Daily Market Analysis from ForexMart

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USD/JPY. Its own atmosphere

The USD/JPY pair has been trading in its own "coordinate system", prioritizing fundamental factors. For example, the pair was actively rising at the start of the week, despite the decline in the U.S. dollar index. Traders of USD/JPY ignored the general weakening of the US currency and even updated the local high (131.14). We will discuss the reasons for such behavior below, but first of all we should pay attention to the most important fact: the bulls failed to settle above the resistance level of 131.00 (middle line of the indicator Bollinger Bands on the D1 chart). Bulls found it hard to climb above this level, which speaks about how unstable their position is. The scale is still in favor of the yen, even in that isolated "coordinate system", in which the pair has to trade.

Yen at the helm
What is the peculiarity of the pair's behavior?

For so many years, the yen acted as a follower, while the greenback took the lead. The Bank of Japan's monetary policy with Governor Haruhiko Kuroda, who was appointed to his post in 2013, repeated the same mantra month after month - that the central bank is committed to accommodative policy and, if necessary, ready to further ease monetary policy parameters. Everybody got used to this rhetoric and did not react to it, at least in the context of the USD/JPY pair. Nearly all of the BOJ meetings were of a pass-through nature, so they had little effect on the price values.

But everything changed in December, when the BOJ allowed long-term Japanese government bond (JGB) yields to move in a wider range at the end of the last meeting in 2022. This decision was made, firstly, quite unexpectedly, and secondly - ahead of Kuroda's resignation (he will leave his post in April). Therefore, the market interpreted the outcome of the December meeting very unambiguously, coming to the conclusion that the central bank had taken the first step towards the normalization of monetary policy. Since then, the yen has ceased to be a "slave" in the USD/JPY pair: the focus is no longer just on the Federal Reserve's monetary policy prospects, but also on the prospects of a pivot in the Japanese central bank's policy.

The BOJ strikes back
The BOJ obviously did not expect such a violent reaction from the market and such unambiguous, categorical conclusions. That is why Kuroda said back in late December that the central bank was not going to abandon its ultra-loose monetary policy in the near future. But the market ignored his rhetoric.

Earlier this week, the bears had to deal with another blow: the BOJ published the minutes of its December meeting where several Governing Council members stressed that the "the Bank should carefully explain that it needs to continue with monetary easing, that its accommodative policy stance has not been changed,". The bears were then forced to retreat. Bulls took the initiative and hit a new local high on Tuesday, testing the 131.00 level of resistance. But they failed to hold on to their positions: the bears took the initiative as soon as the bullish momentum faded. At the moment, when this article was being written, the pair was already going down to the bottom of the 129th figure, almost 200 points away from the local high (in only 2 days!).

The pair is going down not only because the dollar is "moping" (dollar index is moving to the base of the 101st figure again), but the yen is also strengthening its positions due to "its" own fundamental factors.

Inflation, inflation, inflation
First, inflation in Japan continues to show an uptrend, renewing multi-year records. Overall consumer price inflation accelerated to 4.0% in December. Excluding fresh food and energy, consumer prices climbed 3.0% annually, and the corporate goods price index was up 10.2% y/y. On Friday, January 27, Japan will publish another important inflation indicator, the January Tokyo Consumer Price Index. It is considered a leading indicator for price movements across the country, so certain conclusions can be drawn from the published figures. If it will be in favor of the yen again, the USD/JPY pair may return to the area of 127-128 figures, where it was traded in early January.

Traders of the pair are now acting ahead of the consolidated forecasts. Thus, according to most experts, Tokyo's overall CPI will rise to 4.2%: the last time the figure was at that high was in November 1981. The other components of the report (excluding fresh food prices; excluding food and energy prices) should also show an uptrend.

Conclusions
Judging by the results of the last few days, we can conclude that the yen held its ground and did not let the bulls settle above the resistance level of 131.00. Undoubtedly, the greenback, which is getting weaker all over the market again, has also played its part. But we should also consider that the pair was rising this week while the USD index was falling. Therefore, the pair is bearish also due to the strengthening of the Japanese currency. Further price declines will largely depend on this week's key releases: if US GDP growth data for Q4 and the core PCE index come out in the red, while Tokyo CPI surprises with its greenback, the pressure on the pair will only intensify. The main bearish target is 127.30 (bottom line of the Bollinger Bands indicator on the D1 chart).

 

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Hot forecast for GBP/USD on 27/01/2023

US economic growth is expected to have slowed from 1.9% to 1.6%, but the first estimate of GDP for the fourth quarter showed a slowdown to 1.0%. This is perfectly in line with speculation that the US economy is at risk of sliding into recession. And with it the global economy. In theory, this would lead to the inevitable depreciation of the dollar. However, this has not happened. If you look at the pound, it has actually remained in place. The dollar edged up when the report was published, but then it quickly returned to the positions at which it was just before the US GDP report was released. The reason for such a strange reaction to obviously weak data lies in the preliminary estimates themselves. Yes, in annual terms, the growth rate slowed down significantly. However, if we look at the quarterly data, the economy grew by 2.9% in the fourth quarter, while the growth forecast was 2.7%. And if you also look at the durable goods orders, which suddenly rose as much as 5.6%, well above the 2.2% forecast, then you would see that the market's reaction is quite understandable. Yes, the economy has slowed down a lot, but there are signs that a recession can be avoided. The durable goods report hints at the possibility of an economic recovery as early as the first quarter.

GDP change (United States):

Despite the obvious interest in long positions, GBPUSD failed to update the local high of the upward cycle. As a result, 1.2440 has become a kind of resistance level against which stagnation/rebound occurs.

On the four-hour chart, the RSI technical indicator is moving in the upper area of 50/70, which points to the bullish sentiment. There is a similar technical signal on the daily chart.

On the four-hour chart, the Alligator's MAs have numerous intersections, which corresponds to the flat movement. The MAs are headed upwards.

Outlook

Based on the fact that the price has been fluctuating this week, the pair has been trading within the sideways channel of 1.2300/1.2440. At the peak of the upward cycle, this movement points to an accumulation process. As a result, an outgoing momentum should emerge that may indicate the price's succeeding direction.

In terms of the complex indicator analysis, we see that in the short-term and intraday periods, the indicator is providing a mixed signal because of stagnation. In the mid-term period, the indicators are moving in the direction of the upward cycle from the previous fall.

 

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EUR/USD and GBP/USD trading plan for beginners on January 30, 2023

Details of the economic calendar on January 27
The economic calendar was almost empty on Friday. No important reports were published in the EU, the United Kingdom, and the Unites States.

However, it was possible to highlight the U.S. Pending Home Sales Index, which grew by 2.5% in December. Despite the positive data, no one paid attention to them.

Analysis of trading charts from January 27
The EURUSD currency pair has been within the sideways movement of 1.0840/1.0930 throughout the past week. This amplitude indicates the process of accumulation of trading forces, where, in the light of upcoming economic events, it will be won back in the form of price leverage.

Despite the fact that the GBPUSD currency pair had a wider amplitude compared to EURUSD, in general terms, everything is the same. The borders of price fluctuations are clamped between the values of 1.2300 and 1.2440, where the quote has been moving for almost two weeks. In fact, this price movement, as well as for the euro, indicates the process of accumulation of trading forces. Otherwise, a full-blown correction would have already occurred in the market.

Economic calendar for January 30
The economic calendar is traditionally empty on Monday. No important reports are expected. But do not be discouraged as the heat will begin at the middle of the week: the results of the Fed meeting, followed by the ECB, the Bank of England, inflation in the EU, and U.S. Department of Labor report. We expect high volatility in the financial markets.

EUR/USD trading plan for January 30
In this situation, where there is a price movement looped in a sideways range, it is appropriate to work according to the method of breaking through one or another stagnation border. As a result, with a high degree of probability, an outgoing impulse will arise, which will lead to the completion of the flat, indicating the subsequent movement.

Based on the above, consider two possible scenarios:

The upward move will be relevant if the price holds above 1.0940 in a four-hour period. This move will lead towards the 1.1000 psychological level.

The downward move will be applied if the price holds below 1.0840 in a four-hour period. This move could initially push the euro towards 1.0800. After that, a transition to the full-blown correction stage is possible.

GBP/USD trading plan for January 30
Based on the fact that the flat still takes place in the market, the tactics of working by the method of breaking through one or another range boundary is considered the most optimal.

Let's concretize the above:

The downward move will be relevant if the price holds below the level of 1.2300 in a four-hour period. This step can lead to the formation of a full-blown correction.

The upward move is taken into account in case of a stable holding of the price above the value of 1.2450 in a four-hour period. This move will indicate a continuation of the upward trend.

What's on the charts
The candlestick chart type is white and black graphic rectangles with lines above and below. With a detailed analysis of each individual candle, you can see its characteristics relative to a particular time frame: opening price, closing price, intraday high and low.

Horizontal levels are price coordinates, relative to which a price may stop or reverse its trajectory. In the market, these levels are called support and resistance.

Circles and rectangles are highlighted examples where the price reversed in history. This color highlighting indicates horizontal lines that may put pressure on the asset's price in the future.

The up/down arrows are landmarks of the possible price direction in the future.

 

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AUD/USD. A black streak for the Australian dollar

A "black streak" came for the AUD/USD bulls after a streak of gains. The pair was rising almost the entire week and hit 0.7147, a seven-month high. But traders couldn't keep it at the level of the 71st figure: the price went down for the second day and tested the 69th price level. Although, it is worth taking note of the fact that the pair is losing ground not only because of the greenback's strength ahead of the Federal Reserve meeting.

Australia: Labor market and inflation
In exactly one week's time, the Reserve Bank of Australia will hold its meeting on February 7. Therefore, traders are not only discussing the outcome of the Fed meeting, but are also preparing for the announcement of the RBA's verdict.

See also: You can open a trading account here
AUD/USD. A black streak for the Australian dollar
Take note that last week, the pair received strong support from Australian inflation. Data on consumer price index growth in Australia turned out to be in the green zone, surprising market participants. For example, the monthly CPI indicator rose to 8.4% in the twelve months to December (with a forecasted increase to 7.6%). As for Q4 as a whole, all indicators were also in the green zone, exceeding analysts' expectations. In particular, Australia's annual rate of inflation has risen to a record high of 7.8% (with the forecast of 7.5%). The indicator continued the uptrend that it demonstrated throughout last year. The CPI rose 1.9% in the December 2022 quarter, while most experts had forecast a decline to 1.6% (after 1.8% in the third quarter). Core inflation in Australia (weighted average CPI) in quarterly terms also exceeded forecasts, coming in at 1.7%.

The inflation report "revived" the aussie after the previous labor market report. This report, on the contrary, turned out to be very controversial. The growth rate of the number of employed people fell to -14,600, while the growth rate was forecasted to +27,000. After the report, there were rumors in the market that the RBA might take a break in hiking rates in the beginning of spring. Unexpectedly strong inflation refuted these rumors, and the pair managed to conquer the resistance level of 0.7000.

The decline was due to investors' concerns over the actions of the Australian central bank. In my opinion, these fears are exaggerated.

The next steps of the RBA
Let me remind you that after the previous (December) meeting, RBA Governor Philip Lowe said that the central bank does not follow the pre-planned course: according to him, "the size and timing of future rate hikes will continue to be determined by incoming data and the Board's assessment of the outlook for inflation and the labor market". And while the labor market has generally "let down" the bulls, rising Australian inflation clearly speaks in favor of further rate hikes.

In this context, another phrase from Lowe is also noteworthy - that "the Board's priority is to return inflation to target over time".

One would assume that the central bank would slow the pace of rate hikes. But in this case, the RBA played ahead of the curve, lowering the rate to 25 points ahead of many of the leading central banks in the world. That's why this issue was off the table months ago.

As for rumors that the RBA may pause in monetary tightening, first of all, representatives of the central bank have repeatedly denied such intentions, and secondly, inflation indicators have offset the "dovish" talk, even amid weak "Australian Nonfarm".

Conclusions
The Australian dollar, in my opinion, unreasonably yields to pressure from the US currency. Certainly, ahead of the announcement of the results of the Federal Reserve's February meeting, it is detrimental and even dangerous to open any trading positions on the pair. But if the Fed does not ally with the greenback, the upward route for the pair's bulls will be open, even despite some doubts regarding the RBA's further actions. The bullish target will be 0.7150 again.

Technically speaking, the pair is between the middle and the upper lines of the Bollinger Bands indicator on the D1 chart, as well as above all lines of the Ichimoku indicator, which demonstrates a bullish "Parade of Lines" signal. In other words, technically, the pair retains the potential for further growth, to the major resistance level of 0.7150 (the upper line of the Bollinger Bands indicator on D1). A breakdown of this level will open the way to the area of the 72nd figure.

 

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Aggressive Fed rate hike is ending

Euro rose above 1.1000 after the Fed signaled a change in their stance on monetary policy. Their statements during yesterday's meeting were more dovish compared to December, with interest rates increasing by only 25 basis points to a range of 4.5%-4.75%.

At first, markets did not react much to the news as everyone was waiting for the speech of Jerome Powell. But when the Fed Chairman confirmed that they will no longer be aggressive in terms of interest rates, risk appetite surged. The decision was kind of in line with what everyone was expecting, that is, a more optimistic view of inflation and the economy. Of course, Powell was not objectively dovish, but neither was he overly hawkish, which was enough for the market.

Speaking to reporters on Wednesday, Powell said they are forecasting "a couple more" rate hikes, but are ready to adjust their plans if price pressures eased faster than expected. When asked about easing conditions in financial markets that could complicate the central bank's path to return to its 2.0% inflation target, he did not sound particularly concerned.

The 25 basis point hike that was made yesterday was another step towards policy normalization after a half-point rate hike in December and four giant hikes of 75 basis points before that. Most likely, the soft inflation data in recent months has been persuasive enough for the Fed to consider suspending their rate hike campaign. Although the committee continues to cite high prices, the hint of two more 25 basis point hikes confirms market expectations of a final rate hike of 5.25%.

During the press conference, Powell admitted that the US economy is now in an era of disinflation with cooling price pressures. He stressed that more data is needed before they can declare victory, but did not specify how much they need to ensure that inflation is on the right track.

In terms of the forex market, demand for euro surged, but buyers need to protect 1.1000 in order to maintain the chance of rising above 1.1050. Possible price levels in such a situation are 1.1090 and 1.1125. In the event of a decline, EUR/USD could move below 1.1000 and head towards 1.0960 and 1.0920.

For GBP/USD, the sideways trend persists, so buyers need to return above 1.2420 to regain their advantage. Only the breakdown of this resistance level will strengthen the hope of a rise towards 1.2470, after which it will be possible for the pair to reach 1.2540. If pressure returns and sellers take control of 1.2350, the pair will fall to 1.2290 and 1.2230.

 

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EUR/USD. The Fed hit the dollar, the ECB hit the euro

The European Central Bank increased the interest rate by 50 points at this year's first meeting, while announcing a 50-point hike at the next meeting in March. Despite such hawkish results of the February meeting, the euro came under pressure. The single currency retreated from a multi-month price peak (1.1034) and returned to the area of the 9th figure. Anomalous, at the first glance, market reaction is due to several factors.

Spring is near
If you assess the February meetings of the Federal Reserve, Bank of England and ECB, you can take note of one general characteristic. On the one hand, central banks declared the continuation of a hawkish course, but on the other hand, they made it clear that aggressive monetary policies are coming to an end. That's why the dollar was under attack at the end of the Fed meeting, the pound was under pressure by the end of the BoE meeting, and the euro was losing ground by the results of the ECB meeting. At the same time, traders actually ignored the fact that the central banks announced further steps to monetary tightening.

For example, ECB President Christine Lagarde without any vague wording, which is considered "straightforward", announced that the ECB intends to raise interest rates by another 50 basis points during the next meeting in March. According to her, the disinflationary process hadn't begun, despite the slowdown in the overall consumer price index (core inflation continues to show an uptrend).

It would seem that such straightforward hawkish verbal signals should have served as a springboard for the euro. But instead of growth to the resistance level of 1.1090 (the upper line of the Bollinger Bands indicator on the weekly chart), the price turned 180 degrees and was marked in the area of the 8th figure, followed by the retreat to the area of the 9th price level.

Why did this happen?
First of all, Lagarde, while announcing monetary tightening in March, questioned the further growth of interest rates. According to her, after the March decision "the ECB will evaluate the subsequent path of monetary policy." At the same time, market expectations (in particular, currency strategists at Danske Bank and a number of other large conglomerates) are more hawkish. The assumed scenario includes a 50-point hike in March and a 25-point increase at the next meeting (by 50 points according to some other analysts). Therefore, Lagarde's "wrap-up" sentiment was negatively received by EUR/USD bulls. The single currency was under pressure as traders took the ECB's message as a sign that the central bank nears the end of its rate hike cycle. In my opinion, the market adequately assessed the situation and correctly perceived the signals of the ECB.

Secondly, the ECB head emphasized her stance on problematic aspects - in particular, she said that economic activity in the European region has slowed down noticeably. At the same time, "high inflation and tighter financing conditions, these headwinds dampen spending and production,". Such comments put pressure on the euro.

Nevertheless, despite the euro's negative response, the EUR/USD pair did not collapse into the area of 7-6 figures, but only retreated from the multi-month price high to the base of the 9th price level. The underlying reason for such stress tolerance is that Lagarde tried to maintain a balance in her rhetoric. On the one hand, she announced a "guaranteed" 50-point hike in March, on the other hand, she questioned further steps towards tightening. On the one hand, Lagarde complained about the slowdown in economic activity; but then she also admitted that the European economy has been more resilient than expected. Moreover, according to forecasts, the economy will show signs of recovery in the coming quarters. At the same time, the ECB head pointed to the optimism of entrepreneurs (obviously referring to the PMI and ifo indices), stable gas supplies to Europe and reduced interruptions.

Conclusions
Figuratively speaking, the scales are back in equilibrium again: The Fed put pressure on the dollar, and the ECB put almost as much pressure on the greenback. The bulls couldn't conquer the 10th figure, the bears couldn't pull the price down to the 7th figure (and even failed to get a foothold at the 8th price level). Now everything will depend on the values of the key macroeconomic indicators, first of all, in regards to inflation. If core inflation in the European region persistently climbs up, the ECB may raise the rate not only in March but also at the next meeting. The US faces a similar situation: the Fed chief has declared a hawkish course, "tying" the scope of monetary tightening to the dynamics of key inflation indicators. Each inflation report and each inflation component (both in the US and Europe) will be viewed through the prism of further central bank actions.

Following the Fed and ECB meetings, the pair remained in the 1.0850-1.0970 range within which it has been trading for several weeks. In my opinion, in the mid-term perspective, the pair will fluctuate in the given price range, alternately pushing back from its limits, reacting to the current information flow.

 

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EUR/USD: euro seeks growth opportunities as US dollar remains under pressure from statistic data

The US currency began this week on the back foot. USD retreated significantly after an earlier upsurge triggered by US labor market data. The euro took advantage of the situation and once again rebounded, trying to consolidate its past gains.

On Monday, February 6, the US dollar extended its Friday rally, which began after the release of strong labor market data. However, USD could not overtake EUR. On Friday, February 3, the US dollar index (USDX) jumped and tested the three-week high at 102.7.

As the greenback surged, US stock futures declined considerably. The release of strong US labor market data prompted investors to avoid risky assets, and sent USD higher, as it indicated that the Fed's policy expectations should be reconsidered. Market participants are expecting the regulator to continue its hawkish policy and put the peak interest rate at 5%-5.25%. According to preliminary estimates, this could be achieved with two additional hikes. Analysts say that the non-farm payrolls for January show that the US labor market is overheated. This would give the Fed more room for further rate hikes, experts say.

In the meantime, the European currency rallied after dropping on Friday by 1%. At the beginning of the new week EUR rose against USD and hit 1.0796. EUR/USD traded at 1.0790 early on Monday, February 6, trying to hold on to its gains. FX strategists at TD Securities believe the pair will move near 1.0800, but may retreat to the low of 1.0600 in the near future.

According to the US Bureau of Labor Statistics, unemployment in the United States dropped unexpectedly by 0.1% in January, reaching an all-time low of 3.4%. Experts expected the rate to rise to 3.6%. The latest data shows that employment rose by 894,000 in January, while the number of unemployed declined by 28,000. At the same time, the number of non-farm payrolls rose by 517,000, far exceeding forecasts. The non-farm payroll report for December 2022 was also revised upward.

According to estimates, the number of new jobs in the US economy was almost three times higher than expected. The unexpected growth gave the American economy a new impulse, experts noted. In January, the world's largest economy added 517,000 jobs. This is almost twice as much compared to 223,000 new jobs registered in December 2022.

In addition, average hourly earnings in the US rose by 0.3% last month. Last December average hourly earnings increased by 0.4%. As a result, year-on-year wage growth declined to 4.4% from 4.8% in the previous month. According to current data, public sector employment in the U.S. increased substantially, with 74,000 new jobs added.

Business activity in the US service sector also picked up in January. After a brief dip in December 2022, the index was back above the key level of 50 points, which separates growth from decline. As a result, the ISM Services PMI went up noticeably and advanced to 55.2 points from 49.6 points in November 2022. Recall that in November last year this indicator was 49.6 points.

The current macroeconomic data supported the US dollar, which gained 1% against the euro at the end of last week. However, on Monday, February 6, USD reversed course. As a result, the European currency got the upper hand, recouping its earlier drop.

Analysts believe that upcoming retail sales data in the eurozone may change this situation. Earlier, the euro decreased after the ECB made its decision on interest rates, only to increase after the statements made by the Federal Reserve. Last week, Fed chairman Jerome Powell suggested that there were only two rate hikes left for the regulator. In addition, the head of the Federal Reserve made it clear that the regulator may likely change its monetary policy interest rate, as the rate could reach its peak in 2023 (5%-5.25%).

Amid this situation, analysts noted that the market has become "tired" of endless USD sell-offs. This trend has been continuing throughout the last four months. This might lead to a corrective pullback of EUR/USD by 3%-4%, experts argue. In case of such a scenario, market participants will be able to take their current profits and balance their investment portfolios.

 

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EUR/USD and GBP/USD trading plan for beginners on February 8, 2023

Details of the economic calendar on February 7
The macroeconomic calendar was empty. No important reports were released in the EU, the United Kingdom, and the Unites States.

In this regard, investors and traders focused on the incoming information and news flow. Federal Reserve Chairman Jerome Powell spoke before the Economic Club of Washington, where he once again pointed out the hawkish position of the regulator. However, the markets ignored Powell's words, perhaps due to the fact that all his statements were already known from the recent Fed meeting.

The main theses from Powell's speech:

- inflationary pressure is decreasing

- there is still a lot of work to be done

- interest rates need to be raised further

- national employment report was much stronger than expected

- monetary policy is still not sufficiently restrictive

- if the data continues to come out stronger than expected, the Fed will raise the rate even more

- 2% inflation target will not change

- inflation to fall significantly in 2023

- the labor market is strong because the economy is strong

- no decline in service sector inflation yet

- no decline in real estate inflation so far, expected in 2H 2023

- in order to fully reduce inflation, easing in the labor market is necessary

- if strong labor market reports or reports of higher inflation continue, the Fed may need to raise rates more than the markets are laying

- The Fed will respond to incoming statistics

Analysis of trading charts from February 7
The EURUSD currency pair reached 1.0670 during the downward cycle, where there was a reduction in the volume of short positions. As a result, the market rebounded slightly above 1.0750, but this movement did not lead to anything cardinal. So far, all this reminds of the stagnation that arose at the stage of the downward cycle.

The GBPUSD currency pair, despite the manifestation of local activity, continued to move within the area of the 1.2000 psychological level. This price stagnation may well indicate a realignment of trading forces, which will eventually play into the hands of speculators.

Economic calendar for February 8
Today, the macroeconomic calendar is again empty. No important reports are expected in the EU, the United Kingdom, and the Unites States.

In this regard, investors and traders will continue to focus on the incoming information and news flow.

EUR/USD trading plan for February 8
Based on the euro's oversold status due to the strong price action the days before, the current stagnation-pullback is a justified move in the market. At the same time, the update of the correction low points to the continuing downward mood among traders in the market.

In this situation, the technical signal about the completion of the corrective move may be the price holding above the level of 1.0800 in a four-hour period.

As for the downward scenario, a prolonged corrective move may occur when the price holds below 1.0660.

GBP/USD trading plan for February 8
In this situation, special attention is paid to two values, these are 1.2100, where holding above it for at least a four-hour period may indicate the completion of a corrective move, and 1.1950, if the price holds below this value in the daily period, it may prolong the current downward cycle.

Until the above technical signals are confirmed, the market will continue to have variable turbulence along the 1.2000 psychological level.

 

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EUR/USD: Breaking forecast on February 13, 2023

At the beginning of the previous week, Fed Chair Jerome Powell said that there was a need for more rate hikes. Meanwhile, ECB member Isabel Schnabel gave vague answers to questions about interest rates in an interview on Friday. Thus, we can see how the stance of the two regulators differs. That adds more pressure on the euro. At the same time, a predictable ECB is what investors need right now. Above all else, the market believes that the European regulator will be the first to cut rates this year. Therefore, the greenback goes up in price. Nevertheless, the dollar is significantly overbought. So, a correction in the market is needed. Given that the macroeconomic calendar is empty today, now is the perfect time for it. However, taking into account the rhetoric of the central banks, technical factors might not be enough for triggering a correction. Without macro statistics, the market will simply consolidate near the current levels.

Moving down, EUR/USD hit a new low, and the corrective move went on from the high of the medium-term trend.

The RSI technical indicator is moving down between lines 30 and 50 in the 4-hour time frame, which indicates a corrective move. In the daily time frame, the RSI is near the levels of October last year, which reflects strong bearish sentiment in the market.

The Alligator's moving averages (MA) are headed down in the 1-hour, 4-hour, and daily time frames, signaling a corrective move from the high of the upward cycle.

Outlook

At this point, consolidation below 1.0650 in the 4-hour time frame at least could cause an increase in selling volumes, which in turn could prolong the corrective move.

Alternatively, if the downtrend cycle slows, the price may retrace and come to a standstill.

Based on complex indicator analysis, there is a sell signal for short-term and medium-term trading due to a correction continuation.

 

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Trading signal for GOLD (XAU/USD) on February 15-16, 2023: buy above $1,856 (221 SMA - bearish channel)

Early in the Asian session, gold is trading around 1,853.79, below the 21 SMA, and below the 3/8 Murray. It is likely that the bearish force in gold could be running out and a technical bounce could follow.

Yesterday during the American session, gold reached the support of 1,843 (3/8 Murray) in light of the US inflation data. Since then, the metal has been rebounding and reached the top of the downtrend channel which has been underway since February 2 but could not break it.

A sharp break above this downtrend channel could be a signal for a sustained gold rally. The price could hit 5/8 Murray at 1,906.

The key to buying should be to wait for XAU/USD to consolidate above the 200 EMA and 4/8 Murray around 1,875. From there, the instrument could reach 1,900 and 1,937(6/8 Murray).

Conversely, below 1,858, we would expect gold to continue to consolidate but for a clear continuation of the bearish move, we should wait for a daily close below 3/8 Murray located at 1,843 (3/8 Murray).

If in the next few hours, gold consolidates above the daily pivot point located at 1,854 and 1,856 (21 SMA) or above 1,843, we could expect it to reach 1,865 (top of the bearish channel) and 4/8 Murray at 1,875.

 

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Technical Analysis of EUR/USD for February 16, 2023

Technical Market Outlook:

The EUR/USD pair has been seen moving lower after the bounce from the level of 1.0656 had been capped at 50 MA on H4 time frame chart. The High Tide candlestick pattern was followed by Bearish Engulfing candlestick pattern and then Marubozu candle was done as well. The market is in progress of the ABC corrective cycle and now the wave C in being developed. So far the wave C had reached the level of 1.0656 again, but a breakout is imminent. When the corrective cycle is done, the next target for bears is the technical support located at 1.0622. The momentum remains weak and negative, so all bounces are being used by bears to sell the EUR for a better price. Please keep an eye on the level of 1.0787 because this is the key short-term technical resistance.

Weekly Pivot Points:

WR3 - 1.07422

WR2 - 1.07078

WR1 - 1.06916

Weekly Pivot - 1.06734

WS1 - 1.06572

WS2 - 1.06390

WS3 - 1.06046

Trading Outlook:

Since the beginning of October 2022 the EUR/USD is in the corrective cycle to the upside, but the main, long-term trend remains bearish. This corrective cycle might had been terminated at the level of 1.1033 which is 50% Fibonacci retracement level. The EUR had made a new multi-decade low at the level of 0.9538, so as long as the USD is being bought all across the board, the down trend will continue towards the new lows.

 

[KostiaForexMart]

EUR/USD and GBP/USD trading plan for beginners on February 20, 2023

Details of the economic calendar on February 17
Friday's U.K. retail sales data reflected a slowdown in the rate of decline from -6.1% to -5.8%. However, it should be taken into account that the previous data was revised negative from -5.8% to -6.1%.

The pound declined amid the statistical data.

Analysis of trading charts from February 17
EURUSD locally dropped below the level of 1.0650, but the quote did not manage to hold on to the new values. As a result, a pullback occured, which brought the quote back above the previously passed level. Based on the dynamics during the pullback period, there was a sharp reduction in the volume of short positions in the euro. Thus, the breakdown of the 1.0650 level might have been false.

GBPUSD failed to stay below the value of 1.1950. As a result, there was a reduction in the volume of short positions on the market, leading to a slowdown in the downward cycle, which caused a price pullback.

Economic calendar for February 20
Today, the macroeconomic calendar is empty, the publication of important statistics is not expected. It is worth noting that today is a non-working day in the United States on the occasion of a national holiday. For this reason, banks and stock exchanges are not working, which may adversely affect trading volumes.

EUR/USD trading plan for February 20
If the current pullback leads to strengthening of long positions in the euro, it may return the quote to the local high of the past week.

As for the downside scenario, the quote must first return below the level of 1.0650 and stay there in the daily period. In this case, the breakdown of 1.0650 will be confirmed on the market, which will open the way towards 1.0500.

GBP/USD trading plan for February 20
The area of the 1.2000 support level still puts pressure on sellers, despite the fact that it was locally broken by the price. Presumably, the current pullback-stagnation will play the role of accumulation of trading forces. This, in turn, will lead to new price hikes.

As for the signal values, the boundaries of the deviation from the 1.2000 psychological level will be 1.1950 and 1.2050. These values are highly likely to become the starting point for speculators. Note that the quote needs to hold beyond this or that value in the daily period.

What's on the charts
The candlestick chart type is white and black graphic rectangles with lines above and below. With a detailed analysis of each individual candle, you can see its characteristics relative to a particular time frame: opening price, closing price, intraday high and low.

Horizontal levels are price coordinates, relative to which a price may stop or reverse its trajectory. In the market, these levels are called support and resistance.

Circles and rectangles are highlighted examples where the price reversed in history. This color highlighting indicates horizontal lines that may put pressure on the asset's price in the future.

The up/down arrows are landmarks of the possible price direction in the future.

 

[KostiaForexMart]

EUR/USD and GBP/USD trading plan for beginners on February 22, 2023

Details of the economic calendar on February 21
Particular attention was given to the preliminary assessment of business activity indices in Europe, Great Britain and the United States.

Details of PMI statistics:

The Eurozone manufacturing PMI fell from 48.8 to 48.5 in February, with a forecast of 49.5. Services PMI for the same period rose from 50.8 to 53.0, with a forecast of 51.5. And the composite PMI rose from 50.3 to 52.3, with a forecast of 51.0.

The euro did not win back the news flow in any way.

UK manufacturing PMI rose from 47.0 to 49.2, with a forecast of 47.5. Services PMI rose from 48.7 to 53.3, while composite PMI rose from 48.5 to 53.0.

The pound sterling reacted to the statistical data with a rise in value.

U.S. Manufacturing PMI rose from 46.9 to 47.8. Services PMI rose from 46.8 to 50.5 points, while composite PMI rose from 46.8 to 50.2 points.

The dollar reacted not quite typically to positive statistics.

Analysis of trading charts from February 21
Despite the local manifestation of speculative activity, the EURUSD currency pair continues to move within the level of 1.0650. This indicates a typical uncertainty of the direction of movement among market participants.

The GBPUSD currency pair was able to overcome the stagnation in the upper area of the 1.2000/1.2050 psychological level due to the upward momentum. This led to an increase in the volume of long positions on the pound sterling and a further rise of quotes to 1.2150.

Economic calendar for February 22
Today, the macroeconomic calendar is almost empty except for a few publications which are unlikely to attract the attention of large investors. However, familiarization with the FOMC protocol, which will be released at 19:00 UTC, may be informative.

EUR/USD trading plan for February 22
In order for the market to have a technical signal about the continuation of the current corrective trend, the quote needs to stay below the level of 1.0650 in the daily period. In such a situation, an increase in the volume of short positions on the euro is possible, which will lead to a decrease in the price to the level of 1.0500.

If the market moves in an alternative direction, the quote needs to rise above the level of 1.0750 to continue the upward trend. In this case, an increase to the level of 1.0800 is possible.

GBP/USD trading plan for February 22
Buyers face resistance at 1.2150, which leads to a decrease in the volume of long positions and stagnation-pullback in the market. In order to continue rising, the quote needs to be kept above the level of 1.2150 within a 4-hour period. If this level is not overcome, the quote may return to the 1.2000 support level.

 

[KostiaForexMart]

GBP/USD: Breaking forecast on February 28, 2023

Yesterday, the greenback plunged on the back of disappointing macro statistics in the US. Thus, durable goods orders tumbled by 4.5% after surging by a downwardly revised 5.1% in the previous month. Figures had been expected to show a 3.5% decline. In this light, consumer spending in the US may soon drop, with its growth now slowing.

United States Durable Goods Orders:

Today's macroeconomic calendar is empty. The greenback has recently been bearish only when under the pressure from weak macroeconomic statistics. When the calendar was empty, the dollar either strengthened or traded sideways. The first scenario is unlikely to play out due to the greenback's current overbought status. Therefore, we may see a flat trend in the market today.

GBP/USD gained about 1% yesterday. Despite such a sharp price change, the quote is still hovering around a psychological level. In other words, the graphical picture on the chart remained almost unchanged.

Moving up, the RSI crossed line 50 on the H4 chart, signaling a bullish bias.

The Alligator's MAs are intertwined on the H4 chart, indicating a slower downward cycle.

Outlook

The pair is hovering in the 1.1950/1.2050 range, with the psychological level seen at 1.2000. It can be assumed that the current fluctuations near this mark will go on for a while. However, consolidation beyond one of the limits of the 1.1950/1.2050 range on the daily chart may reveal the pair's further movement.

Speaking of complex indicator analysis, there is a signal to buy in the short term and intraday in the wake of the recent impulse.

 

[KostiaForexMart]

EUR/USD looking for direction as market faces uncertainty

Yesterday, the greenback lost almost 0.6% against its main rivals, including the euro.

On Monday, the US dollar stopped its four-day winning streak, giving away profits received in the previous session and rolling back to Friday's levels.

The recent jump in USD was driven by the US Personal Consumption Expenditure Price Index (PCE), which rose by 0.6% last month after increasing by 0.2% in December. In annual terms, the indicator accelerated by 5.4% after rising by 5.3% a month earlier.

"Inflation remains too high and the latest data reinforces my view that we still have a long way to go to bring inflation down to our 2% target," Boston Fed President Susan Collins said in a statement.

"The PCE price index report indicates that more effort will be needed from the Fed to put inflation on a sustained path down to 2%," Cleveland Fed President Loretta Mester said.

The latest data cast doubt on the assertions of Fed Chairman Jerome Powell about the start of a disinflationary process in the United States.

This sentiment seemed to be shared by most FOMC members and justified the central bank's decision to raise interest rates by 25 basis points at its monetary policy meeting on January 31-February 1 after a string of larger moves in 2022.

"If the Fed had received this data at the last meeting, it would probably have raised rates by 50 basis points, and Jerome Powell's stance at the press conference would have been very different," strategists at Cetera Investment Management said.

Fed officials speaking on Friday did not push for a return to last year's massive rate hikes, suggesting the central bank is content with a gradual tightening for now, despite signs that inflation is not declining as they had hoped.

It is expected that the Fed will increase the cost of borrowing by another 25 basis points at its next meeting on March 21-22.

However, some analysts see the possibility of raising rates by 50 basis points if inflation remains high and US economic growth is strong.

"We now believe that the likelihood of a 50 basis point Fed rate hike in March is much higher. We estimate the chances of such an outcome at about 60%," NatWest experts noted.

Barclays experts also do not rule out an increase in the cost of borrowing in the US next month by 50 basis points at once.

According to the CME Group, 76% of traders expect the Fed to hike the key rate in March of 25 basis points, while 24% predict a rise by 50 basis points.

The prospect of more robust US inflation, which requires more consistent monetary tightening from the Fed, saw Wall Street's key indicators suffer their biggest weekly losses of the year on Friday.

Over the past week, major US stock indices have lost an average of 3%.

"We have learned that US inflation is proving to be much more stubborn and US activity more resilient than we anticipated in December and January. It is clear that investors are now more serious about the statements of the Fed hawks and have priced in three more rate hikes of 25 basis points in March, May, and June," ING strategists said.

The derivatives market expects the Fed's key rate to peak at 5.4% this year, although a month ago the maximum rate was estimated at 5%.

Traditionally, the Fed raises the rate to support the US currency.

While the US stock market was knocked out by the PCE price index, the dollar hit seven-week highs at 105.30 on Friday and posted its biggest weekly gain since late September 2022, gaining more than 1.3%.

Meanwhile, EUR/USD came under bearish pressure on Friday and went down by about 0.5% to close the day near 1.0545. As a result, the pair lost about 150 pips.

On Monday, the greenback retested multi-week highs and approached 105.40 but failed to hold on to these levels and retreated, following the decline in US Treasury yields.

The demand for USD weakened after the release of disappointing data on US durable goods orders for January.

Last month, the indicator fell by 4.5% compared to December when it jumped by 5.1%.

In addition, renewed risk appetite has left USD on the sidelines.

American stock indices finished yesterday's trading with a moderate rise, recovering by 0.2-0.6% after a sharp decline in the previous week.

Taking advantage of the general weakening of the dollar, EUR/USD managed to recover from multi-week lows in the range of 1.0535-1.0530. The pair gained over 60 pips on Monday and closed in positive territory for the first time in five days, hitting 1.0610.

On Tuesday, the greenback sank to its lowest level since Thursday, reaching the area of 104.40. Later, it managed to win back all the daily losses, rising by about 0.2% from the previous close near 104.60.

The resumption of growth in Treasury yields on Tuesday after a modest retreat on Monday served as a tailwind for USD.

Deteriorating risk sentiment also helped the US dollar to recover.

The "rally of relief" after the correction in equity markets on Friday caused by a negative surprise in the US PCE price index turned out to be short-lived.

Wall Street's key indices were down again on Tuesday.

Traders continue to assess the risks of further tightening of the monetary policy by major central banks in the context of stubbornly high inflation.

Back in January, investors were confident that a slowdown in economic growth would prompt Fed officials to pause the cycle of aggressive rate hikes but strong data has since changed this view.

As a result, investors are reconsidering their soft-landing scenario and are worried that major central banks could tighten monetary conditions too much in response to positive data, triggering a deep recession.

"The market is aware that inflationary pressures in developed countries, namely in the US and the eurozone, are more stable than previously thought," Commerzbank said.

"This is a positive factor for the US dollar because the Fed is seen as being more proactive compared to the ECB. Thus, the EUR/USD levels near 1.1000 have not proved sustainable yet. The pair may struggle to stay above 1.0600 in the coming months," they said.

Nordea strategists expect EUR/USD to drop occasionally to 1.0300 until the summer.

"We assume that the Fed and other central banks will continue to raise rates more than previously expected to tighten financial conditions and reduce inflation. Thus, a rate hike by the Fed would support the dollar, and risk-free market conditions associated with higher interest rates could put pressure on equity markets, further boosting interest in the safe-haven greenback," they said.

Societe Generale believes that the EUR/USD pair will remain under downward pressure.

"The problem facing the ECB, as well as the Fed, is that it may have to extend the tightening cycle and thereby force a harder downturn in the economy. This could lead to a fall in stocks and credit markets. Since the beginning of the year, European securities have been outperforming their American counterparts, and the re-convergence will be a test of the prerequisites for the strengthening of the EUR/USD pair," bank economists said.

"The major currency pair has recently dropped by five figures over the past month on the back of a possible 60-basis-point rate hike implied Fed tightening. If the markets revise the rate forecast to 6%, it would be unwise to rule out further selling," they added.

Stronger-than-expected data from the United States boosted yields in the US more than anywhere else and pushed the dollar higher against most currencies for the first time since it hit a cyclical peak last September, analysts at Capital Economics said.

"While the resilience of the US economy will allow the dollar to remain strong in the near term, we hold the view that recessions in most advanced economies and reduced risk appetite will eventually be the factor that returns USD to its cyclical high later this year," they said.

Despite a recent bout of weakness, the greenback has gained 2.5% since early February and is close to posting its first monthly rise since last September.

The 10-year US Treasury yield could rise by about 40 basis points in a month.

The S&P 500 was down by more than 2% in February after a 6% jump in January.

The market is now waiting for data on the US consumer price index which will be released on March 14.

The data will have an impact on the Fed's policy on interest rates, as well as show whether the efforts of the central bank to slow inflation to the target level are bearing fruit.

If fresh numbers point to accelerating US disinflation, stock markets could turn bullish again, thus triggering a return to the dollar's downtrend.

"But if instead the data released during March confirm the worst-case inflationary no-landing scenario, the resulting March madness could send the 10-year Treasury bond yield above its most recent high of 4.25% on October 24 and the S&P 500 tumbling toward its bear-market low of 3,577.03 on October 12," Yardeni Research said.

In such a scenario, USD is sure to continue the uptrend and EUR/USD is set to decline.

"The repricing of the higher interest rate and reduced expectations of interest rate cuts later this year has breathed new life into last year's strong US dollar trading," MUFG Bank economists said.

They believe that the recent greenback bounce has room for further development in the near term.

"After a break above 105.00, USD could retest its yearly high of 105.63 and then the 200-day moving average in the area just below 106.50," MUFG Bank strategists said.

MUFG believes that the US dollar is the main driver of the EUR/USD exchange rate.

 

[KostiaForexMart]

European stock markets show declines

Yesterday, European stock exchanges closed mostly with declines. The exception was the FTSE 100 index, which rose by 0.49%. All other indices dropped. The DAX index fell by 0.39%, the CAC 40 index decreased by 0.46%, the FTSE MIB lost 0.59%, and the IBEX 35 index slumped by 0.76%. The composite STOXX Europe 600 was down by 0.74%.

European indicators dropped after the release of the latest statistical data on inflation in Germany. According to last month's results, the growth in consumer prices in the country increased to 9.3% from January's level of 9.2%. This indicator exceeded the forecasts of experts, who projected a reduction of 9%.

In addition, France and Spain posted an upsurge in consumer prices over the past month.

Today, the statistical data for all eurozone countries will be published. According to the preliminary forecast, consumer price growth over the past month is expected to decrease to 8.2% from the January level of 8.6%, as well as core inflation is forecasted to maintain at 5.3%.

Skyrocketing inflation is causing fears among investors about a further increase in interest rates by the European regulator more than previously expected. According to analysts' forecasts, the interest rate is expected to rise by 0.5% this month from the current level of 2.5%. In the future, the rates may soar to 4% by February next year.

Another factor was the eurozone manufacturing PMI which dropped to 48.5 from 48.8 on a monthly basis. At the same time, this indicator was in line with preliminary forecasts.

At the same time, the growth of the UK manufacturing PMI was promoted by the release of the latest statistical data from China, which indicate the recovery of the country's economy as a result of the easing of restrictions since the beginning of 2023. In China, the industrial and service sectors expanded.

Among the British FTSE 100 companies, Rio Tinto rose by 4.6%, Glencore gained 3.5%, Anglo American increased by 3.3%, as well as BHP Group added 2.3%. All companies listed above demonstrated the highest gains.

The stocks of European companies were trading mixed. Thus, Siemens AG gained 0.4% due to the company's announcement about the creation of a new company Innomotics, which will start operating independently on July 1, 2023. This division will be engaged in the production of various types of engines and converters.

By contrast, Puma SE fell by 6.8% due to a more than five-fold drop in net profits in the last quarter to €1.4 million, while revenues rose by 24% to €2.2 billion.

In addition, the company's gross margin dropped to 44% as a result of higher promotional costs for products that need to be sold to make room in warehouses.

Just Eat Takeaway.com NV declined by 3.2% due to a sharp increase in net losses last year, which was the result of large write-downs totaling €4.6 billion after the revaluation of previously acquired assets.

On the contrary, Aston Martin Lagonda rose by 3.2%, despite the company's report of a 2.3-fold increase in the company's loss last year. One of the reasons for this was the weakening of the British currency against the US dollar.

Beiersdorf decreased by 0.5%, despite the increase in revenues last year by 10.2%, to €8.8 billion. At the same time, the company predicts a decline in sales growth this year.

 

[KostiaForexMart]

European stock markets show declines

Yesterday, European stock exchanges closed mostly with declines. The exception was the FTSE 100 index, which rose by 0.49%. All other indices dropped. The DAX index fell by 0.39%, the CAC 40 index decreased by 0.46%, the FTSE MIB lost 0.59%, and the IBEX 35 index slumped by 0.76%. The composite STOXX Europe 600 was down by 0.74%.

European indicators dropped after the release of the latest statistical data on inflation in Germany. According to last month's results, the growth in consumer prices in the country increased to 9.3% from January's level of 9.2%. This indicator exceeded the forecasts of experts, who projected a reduction of 9%.

In addition, France and Spain posted an upsurge in consumer prices over the past month.

Today, the statistical data for all eurozone countries will be published. According to the preliminary forecast, consumer price growth over the past month is expected to decrease to 8.2% from the January level of 8.6%, as well as core inflation is forecasted to maintain at 5.3%.

Skyrocketing inflation is causing fears among investors about a further increase in interest rates by the European regulator more than previously expected. According to analysts' forecasts, the interest rate is expected to rise by 0.5% this month from the current level of 2.5%. In the future, the rates may soar to 4% by February next year.

Another factor was the eurozone manufacturing PMI which dropped to 48.5 from 48.8 on a monthly basis. At the same time, this indicator was in line with preliminary forecasts.

At the same time, the growth of the UK manufacturing PMI was promoted by the release of the latest statistical data from China, which indicate the recovery of the country's economy as a result of the easing of restrictions since the beginning of 2023. In China, the industrial and service sectors expanded.

Among the British FTSE 100 companies, Rio Tinto rose by 4.6%, Glencore gained 3.5%, Anglo American increased by 3.3%, as well as BHP Group added 2.3%. All companies listed above demonstrated the highest gains.

The stocks of European companies were trading mixed. Thus, Siemens AG gained 0.4% due to the company's announcement about the creation of a new company Innomotics, which will start operating independently on July 1, 2023. This division will be engaged in the production of various types of engines and converters.

By contrast, Puma SE fell by 6.8% due to a more than five-fold drop in net profits in the last quarter to €1.4 million, while revenues rose by 24% to €2.2 billion.

In addition, the company's gross margin dropped to 44% as a result of higher promotional costs for products that need to be sold to make room in warehouses.

Just Eat Takeaway.com NV declined by 3.2% due to a sharp increase in net losses last year, which was the result of large write-downs totaling €4.6 billion after the revaluation of previously acquired assets.

On the contrary, Aston Martin Lagonda rose by 3.2%, despite the company's report of a 2.3-fold increase in the company's loss last year. One of the reasons for this was the weakening of the British currency against the US dollar.

Beiersdorf decreased by 0.5%, despite the increase in revenues last year by 10.2%, to €8.8 billion. At the same time, the company predicts a decline in sales growth this year.

 

[KostiaForexMart]

Trading signals for GOLD (XAU/USD) on March 6-7, 2023: buy above $1,853 (200 EMA-21 SMA)

Early in the European session, gold is trading around 1,852.80, above the 200 EMA and above the 21 SMA. We can see a bullish bias but no signs of exhaustion.

According to the 4-hour chart, we can see that gold is entering an overbought zone. In the next few hours, gold could fall below 1,850. A technical correction toward the 21 SMA at 1,835 is likely.

Last week's US Durable Goods Orders came in worse than expected. As a result, XAU/USD rallied from the low of 1,804. The performance was about $50 of profit which could mean a change in trend in the short term, but before, we should wait for a technical correction.

This week, Chairman Jerome Powell will release the Federal Reserve's semi-annual monetary policy report. In the event that Powell communicates that it is unlikely that the interest rate increases by more than 0.50% again, the US dollar could be affected and could help gold resume its bullish cycle.

According to the technical chart, gold is in a key zone. If it consolidates above 1,853 in the next few days, it could reach 4/8 Murray at 1,875 and finally could reach the psychological level of 1,900.

According to the eagle indicator, gold is in an overbought zone (95-points). In case it trades below 1,850 we could expect it to consolidate around 1,843 (3/8 Murray). If it breaks below 1,835 (21 SMA), it could then fall until reaching the area of 1,818. At this level, gold left a GAP that still needs to be covered.

Our trading plan for the next few hours is to sell below 1,850, with targets at 1,843 and 1,835. On the other hand, in case the trade is above 1,853, we should continue buying with targets at 1,875 (4/8 Murray).

 

[KostiaForexMart]

Breaking forecast for EUR/USD on March 9, 2023

Jerome Powell's speech led to a slump in the single currency and forced investors to revise their attitude toward the current state of affairs. Against the backdrop, all the macroeconomic reports were ignored yesterday. Notably, a lot of information was issued. Thus, the third estimate of the eurozone GDP was worse than the previous one. The economic growth contracted to 1.8% from 2.4%. This means that Europe may slip into a recession. Meanwhile, US employment increased by 242,000 instead of 191,000, thus pointing to further improvement in the US labor market. Both reports should have led to the appreciation of the greenback but the market got stuck. Investors are trying to predict the future actions of the Fed.

Today, the market is likely to remain stagnant if the forecasts for the US unemployment claims meet reality. A change is expected to be insignificant. Thus, the number of initial claims may increase by 2,000, whereas the number of continuing claims may drop by 5,000. Such figures will hardly revive the market. However, traders should keep in mind that the US dollar is overbought and it may unexpectedly drop.

The euro is stagnant but may rebound against the US dollar after a bearish rally recorded on March 7. Short positions have become overheated amid a sharp price change. This points to the euro's oversold conditions in the short-term periods.

On the one-hour chart, the RSI managed to leave the oversold area thanks to the current stagnation. On the four-hour and daily charts, the indicator is hovering in the lower area of 30/50, which points to the mainly bearish sentiment among traders.

On the four-hour and daily charts, the Alligator's MAs are headed downwards, which corresponds to the existing cycle. On the one-hour chart, the indicator is pointing to a pause in the downward cycle as MAs are intersecting each other.

Outlook

The current stagnation within the range of 40 pips could be considered an accumulation process. This, in turn, may spur an outgoing impulse, indicating the price direction.

The complex indicator analysis unveiled that in the short-term period, indicators are signaling mixed opportunities amid stagnation. In the intraday and mid-term periods, indicators are still providing a bearish signal.

 

[KostiaForexMart]

Hot forecast for GBP/USD on 10/03/2023

At first glance, it is not surprising that the pound was able to show quite good growth yesterday, as the data on unemployment claims in the United States was not only worse than expected, but also pointed to a clear deterioration of the situation in the labor market. For example, the number of initial applications has grown by 21,000 instead of the expected 2,000. The number of new applications, which was expected to fall by 5,000, jumped by 69,000. It turns out that the data only confirmed the validity of this growth. While its main reason was because the pound was oversold. The most important thing is that all the labor market data is coming out in different directions and it is quite obvious that the content of the report, which will be published today by the U.S. Labor Department, will be very different from the forecasts. It is just not clear in which direction it will head.

The number of jobless claims (United States):

Anyway, the start of the trading day isn't going to be very good for the pound as the pace of industrial production decline is expected to accelerate from -4.0% to -4.8% in Great Britain. Moreover, monthly GDP data is not expected to be very encouraging either as it should show a -0.2% drop of the economy. So the British economy is steadily sliding into recession.

Industrial production (UK):

The main event not only of the day, but also of the week, is the report of the United States Department of Labor. If we proceed from current forecasts, which are the only ones we can rely on for the time being, then everything looks good. With a stable level of unemployment, 210,000 new jobs should be created outside of agriculture. This is enough to keep the unemployment rate, which is already incredibly low, stable. And results like that should help the dollar strengthen. The problem is that the data will most likely not match the forecasts. But it's hard to tell whether it will be better or worse. In other words, investors will not take chances and will wait for the report and then they will make their decision.

Unemployment Rate (United States):

GBPUSD reduced the volume of short positions around 1.1800. As a result, there was a slowdown in the bearish cycle, and then the quote reversed. This movement caused the pound to recover relative to its decline on March 7.

On the four-hour chart, during the process of recovery, the RSI crossed the 50 middle line and made its way upwards. This confirms the bullish sentiment.

On the same chart, the Alligator's MAs are intertwined with each other. This is the primary signal of the slowdown of the downward cycle. One the one-day chart, the indicator lines are directed downwards, which corresponds to the downward movement from the beginning of February.

Outlook

As a result, the quote returned to the lower limit of the horizontal channel (1.1920/1.2150) it had already passed. At the moment, the 1.1920/1.1950 area may serve as resistance, and in terms of technical analysis, this can reduce bullish sentiment on the pound. This in turn allows the price to rebound.

However, in case the bullish sentiment persists among traders, and the quote is able to stay above 1.2000, then the pound can rise further.

The complex indicator analysis in the short-term and intraday periods indicate an upward bias or bullish sentiment, this is because the price bounced from 1.1800.