Yesterday started with the Australian Q1 inflation report for March exceeded expectations, with the headline CPI rising by 1% quarter on quarter, higher than the anticipated 0.8%. Year on year, it reached 3.6%, slightly above projections but lower than the prior figure of 4.1%. Monthly CPI came in at 3.5%, surpassing the predicted 3.4%.

The trimmed mean CPI, a core metric, also increased by 1% quarter on quarter, as expected. However, its year-on-year growth rate of 4% exceeded forecasts at 3.8%, although it was lower than the previous 4.2%. The weighted median CPI rose by 1.1% quarter over quarter, exceeding estimates of 0.9%. Year over year, it remained at 4.4%, meeting forecasts and equaling the prior level.

USD/JPY has broken through another significant level, reaching a new high not seen since 1990, as confirmed at the beginning of the US trading session. This move was supported by a statement from an LDP official indicating no active consideration of action. Meanwhile, the Canadian dollar exhibited strength despite disappointing February and March advance retail sales data, suggesting a weaker consumer outlook. This strength contributed to a 40-pip gain in the pair, reaching 1.3725.

Today’s Market Expectations

Today the economic calendar was very light in the Asian and the European sessions, with only the German GfK Consumer Climate which is expected to improve somewhat. The most important event will come from the USD, with the preliminary estimate for Q1 2024 GDP growth expected to decrease to 2.1% from 3.4% in Q4, with analyst expectations ranging from 1.9% to 2.4%. However, the Atlanta Fed’s GDPNow estimate for Q1 growth is slightly higher at 2.9%.

Despite some positive indicators, such as the expansionary territory in the services sector, as indicated by ISM statistics, there have been fluctuations. The services sector’s index fell from 53.4 in January to 52.6 in February and 51.4 in March. Similarly, the manufacturing sector saw inconsistency, with the ISM manufacturing headline dropping to 49.1 in January, falling further to 47.8 in February, but returning to expansionary territory at 50.3 in March.

Consumer spending proxies have shown mixed results, with January retail sales disappointing but improving in February. However, the Retail Control component remained unchanged. Inflation data has been on the high side of projections, influencing Fed expectations. Moody’s analysts anticipate GDP growth to be less than 2%, but this is not necessarily cause for alarm given recent unsustainable expansion. The March PCE data, scheduled for Friday, will provide a more timely update on inflation.

Forex Signals Update

Yesterday the volatility was low but again there was not much to drive markets apart from the Canadian retail sales report, which was negative, leaving the loonie weak. As a result, we didn’t open any signals, just closed two of the trading signals, both of them in profit.

No Bounce in Gold Off the 20 SMA

On Monday, gold exhibited a similar price pattern to the previous day. The precious metal faced difficulty surpassing its pivot point of $2,400, indicating prevailing market pessimism. Consequently, the price experienced a significant decline of over $100, closing below the $2,300 mark. However, later in the session, there was a reversal, with the price climbing back above the 20-day Simple Moving Average (SMA), represented by the grey line on the chart. This reversal suggests a potential shift in momentum, although market participants remain cautious amidst ongoing volatility.

XAU/USD – Daily chart

Expecting BOJ Intervention Anytime, After USD/JPY Breaches 1.55

The USD/JPY exchange rate has finally breached the 155.00 level after trading below it for two weeks, supported by strong US durable goods orders in March. This breakout indicates heightened volatility and raises the possibility of intervention by the Ministry of Finance (MOF). However, the underlying strength of the USD, driven by fundamentals, may ultimately outweigh MOF interventions in the long term.

USD/JPY – Daily Chart

Cryptocurrency Update

Bitcoin Rejected by the 50 SMA

Bitcoin’s price has experienced a recent decline, dropping below the $60,000 mark, its lowest level since early March. Currently trading around $61,200, the cryptocurrency remains close to its recent low of about $59,300, observed roughly a month ago. While there were expectations of reaching lower price targets if this level was breached, BITCOIN managed to find support in this zone and subsequently surged back above $67,000. But the 50 SMA (yellow) turned into resistance and yesterday we saw a bearish reversal after the doji candlestick.

BTC/USD – Daily chart

Ethereum Fails at the 20 SMA

ETHEREUM experienced a decline last week, closing below the $3,000 level and piercing the 100-day Simple Moving Average (SMA) on the daily chart. However, the price managed to bounce back above $3,000. Buyers made significant gains yesterday, but the upward momentum stalled around the 20-day SMA (grey) and reversed lower yesterday.

ETH/USD – Daily chart