Weekly Market Outlook - March W1

The U.S. dollar index was slowly retracing off the 105 level in a choppy manner last week. There are mainly 2 factors leading to that choppiness, the first being the modest changes in the U.S. consumer confidence, and ISM PMI whether on the manufacturing side or services side.


The second main reason is the expectations set for the NFP reading for the month of February, which show a drop of approximately 61% in employment change compared to the month of January.


The choppy road is waiting for the FX market this week with major central banks preparing to announce their interest rate decisions from one side, and Powell’s testifying statement in front of the Senate Banking Committee on the other.

Consequently, upward movements were noticed in opposing currencies, whereby the EURUSD rose by around 0.4%, and GBPUSD by 0.9%.


USDCHF dropped by 0.4% early on Monday’s session as the inflation rate increased by a surprising 0.7% compared to the previous 0.6% value. This might lead the SNB to postpone interest rate pivoting to further fight inflation.

 Further drops for the U.S. dollar might be witnessed by the end of this week, which might lead to further increases in opposing currencies due to the weaker employment data expected.


To date, 99% of S&P500 firms have reported their Q4 and full-year earnings, 69% of which beat the market’s expectations in terms of both EPS and revenues. Retailers have had an intriguing earnings season, with several high-profile companies in the industry, such as Walmart (WMT) and Target (TGT), surpassing quarterly forecasts but providing cautious guidance amid concern about consumer spending this year. To date, the blended earnings for Q4 2022 declined by 4.6% versus an estimate of 3.3% marking the first time the index has reported a YoY decline in earnings since Q3 2020 of -5.7%.


Main US equity benchmarks closed higher last week Dow jones gained 1.7%, SP500 gained 1.9% and Nasdaq100 Index gained 2.6%. A rally in the S&P 500 Friday helped snap a three-week losing streak while the Nasdaq 100 scored its best day since early February.

Traders will be watching the US non-farm payrolls report for clues on whether the economy can handle more rate hikes. Data last week showed continued labour-market resilience in the US, supporting the case for the Fed to stick to its tightening policy

China’s Caixin general manufacturing PMI for February 2023 was above the market forecast of 50.2 as it recorded 51.6 in comparison to 49.2 in January. That was the first significant increase since July 2022. Moreover, new manufacturing orders increased to 54.1 points in February compared to 50.9 in January 2023 which is also the first significant increase for 7 months- June 2022 and a strong comeback from last December’s 43.9. 


On the other hand, U.s Crude oil weekly stocks are at the level of 851.79 million barrels, modestly 0.14% higher than the previous week and at -14% YoY.


It was noticed that oil prices were relatively steady as inflation fears and increasing inventories together with circulated rumours that the UAE had the intention of quitting the cartel – that was later denied by the UAE officials were shadowing a negative sentiment against the positive appetite regarding China’s rebounding economy.


WTI closed last week 4.46% higher at $79.83 and Brent 3.77% higher at $85.93. Both secured closing at the 20-week exponential moving average resistance levels which is the upper boundary of the trading range. Friday’s bullish candle contributed the most to last week’s bullish control where WTI closed 2.54% higher and brent 1.8% higher on March 3rd. Closing above the current resistance would promote WTI and Brent $84-$85 zone and $90 respectively.


Gold rose last week by about 2.5% as a result of the decline in the US dollar, after the possibility increased that the Federal Reserve may raise interest rates by 25 basis points at its next meeting, despite the rise in most of the economic data during the month of February by more than expected and more than the previous reading.


The markets are still in a state of assessing the economic situation, awaiting the decisions of the major central banks about monetary policy and the decisions they will take in order to control inflation, which is still much higher than the goal of central banks.

From a technical point of view (Figure 1), gold succeeded last week in breaching the important resistance levels near $1846 an ounce, and succeeded in breaching the average prices for the last 100 days, and we will monitor to what extent gold will be able to continue trading above those levels and also, we will monitor its ability to targeting the previous peak at $1870 an ounce.


XAUUSD chart

Figure 1: XAUUSD, Metatrader 5, CFI Brokerage


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