Markets have been on a roller coaster ride. Here are our latest forex trading ideas.
Markets overview
Markets continue to examine the banking sector's turmoil, while headlines that First Citizens Bank would purchase Silicon Valley Bank for USD 72 billion provided some relief.
Risky assets gained traction at the start of the week, with European stocks rising and high-beta currencies strengthening against the dollar.
The private sector activity survey in the United States increased the most in 10 months in March, according to the S&P Global PMIs, with the service sector far exceeding estimates. On Friday, ECB President Christine Lagarde reminded European Union leaders that the eurozone financial system is robust and healthy. However, global risks persist.
Last week, the Fed raised interest rates by 25 basis points to 4.75-5%, the highest level since 2007, rejecting market expectations of imminent rate cuts this year, which investors have substantially discounted over the past weeks.
The IMF cautioned on Sunday that threats to global financial stability have grown as the banking sector's troubles worsen. IMF Director Kristalina Georgieva noted that the global economy will expand by just 3% this year due to growing borrowing costs, the Ukrainian crisis, and pandemic strain.
Minneapolis Federal Reserve President Neel Kashkari also cautioned on Sunday that current banking sector stress and the risk of a subsequent credit crisis are bringing the US economy closer to recession.
From the start of the banking crisis, investors have continued to pour money into safe haven assets such as money market funds, US Treasuries, and gold.
Assets under management in money market funds have now surpassed $5.1 trillion, a new all-time high, with more than $300 billion inflows over the previous month. $29.3 billion has flowed into US Treasuries in the preceding six weeks, the highest flow ever recorded.
Gold, a significant barometer that is used as a hedge against risk of uncertainty and recession, reached $2,000/oz last Friday before slightly retracing.
In terms of major economic data, the week is quiet until Friday, when investors will analyze the Eurozone inflation rate, personal income, and PCE inflation for the United States.
Here are the trading ideas for the week.
EUR/USD Update: At a crossroad
We reached the stop loss on our previous short last week on Wednesday, as traders continued to cut their expectations for US interest rates, now completely discounting three 25 basis point cuts until December '23.
The EUR/USD price invalidated the head-and-shoulder top pattern and surged to a weekly high of 1.093 before retreating somewhat.
Following five consecutive days of gains, EUR/USD ended the week with two days of losses, encountering sellers' resistance around the 50% Fibonacci retracement of the 2021-2022 high-to-low range.
We believe the EUR/USD is at a crossroads, and that this week's price action will determine the future short-term trend.
The immediate support level is presently 1.0723 (50-day moving average). If the EUR/USD falls below this level, it might test 1.0582 (the 38.2% Fibonacci level) and 1.0516. (15 March low).
The biggest resistance levels on the upswing are 1.0905 (50% Fibonacci level) and 1.0923 (last week's high). Moving above this territory would likely boost buyers' confidence, allowing them to break over 2023's highs at 1.1033 and try an assault on 1.1227 (61.8% Fibonacci level).
EUR/USD Trading Strategy
Sell order: Entry @1.0695 (50dma breakdown), TP 1.0482 (2023 low), SL 1.0760 (March 24 close) – Risk-reward-ratio 3.29
Buy order: Entry @1.095 (March 23 high), TP 1.1227 (61.8% Fibo), SL 1.0834 (March 24 close).
GBP/CHF New Idea: Bearish channel in place
GBP/CHF has seen an interesting bearish price action lately, as the pair totally retraced the powerful green candlestick observed on Monday, March 20.
The Swiss National Bank hiked its policy rate by 50 basis points to 1.5% at its March meeting, after a similar move in December and raising borrowing costs to the highest since November 2008, while also indicating that further policy rate rises could not be ruled out.
In the meantime, the Bank of England also raised interest rates by 25 basis points to 4.25%, although the move sounded as a dovish hike, and markets started to discount a halt in the hiking cycle.
GBP/CHF briefly fell below the important 50dma support level on Friday, March 24, before closing slightly higher. Bearish pressure is present again at the start of the week, validating the pattern established by the descending channel created in December.
Here, GBP/CHF may have an opportunity to test 2023 low at around 1.0991, which also coincides with the channel line. If the pair breaks above the 200dma at 1.1234, the strategy will be proven incorrect.
GBP/CHF Trading Strategy
Short GBP/CHF: TP 1.908; SL 1.1234 (200dma), risk-reward ratio @2.22 
NZD/USD New Idea: Moving Southward
The Kiwi dollar may witness an acceleration of the short-term negative trend that began in February when NZD/USD recorded a bearish RSI divergence.
Last week, the pair most likely established a new high of the main channel line at 0.6295, which also coincided with the 50dma.
We believe there is opportunity here to head southwards, particularly if the 200dma support does not hold.
The New Zealand dollar is especially vulnerable to global risk aversion, and a worsening in the sentiment will result in a resumption of selling pressure in the NZD/USD pair.
The take profit target is set at 0.5994, which is close to the channel line and just slightly below the 50% Fibonacci retracement of the October-February range.
NZD/USD Trading Strategy
Sell NZD/USD TP 0.5994; SL 0.6295 (risk-reward ratio 2.22).
XAU/USD Update: Holding longs
Last week we opened a XAU/USD long trade at $1,975/oz on the back of bullish fundamental and technical reasons.
Goldman Sachs recently updated its 1-year gold price target to $2,100/oz as investors will likely rush to the precious metals amid banking stress and fear of an economic recession.
Technically, we saw a bull flag formation which is still holding quite nicely.
Gold is now trading right at the February 2nd’s high, which set the flagpole size of the bull flag pattern.
The case for a bullish extension above $2,000/oz remains intact and we keep our long XAU/USD trade with TP at 2,110 and SL 1,917 (risk-reward ratio 2.2).
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