the world follow in raising interest rates to control high inflation rates. The report also stated that expectations focus on the possibility of the lira recording more decline during the current month, despite the stability it has witnessed since nearly a month. Their foreign earnings into the lira.

On the technical front, the Turkish lira declined against the dollar during today’s trading, as the pair reached the bottom recorded at the end of last month, which represents strong support levels, as the pair rose from it. In general, the US dollar against the dollar continued to trade within a narrow trading range. The pair is currently trading below the descending trend line on the 240-minute time frame, shown on the chart. The pair also varied around the 50, 100 and 200 moving averages, respectively, on the four-hour time frame, while the pair fell above those averages on the 60-minute time frame. The pair is trading the highest support levels that are concentrated at 14.50 and 14.25 levels, respectively. On the other hand, the lira is trading below the resistance levels at 14.76 and 14.85, respectively. We expect the lira to fluctuate within the current range without major changes. Please adhere to the numbers in the recommendation with the need to maintain capital management.

The US Federal Reserve confirmed that it is ready to raise US interest rates strongly during the year, and thus the strength of the US dollar increased against the rest of the other major currencies. In the case of the EUR/USD currency pair, it moved in its descending path, reaching the support level 1.0875, where it is stable near at the time of writing the analysis. The most popular currency pair in the Forex market is the closest to breaching the psychological support 1.0800. As I mentioned before, the divergence in economic performance and the future of monetary policy tightening by central banks will remain in favor of the US dollar.

The results of the recent economic data confirm this. The economy of the Eurozone is suffering strongly from the effects of the Russian-Ukrainian war, which has entered its second month, and there are no strong signs on the ground that it is nearing an end, adding to the euro’s suffering. Within the series of weak data, data from statistics agency Destatis revealed that German factory orders fell for the first time in four months in February, driven largely by lower foreign demand. According to the figures, German factory orders fell by -2.2 percent on a monthly basis in February, in contrast to an increase of 2.3 percent in January. Economists had expected a slight decrease of 0.2 percent. This was the first drop since October 2021.

Meanwhile, annual growth in total new orders fell sharply to 2.9% from 8.2% in January.

New orders from foreign countries fell 3.3 percent from January. Within this foreign demand, orders from the eurozone fell by 3.3 percent and orders from economies outside the eurozone fell by 3.4 percent. Meanwhile, domestic orders posted a monthly decrease of 0.2 percent. The data showed that producers of capital goods recorded a decrease of 2.8 percent. Intermediate goods producers saw a 1.9 percent drop in new orders. On the consumer goods front, orders rose 0.7 percent. Moreover, the data showed that domestic trading volume fell 1.4 percent in February, reversing a revised 1.6 percent increase in January. For its part, the German Economy Ministry said that the outlook for factory orders is currently muted due to the uncertainty caused by the war in Ukraine.

Elsewhere, a survey of German construction purchasing managers showed that the sector recorded a sharp slowdown in activity growth in March as the Ukraine war dented demand and prices as well as supply. Accordingly, the S&P Global Construction Purchasing Managers’ Index fell to 50.9 in March from a two-year high of 54.9 in February. A score above the 50.0 level indicates growth in this sector.

On the daily chart, the general trend of the EUR/USD currency pair is still bearish, and it crossed the 1.0800 psychological support, which deepens the bears’ control over the performance, thus preparing for lower levels. On the other hand, and over the same period of time, the breach of the 1.1200 resistance will be crucial to change the general outlook initially, but so far the EUR/USD gains will remain subject to sale as long as the Russian war continues. Investors do not care about technical indicators reaching oversold levels as much as they monitor and react to developments in the war and their negative impact on the European economy.

Some investors are bullish on the Australian dollar, even though there are still concerns regarding the Reserve Bank of Australia’s Bond Purchase Program. 

The Reserve Bank of Australia announced its decision to keep the interest rates unchanged at 0.1 percent, leaving them at a historical low and in line with analysts’ expectations.

Reserve Bank Governor Philip Lowe announced that the governing board is not planning to raise cash rate levels over the next three years. He also announced the governing board’s decision to leave its Bond Purchase Program under review, highlighting its willingness to do more if it’s required.

Economic Calendar

Beyond the RBA’s announcement, this week has been somewhat slow in terms of the economic calendar. On Monday, the University of Melbourne reported that securities inflation went up by 1.4 percent (year-on-year) in November, after climbing by 1.1 percent in the previous month. In monthly terms, it went up by 0.3 percent, after shrinking by 0.1 percent in October.

The Australian Industry Group reported that the Australian manufacturing sector expanded at a slower pace in November, as the manufacturing index stood at 52.1 after being at 56.3 in the previous month. The Commonwealth Bank Manufacturing PMI, released by both the Commonwealth Bank of Australia and Markit Economics, signaled an expansion of the banking sector at 55.8 in November, though lower than expectations of 56.1.

The RBA reported that private sector credit went up by 1.8 percent in October (year-on-year), after gaining 2.4 percent in the previous month. In monthly terms, the figure remained unchanged.

On Tuesday, the Australian Bureau of Statistics reported that building permits rose by 3.8 percent in October (month-on-month) after an increase of 16.2 percent in the previous month and higher than predictions of a 3 percent contraction. In yearly terms, building permits went up by 14.3 percent, after climbing by 8.8 percent in the previous month.

Australian Dollar Languishes

So far this week, the Australian currency has had a poor performance, losing by 0.49 percent against the US dollar and breaking a four-week gaining streak. November ended up being a good month for the Aussie, in which it gained 4.54 percent against the greenback and recovered from a two-month losing streak.

The late volatility of the Aussie can be linked to the most recent news from China. The Asian country reported that its manufacturing sector expanded in November, as the Manufacturing PMI went up to 52.1 and above expectations of 51.5. Similarly, the services sector expanded, with the non-manufacturing PMI standing at 56.4, also higher than expected.

This ended up being good news for the Aussie, which opened the week in positive territory, though posting mild gains. Nevertheless, the Aussie’s early advances were undermined by the US government’s decision to add two Chinese firms to its defense blacklist, further affecting the already complicated trade relationship.

Some investors are bullish on the Australian dollar, even though there are still concerns regarding the Reserve Bank of Australia’s Bond Purchase Program. An example of this is Morgan Stanley’s expectation that the upcoming global economic recovery will end up benefiting risky currencies like the AUD.

“Combinations of strong growth, ample global liquidity, and a solid fundamental outlook for risk assets suggest that risk-correlated currencies should continue to see tailwinds,” reported an analyst at Morgan Stanley.

Nevertheless, this possible trend could be undermined by the Reserve Bank of Australia, as the excessive appreciation of the currency could end up being prejudicial for the Australian economy.

Economy Currently on Path Towards Recovery

According to the most recent data, the Australian economy has been struggling with the consequences of the coronavirus pandemic. The latest gross domestic product figures, released at the beginning of September, showed that the economy contracted more than expected, shrinking by 7 percent (year-on-year) after decreasing by 0.3 percent in the second quarter. In yearly terms, the figures followed the same trend, falling more than expected at -6.3 percent, after climbing by 1.6 percent in the first quarter.

All eyes are now on the upcoming national accounts report, which is set to be released by the Australian Bureau of Statistics on Wednesday. The surveyed analysts expect a 2.6 percent expansion (quarter-on-quarter), as well as a yearly 4.4 percent contraction.

Inflation is currently under control, as the latest Consumer Price Index figure stood at 0.7 percent (year-to-year), in line with polled analysts’ expectations and higher than the previously reported -0.3 percent. Despite being congruent with analysts’ forecasts, the figure is still way behind the Reserve Bank of Australia’s target, which is currently a 2-3 percent range.

On the other hand, the latest unemployment rate was better than expected at 7.0 percent in October, though an increase from the previous month’s 6.9 percent.

In its latest release, the Reserve Bank of Australia reported that data “have generally been better than expected” and that Australia is currently on the path towards an “uneven and drawn-out” economic recovery. This recovery is also heavily dependent on policy support which, given the latest inflation and unemployment data, will be needed for some time.

Upcoming Events

• Tomorrow, the RBA’s governor Phillip Lowe will be giving a speech at 00:00 GMT.

• Also tomorrow, the Australian Bureau of Statistics will release the gross domestic product figures for the third quarter.

• On Thursday, the Australian Bureau of Statistics will report October’s trade balance, followed by exports and imports of goods and services figures.

• Retail sales figures will be released by the Australian Bureau of Statistics on Thursday.