In the absence of significant scheduled risk events this week, sterling could fall back in line with its historical performance for the month of April, shown in the heatmap below. Using GBP/USD data from the beginning of 2010 until now, April emerges as cables strongest month followed immediately by May, the worst month on average. On average, since 2010 the pound appreciated by 1.39% for April while May saw a depreciation vs the dollar of 1.80%.
Should history repeat itself, cable is in a prime position for an extended move higher. GBP/USD has sold-off since June 2021 and currently trades around the lower bound of the long-term descending channel , meaning there is a lot of room to the upside should we start to see significant bullish momentum.
While the current chart still appears bearish, sterling appears to have bounced off the 1.3080 level , a prior level of support. Short term sterling momentum may see prices approach 1.3190 as the nearest level of resistance, followed by the zone of resistance around 1.3265.
Something to keep in mind is the relative stages of the rate hiking cycle between the Fed and the Bank of England (BoE). The dollar has shown resilience and is likely to remain at elevated levels when considering the increasing probability of 50 basis point hikes in May and June. In contrast, the BoE has already hiked in all of their last three meetings (none of them being as large as 50 basis points) and may become reluctant to hike at the same pace in light of the negative economic effects of the war in Ukraine - mainly stubbornly high energy prices.
NZD/USD trades to a fresh yearly high (0.6998) as it retraces the decline from the start of the week, and the exchange rate may continue to appreciate over the remainder of the week as it climbs above the 200-Day SMA (0.6908) for the first time since November.
NZDUSD initiates a series of higher highs and lows after failing to test the 0.6870 zone, with the exchange rate pushing back around 0.6940 to 0.6990 as it trades to a fresh yearly high (0.6998).
Need a close above the overlap around 0.6940 to 0.6990 to bring the 0.7070 to 0.7110 area on the radar, with a break above the October high (0.7219) opening up the 0.7260 region.
Failure to hold above the overlap around 0.6940 to 0.6990 may push NZD/USD back below the 200-Day SMA (0.6908), with a move below the 0.6870 zone, with the next area of interest coming in around 0.6770 to 0.6810 which largely lines up with channel support.
Brent crude oil trades higher today off the back of declining oil stock figures, the upcoming OPEC+ meeting and the overall boost to the energy sector resulting from Putin’s announcement to “unfriendly nations” that future gas purchases are to be paid for in Russian Rubles.
Yesterday, the Energy Information Agency (EIA) published its latest weekly petroleum status report, which covers data up until the 18th of March. Most notably, crude oil stocks witnessed a massive decline of 2.508 million barrels when stocks were forecast to see an increase of 0.114 million. US crude oil inventories currently stands at 413.4 million barrels and is 13% below the 5-year average for this time of the year.
Oil traders now turn their attention to the OPEC+ meeting on March the 31st where the group will discuss their output target for May. It is largely expected that the existing agreement to increase oil output by 400,000 barrels per day will go ahead as planned as this has been the case in previous meetings.
Recent meetings have been uncharacteristically brief in duration but this month’s agenda may require greater engagement amid large scale sanctions of Russian oil imports. OPEC+ has previously stated that the large price spikes should not be attributed to OPEC’s policies but is rather the result of fears of supply shortages.
Brent Crude oil prices pulled back extensively after reaching the recent high of around $139. A bounce off the 50 simple moving average along with the appearance of a morning star candle stick pattern lead the way for a bullish continuation. A retest of $139 remains constructive above $113. Failure to trade above $113, opens the door to 97.20 as the next level of support.
AUD/USD trades to a fresh yearly high (0.7528) as it extends the series of higher highs and lows from the start of the week, and the rally may push the Relative Strength Index (RSI) into overbought territory for the first time in 2022 as it appears to be on track to test the October high (0.7556).
AUD/USD appreciates amid the ongoing improvement in investor confidence, with the recent strength in commodity bloc currencies largely coinciding with the rise in global equity prices, and a further improvement in risk appetite may continue to push the exchange rate to fresh yearly highs even as a growing number of Federal Reserve officials show a greater willingness to adjust the exit strategy.
AUD/USD trades above the 200-Day SMA (0.7297) for the first time since June 2021 as it clears the yearly opening range in March, with the break/close above the 0.7440 (23.6% expansion) region pushing the exchange rate towards the 0.7560 , which lines up with the October high (0.7556).
The recent advance AUD/USD may push the Relative Strength Index (RSI) above 70 for the first time in 2022 as the exchange rate extends the series of higher highs and lows from earlier this week, with a break/close above the 0.7560 area bringing the 0.7640 region on the radar.
However, failure to clear the October high (0.7556) may push AUD/USD back towards the 0.7440 region, with a break/close below 0.7370 bringing the 0.7260 area back on the radar.
U.S. equities have put in a massive rally after the Fed hiked rates last week. And this was a ‘famine to feast’ kind of mood as the Nasdaq 100 had hit a fresh 10-month low just last Tuesday. Sellers even seemed aggressive around the initial statement of the FOMC hiking rates. But when the press conference started 30 minutes later, stocks began to bounce and that bounce hasn’t really quieted until last night. That rally accumulated as much as 13.56% in the Nasdaq 100 in one week. There’s a large zone of support sitting underneath both the Nasdaq 100 and S&P 500 price action that, if bulls respond to, the door very much remains open for topside continuation. This has been the most extreme of the three U.S. indices so I wanted to touch on this first. The rally pushed 13.5% at it’s peak and as of right now, prices are around 12.4% above the Tuesday low.
The Nasdaq 100 set a fresh monthly high along the way while breaking through a number of key resistance levels, many of which now become potential support.
The big zone of interest in the Nasdaq 100 spans between two levels at 14,500 and 14,375. This zone came into play last October as support and it quickly came back into the picture this year as resistance in late-January, support in early-February and then resistance again in mid-March.
But, this zone was only able to stall the advance ahead of last week’s close, and bulls have run right through that zone to continue the trend this week. This becomes a massive spot of importance for the rally as it will help us to see just how aggressive buyers remain to be. And from that, we can begin to gauge just how aggressive we should be in response.
A hold in this zone today keeps the door open for bullish continuation scenarios. If the zone doesn’t hold, there’s another possible spot of support around 14,183. For near-term resistance, the 14,669 level remains important, after which 14,816 and 14,993 come into view.