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Forex Technical Outlook for 04 March 2024 to 08 March 2024

forex-technical-outlook for-04-march-2024-to-08-march-2024

The upcoming trading days will be crucial to gauge the US economy is direction. On March 8, the focus will shift to non-farm payrolls and the unemployment rate. Before that, the final S&P Global Services PMI, the ISM Services PMI, and Factory Orders are all scheduled to occur on March 5, preceding these events. In anticipation, March 6 will see the release of the ADP report, Wholesale Inventories, and Fed Beige Book. On March 7, the customary Initial Jobless Claims and Balance of Trade figures are scheduled to be released.

 

In the Eurozone, the agenda for March 6 includes the German Trade Balance, while March 7 will feature the ECB meeting and a press conference by President Lagarde. Furthermore, an additional revision of the EMU Q4 GDP Growth Rate is expected by the end of the week.

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Forex Technical Outlook for 04 March 2024 to 08 March 2024

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

 

  • CHF CPI m/m on Monday
  • BOJ Gov Ueda Speaks on Tuesday
  • ISM Services PMI on Tuesday
  • AUD GDP q/q on Wednesday
  • ADP Non-Farm Employment Change on Wednesday
  • BOC Overnight Rate & Rate Statement on Wednesday
  • EUR Main Refinancing Rate & Rate Statement on Thursday
  • US Non-Farm Employment Change on Friday
  • CAD Unemployment Rate on Friday

EURUSD

The data on inflation in the European Union surfaced, indicating a marginal decline that exceeded economists' forecasts. The EU Harmonised Index of Consumer Prices (HICP) increased by 2.6% year-over-year. In contrast, the year-on-year increase in the Core HICP was 3.1%, exceeding the expected 2.9% but falling short of January's 3.3%.

European and U.S. yields also increased, supporting EURUSD bulls. Investors expected interest rates to decline by 90 basis points in 2024, with the first reduction likely in June. Analysts at Commerzbank and Nordea anticipate that the European Central Bank (ECB) will gradually reduce interest rates in anticipation of forthcoming wage increases.

On the other hand, Thomas Barkin, the president of the Federal Reserve Bank of Richmond, expressed a hawkish stance by recommending a measured approach to reducing interest rates. Barkin emphasized the criticality of relying on consistent economic data before implementing policy modifications.

eurusd

EURUSD went sideways after forming the descending channel breakout. Moreover, the latest bullish daily candle closed above the 20- and 100-day SMA levels, suggesting a possible bullish continuation.

A daily candle above the 1.0865 static level could signal a conservative long opportunity in this instrument, targeting the 1.1050 level. However, the 1.0795 level could work as a strong base, and a bearish recovery below this line could lower the price.

GBPUSD

The surprise drop in the US ISM Manufacturing Purchasing Managers Index (PMI) on Friday caused a sharp increase in GBP/USD, increasing the possibility of a rate cut by the Federal Reserve (Fed) to alleviate inflation concerns.

In February, the US ISM Manufacturing PMI dropped to 47.8, vs forecasts of a rise to 49.5 after the previous month's 49.1. The PMI's decline stoked resurgent anticipation for Fed rate cuts, reaffirming the central bank's commitment to lowering inflation back within the 2% goal range.

The focus will switch to important labor data releases from the US the following week, while economic data from the UK stays scarce this week and the next. The ISM PMI statistics for services will be released on Tuesday, and on Wednesday, there will be a sneak peek at the ADP Employment Change for February. The much-awaited release of the most recent US Nonfarm Payrolls (NFP) report will round off the week.

gbpusd

GBPUSD trades sideways within the descending channel, where the dynamic 20-day EMA is the immediate support. Moreover, the 100-day SMA is a major support, followed by a neutral momentum in the RSI.

A bullish breakout with a daily candle above the 1.2710 static support could be a potential long opportunity with a confluence bullish channel breakout. However, a downside recovery is possible, where a selling pressure below the 20-day EMA could lower the price towards the 100-day SMA line.

AUDUSD

The quick rebound of the AUD/USD pair from 0.6490 reflects investor optimism regarding the possibility that interest rate reductions by the Federal Reserve (Fed) could begin with the June policy meeting. As pressure mounts on the US dollar, the Australian dollar rises substantially.

The market consensus points to a June Fed rate cut, especially given that annual core inflation data indicates a moderate 2.8% growth rate—the lowest level in years. However, the Fed is still hesitant to abandon its tight monetary stance quickly, as it wants further assurance that inflation will reach its 2% target.

The Australian dollar holds strong after the positive Caixin Manufacturing PMI for February. Australia's economic ties to China are further highlighted by the surprising increase to 50.9, which is above the previous reading of 50.8 and the expectations of 50.6. As China's main trading partner, the latter's improving economic outlook adds to the Australian dollar's appeal.

audusd

AUDUSD trades within a corrective momentum as the recent dynamic 20-day EMA is sideways. Moreover, the RSI is still below the 50.00 line, while the 100-day SMA works as a resistance.

In the current scenario, a potential bullish continuation awaits an Inverse Head and Shoulders breakout. A daily close above the 0.6596 necklines could be a potential long opportunity in this pair

 

USDJPY

Friday saw a sharp increase in the Japanese yen (JPY) value relative to the US dollar due to hawkish comments made by Bank of Japan (BoJ) board member Hajime Takata. 

BoJ Governor Kazuo Ueda stated that monetary tightening plans will likely be delayed as meeting the 2% inflation objective remained distant. As a result, the JPY's safe-haven appeal diminished in a risk-on market, enabling the USD/JPY pair to find support near 149.20.

Concurrently, signs of declining US inflation support forecasts of later-year rate cuts by the Federal Reserve (Fed). Investors still expect the Fed to hold off on action until the June policy meeting. However, worries about possible government involvement in Japan to stop more JPY devaluation remain, which might restrict upward movements.

usdjpy

The recent buying pressure is potent in the daily USDJPY price, as the recent price shows a bullish rejection from the dynamic 20-day EMA. Moreover, the 100-day SMA supports bulls, followed by the RSI.

A bullish rebound with a stable momentum above the 150.96 level could be a high probability of a trend trading opportunity. However, investors should monitor how the price reacts on the dynamic 20-day EMA, where a bearish break might lower the price in the coming days.

XAUUSD

Following the lower-than-expected PMI announcement, Spot Gold saw a spike. Investors were encouraged by this development to believe that rate cuts from the Federal Reserve (Fed) might occur sooner rather than later.

In February, the US ISM Manufacturing PMI fell short of expectations, coming in at 47.8 instead of the predicted 49.5 from the previous month's 49.1 reading.

Despite ongoing difficulties in a labor market with tight supply constraints, the Fed's most recent Monetary Policy Report expressed cautious optimism about controlling inflation.

xauusd

The XAUUSD daily chart shows a potential channel breakout, supported by the rising 20-day EMA, as the market momentum is bullish.

In that case, the ideal trading approach is to seek short-term long opportunities from the lower timeframe. However, a strong bearish exhaustion from the near-term area could offer a potential reversal opportunity.

BTCUSD

The rise of Bitcoin to its peak of $64,000 in 2024 has caused funding rates to rise significantly, hitting a 27-month high. According to insights from the centralized exchange data platform Velo Data, the bullish prognosis in the futures market has been sparked by the rising trend in BTC prices. This has attracted the interest of arbitrageurs and institutional investors.

The new high for 2024 indicates that a protracted bear market is ending and gives BTC holders hope that catalysts such as the impending halving event in April 2024 will materialize.

According to Velo Data, the funding rate for Bitcoin on Binance has risen above 89%, and on the OKX exchange, it is getting close to 80%. Large wallet addresses and institutional investors are especially drawn to arbitrage opportunities presented by such substantial increases in annualized funding rates for Bitcoin contracts.

btcusd

BTCUSD shows a stable market above the static 60000.00 psychological level, while the current RSI is bullish above the 70.00 line.

In this context, if bulls hold the price above the 60000.00 level, we may expect an upward continuation, targeting the 75000.00 resistance. However, bearish exhaustion, with a bearish recovery below the 60000.00 level, could be a potential trend reversal signal.

 

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