official Market Update by Solidecn.com

[Solid ECN ✔️]

NZDUSD 

• Indices from Asia-Pacific traded mostly higher at the beginning of a new week. Nikkei and S&P/ASX 200 traded 0.1% higher, Kospi added 0.2% and Nifty 50 dropped 0.1%. Indices from China traded up to 2% higher.
• DAX futures point to a higher opening of the European cash session today.
• US index futures trade little change compared to Friday's cash closing prices.
• US and Canadian traders are off for holidays today so liquidity conditions in the afternoon may be thinner.
• US Secretary of State Blinken said that US has information suggesting that China is considering providing Russia with ammunition and lethal weapons for war in Ukraine.
• Bloomberg reports that meeting between Blinken and his Chinese counterpart Wang Yi over the weekend was rocky and far from encouraging.
• People's Bank of China left 1- and 5-year prime lending rates unchanged at 3.65 and 4.30%, respectively. Decision was in-line with expectations.
• According to Reuters report, People's Bank of China has reportedly asked domestic bank to slow issuance of loans this month.
• North Korea fired two ballistic missiles today. UN Security Council will convene at 8:00 pm GMT today to discuss the situation.
• Cryptocurrencies are trading mixed today with major coins experiencing rather small moves. Bitcoin drops 0.2%, Ethereum trades 0.3% higher and Dogecoin adds 0.4%.
• Energy commodities trade mixed - oil gains 0.8-0.9% while natural gas pulls back around 2%.
• Precious metals benefit from USD weakening at the beginning of a new week - gold and silver gain around 0.1% each while platinum adds almost 0.5%.
• AUD and JPY are the best performing major currencies while CHF, EUR and USD lag the most.

NZDUSD bounced off the 0.62 support zone last week but failed to launch a major recovery move. There is a lot of uncertainty around NZD as RBNZ is set to announce rate decision this week (Wednesday, 1:00 am GMT) and some see a chance for rate hike cycle pause amid recent floods and cyclone hit. 

[Solid ECN ✔️]

EURUSD - The price is in a correction and a fall is possible.

On the daily chart, the downward wave of the higher level А ended, and the development of the upward wave B started, within which the entry first wave of the lower level 1 of (А) of B formed. Now, a downward correction is developing as the second wave 2 of (А) of B, within which the wave a of 2 has formed, and the wave b of 2 is developing. 

If the assumption is correct, the EURUSD pair will fall to the area of 1.0325 – 1.0163. In this scenario, critical stop loss level is 1.1040.

 

[Solid ECN ✔️]

GBPUSD - The price is in a correction and a fall is possible.

On the daily chart, the upward first wave of the higher level (1) formed, within which the wave 5 of (1) ended. Now, a downward correction is developing as the second wave (2), within which the wave of the lower level A of (2) has formed. 

If the assumption is correct, after the end of the wave B of (2), the GBPUSD pair will fall to the area of 1.1400 – 1.1155. In this scenario, critical stop loss level is 1.2437.

 

[Solid ECN ✔️]

NZDJPY

NZDJPY may be entering a volatile week. The Reserve Bank of New Zealand is scheduled to announce the next monetary policy decision on Wednesday at 1:00 am GMT. There is a lot of uncertainty around this announcement. Money markets price in around 40 basis points of tightening and majority of economists polled by Bloomberg see 50 bp rate hike as the base case scenario. However, calls for a lower hike or even a pause have been mounting recently as New Zealand is facing floods and damage from a cyclone. A decision to pause rate hikes to wait and see what damage to the economy weather has done, would be surprising and would likely trigger a pullback on NZD market. 

When it comes to the JPY-side, an event to watch this week is the confirmation hearing of Kazuo Ueda in the lower house of the Japanese parliament scheduled for Friday, February 24. Ueda has been nominated to succeed Kuroda as Bank of Japan head and this week's confirmation hearing will be his first appearance since nomination. Any suggestions that the Bank of Japan may exit or roll down highly expansionary policy under his watch could trigger moves on the JPY market.

Taking a look at NZDJPY chart at D1 interval, we can see that the pair has been largely trading sideways as of late. The pair failed to break above the midpoint of the trading range in the 84.50 zone. Apart from previous price reactions, this zone is also marked with a 200-session moving average. Moves on the pair has been recently confined to the inner 82.50-84.50 range and high-volatility events scheduled for this week, especially RBNZ decision, could lead to a breakout, direction of which may determine the direction of the next big move.
 

[Solid ECN ✔️]

AUDUSD Approaches Major Resistance

The Australian dollar is the best performing G10 currency today as rising copper prices seem to support the resources-linked currencies amid subdued USD demand. AUDUSD bounced off the lowest level since January 6 touched on Friday and returned above 0.6900 level, however hawkish FED and simmering tensions between US and China may limit the upside movement. Currently the pair is approaching local resistance at 0.6925, which is marked with previous price reactions, 50% Fibonacci retracement of the last upward wave and 50 SMA (green line). Break higher would pave a way towards the next resistance at 0.6980, however if sellers manage to regain control and halt advances, then another downward impulse towards  support at 0.6870 may be launched. Aussie may experience increased volatility in the evening and the coming Asian session, during the releases of flash PMI for February and RBA minutes.

One can observe a significant weakness of the US dollar, despite heightened geopolitical tensions.

 

[Solid ECN ✔️]

EURUSD

The bullish momentum of recent months eased in February. The last sessions have been marked by some indecision in the price that ended up consolidating.

On the dollar index chart, we can see that there may be room for further declines in the dollar. Friday's daily candle rejected the 200-period EMA and if the price moves back below the 200- and 50-period EMAs, then the EUR could gain against US Dollar weakness.

AUD leads the gains this trading session.

 

[Solid ECN ✔️]

Silver

Major European indices finished today's session mostly lower, with Dax closing slightly below the flatline as traders brace themselves for the release of critical PMI data for the eurozone and the US due tomorrow before the publication of FOMC minutes later on Wednesday. ECB's Rehn said rates should be raised after March and the terminal rate could be reached this summer.

Silver bounced off the key support zone around $21.35-21.45 on Friday, which is marked with the lower limit of 1: 1 structure and 50% Fibonacci retracement of the last bullish wave. Moreover, a hammer formation has appeared on the D1 interval, which may be a sign that recent downward correction may have come to an end.
 

[Solid ECN ✔️]

AUDUSD

• Indices from Asia-Pacific traded mixed today. Nikkei and S&P/ASX 200 dropped 0.2% each, Kospi and Nifty 50 gained 0.1% while indices from China traded mostly lower.
• DAX futures point to a more or less flat opening of the European cash session today.
• RBA minutes showed that Australian central bankers see inflation as more broad and persistent than expected. The document also strongly hinted that rate hike pause at meeting in February was not an option.
• New Zealand Treasury said in a statement that reconstruction after a cyclone hit will be a boost to the New Zealand economy. Treasury noted, however, that boost to the demand will increase inflationary pressures in the economy and may cause RBNZ to hold rates at higher levels for longer.
• BoJ Governor Kuroda expects wage growth in the Japanese economy to accelerate as labor market gets tighter.
• Australian manufacturing PMI index ticked higher in February, from 50.0 to 50.1. Services index moved from 48.6 to 49.2.
• Japanese manufacturing PMI dropped from 48.9 to 47.4 in February (exp. 49.2).
• Cryptocurrencies are trading mixed with major coins posting decent gains. Bitcoin trades 1% higher, Ethereum gains 0.6% and Dogecoin moves 0.4% higher.
• Energy commodities trade mixed - Brent drops 0.6%, WTI trades 0.9% lower and US natural gas prices increased 0.3%.
• Precious metals pull back as USD strengthens - gold trades 0.2% lower, silver drops 0.5% and platinum declines 0.7%.
• USD and GBP are the best performing major currencies while NZD and AUD lag the most.

In spite of a rather hawkish RBA minutes release, Australian dollar is pulling back today. AUDUSD is one of the worst performing major FX pairs as USD is on the rise. AUDUSD made an attempt at breaking back above a price zone marked with 50-session moving average (green line) and 50% retracement of the downward move launched in April 2022 but failed and a pullback was launched.
 

[Solid ECN ✔️]

AUDNZD

• Wall Street dropped hard during the first session after a long weekend. S&P 500 dropped 2.00%, Dow Jones moved 2.06% lower, Nasdaq plunged 2.50% and Russell 2000 slumped 2.70%.
• While US stocks launched the day in bad moods, declines accelerated after solid US data (services PMI coming back above 50) boosted USD and Treasury yields, with 10-year rate climbing above 3.9%.
• Indices from Asia-Pacific traded lower as well but scale of the drop was smaller. Nikkei dropped 1.3%, S&P/ASX 200 traded 0.3% lower, Kospi slumped 1.7% and Nifty 50 declined 1%. Indices from China traded 0.2-0.8% lower.
• DAX futures point to a flat opening of the European cash session today.
• NZD gained after RBNZ delivered a 50 bp rate hike, putting cash rate at 4.75% - the highest level since late-2008. Majority of economists expected such a move but there were some calls for 25 bp hike or even pause following a recent cyclone hit.
• RBNZ signaled need for more rate hikes and confirmed its peak rate forecast at 5.50%.
• AUD weakened following disappointing data for Q4 2022. Wage index increased by 0.8% QoQ (exp. 1.0% QoQ) while construction work completed dropped by 0.4% QoQ (exp. +1.5% QoQ).
• Cryptocurrencies trade mostly lower - Bitcoin drops 1.6% while Ethereum and Dogecoin decline 1% each. Litecoin bucks the trend and gains 1%.
• Energy commodities are pulling back amid overall increase in risk aversion - Brent drops 0.3%, WTI trades 0.4% lower and US natural gas prices plunged 2.5%.
• Gold and silver trade little change while platinum and palladium jump around 0.8% each.
• NZD and JPY are the best performing major currencies while AUD, CAD and USD lag the most.

AUDNZD is plunging today amid a mix of NZD-positive and AUD-negative news. The pair pulled back from the resistance zone marked with 61.8% retracement and plunged back below recently-broken 200-session moving average (purple line). AUDNZD is attempting to make a break below the zone marked with 50% retracement, which would pave the way for a test of 1.0870 area, marked with 38.2% retracement.
 

[Solid ECN ✔️]

NZDUSD

New Zealand dollar is the top performing G10 currency today. Strength of NZD is driven by the rate hike announced by the Reserve Bank of New Zealand earlier today. RBNZ delivered a 50 basis point rate hike. While the decision was in-line with expectations of most economists, there were some concerns that RBNZ may decide to slow the pace of tightening following a recent hit from cyclone Gabrielle. 

RBNZ Governor Orr said that there was barely any consideration for a 25 basis point rate hike as it is too early to determine impact of cyclone hit and that discussion was centered around a 50 bp rate move.  RBNZ Chief Economist said that cyclone hit boosts demand for labour but it is possible that the build-back programme will exert upward pressure on inflation. Minutes showed that discussion was whether to hike rates by 50 or by 75 basis points. Ultimately, the official cash rate was increased by 50 bp to 4.75% - the highest level since late-2022. Moreover, the peak rate forecast was confirmed at 5.5% and it is expected to be reached Q1 2024. Interestingly, the cash rate forecast for June 2023 was cut from 5.4 to around 5.15%. While RBNZ sees need for more tightening ahead, it should also be said that Governor Orr noted that the Bank is still expecting recession in New Zealand in a 9-12 months period.

Taking a look at NZDUSD chart at D1 interval, we can see that the pair has recently pulled back and tested the lower limit of a trading range in the 0.6200 area. A 50 bp RBNZ rate hike today helped the pair bounce off the 0.62 handle and while initially it looked like a recovery move may be launched, gain started to be erased as USD regained ground.
 

[Solid ECN ✔️]

BREAKING: German IFO Data Meets Estimates, DE30 Muted

German IFO Institute published the latest survey data for February today at 9:00 am GMT. Data came in mostly in-line with market expectations with headline Business Climate index reaching 91.1 (exp. 91.2). Current conditions subindex missed estimates by quite a big margin while Expectations subindex turned out to be slightly better than expected. However, as scale of deviations from median estimates was small, there were no major reactions on the market. EURUSD ticked lower while DE30 was flat following the release.

IFO Business Climate index for February: 91.1 vs 91.2 expected (90.2 previously)
Expectations: 88.5 vs 88.4 expected (86.4 previously)
Current Conditions: 93.9 vs 95.0 expected (94.1 previously)

DE30 barely saw any reaction to in-line IFO data. Index continues to trade near 15,300 pts price zone, that has limited recent downward moves.
 

[Solid ECN ✔️]

BREAKING: German IFO Data Meets Estimates, DE30 Muted

German IFO Institute published the latest survey data for February today at 9:00 am GMT. Data came in mostly in-line with market expectations with headline Business Climate index reaching 91.1 (exp. 91.2). Current conditions subindex missed estimates by quite a big margin while Expectations subindex turned out to be slightly better than expected. However, as scale of deviations from median estimates was small, there were no major reactions on the market. EURUSD ticked lower while DE30 was flat following the release.

• IFO Business Climate index for February: 91.1 vs 91.2 expected (90.2 previously)
• Expectations: 88.5 vs 88.4 expected (86.4 previously)
• Current Conditions: 93.9 vs 95.0 expected (94.1 previously)

DE30 barely saw any reaction to in-line IFO data. Index continues to trade near 15,300 pts price zone, that has limited recent downward moves.
 

[Solid ECN ✔️]

AUDUSD - A fall is possible.

If the assumption is correct, the AUDUSD pair will fall to the area of 0.6645 – 0.6524. In this scenario, critical stop loss level is 0.7008.

 

[Solid ECN ✔️]

NZDUSD - A fall is possible.

If the assumption is correct, the NZDUSD pair will fall to the area of 0.6008–0.5890. In this scenario, critical stop loss level is 0.6388.

 

[Solid ECN ✔️]

AUDUSD

The Australian dollar is the worst performing G10 currency today, dragged down by disappointing macro data. Australia's seasonally adjusted wage price index rose by 3.3% YoY in Q4, after an upwardly revised 3.2% rise in Q3 and below analysts’ estimates of 3.5%. This was the highest reading since Q4 of 2012, amid further improvement in business conditions in the wake of the COVID pandemic. Wages in the private sector quickened to 3.6%, the highest since Q3 of 2012; while those in the public one accelerated to 2.5%, the highest since Q2 of 2019.

Meanwhile construction work completed dropped by 0.4% QoQ, well below market estimates of 1.5% rise, while Australia’s Westpac Leading Index marked -0.1% figure in January, the second time in a row. Also stronger-than-expected US economic data and hawkish remarks from policymakers also bolstered expectations the Fed would keep pushing interest rates higher to bring down inflation, weighing on the Aussie further. Today market attention will focus on the release of the latest FOMC monetary policy meeting minutes, due later during the US session,  which may determine the short-term trajectory for the pair.

From technical point of view, AUDUSD approaches a major support zone between 0.6810 - 0.6790, which is marked with previous price reactions and 78.6% Fibonacci retracement of the upward wave launched at the beginning of the year. Should break lower occur, sell-off may deepen towards the lower limit of the 1:1 structure at 0.6725 or even January lows at 0.6688. Nevertheless as long as price sits above the aforementioned support zone, another upward impulse may be launched towards local resistance at 0.6870.
 

[Solid ECN ✔️]

Shell stock %5 weaker in 5 days but still well above SMA 200

Shell (SHEL.UK) is doing well even though the winter supply problems and energy crisis have not materialized. Natural gas is seeing unprecedented sell-offs, and oil prices, despite the fuel embargo from Russia, have fallen from wartime highs on a wave of fears of a global recession.

In 2022 Shell's profit rose more than 100% y/y to around $40 billion. In Q4 2022, the company reported record quarterly financial results, and full-year profit significantly beat the previous record set in 2008. Shell paid out $6.3 billion in dividends in Q4 and plans another $4 billion share buyback. 

UK 'windfall tax'

In the UK, controversy over 'Big Oil' profits is growing in the face of a planned 40% increase in energy prices in April. Shell is in a complicated position because it is based in the UK, but produces a relatively small amount of oil and gas in British waters. It paid $134 million (£110 million) in taxes on its UK operations in 2022 (about 1% of the company's $13 billion in taxes in 2022) but expects up to a 350% increase in that amount in 2023. Companies operating in the UK already pay 40% tax on oil and gas profits. However, they can reduce it by deducting the costs of shutting down oil rigs, advances on future investments and losses from earlier years. The UK estimates that between 2022 and 2028, the higher 40% windfall tax will bring about £40 billion to the budget, collected from all companies operating in British waters. However, Shell will be probably able to deduct more than 90% of the cost of new exploration and production, reducing the final tax. 

Circumventing sanctions?

In a wave of 'Guardian' reports, controversy has grown around Shell, which is accused of circumventing sanctions by exploiting a 'loophole' in the system, i.e. importing Russian oil and its derivatives to Europe via Turkey, which has become the Kremlin's import hub. An analysis of data from Kpler by the Global Witness group showed that Shell has imported more than 600,000 barrels of refined products from Turkish refineries into the Netherlands since December 5. It is impossible to prove whether the products definitely came from Russia, but Turkish refineries import huge quantities of cheap oil from Russia, which are then refined or blended with crude from other countries. In 2022 Turkey imported 143 million barrels of oil from Russia, a 50% year-on-year increase. Shell announced its intention to withdraw from trade with Russia, last March, following the outbreak of war in Ukraine. A Shell spokesman denied media reports of sanctions, the company accounted for 11% of LNG shipments to the EU, easing supply pressures caused by sanctions on Russia. 

RNG - BioLNG

Shell has completed the acquisition of Europe's largest producer of renewable natural gas (RNG), Nature Energy. According to the company, the acquisition is expected to generate double-digit profits, thanks to its broad customer portfolio. Nature Energy has 14 operating plants and produced about 6.5 million MMBtu of RNG in 2022. More than a third of the company's 30 new projects are in mid- to late-stage development in Denmark, the Netherlands and France, and could deliver up to 9.2 million MMBtu per year by 2030.  RNG is a biomethane that works similarly to conventional gas and can be used in existing infrastructure (also as a BioLNG), while not releasing harmful methane into the atmosphere, allowing it to be processed. 

Shell (SHEL.UK) shares, D1 interval. The stock, despite the correction of the last few days, has been doing very well recently despite the decline in oil prices (yellow chart). The main support for the stock is the SMA200 (red line), which has been limiting the space for declines for 2 years. Lower levels worth noting are the 23.6 and 38.2 Fibonacci retracement of the upward wave started in 2020.
 

[Solid ECN ✔️]

US500 Fell Slightly after Minutes

Markets unimpressed by latest FOMC minutes

 

Minutes from the latest FOMC meeting were hawkish but investors were expecting this narrative. The document did not present many new information regarding further steps that the FED intends to take regarding fiscal policy. Almost all FOMC participants agreed that it was appropriate to raise the target range for the federal funds rate by 25bps at the first monetary policy meeting of 2023, although a few officials favored raising it by 50bps. Minutes release taking into account hawkish tone led to small pullback on equity markets and appreciation of USD dollar.

 

Below you can find key takeaways from the document:

• A few participants favored raising rates by 50 basis points
• Several participants advocated raising interest rates by 50 basis points.
• Some participants predicted an increase in the likelihood of a recession in 2023.
• Participants stated that the continued tight job market would contribute upward pressure to inflation.
• Participants said that inflation in last three months has eased, but they need to see more progress.
• All participants agreed more rate hikes needed to achieve federal open market committee's job, inflation objectives.
• Upside risks for inflation, including China's economic reopening and Russia's war in Ukraine.

[

 

US500 pulled back slightly after today's Minutes, however continues to trade above major support at 4000 pts.

[Solid ECN ✔️]

USDCAD - Growth is possible.

If the assumption is correct, the USDCAD pair will grow to the area of 1.3691–1.3850. In this scenario, critical stop loss level is 1.3440.

 

[Solid ECN ✔️]

USDCHF - Growth is possible.

If the assumption is correct, the USDCHF pair will grow to the area of 0.9455 – 0.9600. In this scenario, critical stop loss level is 0.9213.

 

[Solid ECN ✔️]

US100

• US indices finished yesterday's trading mixed. S&P 500 dropped 0.16%, Dow Jones moved 0.26% lower, Nasdaq gained 0.13% and Russell 2000 added 0.34%.
• FOMC minutes triggered a hawkish reaction on the markets, with USD gaining somewhat and indices slashing gains. Document noted that a few FOMC members opted for a 50 bp rate hike and that all members agreed more tightening is needed.
• Indices from Asia-Pacific traded mixed today. S&P/ASX 200 dropped 0.4%, Kospi moved 0.8% higher while Nifty 50 traded flat. Indices from China traded 0.2-0.4% lower.
• DAX futures point to a slightly higher opening of the European cash session today.
• Fed Williams said that demand is still exceeding supply and that monetary policy must ensure that balance is restored. Williams said that 2% inflation is foundational target.
• RBNZ Governor Orr said that cyclone-related price pressures may require higher rates to be kept for longer. Orr also said that a large inflationary shock would be needed for RBNZ to return to 75 bp rate hikes.
• Australian capital expenditures increased 2.2% QoQ in Q4 2022 (exp. +1.0% QoQ).
• API report pointed to a 9.89 million barrel build in US oil inventories (exp. +1.1 mb).
• Nvidia rallied almost 9% in the after-hours trading, following the release of earnings report for November 2022 - January 2023 period. Revenue reached $6.05 billion (exp. $6.00 billion) while adjusted EPS came in at $0.88 (exp. $0.81). Company expects revenue to reach $6.5 billion in February - April period, above Wall Street estimate of $6.33 billion.
• Cryptocurrencies are trading mostly higher - Bitcoin gains 1.1%, Ethereum adds 1.8% and Tezos jumps over 5%.
• Energy commodities trade mixed - Brent and WTI trades 0.3-0.4% higher while US natural gas prices drop 0.2%.
• Precious metals catch a bid amid USD weakening - gold gains 0.4%, silver adds 0.7% and platinum jumps 1%.
• NZD and AUD are the best performing major currencies while USD and JPY lag the most.

Nasdaq-100 (US100) trades within a short-term downward channel. Index took a hit yesterday following release of FOMC minutes but managed to find support at 200-period moving average (purple line, H4 interval) and climbed back above the price zone marked with 38.2% retracement of the upward move launched in late-December 2022.