The Week of March 17, 2025

During the past week, we have seen a lot of noisy trading, but at the end of the day, we are still discussing the same things. Everyone is still worried about a US recession, tariff wars, and the entire situation in Ukraine. This will continue to cause volatility, which can offer a few opportunities and high potential for losses if you are on the wrong side of a trade. Big moves back and forth are a situation where, in one minute, we are racing higher, only to turn around and drop massively.

Central Banks

The central bank situation will be hectic, to say the least. The first interest rate decision was made on Wednesday, with the Japanese entering the picture. The Japanese aren’t expected to raise rates yet, but the market will be closely watching the press conference and any expectations they give the markets. The interest rate has been expected to rise in Japan for some time now. Still, there is a real possibility that the Bank of Japan could give us the idea that they aren’t close to raising rates again, which could change the strength dynamics of the Japanese yen, which has been overly strong.

Later that day, the Americans have the FOMC coming out. At this point, the US central bank isn’t expected to be overly aggressive in any way. The crucial part of this central bank decision is the press conference. It comes down to what Jerome Powell says. The statement will also be essential, but think of this as a complete hour in which Jerome Powell will have to make a mess of things, as he typically does.

Thursday, the Swiss National Bank has its interest rate decision. During the announcement, the Swiss should cut by another 25 basis points, from 0.50% to 0.25%. There shouldn’t be a big surprise here, and I believe the CHF will continue to be used as a funding currency. For example, the buyers of other currencies will continue to take advantage of interest rate differentials, and the Swiss will be more than happy to watch the Franc fall further, as it is still overbought.

We have the Bank of England and its interest rate decision almost immediately after the Swiss announcement. There isn’t expected to be a change, but in this case, there is the MPC Official Bank Rate Votes announcement, which can sometimes move the markets, as it gives us an idea of whether or not the British are likely to move towards cuts sooner or later. The expected result is for 2 of 9 to call for cuts.

US Dollar Index

If you get the US dollar correct, you get most things correct. This is especially true in the FX markets. As I look at the USD, it does look a bit oversold. The Friday close shows that we could very well be looking to bounce. Last week showed a bit of stubborn support, and with all of the central bank decisions, there is a real chance that the dollar rallies in the short term.

The Friday candlestick was a hammer, as we are approaching the 200-week EMA. This is an indicator that many people will be watching, and as it isn’t a brick wall, the reality is that the market could fall further in the US dollar. However, we are getting a bit overdone, and I think we are about to see a bounce, not only based on the US Dollar Index charts but also the fact that interest rates in the 10-year continue to show signs of life. The weekly candlestick in the yields chart formed a hammer for the second week in a row. This chart will be one of the most important ones to pay attention to.

The chart below is an example of what you can use for analysis in these markets. The symbol on Tradingview is "US10Y," with the symbol “DE10Y” added. You can see that the red line is the German ten-year yield, and it has been rising. If the red line starts dropping while the candlestick chart on the top is rising, then the EUR/USD pair will almost certainly shift to favor the US dollar. This would signify that the interest paid in America is getting stronger while the German rates are falling. You can do this with many currencies, such as Canadian, British, Japanese, etc.

So, this could be the week the US dollar gets a boost. This will be especially true if some central bank speakers signify they are more dovish than anticipated. This will almost certainly be part of a central bank statement or press conference.

Bitcoin

I still get a lot of questions about Bitcoin on an almost daily basis. If you are not in Bitcoin for the long term, there isn’t much happiness waiting for you. I still see the $74,000 level as significant support, but the risk appetite in Bitcoin and other markets continues to be wanting. Oddly enough, many Bitcoin traders were excited by it “going mainstream.” They are dismayed that it isn’t rising, even though it is an ETF at this point. I am still buying little bits in pieces, dollar cost averaging. I set up automatic purchases and don’t get too concerned about it. If it drops for the next year, that’s even better for me. I would not be a Bitcoin trader at this point.

If the NASDAQ suddenly takes off, this could be the signal that Bitcoin needs. We will have to see, but higher interest rates in the US drag Bitcoin and many other alternative investments lower.

Trade well,

Chris