Dollar Index:
As of March 11th, 2024, the latest news impacting the USD revolves around various global economic events and market trends.
Federal Reserve’s Interest Rate Path: The assumption that the Federal Reserve’s rate hiking cycle has concluded is central to 2024’s economic outlook. The Fed Funds rate is expected to be held at 5.25%-5.5% until mid-2024, with potential rate cuts starting in June if inflation continues to moderate. These adjustments, along with the maintenance of the quantitative tightening program, are crucial components of the Fed’s strategy to manage economic growth and inflation.
Labor Market and Consumer Sentiment: The US labor market shows signs of normalization, with the potential for a modest increase in unemployment rates while remaining low by historical standards. This shift indicates a cooling off from the robust job growth seen in the aftermath of the pandemic. Consumer sentiment may be impacted by several factors, including the resumption of student loan payments and signs of stress in subprime auto and millennial credit card delinquencies. Nonetheless, the overall health of household balance sheets and debt servicing levels remains strong.
Inflation and Federal Reserve’s Potential Rate Cuts: Recent inflation data in line with expectations, combined with a disappointing February ISM Manufacturing PMI report, has fueled speculation that the Federal Reserve might cut interest rates sooner than previously anticipated. This speculation has implications for the USD, influencing investor sentiment and market dynamics. Important economic indicators, including employment data and services sector health, are closely watched for hints on the Fed’s future monetary policy decisions
Upcoming Events for the week:
The forthcoming week in the currency markets will be densely populated with influential economic data releases from both sides of the Atlantic. In the UK, the focus will be on the labor market, with the Unemployment Rate meeting expectations and the Employment Change showing a positive surprise, nearly doubling the forecast. This robust job growth may reinforce the value of the GBP, as it suggests economic resilience and could decrease the likelihood of monetary easing by the Bank of England.
Across the pond, the United States will release several key inflation indicators. The CPI and core inflation rates have both exceeded expectations, indicating persistent inflationary pressures. This could lead to heightened expectations for continued or even more aggressive interest rate hikes by the Federal Reserve, potentially strengthening the USD. Later in the week, retail sales data and jobless claims will give further insight into the U.S. economy’s strength. Should the retail sales figures and jobless claims outperform, they would likely provide additional support to the USD.
Towards the end of the week, the markets will turn their attention to the ECB with Guindos’ speech. Investors will be looking for hints on the future direction of the Eurozone’s monetary policy, which could sway the EUR significantly depending on the tone and content of the speech.
Overall Market Sentiment:
- For the GBP, considering the stronger employment data, market sentiment might be bullish, with an estimated breakdown of 60% Positive, 20% Negative, and 20% Neutral.
- The USD sentiment, influenced by higher inflation rates, could lean towards optimism about the currency’s strength, with a potential breakdown of 65% Positive, 15% Negative, and 20% Neutral, especially if retail and unemployment data reinforce a strong economic outlook.
- The EUR sentiment will likely be defined by ECB communications, and until then, it might remain neutral with a sentiment breakdown of 40% Positive, 40% Negative, and 20% Neutral, as markets await policy direction.
EUR USD Outlook:
EURUSD: Week Ahead Technical and Fundamental Forecast
Technical Scenarios for EUR/USD:
Bullish Scenario:
- EUR/USD moves towards the Fibonacci level of 0.618 at 1.10562, potentially breaking through to target higher resistance levels, including 1.09889 and 1.09423.
- A decisive move beyond these levels may point to an attempt to test the recent high at approximately 1.10108.
- The RSI above 50 indicates that there might be underlying bullish momentum.
Neutral Scenario:
- The pair may consolidate around the pivotal level of 1.08580, marked by the recent support, trading within the range between this and the 1 Fibonacci level at 1.09887.
- The RSI lingering around the midpoint would suggest a lack of conviction among traders, leading to sideways movement.
Bearish Scenario:
- A breakdown below the support level at 1.08580 could lead to a test of lower support at the 1.272 Fibonacci level of 1.09407, and potentially the 1.414 level at 1.09156 if the decline continues.
- The RSI turning downward below 50 would confirm bearish momentum.
Fundamental Scenarios for EUR/USD:
Positive Data Outcomes:
- Higher-than-expected U.S. inflation figures or a strong employment report (e.g., Non-Farm Payrolls, Unemployment Rate) could bolster the USD, leading to a bearish scenario for EUR/USD.
- Hawkish comments from Fed Chair Powell may reinforce expectations of tighter U.S. monetary policy, further supporting the USD.
Neutral Data Outcomes:
- If data releases from the U.S. and Eurozone align with consensus expectations, the impact may be limited, leading to a neutral technical scenario.
- In this case, the EUR/USD pair’s movements may be more influenced by technical factors and broader market trends rather than individual data releases.
Negative Data Outcomes:
- Weaker-than-expected U.S. CPI or disappointing employment figures could weaken the USD, supporting a bullish scenario for EUR/USD.
- A dovish outlook conveyed by Fed Chair Powell or soft U.S. retail sales data could also exert downward pressure on the USD.
Overall Market Sentiment:
Taking into account the potential market reactions , the sentiment for EUR/USD in the upcoming week could be segmented as follows:
- Positive: 35% – Considering potential bullish responses to weaker USD data or negative surprises in U.S. economic reports.
- Negative: 45% – Reflecting the possibility of bearish movements in response to strong USD data or positive surprises in economic reports.
- Neutral: 20% – Acknowledging the chance of a neutral stance if data meets expectations or if market participants focus on other global factors.
GBP USD Outlook:
GBPUSD: Week Ahead Technical and Fundamental Forecast
Technical Scenarios for GBP/USD:
Bullish Scenario:
- GBP/USD breaks through the resistance level near the 0.5 Fibonacci retracement at 1.27903, aiming for the 0.786 level at 1.29442.
- Further upward momentum could challenge the recent high around 1.29896.
- A consistently above-50 RSI supports the potential for continued upward movement.
Neutral Scenario:
- The pair trades within the established range, with potential support at the 0.382 Fibonacci level of 1.28271 and resistance at the 0.5 level.
- Fluctuation around these levels without a clear breakout could keep the pair range-bound, as indicated by an RSI hovering around 50, suggesting indecision.
Bearish Scenario:
- A drop below the key support level at 1.27925 might see GBP/USD heading towards the 1.272 Fibonacci level at 1.27430.
- A significant move lower would potentially target the 1.27137 level, with the RSI falling below 50 signaling increasing bearish momentum.
Fundamental Scenarios for GBP/USD:
Positive Data Outcomes:
- Stronger-than-expected U.S. inflation data could lead to USD strength, possibly pushing GBP/USD lower towards the bearish scenario.
- Similarly, if U.S. retail sales and PPI data outperform, this could further support the USD and weigh on GBP/USD.
Neutral Data Outcomes:
- If the upcoming economic data from both the UK and the U.S. meets consensus forecasts, the pair might experience limited fundamental-driven movement, aligning with the neutral technical scenario.
- Traders could focus more on global risk sentiment and other market dynamics, leading to sideways trading.
Negative Data Outcomes:
- Disappointing U.S. economic figures, particularly in the CPI or labor market reports, could weaken the USD and support a bullish scenario for GBP/USD.
- If U.S. retail sales contract or inflation comes in lower than expected, it could reduce expectations for U.S. monetary tightening, favoring GBP strength.
Overall Market Sentiment:
Considering the economic events and the technical outlook, the sentiment for GBP/USD in the upcoming week could be divided as:
- Positive: 35% – Based on the potential for GBP to rise on the back of poor U.S. data or lack of supportive data for continued USD strength.
- Negative: 45% – Reflecting the likelihood of GBP/USD falling if U.S. economic data points to a stronger economy and supports the USD.
- Neutral: 20% – Considering the chance for the pair to remain within the current range if data releases align with expectations and no new drivers emerge.
USD/JPY Outlook:
USDJPY: Week Ahead Technical and Fundamental Forecast
Technical Scenarios for USD/JPY:
Bullish Scenario:
- USD/JPY rebounds from the support level at 146.920, targeting the resistance near 147.695. If bullish momentum continues, it could aim for higher Fibonacci retracement levels such as 148.505.
- The RSI shows room for upside potential if it moves above the 50-level, supporting the bullish case.
Neutral Scenario:
- The pair remains range-bound, oscillating between the support at 146.920 and immediate resistance levels.
- The RSI stabilizes around the midpoint without showing a clear trend, indicating a possible consolidation phase for the currency pair.
Bearish Scenario:
- A break below the support level at 146.920 could see the pair testing lower support at 145.869, with further potential declines if bearish pressure intensifies.
- A falling RSI below 50 would confirm increasing bearish momentum, suggesting a continuation of the downward trend.
Fundamental Scenarios for USD/JPY:
Positive Data Outcomes:
- Strong U.S. economic data, particularly CPI and retail sales, could bolster the USD, potentially leading to the bullish scenario.
- A decrease in jobless claims and a positive outlook from Fed Chair Powell’s testimony could further enhance USD strength.
Neutral Data Outcomes:
- If the upcoming economic data from the U.S. meets consensus expectations without any significant surprises, USD/JPY might experience limited fundamental-driven volatility, adhering to the neutral technical scenario.
- Market participants may then turn their attention to other global economic factors or technical levels for trading cues.
Negative Data Outcomes:
- Weaker than expected U.S. CPI, retail sales, or higher jobless claims could lead to USD weakness, aligning with the bearish scenario for USD/JPY.
- A dovish narrative from Fed Chair Powell’s testimony might also undermine the USD, potentially favoring a downtrend in the pair.
Overall Market Sentiment:
Considering the technical analysis and upcoming economic events, the sentiment for USD/JPY in the forthcoming week could be distributed as follows:
- Positive: 40% – There is a significant chance for a bullish trend if U.S. economic data outperforms, signaling a robust economy and supporting USD strength.
- Negative: 35% – There is a potential for a bearish trend if U.S. data disappoints, leading to USD weakness.
- Neutral: 25% – There is a possibility of a sideways movement if data releases are in line with market forecasts and no new catalysts emerge.
XAU/USD Outlook:
XAUUSD (Gold): Week Ahead Technical and Fundamental Forecast
Technical Scenarios for XAU/USD:
Bullish Scenario:
- Gold may continue its ascent, breaching the 0.618 Fibonacci retracement level at 2198.369 and potentially targeting the 0.786 level at 2227.695.
- A persistent bullish trend could push the price towards the recent peak around 2199.294.
- The RSI above the mid-level supports the ongoing uptrend, indicating room for further gains.
Neutral Scenario:
- The price of gold could stabilize, trading sideways between the significant Fibonacci levels of 0.618 (2198.369) and 0.5 (2177.759).
- In this scenario, the RSI might fluctuate around the 50 level, signifying a balance between buying and selling pressures.
Bearish Scenario:
- A reversal from the current levels could see gold retracting towards the 0.5 Fibonacci level at 2177.759, with a further slide possibly testing the 0.382 level at 2157.171.
- If the RSI dips below 50, it would suggest a loss of bullish momentum and could confirm a bearish trajectory.
Fundamental Scenarios for XAU/USD:
Positive Data Outcomes:
- Strong U.S. economic data, particularly higher-than-expected CPI figures, could enhance the appeal of the USD and diminish the allure of gold, aligning with a bearish technical scenario.
- A surge in U.S. Retail Sales or positive employment data may also bolster the USD, applying downward pressure on gold prices.
Neutral Data Outcomes:
- If upcoming U.S. economic data aligns with consensus forecasts, the impact on gold might be muted, likely leading to a neutral market sentiment and limited price movement.
- Market focus might shift to other global economic developments or geopolitical risks, which traditionally influence gold’s safe-haven appeal.
Negative Data Outcomes:
- Weaker U.S. CPI or employment data could trigger a flight to safety, bolstering gold’s safe-haven status and supporting a bullish price action.
- Unexpectedly dovish remarks from Fed officials or disappointing Retail Sales data could weaken the USD, providing a tailwind for gold prices.
Overall Market Sentiment:
Taking into account the potential reactions to the upcoming economic data and technical analysis, the market sentiment for XAU/USD in the forthcoming week could be divided as follows:
- Positive: 40% – Reflecting the potential for a continuation of the uptrend on weaker USD or heightened economic uncertainty.
- Negative: 35% – Considering the chance of a pullback on stronger USD strength following positive economic data releases.
- Neutral: 25% – Acknowledging the possibility of gold trading in a range if the economic data meets market expectations and no new catalysts emerge.
Risk based Sentiments-What to Look out for?
EUR/USD: Pay attention to the U.S. CPI and retail sales data. Strong figures could reinforce the USD’s strength, pressuring EUR/USD lower.
GBP/USD: U.S. inflation data and retail sales are key. Positive surprises in these indicators could enhance USD value, potentially leading to a downward movement for GBP/USD.
USD/JPY: Watch closely the U.S. CPI, retail sales, and jobless claims. Better-than-expected outcomes could bolster the USD, favoring a bullish scenario for USD/JPY.
XAU/USD (Gold): U.S. CPI and employment figures will be critical. Weakness in these areas could drive gold prices higher as investors seek safety, while stronger data may dampen gold’s appeal.
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Disclaimer: This is not an Investment Advice. Investing and trading in currencies involve inherent risks. It’s essential to conduct thorough research and consider your risk tolerance before engaging in any financial activities.
