Market Update – 24th March

This week all eyes were on the Federal Reserve economic projections and interest rate decision. The FED indicated they would maintain low interest rates until at least 2023. The fresh forecasts showed the FOMC expects GDP to contract by 3.7% which was softer than the 6.5% forecast, and unemployment to reach 7.6% at years end compared to the 9.3% forecast made previously. The upgrade in economic projections provided a surge in the USD throughout early Thursdays trading session.

Gold dropped over 400 points from the top of the pennant formation after teasing a potential breakout to the upside. Gold price action is becoming compressed between a pennant formation. The recent recovery in the US economic data has dampened the bull run in precious metals. Traders will be waiting for a breakout of the pennant formation for an indication on the next big move.

Overnight the USD erased gains made against all major currencies as initial jobless claims came in above forecast at 860k. The EURUSD broke down from an inclining channel that had been intact since May 2020. The negative jobless claims from the US resulted in a reversal back into the bullish channel formation.

In other news the NZD has been in high demand overnight leading into next weeks interest rate decision. Previously, analysts have forecast the RBNZ to take interest rates into the negative at some point in the near future. However, recent comments from New Zealand’s Finance Minister suggests rates may remain on hold until March 2021. Therefore, traders are anticipating next weeks interest rate decision to remain on hold. The tone from the RBNZ has turned less dovish as economic conditions have improved since the covid-19 pandemic providing strength in the NZD.

The AUDNZD has broken an inclining trendline support and is currently testing a support zone at 1.0810.

The ongoing BREXIT sage continues. The GBP has been one of the worst performers throughout September as negative news regarding Brexit negotiations have come to light. The UK Government is set to debate the latest Bill proposed by Boris Johnson. The GBPUSD is down roughly 500 pips against the USD as the UK revealed their Internal Market Bill. The Bill would see the UK break international law by overriding parts of the EU withdrawal agreement. If the Bill is passed a no-deal Brexit looks ever more likely leading into the October deadline. Overnight the BoE (Bank of England) shocked the markets suggesting the Committee had discussed its policy toolkit, and the effectiveness of negative policy rates. The tone coming from the BoE has changed from their previous statement. The BoE has opened the doors for negative rates depending on economic conditions. The GBPUSD bounced on a crucial trendline as sellers took a breather. The weakness in the USD provided support on the pair. As the October Brexit deadline approaches expect volatility across all GBP pairs.

Jamie DuttaAnalyst / Trader

"With extensive experience as a full time trader and financial market commentator, I have worked as a trader in top tier investment banks and trading houses, including Morgan Stanley and GAIN Capital trading Forex, Index derivatives. and Bonds. I combine technical analysis with a deep fundamental knowledge to identify trade set-ups. My real life experience allows me to break down the complexities of financial jargon and trading. This means everyone can better understand the compelling forces of greed and fear which are realised every day in countless ways across markets."

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