Fundamental Analysis

• Silicon Valley Bank (SVB) fails, second largest in U.S. history
• Widespread concern over the U.S. banking system, risk aversion
• Selling pressure increases due to the first U.S. bank failure since the Lehman Shock
• Safe-haven assets such as the yen, Swiss franc, and gold are being bought
• U.S. stock prices plunged, with bank stocks falling sharply across the board
• Need to determine if banking problems are temporary or have long-term effects
• Market fluctuates mainly due to fundamentals
• Stocks started the day with wide open windows, which may not be filled immediately
• Market’s short-term focus is on the SVB issue; watch for related news

Technical Analysis

The yen, Swiss franc, and gold, the leading risk-averse currencies, are all higher across the board, with each stock surging. The bank failure of a U.S. regional bank is a sufficient fundamental factor, and there is a high probability of a major adjustment in the market. The possibility of a trend reversal should also be given due attention. The dollar is headed for overall weakness in early-week trading.

Dollar Yen (USDJPY)

The dollar dropped sharply in the Oceania market, plunging to the JPY 133.50 level at one point. The U.S. regional bank problem is a growing concern and is causing risk aversion for the first time in a while. This is an unstable move, and it is difficult to hold positions until the direction is determined.

However, we cannot deny the possibility that the yen will strengthen to some extent and could fall to the latter half of JPY 132. If other U.S. banks are affected, the market will likely continue to search for lower prices; ADX is above 30 and may return to a downtrend.

Gold (XAUUSD)

Gold, a safe-haven asset, surged. It opened a wide window from Friday’s close of USD 1,870.00 to USD 1,878.00 and reached a high of USD 1,894.00 on the Oceania market. Risk aversion is likely to continue today, and Gold is expected to be in a better position to rally.

The 50% Fibonacci retracement between the February 2023 high and low is now in mind; if the 50% is exceeded, the next resistance level is USD 1900.00, which corresponds to 61.8%. It also coincides with the round number and may take some time to cross.

US dollar Swiss franc (USDCHF)

Along with the Japanese yen, the Swiss franc, a leading risk-averse currency, is appreciating. Drawing Bollinger bands on the 4-hour time frame shows that after a squeeze, the trend is in a period of expansion, called an expansion, suggesting the occurrence of a strong trend.

ADX, which measures the strength of the trend, is well above the standard 30 and remains at 65. The -DI, which indicates the momentum of the decline, is above 30, and the +DI is as close to 0 as possible. The downward trend is likely to continue for some time in European hours.

Today’s Important Economic Indicators

*Trading advice in this article is not provided by Milton Markets, but by Shu Fujiyasu Jr., a certified technical analyst.