FX Weekly Update – March 20th, 2023
Posted Under: Weekly updates
The dollar moved lower following last week’s volatile session. Inflation remains in a downward trend, but employment remains solid. The SVB/Signature bank collapse has kept the equity markets volatile and the dollar on edge. This coming week is the FOMC meeting (March 22), in which the market expects a 0.25% hike. Durable goods, a volatile report, is released on March 24.
Last week the ECB raised rates by 50 bps, but the euro did not gain much strength. The BoE will announce its rate decision this week on March 23. The big headline of this coming week will be China President Xi’s meeting with Russia’s Putin. Markets are intensely focused on any leaked information from this encounter.
EUR (1.0690): UBS has taken control of Credit Suisse to help stabilize the banking industry. This week the single-currency will be impacted by the central bank decisions and the bank takeover. 1.0760, the high on March 15, will be a crucial resistance area. A close above will open the door for a test of 1.1025, the high on February 2. Support is at 1.0550 and 1.0515. Several weeks ago we said that 1.1025-1.0500 would hold the euro. We maintain this view.
GBP (1.2190): The combination of the Fed on Tuesday and the BoE on Wednesday will keep the sterling on edge. The range has been well defined by 1.2450 and 1.1790. GSFX expects the GBP to test the 1.2450 early in the week. Failure to make it above 1.2450 will push the sterling back toward 1.2000.
JPY (132.55): Safe haven buying is helping the yen against most currencies, including the dollar. The daily chart may be sketching out a head and shoulders top. Trendline support at 130.25 will be the first test for this currency pair, followed by 127.20, which was the low print on January 15, ’23. A close below 127.20 will signal the top has been completed, and the target is 105.00! Resistance is at 134.00 and 135.50.
CAD (1.3695): Oil has fallen to $66/bbl! Daily ranges remain narrow. But USD/CAD still needs to be addressed. We will watch the week develop to see if the current weakness in the energy sector impacts the Canadian currency. Support holds the pair just below 1.3700, but the next critical level is 1.3400. Resistance at 1.3800 (trendline) and 1.3980. The weekly chart has developed a large triangle, a consolidation pattern. A close above 1.3980 will target 1.4500. Below 1.3200 would keep the U.S. dollar falling to 1.2700.
MXN (18.9000): Like most dollar pairs, the peso has been consolidating with little volume. The daily chart has mapped out a triangle, with 1.1920 and 1.1860 as the key levels. Above 1.1920, the dollar will push higher toward 19.7000. Below 18.6000, target 18.1000.
CNY (6.8900): Push the Fed, BoE, and the regional banking situation in the U.S. to the backburner. President Xi and Putin will meet on Tuesday. Usually, a political meet-up doesn’t impact the FX markets but expect a volatile currency pair this week. Support is at 6.6500 and 6.2800. Resistance at 7.0000 and 7.1900.