The major sector of the global forex market has been divided into opposite categories- EURUS and DXY. The EUR side comprises various assets, including stock indices, precious metals such as Gold, Silver, Copper and other commodities.
On the other hand, DXY trades in the opposite direction but alongside the bond price. These categories can be broken down into yields, bonds, and interest rates.
All market prices are determined by the interest rate curve, which serves as parity or 1.0000. The Australian dollar (AUD) and the New Zealand dollar (NZD) are considered 0-point currencies and trade from parity.
In contrast, the Japanese yen (JPY) and the Bank of Japan (BOJ) contain negative interest rates but trade from parity. The interest rate floor is set at parity, meaning all market prices rise from parity.
It is rare for a market price to trade below parity, as the central bank regulates market design, prices, and movements accordingly.
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Forex Technical Outlook for 27 February 2023 to 03 March 2023
Corrective trading days are coming as the economic calendar has limited releases for the US Dollar. In that case, other currencies like CAD, JPY and AUD could provide a decent movement based on several pending events.
Let’s see important releases for this week:
- BOJ Gov-Designate Ueda Speaks on Tuesday
- CAD GDP m/m on Tuesday
- CB Consumer Confidence on Tuesday
- AUD CPI y/y on Wednesday
- ISM Manufacturing PMI on Wednesday
- ISM Services PMI on Friday
Now move to the weekly price forecast:
As per the previous weekly outlook, EUR/USD continued pushing higher and made a new bearish weekly candle. Moreover, the monthly candle engulfed the January’s price action, and it is time to see how the February close happens.
As per the weekly price action, EUR/USD is approaching the 50% Fibonacci Retracement level of the 2022 decline to 1.0515 level. Moreover, the downside pressure is supported by multiple failures to hold the momentum above 61.8% Fibo retracement level at 1.0745.
The dynamic 20 day EMA is above the price and working as a resistance, while the current Relative Strength Index is steady below the 50% level.
The fixed range high volume level is above the 20 DMA, which is a signal that a significant downside momentum appeared in 2023.
Based on the current price prediction, a minor upside momentum is pending in the EUR/USD daily chart, but the overall structure will be bearish for the coming days.
An immediate bearish pressure with a bullish rejection from the 1.0482 level could relieve some pressure to bulls, but a stable momentum above the 20 EMA is needed to seek for buying opportunities.
As per the previous weekly forecast, a minor bullish correction appeared, and a bearish rejection from the 20 DMA pushed the price down and made multiple intraday lower lows.
In the daily price of GBP/USD, the 20 EMA crossed below the 50 SMA on last Wednesday, which confirmed the upcoming trend as bearish. Moreover, the 100 SMA also crossed below the 200 SMA.
Institutional traders support the downside pressure as the current high volume level of 2023 is above the 20 DMA. Moreover, a bearish crossover of the 20 DMA is seen from the high volume level, which is a sign of a selling pressure from medium term traders.
In the indicator window, the 14 day RSI remains steady below the 50% neutral line, which is a sign of a further downside pressure in the coming days.
Investors should find the price below the 1.1912 support level in the coming days before aiming for the 1.1645 support level.
The alternative approach is to find the price above the 1.2150 resistance of 50 day SMA, which could increase the possibility of reaching the 1.2200 level.
AUD/USD was more bearish than EUR/USD and GBP/USD, and provided a decent gain to bears after forming a minor bullish correction at the beginning of the previous week.
The massive selling pressure with a weekly candle close with a 146 pips loss increases the gap with the dynamic 20 EMA. As a result, a minor bearish pressure became pending in this pair as a mean reversion.
The high volume level from the beginning of 2023 is at 0.6912, which is above the current price and at the 20 DMA area. It is a sign that bears control the current price, and they can regain the momentum at any time.
In the indicator window, the 14-day RSI is moving steadily down towards the 30.00 ovesold area, which is a sign of a strong bearish trend.
A bullish correction may appear from the 0.6690 to 0.6628 area in the coming days due to mean reversion and monthly profit taking. However, an immediate recovery and a daily candle above the 0.6900 level is the primary requirement to consider the upcoming price direction as bullish.
As per the previous weekly forecast, bulls have joined the market, as shown from the descending channel breakout. Moreover, a stable bullish price action appeared above the 134.79 level, which validated the bullish possibility.
A stable price above the 134.79 level with a strong bullish daily candle increased the possibility of extending higher in the coming days.
The high volume level is below the price, while the 20 day Exponential Moving Average (EMA) is working as dynamic support. The Relative Strength Index (RSI) also reached the overbought 70% level, signaling a strong buyers presence in the market.
Based on the current price action, bulls may regain the momentum after a minor correction, which could increase the price towards the 139.91 level.
The alternative trading approach is to wait for the price below the 20 EMA before aiming for the 129.81 support level.
The increased possibility of rate hike by the Fed shifted the market sentiment from safe haven Gold to US Dollar. The sentiment is expected to remain unchanged throughout the week, and the US Dollar could dominate the market until a surprise comes from central banks.
As per the current reading of 14-day Relative Strength Index, the price is almost over old as the current RSI reached the 30% area.
The latest high volume level is way above the current price, increasing the possibility of a mean reversion. Moreover, the dynamic 20 DMA created a gap with the price, but it remained towards the bearish side.
It is important to find the price below the 1800.00 psychological level before aiming for the 1790.00 level or 100 SMA area. The second price target would be 1780.00 level or the current 200 SMA level.
On the other hand, a stable price above the 1830.00 level could increase the possibility of reaching towards the 1860.00 level.
According to on-chain metrics, whales are not accumulating BTC and there has been a consolidation of wallets holding 100 to 10K BTC for over two months.
On-chain transaction volume has also dropped from 42 billion to 29 billion BTC. This suggests a retracement is due for the largest crypto asset by market capitalization.
The Whale Transaction count metric, which tracks transactions worth $1 million or higher, indicates that profit-taking is on the agenda for BTC holders. After Bitcoin's new year rally, whale transactions worth $1 million or higher have stayed above the seven-day average.
A strong selling pressure is visible in the daily price of BTC/USD while the latest price moved below the 20 DMA level. The RSI is corrective at the 50% level, which is signaling a corrective price action in this instrument.
Investors should be cautious of getting trapped in smart money traders' plans and should short BTC after a sweep of the recent swing high of 25,211.00.
Conversely, it would be a massively optimistic development if Bitcoin produces a weekly candlestick close above the 200-week SMA at 25,207.00. Such a move would invalidate the short-term bearish outlook and attract sidelined buyers to accumulate.
Depending on the momentum, this could kick bears out of the arena and trigger a run-up to the next psychological level at 30,000.00.
Corrective trading days may come due to the absence of the Federal Reserve’s presence with an anticipation of the rate hike. Meanwhile, the Canadian Dollar and Asian Currencies could show a strong position against the US Dollar, depending on economic releases.