<p style=““ class=“text-align-justify“>In the short-term, the actions overnight <a target=“_blank“ href=“https://www.forexlive.com/news/credit-suisse-group-takes-steps-to-improve-liquidity-20230316/“ target=“_blank“ rel=“follow“>here</a> should help but that doesn’t fix the long-term strategy and overall outlook of the firm. At this stage, I would say that an eventual takeover by another bank is still arguably the most probable outcome for Credit Suisse.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>The general line of thinking is that markets could possibly fall apart if the ECB goes with a 50 bps rate hike today. That comes of course after all the concerns of a banking crisis this week, which started from Silicon Valley Bank’s collapse to Credit Suisse’s capital distress.</p><p style=““ class=“text-align-justify“>The fact that <a target=“_blank“ href=“https://www.forexlive.com/news/what-does-the-market-pricing-say-about-credit-suisse-right-now-20230315/“ target=“_blank“ rel=“follow“>CDS swaps</a> in the latter were showing that the underlying scenario is akin to a „this is not a drill“ type of situation shows how worried markets have been this week over a breakdown in the global financial system. </p><p style=““ class=“text-align-justify“>Now, Credit Suisse has already tried to address its issues through a CHF 50 billion borrowing and some creative financial chemistry (as noted <a target=“_blank“ href=“https://www.forexlive.com/news/this-is-the-only-thread-you-need-to-understand-what-credit-suisse-is-doing-20230316/“ target=“_blank“ rel=“follow“>here</a>). But it remains to be seen if that is enough to turn the tide in markets.</p><p style=““ class=“text-align-justify“>Essentially, we are in a place where the longer it is that there is no bad news, that in itself is good news. As such, the timing of the ECB policy decision is a rather unfortunate one for policymakers. Now, they can’t just focus on what they have to do but take into account the market’s „feelings“.</p><p style=““ class=“text-align-justify“>If you were to have written an ECB preview before yesterday and arguably before European trading today, it would have been ripped up. I would say even <a target=“_blank“ href=“https://www.forexlive.com/centralbank/barclays-forecast-for-the-european-centralbank-meeting-today-is-a-25bp-rate-hike-20230315/“ target=“_blank“ rel=“follow“>Barclays‘ latest call</a> this morning for a 25 bps rate hike is pretty much invalid now.</p><p style=““ class=“text-align-justify“>Considering how markets have digested the mood music in European trading, I’m even more convinced that the ECB will go with a 50 bps rate hike later today.</p><p style=““ class=“text-align-justify“>They’ve made that clear in the sense that going up against inflation is their number one concern and with core inflation still running rampant in the euro area, there is no reason to back down – at least from this argument. Besides that, they have already in a way committed to this by telling markets that they would so for quite a while now.</p><p style=““ class=“text-align-justify“>If they were to relent, it would practically call into question their resolve and their entire policy in communicating with markets. The backlash that Lagarde will face in her interview would be immense.</p><p style=““ class=“text-align-justify“>But another reason why I think that they would stick with their call for a 50 bps rate hike is that they can address any market concerns in a confident and yet elegant manner, while delivering on tighter policy.</p><p style=““ class=“text-align-justify“>As mentioned earlier, the simplest step would be to adjust TLTRO terms and delay early repayments from banks. In that sense, they can roll them over to a later date and keep liquidity conditions sufficient and just kick any QT talks down the road for now.</p><p style=““ class=“text-align-justify“>There might yet be other tools but I would assume that policymakers will not see fit to disclose them or think about them too much now as the situation in markets is rather fluid. However, they should reinforce the notion that they will stand ready at any point in time to step in and shore up confidence in the banking sector, if need be.</p><p style=““ class=“text-align-justify“>Put those two elements together and a bend but don’t break reaction in markets is what the ECB can hope for later today.</p><p style=““ class=“text-align-justify“>As for the reaction in the euro, I would say that there is scope for an upside move with a 50 bps rate hike should markets be able to take that in with stride and not revert back to a risk-off wave.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>At the start of today, the odds of a 50 bps rate hike were only at 10%. But now with the market calm that has been permeating through the session, we are seeing traders digest the higher likelihood of a move much better. As mentioned earlier <a target=“_blank“ href=“https://www.forexlive.com/news/is-the-ecb-put-in-a-no-win-situation-20230316/“ target=“_blank“ rel=“follow“>here</a>, this should be the play by the ECB and I’ll elaborate more in a preview to come in a bit.</p>

This article was written by Justin Low at www.forexlive.com.

<p>On the daily chart below, we can
see that the broken <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/“>trendline</a> is still acting as support for
the market. The market sold into it last Friday as the Silicon Valley Bank
failed and triggered a widespread risk aversion which weighed on risk assets. </p><p>On Monday, we got another sell
into the trendline as the market was still uncertain on the banking sector but
rebounded as everything calmed down. </p><p>Yesterday, we got yet another selloff
into the trendline as the fear spread to Europe with Credit Suisse bank under
stress, but later on the market rebounded as the SNB offered support for the
bank. </p><p>All of this just shows that the
trendline support is very strong and it’s something that the sellers will need
to break to get conviction on more downside and make the buyers fold. </p><p>In the 4
hour chart below, we can see that now we have another range between the
trendline support and the 3971 <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“>resistance</a> where we can also find the 50
and 61.8% <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-using-fibonacci-retracements-20220421/“>Fibonacci
retracement</a> levels. The buyers will need to break above that
resistance zone to start getting some conviction on an extension to the upside,
but the downward trendline could be another place where the sellers may lean
on. </p><p>In the 1
hour chart below, we can see more closely the current range. Looking ahead we
have the <a target=“_blank“ href=“https://www.forexlive.com/EconomicCalendar“>FOMC meeting</a> next week where the Fed is
expected to hike by 25 bps. The market may keep ranging until then. </p><p>Generally,
it’s better to sit out when the market starts to range and wait for a breakout
or a catalyst strong enough that can give the necessary momentum to break out
of such ranges. </p>

This article was written by ForexLive at www.forexlive.com.

<p>Headlines:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/is-credit-suisse-the-reason-for-the-turn-in-the-market-20230315/“>Credit Suisse top shareholder rules out further financial assistance</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/what-does-the-market-pricing-say-about-credit-suisse-right-now-20230315/“>What does the market pricing say about Credit Suisse right now?</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/dollar-and-yen-pick-up-a-bid-as-the-jitters-return-20230315/“>Dollar and yen pick up a bid as the jitters return</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/ecb-reportedly-still-leaning-towards-50-bps-rate-hike-tomorrow-20230315/“>ECB reportedly still leaning towards 50 bps rate hike tomorrow</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/eurozone-january-industrial-production-07-vs-04-mm-expected-20230315/“>Eurozone January industrial production +0.7% vs +0.4% m/m expected</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/germany-february-wholesale-price-index-01-vs-02-mm-prior-20230315/“>Germany February wholesale price index +0.1% vs +0.2% m/m prior</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/france-february-final-cpi-63-vs-62-yy-prelim-20230315/“>France February final CPI +6.3% vs +6.2% y/y prelim</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/japan-pm-kishida-says-aiming-to-raise-minimum-wages-beyond-1000-nationwide-20230315/“>Japan PM Kishida says aiming to raise minimum wages beyond ¥1,000 nationwide</a></li></ul><p>Markets:</p><ul><li>JPY leads, EUR lags on the day</li><li>European equities lower; S&amp;P 500 futures down 1.6%</li><li>US 10-year yields down 11 bps to 3.526%</li><li>Gold up 0.8% to $1,916.43</li><li>WTI crude down 1.5% to $70.44</li><li>Bitcoin up 0.1% to $24,654</li></ul><p style=““ class=“text-align-justify“>The session started off with markets in a much calmer mood, with 2-year Treasury yields rising up to by 19 bps 4.41% and 2-year German bond yields also up by 9 bps to 3.01%. Equities were tentative but you had the sense that markets were slowly turning their focus and attention to central banks again as the SVB fallout recedes.</p><p style=““ class=“text-align-justify“>But then came along Credit Suisse’s own debacle as its top shareholder, the Saudi National Bank, says that it is not going to offer further financial assistance to the bank. That saw credit swaps blow up with the curve inverting deeply as markets are pricing in a serious risk of a default by the Swiss bank.</p><p style=““ class=“text-align-justify“>Bond yields plunged sharply with 2-year Treasury yields now down 23 bps to 3.99% and 2-year German bond yields down 33 bps to 2.59% on the day. That is a far cry from the highs seen earlier as the volatile swings continue in the bond market.</p><p style=““ class=“text-align-justify“>Banking stocks were pummeled with Credit Suisse itself down by over 20% and US futures, which were flattish at the start of the session, are now down heavily with European indices bordering on 3-4% losses across the board.</p><p style=““ class=“text-align-justify“>In FX, we are starting to finally see some action as the dollar and yen picked up strong bids while the euro and franc tumbled amid more idiosyncratic risks affecting the respective currencies.</p><p style=““ class=“text-align-justify“>EUR/USD fell from 1.0730 to just below 1.0600 now, down 1.3% on the day while USD/CHF moved up from 0.9150 to a high of 0.9260, before settling around 0.9215 now – up 0.8%.</p><p style=““ class=“text-align-justify“>USD/JPY was also a notable mover as it climbed up to hit 135.00 briefly before the turn in the bond market saw the pair fall all the way down to 133.40.</p><p style=““ class=“text-align-justify“>It’s now over to Wall Street to see how they will look upon their European counterparts to handle the mess and let’s also not forget that we have the <a target=“_blank“ href=“https://www.forexlive.com/news/uk-budget-in-focus-later-today-20230315/“ target=“_blank“ rel=“follow“>UK budget</a> coming up.</p>

This article was written by Justin Low at www.forexlive.com.

<p>On the daily chart below, we can
see the big rally in gold since the last Thursday. Everything started with <a target=“_blank“ href=“https://www.forexlive.com/news/us-weekly-initial-jobless-claims-211k-vs-195k-expected-20230309/“>jobless
claims</a> where we saw the first miss after several months of strong beats and
the treasury yields fell as the market started to look at a possible turn in
the jobs market. </p><p>On Friday, the <a target=“_blank“ href=“https://www.forexlive.com/news/us-february-non-farm-payrolls-311k-vs-205k-expected-20230310/“>NFP
report</a> showed a higher-than-expected unemployment rate and lower than expected
wage gains. This caused an extension of the selloff in yields that intensified
as the <a target=“_blank“ href=“https://www.forexlive.com/news/fdic-takes-control-of-silicon-valley-bank-20230310/“>Silicon
Valley Bank</a> failed. The market started to fear another banking
crisis and we saw risk aversion across the board. </p><p>On Monday, the risk sentiment
remained on the backfoot and the market repriced lower future interest rates
expectations with rate cuts by the end of the year and at some point even no
hike at the March FOMC meeting. All these events decreased real yields and gave
gold the tailwind to rally. The <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-moving-averages-20220425/“>moving
averages</a> have now crossed to the upside in a sign that we may be in front of
another rally that could extend beyond the 2000 level.</p><p>On the 4 hour chart below, we can
see that the price is now pulling back from stretched longs. The best level for
the buyers would be the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“>support</a> at 1864 with the 50% <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-using-fibonacci-retracements-20220421/“>Fibonacci
retracement</a> level. One reason for the bigger pullback may be
that the <a target=“_blank“ href=“https://www.forexlive.com/news/us-february-cpi-60-yy-vs-60-expected-20230314/“>US
CPI</a> report
yesterday showed that inflation is still too high in US and the Fed may be
forced to keep hiking even if there are stresses elsewhere. </p><p>On the 1 hour chart below, we can
see that we may have a bullish <a target=“_blank“ href=“https://www.forexlive.com/Education/chart-patterns-guide-20220125/“>flag
pattern</a> if the price manages to break the upper band of the channel. Buyers
will want to wait for the breakout to start piling in and push the price to new
higher highs. Sellers may want to lean on the 1902 level to position short
targeting the 1864 support. That will be the last line of defence for the
buyers. </p>

This article was written by ForexLive at www.forexlive.com.

<p style=““ class=“text-align-justify“>The pair was trading around 1.0730 earlier in the day but has seen a dramatic turn as soon as European markets opened. The worries involving Credit Suisse and European banks are seeing sellers take over, with price tumbling to 1.0595 at the moment.</p><p style=““ class=“text-align-justify“>From a technical perspective, the pair is looking towards its 100-day moving average (red line) once again currently. The level helped to arrest the decline last week and is now seen at 1.0554. So, just be mindful of that alongside further support closer to the 1.0500 mark.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>Well, that’s arguably the smart move as saying anything at this point has the potential to backfire and rile markets up even more. Credit Suisse shares are now down 25% to $1.68 on the day.</p>

This article was written by Justin Low at www.forexlive.com.

<ul><li>Prior +7.4%</li><li>Market index 214.5 vs 201.5 prior</li><li>Purchase index 165.6 vs 154.4 prior</li><li>Refinance index 458.9 vs 437.9 prior</li><li>30-year mortgage rate 6.71% vs 6.79% prior</li></ul><p style=““ class=“text-align-justify“>Mortgage activity caught a bounce for a second week running, with rates retreating slightly in the past week. Both purchases and refinancing activity were seen higher but it remains to be seen if the market will be able to find renewed momentum. It all comes down to the Fed outlook.</p>

This article was written by Justin Low at www.forexlive.com.

<p>Headlines:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/the-jitters-are-still-being-felt-in-markets-20230314/“>Credit Suisse says found „material weakness“ in reporting procedures</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/the-volatile-swings-continue-in-the-bond-market-so-far-today-20230314/“>The volatile swings continue in the bond market so far today</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/2-year-german-bond-yields-erase-its-sharp-decline-at-the-open-20230314/“>2-year German bond yields erase its sharp decline at the open</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/boj-says-direct-exposure-of-japan-financial-institutions-to-svb-is-limited-20230314/“>BOJ says direct exposure of Japan financial institutions to SVB is limited</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/ecbs-stournaras-says-no-impact-from-svb-collapse-on-eurozone-banks-20230314/“>ECB’s Stournaras says no impact from SVB collapse on Eurozone banks</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/boe-rate-hike-odds-moving-closer-towards-a-coin-flip-as-well-20230314/“>BOE rate hike odds moving closer towards a coin flip as well</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/boj-steps-in-with-another-701-billion-worth-of-etf-purchases-today-20230314/“>BOJ steps in with another ¥70.1 billion worth of ETF purchases today</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/uk-february-payrolls-change-98k-vs-102k-prior-20230314/“>UK February payrolls change 98k vs 102k prior</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/spain-february-final-cpi-60-vs-61-yy-prelim-20230314/“>Spain February final CPI +6.0% vs +6.1% y/y prelim</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/switzerland-february-producer-and-import-prices-02-vs-07-mm-prior-20230314/“>Switzerland February producer and import prices -0.2% vs +0.7% m/m prior</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/china-reportedly-to-gradually-raise-retirement-age-to-cope-with-aging-population-20230314/“>China reportedly to gradually raise retirement age to cope with aging population</a></li></ul><p>Markets:</p><ul><li>CAD leads, JPY lags on the day</li><li>European equities slightly higher; S&amp;P 500 futures up 0.8%</li><li>US 10-year yields up 11.3 bps to 3.628%</li><li>Gold down 0.5% to $1,903.98</li><li>WTI crude down 2.1% to $73.24</li><li>Bitcoin up 2.5% to $24,845</li></ul><p style=““ class=“text-align-justify“>It all started with things looking fairly calmer, as bond yields looked for a rebound ahead of European trading. Then, came a headline from Credit Suisse in which the bank says it found „material weakness“ in its financial reporting for 2021 and 2022. That’s not exactly the kind of statement you’d want to see at this point and markets reacted.</p><p style=““ class=“text-align-justify“>Or at least the bond market did.</p><p style=““ class=“text-align-justify“>2-year Treasury yields quickly fell from 4.18% to 3.83% as traders turned fearful again and that also saw a 27 bps dip in 2-year German bond yields right at the open to 2.42%. That set up a nervy open for Europe and induced more volatility swings but by the end of it, we are seeing calmer heads prevail – at least for now.</p><p style=““ class=“text-align-justify“>Credit Suisse shares may not be recovering yet but bond yields have risen drastically in a turnaround from earlier in the day. 2-year Treasury yields are now up 20 bps to 4.23% while 2-year German bond yields are now up 10 bps to 2.80%, as bond bears start to draw a line on the squeeze in the past few sessions.</p><p style=““ class=“text-align-justify“>In FX, USD/JPY was sent for a ride as it fell from 133.80 to 133.20 before recovering to push above 134.00 now – up 0.7% on the day. The rest of the major currencies space is rather muted, with the dollar trading little changed for the most part after its slight gains earlier have been pared.</p><p style=““ class=“text-align-justify“>With the US CPI data coming up later at 1230 GMT, brace yourselves for another round of volatility in North America trading.</p>

This article was written by Justin Low at www.forexlive.com.