EURUSD: 1:25GBPUSD: 4:50USDJPY: 8:50USDCHF: 13:50USDCAD: 17:00NZDUSD: 20:23

This article was written by Greg Michalowski at www.forexlive.com.

The Bank of Japan meets on March 18 and 19. Like the subheading says, the news flow on a likely tightening of policy is relentless.

The Nikkei had this:

• Bank of Japan to end negative interest rates on Tuesday with rates to rise to 0.00-0.10% … Yet-another Bank of Japan leak

Bloomberg (gated) has canvassed MUFG (Mitsubishi UFJ Financial Group is a Japanese financial services group that is the largest in the world measured by assets) and reports this:

• „Given the stronger-than-expected wage talk outcome, the BOJ will likely ditch negative rates and yield curve control next week,“ said veteran BOJ watcher Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities.
• „The BOJ could have waited until April if the wage talk outcome wasn’t this strong. But with markets already pricing in the chance of an exit, it would actually be a surprise if the bank forgoes ditching negative rates next week,“ she said.

From a separate report, on Rengo, a federation of unions, saying its members have so far secured deals averaging 5.28%, a figure that far outpaces the initial 3.8% tally from a year ago and easily the highest in 30 years:

• “This clears the last hurdle for the BOJ and I think it will scrap its negative rate next week and make a shift toward policy normalization,” said Taro Saito, head of economic research at NLI Research Institute. “If they stand pat now, markets will get volatile and the yen is likely to plunge.”

And, Reuters:

• Upon exiting its negative rate policy, the BOJ will also ditch its bond yield control and discontinue purchases of risky assets such as exchange-traded funds (ETF), sources have told Reuters

I did convey more cautious thoughts from UBS:

• Bank of Japan won’t tighten policy next week – here’s why they’ll wait until April

But I think they may be standing in front of a freight train.

—

The BOJ announcement will come sometime after 0230 GMT on Tuesday 19 March. The Bank doesn’t have a firmly scheduled time for its meeting statement, it never does.

This article was written by Eamonn Sheridan at www.forexlive.com.

• NY Fed empire manufacturing survey for March -20.90 vs -7.00 estimate
• UMich March prelim consumer sentiment 76.5 vs 76.9 expected
• Canada January wholesale trade +0.1% vs -0.6% expected
• US February industrial production +0.1% vs 0.0% expected
• ECB’s Makhlouf: Picture should be sufficiently clear in June
• ECB’s Lane: Labor market is softening in many ways
• ECB’s Vujcic says prefers 25 bps pace of cuts but weaker economy could speed the pace
• Goldman Sachs raises average gold price forecast for 2024 to $2180 from $2090.
• US February import prices +0.3% vs +0.3% expected
• Canada February housing starts 253K vs 230K expected

Markets:

• Gold down $4 to $2156
• US 10-year yields up 2.3 bps to 4.33%
• WTI crude oil down 28-cents to $80.98
• S&P 500 down 0.6%
• EUR leads, NZD lags

The Ides of March passed without much drama this year as the dollar made gains in Asia and Europe then largely hung onto them in North American trade. The empire survey was soft and UMich was generally in line but neither one left ripples.

The market appears to have been driven by fixed income flows and angst about the BOJ and Fed next week. Those two central banks are headed in opposite directions but you wouldn’t know if from USD/JPY, which rose again. That pair appears to be more worried about bond market structural changes from the BOJ than rate differentials. That pushed US 10s to a retest of the highs of the year (but not above). USD/JPY climbed to a high of 149.17 in a 30 pip rally in US trade and is slated to finish near the highs.

Another BOJ leak suggests that a hike is priced in, though I imagine there are still fears about mechanical breaks on the first hike in 17 years.

There was some moderate USD buying elsewhere on higher yields and risk aversion. US equities were hit for the second day with many pointing to quad witching as a driver. Adobe was also beaten up in a sign that AI hype might be flagging.

We look forward to the BOJ and Fed meetings next week. Until then, have a great weekend.

This article was written by Adam Button at www.forexlive.com.

The three major indices are closing lower both on the day and for the trading week. The declines are led by the NASDAQ index. A snapshot of the final numbers shows:

• Dow industrial average -190.91 point or -0.49% at 38714.76
• S&P index -33.37 points or -0.65% at 5117.10
• NASDAQ index -155.37 points or -0.96% at 15973.16

For the trading week, the Dow Industrial Average was near unchanged. The NASDAQ index was the weakest of the three:

• Dow industrial average, -0.02%.
• S&P index -0.13%
• NASDAQ index, -0.70%

Looking at the small-cap Russell 2000 index it rose today but was down sharply on the week:

• Russell 2000+8.146 points or 0.40% at 2039.32. For the trading week, the index fell -2.08%

This article was written by Greg Michalowski at www.forexlive.com.

ANZ highlights the unexpected resilience of physical gold demand despite the surge in prices, attributing steady global consumption levels to strong interest from China and India. The report discusses the potential limits to further demand growth due to the prolonged period of elevated prices.

Key Points:

1. Steady Global Consumption: Global gold demand remained consistent at 3,057t in 2023, closely aligning with the decade’s average despite record-high prices.
2. China’s Strong Demand: A 16% year-on-year increase in China’s gold consumption to 959t in 2023, driven by pent-up demand and a shift towards value preservation amidst economic uncertainties.
3. India’s Sustained Interest: India’s gold consumption slightly declined in 2023 but stayed near pre-pandemic levels, supported by a growing affluent population.
4. Price Sensitivity and Demand Outlook: While physical demand has shown resilience, the continued high price levels may challenge further growth in demand, especially in key markets like China and India.

Conclusion:

Despite the challenges posed by sustained high gold prices, physical demand for gold has shown remarkable resilience, particularly in major markets such as China and India. ANZ suggests that while this trend demonstrates the underlying strength and appeal of gold as an investment, the potential for significant demand growth may be curtailed unless there’s a notable change in price trends. Demand is expected to remain stable, reflecting the balance between value preservation motives and price sensitivity among consumers.

Gold today is down $4 to $2156.

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This article was written by Adam Button at www.forexlive.com.

The Bank of Japan will hike rates for the first time since 2017 on Tuesday, according to Nikkei.

„The Bank of Japan is expected to end its negative interest rates when its policy board meets on Monday and Tuesday, Nikkei has learned.“

They report that the BOJ began coordinating both within and outside the BOJ on Friday to end the policy. Rather than just hiking to 0.00%, as assumed, the BOJ will hike to a range in the 0.00-0.10% range.

The final piece of the puzzle appears to be the latest wage numbers, something we’ve been highlighting.

This year’s wage hikes „are of a level that even reflationists who are cautious about modifying monetary policy would accept a change in policy,“ according to a BOJ source.

There has been minimal market reaction to this report, which suggests that the moves are already priced in.

The moves will also end yield curve control and scrap purchases of ETFs and REITs.

USD/JPY last traded at 149.05, up 73 pips today and unchanged since this report.

This article was written by Adam Button at www.forexlive.com.

Headlines:

• Japanese yen struggles despite nod for BOJ policy shift
• Japan’s largest trade union: Preliminary data shows average wage hike of 5.28% this year
• BOJ reportedly making final preparations to exit negative rates next week
• Bitcoin stumbles further, now down 6% on the day
• ECB’s Rehn: We have started discussing rate cuts
• France February final CPI +3.0% vs +2.9% y/y prelim
• Italy February final CPI +0.8% vs +0.8% y/y prelim
• China February M2 money supply +8.7% vs +8.8% y/y expected
• PBOC said to have no intention of actively draining cash from the banking system

Markets:

• CHF leads, NZD lags on the day
• European equities higher; S&P 500 futures up 0.2%
• US 10-year yields down 2.5 bps to 4.273%
• Gold up 0.2% to $2,166.74
• WTI crude down 0.6% to $80.31
• Bitcoin down 4.8% to $67,301

There wasn’t too much movement on the session but the most notable one was yen bulls being dealt a setback once again.

The disappointment from the BOJ last year is a scarring reminder that pricing in an imminent policy shift too soon for the Japanese central bank hasn’t always worked out. And so, even after a more positive development on the spring wage negotiations and a report that the BOJ is making final adjustments to end negative rates next week, the yen fell after a minor bump higher.

USD/JPY fell to a low of 148.03 on the headlines but quickly recovered that to 148.30, before extending its advance to 148.80.

As for the dollar, it is keeping steadier after the jump in Treasury yields yesterday. And even with the slight retreat in yields today, it isn’t factoring in too much for now. The aussie and kiwi are among the laggards as the Chinese yuan weakened further, following a move by the PBOC to drain liquidity via its medium-term loan operation for the first time in 16 months.

Besides that, equities are keeping cautiously optimistic after yesterday’s drop. European indices are consolidating at record highs while US futures are also pointing to light gains ahead of the Wall Street open.

And we also saw Bitcoin stumble further after selling pressures in late US trading yesterday. The cryptocurrency now looks to solidify a drop below $70,000 with the low earlier briefly hitting just under $66,000. It is now down nearly 5% to $67,301.

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

USD

• The Fed left interest rates unchanged as
  expected at the last meeting and dropped the tightening bias in the statement.
• The US CPI and
  the US PPI beat
  expectations for the second consecutive month.
• The NFP report beat
  expectations on the headline number, but the unemployment rate and the average
  hourly earnings missed notably. Moreover, the US Jobless Claims
  yesterday beat expectations across the board with a big positive revision to
  Continuing Claims.
• The latest US ISM
  Manufacturing PMI missed expectations by a big margin
  remaining in contraction with the US ISM Services
  PMI
  following suit but holding on in expansion.
• The US Retail Sales missed
  expectations across the board although the data improved from the prior month.
• The market expects the first rate cut in June.

CAD

• The BoC left interest rates unchanged at
  5.00% as expected stating that further easing in underlying inflation is needed.
• The latest Canadian CPI missed expectations across the
  board with the underlying inflation measures falling.
• On the labour market side, the latest report beat
  expectations but we saw a fall in wage growth which is something that the BoC
  is watching closely.
• The Canadian PMIs improved in
  January although they remain both in contractionary territory.
• The market expects the first rate
  cut in June.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD pulled
back into a key resistance level at
1.3540 following the strong US data release. This is where we can expect the
sellers to step in with a defined risk above the level to position for a drop
into the 1.3360 level. The buyers, on the other hand, will want to see the
price breaking higher to invalidate the bearish setup and position for a rally
into the 1.3620 level.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we can also
find the 61.8% Fibonacci retracement level
around the resistance level for confluence. We can
also notice that the price is a bit overstretched as depicted by the distance
from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the recent price action and we can see that around the 4-hour 8 moving
average we have a support zone on this timeframe with the 38.2% Fibonacci
retracement level for confluence. If the price falls from the resistance, we
can expect the buyers to step in around the support with a defined risk below
it to position for a break above the 1.3540 resistance with a better risk to
reward setup. The sellers, on the other hand, will want to see the price
breaking lower to increase the bearish bets into new lows.

Upcoming Events

Today we conclude the week with the US Industrial
Production data and the University of Michigan Consumer Sentiment survey.

This article was written by FL Contributors at www.forexlive.com.

Tesla, a
major player in the electric car surge and one of the most talked-about
companies over the past decade is facing some severe challenges. To put it
frankly, it’s been one setback after another for Tesla (NASDAQ:TSLA). The
demand for electric vehicles (EVs) is on the decline, the company is battling
fierce competition from other brands, especially in China. Recently, it got bumped
from the S&P 500’s top tier, with its shares taking a 31% nosedive this
year, making its CEO the world’s biggest loser in terms of net worth. And just
when you thought it couldn’t get any worse, this week brought another hurdle.

On
Wednesday, Wells Fargo raised concerns about the diminishing impact of Tesla’s
price cuts, the world’s once most valuable automaker, on demand for its
electric vehicles and downgraded them to „underweight.“ This move led
to a 2% drop in Tesla stock price.

The
brokerage released a scathing report, forecasting a worst-case scenario of $44
a share, which is roughly 75% lower than the current market price of $169 per
share. According to the report, this grim price target could become a reality
within the next 12 months. Additionally, Wells Fargo slashed Tesla’s price
target to $120 from $200, making it one of the lowest on Wall Street.

Tesla’s
stock has plummeted by more than 30% this year. Its lackluster performance
threatens to cast it out of the Magnificent Seven club, lagging behind other heavy hitters such as Microsoft (NASDAQ:MSFT), Apple
(NASDAQ:AAPL), Nvidia (NASDAQ:NVDA), Amazon (NASDAQ:AMZN), Alphabet
(NASDAQ-GOOG), and Meta (NASDAQ:META) in 2024.

Despite
its struggles, Tesla still boasts the highest forward price-to-earnings ratio
of 52 among the seven companies, as analysts lowered their estimates for
earnings. On average, analysts have reduced their earnings forecast for 2024 by
approximately 10.8% in the past 30 days, according to LSEG data. Nevertheless,
the average Wall Street rating for Tesla remains „hold,“ as many
analysts anticipate the demand slump to stabilize later this year.

This article was written by FL Contributors at www.forexlive.com.

Thetanuts Finance, the leading decentralized on-chain options protocol, announced that it has integrated Pendle Finance’s $PT-eETH offering to create a Leveraged LRT Strategy Vault on the Ethereum Mainnet.

This marks the protocol’s first foray into the world of restaking and Liquid Restaking Tokens (LRTs), a fast-growing primitive within the Decentralized Finance (DeFi) industry that has already accumulated more than $10 billion in Total Value Locked (TVL).

Accelerated Staking Yields

Restaking provides a way for DeFi users to use their staked $ETH to secure other networks and earn additional yield beyond what they earn via the Ethereum Mainnet. Pioneered by EigenLayer, it gives users the choice of restaking directly in EigenLayer’s native dApp or within a liquid restaking protocol such as EtherFi. By staking their $stETH in liquid restaking protocols, users generate “Liquid Restaking Tokens” or LRTs that can also be leveraged to earn additional yield elsewhere.

The leading LRT at present is EtherFi, which currently boasts more than $2.5 billion in TVL. It enables users to deposit $ETH, $stETH, $bETH or $cbETH in order to mint an LRT known as $eETH.

By holding $eETH, users can increase their rewards with EigenLayer points and also protocol points such as EtherFi Loyalty Points. Moreover, there are additional opportunities available through third-party LRTs, such as the innovative Pendle Finance protocol, which seeks to increase $eETH yields even more by splitting it into $PT-eETH and $YT-eETH.

$PT-eETH is a token that forgoes $eETH yields and points to instead earn a fixed ~20% APY. $PT-eETH can be redeemed for $eETH at a 1:1 ratio when it matures.

As for $YT-eETH, this provides DeFi investors with leveraged exposure to $eETH yields and points that are streamed to holders on a perpetual basis until maturity, at which point the token decays to no value. At present, $YT-eETH holders can accrue 39x EtherFi points and 20x EigenLayer points.

Bringing Utility To $PT-eETH

While Pendle Finance currently stands out by offering the industry’s highest fixed yield for $ETH via its $PT-eETH offering, together with complete certainty of those returns, Thetanuts Finance’s Leveraged LRT Strategy Vault gives users an opportunity to drive those yields even higher.

With its new offering, Thetanuts is integrating $PT-eETH to launch a Leveraged LRT Strategy Vault on Ethereum Mainnet.

Holders of PT-eETH may either wait for their tokens to mature on June 27 before they can realize any gains, or exit their position earlier if the implied APY is favourable. While waiting for maturation, the Thetanuts Finance Leveraged LRT Strategy Vault provides $PT-eETH holders with the opportunity to earn additional yield by utilizing their $PT-eETH to generate additional yields via option premiums and rewards.

With its Leveraged LRT Strategy Vaults, Thetanuts has created a novel mechanism in which users must “Zap” their $PT-eETH tokens and deposit them into the Thetanuts Finance v3 Lending Market, and borrow $ETH. This $ETH is then deposited into the $ETH Call (“ETH-C”) Basic Vault, where it generates additional Basic Vault Option premiums, but takes on short volatility risk.

In this way, Thetanuts Finance’s Leveraged LRT Vaults give $PT-eETH holders the ability to utilize a valuable asset, which they could previously only hold until maturity. In total, they’ll be able to generate additional yield in five ways – EigenLayer Points, EtherFi Loyalty Points, Pendle $PT-eETH Fixed Yield, Thetanuts Finance $ETH-C Basic Vault Option Premiums, and $NUTS Rewards after Thetanuts Finance’s governance token goes live.

Thetanuts Finance is proud to deliver a new industry-first with its innovative Leveraged LRT Strategy Vaults. The launch represents the first time an options market has created a new yield-generating tool for LRT-related staking products. Due to this, it’s highly likely there will be strong demand for the new product. There is currently 150,000 $PT-eETH (worth $577mm) that is currently in circulation.

Thetanuts Finance will first launch its Leveraged LRT Strategy Vault on the Ethereum Mainnet, and will eventually integrate other LRT protocols – enabling a similar strategy with other LRTs as collateral assets.

As with all DeFi investments, $PT-eETH short-call vaults are not entirely without risk, as depositors effectively take on short volatility risk. As such, there is a danger that their deposits could become worthless if the market for eETH or PT-eETH collapses.

About Thetanuts Finance

Thetanuts Finance (https://thetanuts.finance/) is the leading decentralized on-chain options protocol focused on altcoin options. With the launch of Thetanuts Finance’s Leveraged LRT Strategy Vault, Thetanuts Finance will make its foray into the world of staking and Liquid Restaking Tokens.

This article was written by FL Contributors at www.forexlive.com.