Wave Analysis by InstaForex

Technical Analysis of Intraday Price Movement of Nasdaq 100 Index, Wednesday April 12, 2023



With the appearance of deviation between Nasdaq 100 index price movement with Stochastic Oscillator indicator on the 4 hour chart then it is high likely for #NDX will depreciated for some time in the future up to the area level of 12705,8-12617,7 however during the decline not exceed below the level of 12517,9 then #NDX still has the potential to back to rallying upwards up to the level of 13238,0.

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Forecast for GBP/USD on April 13, 2023

As a result of yesterday, the pound rose by 60 points, trying to move faster and further away from the 1.2422 level. The nearest target will be 1.2598 – the peak of June 7, 2022. At the same time, there is a high probability of forming a reversal divergence with the Marlin oscillator.



On the four-hour chart, the price is climbing above the balance and MACD indicator lines, and the Marlin oscillator is growing in the "green zone". We have an uptrend.



The primary signal of a reversal is when the price falls below the MACD indicator line (1.2460), and the signal will be confirmed once the price settles below the 1.2422 level. The pound's final decision to take a course for a medium-term decline is when it moves below the MACD line, in the area of the 1.2320 mark.

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Forecast for EUR/USD on April 14, 2023

Yesterday's rise in the dollar index by 0.57% and the euro's rise by 0.49% were largely based on expectations for today's quarterly reports from the biggest US banks. As expected, JPMorgan Chase, Wells Fargo, Citigroup, and PNC Financial Services will show good profits, which is important for demonstrating the resilience of the banking sector. Meanwhile, there may be some difficulties with the world's largest asset management company, BlackRock, which is also set to report today, since its in a haste to get rid of bad Credit Suisse assets.



Overall, investors have an appetite for risk, and the euro may reach the target level of 1.1185 – which is the peak of March 31, 2022, and the low of November 24, 2021. Yesterday, the price overcame the first resistance at 1.1033, and the Marlin oscillator slightly turned downward. EUR may take a quick break and consolidate at this level as it braces to rise further.

On the four-hour chart, the price is vigorously growing above the rising indicator lines, the Marlin oscillator has slowed down and is ready to edge down, discharging before further growth.



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EURUSD, Day | Continue to 1st Support?



The EUR/USD chart currently displays an overall bearish momentum, indicating a potential continuation of bearish movements towards the 1st support level. The 1st support level at 1.0806 is an overlap support that has previously demonstrated its strength. However, should the price break through this level, it could potentially drop further towards the 2nd support at 1.0516, which is a multi-swing low support.

Resistance levels for the EUR/USD can be found at 1.1184 and 1.1035. The 1st resistance level is an overlap resistance that is crucial in monitoring for any potential bearish movements. Meanwhile, the intermediate resistance at 1.1035 is a multi-swing high resistance that could potentially trigger a stronger bearish trend towards the 1st support level if the price breaks through it. It's important to note that there is also an intermediate support level at 1.0974, which is a pullback support. Should the price bounce from this level, it could potentially rise towards the intermediate resistance at 1.1035

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Forecast for GBP/USD on April 18, 2023

Yesterday, the British pound showed strong volatility, closing the day with a loss of 38 points. On the daily chart, the signal line of the Marlin oscillator has approached the limit of the downtrend, so to break through it, the price should settle below the MACD indicator line (1.2322). Consolidating below support will open the next target at 1.2155 - the peak of November 2022.



On the four-hour chart, we can see that yesterday's trading range was formed below the target level of 1.2422. The balance indicator line in red also helped the level.



This is a sign of strong resistance, so in the near future, I expect the price to cross the support level of 1.2322. The Marlin oscillator is also set to fall further.

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Forecast for USD/JPY on April 19, 2023

Yesterday, the US dollar lost 35 points against the Japanese yen, coinciding with the dollar weakening throughout the market and the price's struggle with the technical resistance of the strong price channel line (134.30, daily).



The signal line of the Marlin oscillator is pointing upward in the area of the uptrend. The bullish target is 135.40 - the low on March 6th. Consolidating above this level will allow the price to rise to the next embedded price channel line around 138.34.



On the four-hour chart, the Marlin oscillator resumed growth after the signal line rebounded from the limit of the area of the downtrend (arrow). The price is rising above the balance and MACD lines, with the main trend being upward. To guarantee it, the price needs to consolidate above 134.30.

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EUR/USD. Trapped in a wide-ranging flat: traders are stuck within the range of the 9th figure

The euro-dollar pair is trading in a broad price range, but at the same time, it is effectively stagnating, reflecting the indecisiveness of both buyers and sellers. Despite the fairly strong volatility, traders are unable to leave the area of the 9-figure range to develop either an upward or downward movement. This price dynamic is due to the contradictory fundamental background that has emerged for the EUR/USD pair.

Initiative changes hands

Overall, the pair this week mirrors the trajectory of the US dollar index: on Monday, the greenback strengthened its positions across the market, causing the EUR/USD price to "visit" the 8-figure area. On Tuesday, the dollar was under pressure, which the pair's buyers took advantage of. Dollar bulls are again dictating their rules of the game, pulling the pair towards the base of the 9th price level. These "roller coaster" fluctuations are primarily related to the strengthening/weakening of risk-off sentiments in the markets. In addition, traders are quite sensitive to the strengthening/weakening of hawkish expectations regarding the further actions of the Fed/ECB. All other fundamental factors play a more supporting role.



I would like to remind you that initially, the greenback's position was strengthened by Fed representative Christopher Waller, who during his Friday speech, allowed for several interest rate hikes this year. Considering the fact that the market had "come to terms" with one final increase in May, this remark triggered strong volatility among dollar pairs. The hawkish signal came against the backdrop of a decline in overall inflation in the US, a slowdown in the producer price index and the core PCE index. The only concern is the core consumer price index, which accelerated to 5.6% in March (previously, the indicator had been declining consecutively for three months).

The Fed's median forecast, updated at the March meeting, assumes one more rate hike by the end of this year. The probability of a 25 basis point increase following the May meeting is now at 89%. However, the market is doubtful that the Federal Reserve will take further steps in this direction. Most Fed representatives are in favor of tightening monetary policy but only in the context of the May increase. Further decisions will depend on incoming data, primarily in the area of inflation.

For example, Federal Reserve Bank President Raphael Bostic recently stated that his baseline forecast assumes that rates will remain unchanged after the next (May) increase. The head of the St. Louis Fed, who is a consistent "hawk," allowed for a rate increase to 5.75%. However, he called for avoiding broad forward guidance at the May meeting. Federal Reserve Bank of San Francisco President Mary Daly voiced a rather vague formulation, the essence of which is that subsequent decisions will depend on the dynamics of inflation. According to her, the tightening of monetary policy is now at the stage where "the central bank does not expect further rate hikes at every meeting." Richmond Fed President Thomas Barkin expressed confidence that inflation had already peaked, but he wants to see more evidence that it is returning to the target level. Several other Fed representatives also spoke in the same vein. Notably, New York Fed President John Williams even allowed for a rate cut at the end of the year, "if inflation slows down sufficiently."

As we can see, at the moment, we can only speak with some certainty about the May rate hike (as eloquently evidenced by the CME FedWatch Tool). The further prospects for tightening monetary policy look uncertain, considering the side effects of measures already taken and the decline in key inflation indicators.

Taking into account such uncertainty, EUR/USD traders should be very cautious about hawkish statements from Federal Reserve representatives, as the influence of their messages is short-term in nature. Moreover, the European Central Bank also demonstrates a hawkish stance, discussing whether to raise rates in May by 25 or 50 basis points.

Don't trust price fluctuations

It's worth noting that the US dollar index reacts not only to the statements of Fed members. The agenda is also determined by the overall market sentiment, which reflects the degree of interest in risk assets or defensive instruments. These are quite shaky, unreliable, and highly variable fundamental arguments.

For example, yesterday the dollar was under pressure due to the release of strong GDP growth data from China. Macroeconomic reports, which were almost all in the "green," confirmed the recovery of the Chinese economy after the lifting of quarantine restrictions and the abandonment of the zero-tolerance policy towards COVID-19. This fact returned optimism to the market and contributed to the overall improvement of market sentiment. The safe-haven greenback was, as they say, "out of the picture" – the dollar index lost its gained positions.

But now the US currency has regained strength, as traders' risk appetite began to weaken amid caution due to the quarterly earnings season in the US economy. In addition, the dollar is strengthening against the backdrop of rising Treasury yields (in particular, the yield on 10-year bonds was around 3.63% - the highest level since March 22).

As a rule, such fundamental factors "flare up brightly but quickly fade." During one trading day, interest in risk can increase or decrease, providing support or pressure on the EUR/USD pair. Conclusions

The euro-dollar pair demonstrates increased volatility, but traders cannot determine the direction of the price movement. Therefore, any trading decisions (both towards the south and the north) are inherently risky, as the pair traces a wave-like trajectory.

In my opinion, the pair has not exhausted its growth potential, so long positions remain a priority: the dollar temporarily strengthens its positions on shaky foundations and cannot break the northern trend. However, considering long positions is advisable only after EUR/USD buyers consolidate above the 1.1000 mark (Kijun-sen line on the four-hour chart). The next (main) target of the northern movement in this case will be the 1.1100 mark – this is the upper line of the Bollinger Bands indicator on the daily chart.

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USDJPY, H4 | Bounce off 1st support?



The USD/JPY chart currently exhibits strong bullish momentum, with potential for prices to bounce off the 1st support level at 133.72 and advance towards the 1st resistance level at 134.73.

The 1st support level, coinciding with current price, is an overlap support that signals a robust buying interest. Additionally, the 2nd support level, aligned with the 61.80% Fibonacci projection, reinforces its importance as a significant support level.

As for resistance levels, the 1st resistance level is a multi-swing high resistance that corresponds with the 61.80% Fibonacci retracement, and is expected to present a significant challenge for upward price movements. Similarly, the 2nd resistance level, a pullback resistance, may also impede bullish momentum.

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Euro has proven everything to everyone

A strong economy means a strong currency. The soar of the composite business activity index in the Eurozone in April to an 11-month high has become further proof of the accelerating economy of the currency bloc. It doesn't matter that it entirely relies on the service sector, with the gap between its PMI and the manufacturing sector becoming the largest since 2009. What's important is that the region will avoid a recession, and its resilience opens the door for the ECB to further raise interest rates, which positively reflects on EURUSD.

Dynamics of European business activity



Germany is once again becoming the locomotive of European economic growth: the Purchasing Managers' Indices for both Germany and France have exceeded forecasts. At the same time, ECB Vice President Luis de Guindos noted that core inflation in the Eurozone turned out to be persistently high, even more persistent than the market expected. For the European Central Bank not to lose confidence, the indicator should decrease. Such rhetoric implies that the regulator does not intend to rest on its laurels. Most likely, market forecasts about raising borrowing costs to 3.75% are accurate or slightly underestimated.

Bank of Ireland Governor Gabriel Makhlouf also argued that it was too early for the ECB to pause the monetary policy tightening process. He referred to the data available to the European Central Bank, based on which the pause seems premature. It seems that Christine Lagarde's opinion that the European Central Bank has little way ahead is at odds with the views of the Governing Council members. The ECB will undoubtedly raise the deposit rate at the May meeting. The question is by how much, 25 or 50 basis points?

Meanwhile, in the US, the situation is unfolding like a textbook: after rapid GDP growth, the Fed's monetary policy tightens, and then the American economy starts to wobble. Disappointing statistics on existing home sales, manufacturing activity from the Philadelphia Fed, and unemployment benefit claims suggest that a recession is near. If the US faces a downturn and the Eurozone avoids it, why sell EURUSD?



For the week leading up to April 21, the economic calendar will present investors with another puzzle. The key events will be the releases of German and European GDP data for the first quarter, the flash estimate of April inflation in Germany, and statistics on the Personal Consumption Expenditures Index – the Fed's preferred inflation indicator. Almost all important figures will be released at the end of the five-day period, so most of it will involve buying on the facts. The question is, what will be purchased: the US dollar or the euro? Technically, the EURUSD pair has approached the upper limit of the fair value range of 1.08-1.101 at arm's length. A successful assault will open the way for the "bulls" to restore the upward trend towards 1.12 and will form the basis for establishing long positions.

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EUR/USD. IFO report, weakening of the greenback, strengthening of the euro

The euro-dollar pair returned to the area of the 10th figure today, after a brief southern correction. At the beginning of last week, sellers tried to launch a counteroffensive but stopped at the base of the 9th figure. Then, buyers regained the initiative but failed to overcome the psychologically important price barrier of 1.1000. At the start of the new trading week, the EUR/USD bulls are once again entering the battle, despite an almost empty economic calendar.



However, the only significant release on Monday (the IFO index) turned out to be on the side of the euro - almost all components of the release were in the "green zone", reflecting an improvement in the situation. But overall, the northern trend of the EUR/USD is primarily due to the weakening of the US currency: the US dollar index is under pressure today, amid increased interest in risk assets.

The "green hue" of the IFO report

According to data published today, the German IFO Business Climate Index in April slightly improved - to 93.6 points with a forecast of growth to 93.4. On the one hand, the indicator has grown minimally compared to the March values. On the other hand, the index demonstrates a consistent upward trend for the seventh month in a row. For comparison, it is worth noting that in September last year, it was at the level of 84.4 points. Another component of the release also came out in the "green zone": the IFO Economic Expectations indicator, which has also been consistently growing for seven months in a row.

Commenting on the published report, IFO Institute economist Klaus Wohlrabe said that, on the one hand, the German economy is far from a significant recovery. On the other hand, there are positive trends - for example, Wohlrabe noted that recent shocks in the banking sector (SVB, Credit Suisse) did not have a strong impact on the sentiment of German companies. He also pointed out that the economies of China and the United States are supporting German industry: manufacturers' expectations regarding exports have "noticeably increased." In addition, the IFO representative reported that the share of German companies that want to increase prices "has declined again."

The euro received additional support from the Bundesbank report published today, according to which the German economy in the first quarter of this year "turned out to be stronger than expected", and business activity has grown again. However, the prospects for further recovery "remain ambiguous" – due to inflation, which is still putting pressure on consumption.

Nevertheless, today's growth of the EUR/USD pair is primarily due to the weakening of the US currency. The euro received minor support from the IFO Institute, but this release only complemented the already established fundamental picture.

The dollar is losing its grip

Recall that last week the dollar strengthened its position due to two factors: an increase in hawkish expectations regarding the further actions of the Federal Reserve (against the background of statements by Waller and Bullard) and an increase in risk-averse sentiment. This week, these fundamental factors have weakened their influence. The market has crystallized the opinion that the Federal Reserve will raise the rate by 25 basis points at the May meeting, while further steps will depend on the incoming data (in the field of inflation). Waller's statement about "several increases" is rather hypothetical: at present, traders are confident only in the May increase. According to the data from the CME FedWatch Tool, the probability of implementing a 25-point scenario in May is now almost 90%. At the same time, the probability of maintaining the status quo at the June meeting is almost 70%.

At the same time, hawkish expectations regarding the further actions of the European Central Bank continue to strengthen. For example, according to experts from the investment bank Brown Brothers Harriman, there is currently about a 30% probability of a 50 basis point rate hike at the May meeting. Further in the prices, another 25-point increase is expected in June and another 25-point increase in July.

Moving forward, the ECB may take a break, but the probability of a "final chord" – another rate hike in the fall (at the September or October meeting) – is currently almost 50%. Consequently, the final rate level is now considered in the range of 3.75%-4.0%. For comparison, it is worth noting that at the beginning of last week, BBH's expectations for the peak rate were at 3.75%, and the week before that – 3.50%. Hawkish expectations have increased due to corresponding statements from ECB representatives, who, in the majority, continue to insist on maintaining a hawkish course.

Conclusions

The euro-dollar pair has resumed its upward trend after a brief pause and a southern correction. Looking at the weekly chart of EUR/USD, we can see that the pair has been within an upward trend since the end of February. The southern price pullback that we observed last week was a correction against the temporary strengthening of the greenback.

At the end of this week, crucial macroeconomic reports for EUR/USD will be published: US GDP, core PCE index, and German CPI. These releases can "redraw" the fundamental picture for the pair. But for today, the established information background contributes to the strengthening of the upward movement.

From a technical point of view, the pair on the daily chart is between the middle and upper lines of the Bollinger Bands indicator, as well as above all the lines of the Ichimoku indicator, which has formed a bullish signal "Parade of Lines". The first intermediate target is 1.1050 (the upper line of the Bollinger Bands indicator on the D1 timeframe). After overcoming it, the next target of the upward trend will be the 1.1100 mark.

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