Markets Analysis

Is the Risk-On Market Temporary? U.S. Recession Probability Increased from Previous Month【March 29, 2023】

Fundamental Analysis

  • U.S. stock indexes fall; financial concerns gradually dissipate
  • U.S. Interest Rate Outlook Rebounds; 50% Factor in Rate Hike at May FOMC Meeting
  • U.K. BoE Governor Says Disruptions in Financial Institutions Will Affect Policy Rates
  • UK sees signs of economic tightening, hinting that a rate hike halt is imminent
  • Crude oil continues to rise, as legal battles in the Middle East end and risks from banking instability recede
  • Resource-based currencies strengthened across the board, with the Australian and Canadian dollars gaining ground
  • U.S. recession probability rises from previous month; risk-on market may be temporary
  • USD weakens, EURUSD slowly gains strength
  • GBPUSD makes 2nd attempt at USD 1.2350

Technical Analysis

Analyzing the dollar index, resource-rich currencies are all higher today. Oil prices are recovering and the Canadian dollar is being bought. The Australian dollar is also getting stronger, and the weaker U.S. dollar has affected USDCAD and AUDUSD. On the other hand, the U.S. recession probability is higher than in the previous month, and the long-term fundamentals are expected to lean toward risk-off.

Since there is a lull in March, the next major move will likely come in April and beyond; the possibility of more price weakness in the USDJPY cannot be ruled out in April, and a major trend could be in the offing.

Canadian Dollar Yen (CADJPY)

Analyze the 4-hour chart of the Canadian dollar-yen. A large downtrend line can be drawn. This downtrend line can be seen to be conscious twice, but it was broken through a third time. This time we can see that the downtrend line is functioning as a support line.

Since the trend line is functioning as a support, the chart is easy for new buy orders to be placed.

As a trading strategy, we would consider a short-term buy entry. The target is JPY 96.990 and just before JPY 97 However, it will be necessary to liquidate positions and rethink the trade plan once the price falls below JPY 96.

Estimated rangeJPY 94.89 – JPY 97.43
Resistance lineJPY 96.950
JPY 96.560
Support lineJPY 95.50

Crude Oil (XTIUSD)

Analyzing the 4-hour chart of Crude Oil, which has been a factor in the rally of resource-based currencies, the price has recovered USD 73, but USD 74, which corresponds to the 100% Fibonacci level, is in the offing; if USD 74 is breached, there is a large resistance zone in the USD 75 – USD 76 range.

Crude oil continued to rise, but we should be cautious as profit-taking and a sense of overvaluation could lead to a selloff.

Estimated rangeUSD 70.53 – USD 76.40
Resistance lineUSD 75.87 – USD 76.40
Support lineUSD 72.29

Dollar-Yen (USDJPY)

The hourly chart of the dollar-yen is analyzed. Although the yen has weakened against the dollar due to easing concerns about financial institutions in the near term, recession fears in the U.S. as a whole have increased from the previous month. Therefore, there is no change in our long-term view of the yen’s strength.

We expect the yen to remain below JPY 130 for the rest of the week. Therefore, we expect a range, with JPY 131.56 as one upside target. If the upper end of the range is breached, we consider the moving average line near JPY 131.80 to be the next resistance line.

Estimated rangeJPY 130.40 – JPY 132.45
Resistance lineJPY 131.76
Support lineJPY 130.57

Today’s Important Economic Indicators

Economic Indicators and EventsJST (Japan Standard Time)
Australian Consumer Price Index9:30
Taiwanese President to stay in New York

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

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