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Forex Forecast & Forex Technical Outlook for 26 February 2024 to 01 March 2024

Forex Forecast & Forex Technical Outlook for 26 February 2024 to 01 March 2024

Economic indicators exhibited a lackluster performance last week, although the Consumer Price Index (CPI) for January exceeded initial expectations. A deviation from consensus predictions was observed in economic data, as declines were reported in retail sales, industrial production, and housing starts.

In the UK, the fourth quarter GDP decreased by 0.3% quarter-over-quarter, whereas January inflation remained unchanged at 4.0%, below expectations. Japan, too, disclosed unfavorable GDP figures, enduring an unforeseen contraction. Australia's January labor market report could have been more satisfactory, as it revealed a higher-than-anticipated unemployment rate of 4.1% and minimal employment growth.

Notwithstanding the heightened consumer price index inflation observed in January, the FOMC is prepared to reduce interest rates by 25 basis points during its May 1 meeting. On April 11, analysts expect the European Central Bank to implement a reduction of 25 basis points in a similar fashion. Nevertheless, we recognize the potential for both central banks to postpone their policy adjustments.

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Forex Technical Outlook for 26 February 2024 to 01 March 2024

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

  • CB Consumer Confidence on Tuesday
  • RBNZ Official Cash Rate on Wednesday
  • US Prelim GDP q/q on Wednesday
  • Core PCE Price Index m/m on Thursday
  • ISM Manufacturing PMI on Friday

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

EUR/USD

According to the latest EU data, the German economy contracted by the expected -0.3% quarterly in the fourth quarter of 2023. The Gross Domestic Product (GDP) experienced a decline of -0.2% annually. Furthermore, the Ifo Institute observed a marginal enhancement in the business climate in Germany, which rose from 85.2 to 85.5.

On the other hand, the most recent US unemployment data and strong S&P Global Flash PMIs bolstered the hawkish rhetoric of Federal Reserve officials. The individual conveyed a willingness to make prudent policy adjustments. This could potentially reignite inflationary pressures.

The consensus among traders appears to agree with the most recent forecasts put forth by the Federal Reserve, as indicated by the CME FedWatch Tool. At present, 81 basis points (bps) of easing by the end of 2024 have been accounted for by speculators.

EUR/USD

 

On the bullish side, the  50-day moving average (DMA) is at the 1.0885 level, indicating bearish momentum. A failure to break the resistance level with a decline below the 1.0800 area could target the low of 1.0656 set on November 10. 

On the bullish side, the 200-day moving average must be surpassed before investors attempt to drive the pair towards the 50-day moving average, with an objective of 1.0900.

GBP/USD

The GBP/USD surged in the early hours of Friday's trading session, supported by an improving economic outlook in the UK. 

Investors are avidly awaiting new information regarding the interest rate policies of the Bank of England (BoE). Although there is ongoing uncertainty concerning the rate cut by the BoE, there is a sense of optimism that such measures could be implemented in the early months of the latter half of the year. 

The probability of an interest rate cut at the June policy meeting is below 50%, whereas a dovish determination in August is progressively more foreseeable.

Andrew Bailey, governor of the Bank of England, has predicted that price pressures will subside toward the 2% objective by spring. This could substantially ease the central bank's historically stringent monetary policy stance.

On the contrary, the US Dollar demonstrates a sideways trend after a V-shaped recovery amidst conditions of labor market tightening. For the week ending February 16, initial jobless claims decreased to 201K, exceeding both expectations of 218K. In addition, policymakers at the Federal Reserve (Fed) underscore the necessity for additional evidence to substantiate a cut in inflation towards the targeted 2% level.

GBP/USD

 

GBP/USD trades sideways within the descending channel, while 1.2770 is the immediate resistance. The dynamic 20-day EMA works as a support, while the 14-day RSI shows an upward pressure from the 50.00 line.

The immediate projection for this instrument is to form a bearish opportunity from the trendline resistance. However, a bullish breakout with a daily close above the 1.2770 level could validate the channel breakout, aiming for the 1.3100 level.

AUD/USD

Recent optimism is moderated amid ongoing geopolitical tensions deriving from conflicts in the Middle East and diminishing expectations of prompt rate cuts by global central banks. A marginal retreat in equity markets mirrors this shift in sentiment, which strengthens the USD as a safe-haven currency and weakens the risk-sensitive Australian dollar.

The minutes from the FOMC meeting in late January highlighted uncertainty regarding the inflation to the 2% target. This position fosters higher yields on US Treasury bonds and contributes to the USD's recuperation.

Moreover, the AUD/USD pair could potentially be affected by the demand for the safe-haven USD, which could be influenced by broader risk sentiment. Although spot prices are expected to record modest gains for the third consecutive week, bullish traders should exercise caution due to the lack of sustained buying momentum.

AUD/USD

 

AUD/USD hovers above the dynamic 20-day EMA, while the RSI remained correct at the neutral 50.00 level.

The bullish case is valid as long as the 20-day EMA supports the minor upward pressure. A valid bullish daily close above the 0.6624 resistance level could be a long opportunity for this pair.

On the other hand, an immediate selling pressure is visible, which needs a solid bearish breakout below the 20-day EMA.

USD/JPY

USD/JPY bulls remained solid due to the safe haven US Dollar’s appreciation. Investors should monitor how the price reacts at the historic level before anticipating the upcoming price action.

USD/JPY

 

The recent price moved above the 150.00 psychological level with no sign of a bearish recovery. It is a strong sign that bulls are still active in the market and can take the price beyond the 151.89 historic resistance.

The upward pressure is valid if the price trades above the 149.52 level. A solid bearish pressure below this line might alter the current momentum at any time.

XAU/USD

Gold (XAU/USD) prices recovered on Friday, notwithstanding dwindling anticipations of imminent interest rate cuts by the Federal Reserve (Fed). As policymakers express skepticism regarding the 2% inflation target, the precious metal undergoes a significant recovery.

Fed officials are inclined to sustain interest rates between 5.25% and 5.50% for a prolonged duration. Non-yielding assets like gold lose their appeal when the Federal Reserve intends to maintain elevated interest rates. Safe-haven asset futures will be substantially impacted by market sentiment regarding rate reduction by the Federal Reserve.

From a geopolitical standpoint, the increased bombardment in Rafah is ascribed to actions taken by Israel and the United States, which heightens uncertainty and may encourage the appreciation of safe-haven assets such as the US dollar.

XAU/USD

 

The ongoing buying pressure is valid in the daily chart of XAU/USD as it holds momentum above the dynamic 20 EMA.

Following the long-term trend, a valid bullish channel breakout could be a strong buying opportunity for this pair, targeting the 2120.00 level.

An immediate selling pressure might lower the price to the channel support after moving below the 2000.00 mark.

BTC/USD

The impending Bitcoin halving has generated considerable optimism regarding potential price fluctuations after the event. 

A recent post by crypto analyst Willy Woo on X (previously Twitter) states that the Bitcoin network receives $607 million in daily demand from new investors but mines only $46 million worth of Bitcoin to satisfy that demand. The significance of this supply-demand imbalance increases in anticipation of the Halving.

The January regulatory sanction of Spot Bitcoin ETFs predominantly drives institutional demand for Bitcoin. Fund issuers such as BlackRock have been engaged in significant BTC accumulations earlier this month. Bitcoin ETFs reportedly held 3.3% of the circulating supply, secured by Bitcoin, which underscores the imminent possibility of substantial price growth.

BTC/USD

 

Bitcoin (BTC) consolidates above the 50,000.00 level, where the 14-day RSI shows a bearish rebound from the overbought 70.00 line.

As the long-term bullish trend is intact, a minor downside correction is possible towards the 47872.00 level before continuing the bull run. However, a bearish break below this line could lower the price towards the 44,000.00 area.

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