Euro against US dollar: According to NAGA, SVB case is mainly linked to the US market, while Europe may remain untouched
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The latest NFP figures have been released, but all investors are focusing on the US banking sector this morning. The collapse of SVB, the US’s 16th largest bank, has caused distress in the US markets and globally. Silicon Valley is the US’s tech center and accounts for a 1/3 of the US’s venture capital.
The SVB last week aimed to raise capital while voicing some concern over its performance and the effect of higher interest rates. This triggered a lack of confidence, and many depositors looked to withdraw deposits. However, by Friday, depositors could no longer access their funds.
A real sign of relief for depositors is the Federal Reserve, and the US Treasury has announced that all deposits will be guaranteed. Wells Fargo has come out advising there seems to have been a clear lack of fund diversification, leading to the bank’s failure.
So how is SVB influencing tradable assets?
EUR/USD - Higher Rate Hikes in Doubt?
Investors can see a clear correlation between the SVB developments and the US Dollar largely. First, investors are contemplating whether the Federal Reserve will keep raising interest rates to 6%. The chief Economist at Goldman Sachs, Jan Hatzius, is advising the bank no longer believes the Fed will hike interest rates at the next FOMC rate decision. If the Fed does indeed take a more dovish stance, the US Dollar can be negatively affected. However, this cannot be certain unless we receive confirmation from the Fed.
The SVB development is also mainly linked to the US market, and Europe has more or less zero exposure. Again, this is considered negative for the Dollar.
The exchange rate price during this morning’s Asian session continues to move against the Dollar. The EUR/USD has increased in value for 4 consecutive days and is now trading at almost a 4-week high. The decline in the US Dollar largely drives the price movement. The US Dollar Index declined by 0.60% during this morning’s trading session.
Read the second part of the update by NAGA: Total cryptocurrency market capitalization has increased, so has BTC market share| FXMAG.COM
Regarding technical analysis, indicators and price action signal an upward trend and a retracement. The EUR/USD opened on a bullish price gap measuring 0.39%, and the price has crossed a new high. Currently, the price is trading within the upper Bollinger band and above the Ichimoku trading cloud, which indicates an upward trend. However, the price has formed divergence at the stochastic oscillator in the 15-minute timeframe, which is why a retracement may form. Currently, the volatility levels are likely to remain high, and traders will be monitoring the direction of the price.
EUR/USD 1-Hour Chart on March 13th
Most economists have advised that the Federal Reserve hopes for a low CPI reading tomorrow afternoon. If the CPI announcement is lower than 0.4%, the Fed may opt not to hike 0.50%. The less hawkish Fed is only due to the risk to the banking sector. The employment figures on Friday continue to point towards a strong employment sector. The NFP figure remained high, reading 311,000, and the unemployment rate was confirmed as 3.6%.
