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Forex Forecast & Forex Technical Outlook for 18 March 2024 to 22 March 2024

Forex Forecast & Forex Technical Outlook for 18 March 2024 to 22 March 2024

Although last week's data was not entirely positive, it offers potential avenues for progress that the US economy has reached the preferred equilibrium in inflation, closer to the target set by the FOMC.

Despite the efforts of several Latin American countries to combat inflation, regional disinflation encountered challenges, which could potentially disrupt strategies aimed at reducing interest rates.

Despite prevailing anticipations that the forthcoming FOMC meeting would not yield any policy modifications. Fed, earlier this week, disclosed increased uncertainty among lower-income consumers in the face of broader indicators of a weakening labor market.

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Forex Technical Outlook for 8 March 2024 to 22 March 2024

Let’s see the list of events to look at this week:

  • Industrial Production y/y on Monday
  • BoJ Monetary Policy Statement on Tuesday
  • RBA Cash Rate and Rate Statement on Tuesday
  • CAD CPI m/m on Tuesday
  • GBP CPI y/y on Wednesday
  • Federal Funds Rate and FOMC Statement on Tuesday
  • SNB Policy Rate on Thursday
  • GBP Official Bank Rate on Thursday

Let’s see the market outlook from the weekly forecast:

EUR/USD

EUR/USD passed the trading week volatile above the 1.0800 level but closed below the 1.0900 psychological threshold. The catalyst for this change seems to have been the publication of US macroeconomic data on Thursday, which moderated anticipations regarding a potential early rate cut by the Federal Reserve (Fed).

The US Producer Price Index (PPI) unexpectedly increased 1.6% year-over-year in February, exceeding earlier estimates of 1.1%. The US economy continues to operate steadily, with lower-than-expected initial jobless claims and upbeat retail sales. As a result, the Fed may be required to maintain a protracted period of elevated interest rates.

On the other hand, the ECB's official representative Christine Lagarde stated that the interest rates decision would be reviewed in June. However, Francois Villeroy de Galhau, the governor of the Bank of France, suggested an earlier rate cut could occur as early as April.

Overall, the Euro will be the subject of discussion at the press conference of Bundesbank President Joachim Nagel in Frankfurt, Germany. During this event, Nagel may offer insights into ECB policy.

EUR/USD

Despite the US dollar’s strength, EUR/USD remained bullish throughout the week, with the latest price traded above the dynamic 20-day EMA and the support of the Inverse Head and Shoulders neckline.

In that case, investors should monitor how the price trades in the current area. A general bearish rejection and a bullish price action above the 20-day EMA line could be a potential long opportunity.

GBP/USD

GBP/USD abandoned its previous purchasing momentum and continued its downward trend in the face of increasing technical selling pressure, which was noted on Thursday. The increasing yields on US Treasury bonds strengthened the value of the US Dollar (USD), creating a convergence of adverse elements for this particular currency pair.

The benchmark 10-year US Treasury yield soared to 4.3% in February after a 1.6% increase in the US Producer Price Index (PPI). This development prompted investors to reevaluate the possible timing of a policy shift by the Federal Reserve (Fed). The probability that the Federal Reserve would maintain its policy rate between 5.25% and 5.5% in June increased from below 30% prior to the data release to 40%, as measured by the CME FedWatch Tool.

An additional 1.3% annual decline in the Import Price Index occurred in January. The USD's position heading into the weekend could be strengthened by a favorable reading for February. Concurrently, US stock indices' futures declined marginally during Friday trading hours. Suppose risk sentiment continues to improve and primary indices on Wall Street open positively. In that case, the USD may have difficulty locating demand in the coming days.

GBP/USD

As per last week’s price behavior, GBP/USD initiated a bearish correction and found a bottom at the dynamic 20-day EMA. Moreover, a sufficient downside correction is completed towards the ascending channel support from where a bullish continuation is possible.

The valid buy zone for this pair would be the 1.2700 to 1.2600 zone, from where a valid price action is needed to open a long signal.

On the other hand, an extensive bearish pressure below the 1.2517 level could be a short opportunity in this pair, targeting the 1.2400 zone.

AUD/USD

The AUD/USD maintained its downward trajectory from the sell-off on Thursday, extending the pressure into the weekend on Friday. Unfavorable Chinese housing and lending data, which indicate ongoing turmoil in the real estate industry, present headwinds for the duo.

The disappointing Chinese data adversely affects the Australian Dollar, considering its substantial dependence on the Chinese market for exports. The Chinese House Price Index documented a further decline in house prices since 2019, with a 1.4% decline in February following a 0.7% decline in January.

Furthermore, the data released on Friday unveiled an unforeseen decline in the volume of newly issued loans in China throughout February. The People's Bank of China (PBOC) reports that new loans decreased to 1,450 billion Yuan, below the projected 1,500 billion and 4,920 billion Yuan for January. This decrease in lending indicates that AUD supporters may be experiencing a bearish sentiment.

AUD/USD

AUD/USD showed downside pressure throughout the week, suggesting a challenge for buyers who wanted to take a long position from the Inverse Head and Shoulder pattern breakout.

Considering the strength of the US dollar index, we may expect the downside pressure to continue this week. However, an immediate bullish reversal with a daily candle above the 0.6596 level might alter the current market structure.

USD/JPY

Several significant indicators indicate that the Bank of Japan (BoJ) might be inclined to transition away from negative interest rates. The inflation gauge favored by the Bank of Japan, the Consumer Price Index (CPI), has exhibited a sustained period of positive values. Furthermore, according to Reuters, labor unions and the largest corporations in Japan have reached a significant agreement to implement the highest wage increases in 33 years.

Moreover, according to Shunichi Suzuki, the Finance Minister of Japan, the economy has emerged from a period of deflation. As a result, the government is dedicated to employing every feasible policy measure to maintain the current trend of wage increases throughout the year. Despite this, investors continue to be wary of the BoJ potentially abandoning its protracted expansionary policy posture.

Market participants are expected to closely observe the Bank of Japan (BoJ) press conference this week, with a specific focus on the timing of any possible abandonment of negative interest rates. According to BoJ Governor Kazuo Ueda, policymakers will consult regarding whether the current state of the economy justifies the gradual reduction of the substantial monetary stimulus.

USD/JPY

USD/JPY found a bottom at the 146.51 level, from where a decent recovery has come. Considering last week’s bullish close, investors might expect an upward continuation, targeting the 150.86 resistance level.

However, a downside correction is possible towards the 147.00 area as the RSI failed to hover above the 50.00 line. A deeper correction with a bearish daily candle below the 146.50 level might alter the current market structure and lower the price in the coming days.

XAU/USD

Due to rising US bond yields, the price of gold (XAU/USD) declined last week. Gold prices were under pressure to decline due to the market's diminished expectations that the Federal Reserve (Fed) would lower interest rates during its policy meeting in June.

Following the release of the February US Producer Price Index (PPI) data, which were hotter than anticipated, the precious metal saw a significant sell-off on Thursday. Even if Fed policymakers have significantly reduced price pressures, there appear to be more obstacles in achieving the 2% target in the last stages. The expectation of higher interest rates supported the US Dollar (USD), which negatively impacted the XAU/USD pair.

On the other hand, as expectations that the Fed would announce rate decreases in June faded, the yield on the US Treasury 10-year bond increased to 4.31%. This change significantly increased the potential cost of holding investments in gold and other non-yielding assets.

XAU/USD

Gold price remained consolidated in the previous week, suggesting a downside possibility as a mean reversion. However, the 2146.60 static level is still protected, which could be a challenging factor for bulls.

Investors should closely monitor how the price reacts on this line, as a bearish recovery with a daily close could create a decent bearish opportunity.

BTC/USD

A recent report by the market intelligence firm Chainalysis indicates that the broader crypto market has experienced substantial growth in 2023, reaching a peak of $37.6 billion. The profit increase can be attributed to enhanced asset valuations and upbeat market sentiment.

With an estimated $9.36 billion in profits, the United States led the world in cryptocurrency gains in 2023, followed by the United Kingdom with $1.39 billion. Furthermore, several upper and lower-middle-income Asian nations, such as Vietnam, China, Indonesia, and India, realized substantial economic growth.

According to the report from Chainanalysis, the favorable patterns noted in 2023 have persisted into 2024. Prominent cryptocurrencies, including Bitcoin (BTC), attained unprecedented heights of $73,700 subsequent to the validation of Bitcoin exchange-traded funds (ETFs) and heightened institutional acceptance.

As of the most recent update, the market capitalization of all cryptocurrencies is valued at $2.5 trillion, down from its two-year high of $2.7 trillion on Thursday.

BTC/USD

The broader market context is volatile in the daily chart of BTC/USD as the recent price showed indecisive momentum at the all-time high area. The ideal indication of this price action is a possible downside pressure as the price reaches its peak.

However,a bearish signal needs proper confirmation from the daily price. A daily candle below the 65596.15  level could be a valid short opportunity, targeting the 60,000.00 static support level.

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