Daily Market Analysis from ForexMart

Hot forecast for GBP/USD on 27/01/2023

US economic growth is expected to have slowed from 1.9% to 1.6%, but the first estimate of GDP for the fourth quarter showed a slowdown to 1.0%. This is perfectly in line with speculation that the US economy is at risk of sliding into recession. And with it the global economy. In theory, this would lead to the inevitable depreciation of the dollar. However, this has not happened. If you look at the pound, it has actually remained in place. The dollar edged up when the report was published, but then it quickly returned to the positions at which it was just before the US GDP report was released. The reason for such a strange reaction to obviously weak data lies in the preliminary estimates themselves. Yes, in annual terms, the growth rate slowed down significantly. However, if we look at the quarterly data, the economy grew by 2.9% in the fourth quarter, while the growth forecast was 2.7%. And if you also look at the durable goods orders, which suddenly rose as much as 5.6%, well above the 2.2% forecast, then you would see that the market's reaction is quite understandable. Yes, the economy has slowed down a lot, but there are signs that a recession can be avoided. The durable goods report hints at the possibility of an economic recovery as early as the first quarter.

GDP change (United States):

Despite the obvious interest in long positions, GBPUSD failed to update the local high of the upward cycle. As a result, 1.2440 has become a kind of resistance level against which stagnation/rebound occurs.

On the four-hour chart, the RSI technical indicator is moving in the upper area of 50/70, which points to the bullish sentiment. There is a similar technical signal on the daily chart.

On the four-hour chart, the Alligator's MAs have numerous intersections, which corresponds to the flat movement. The MAs are headed upwards.

Outlook

Based on the fact that the price has been fluctuating this week, the pair has been trading within the sideways channel of 1.2300/1.2440. At the peak of the upward cycle, this movement points to an accumulation process. As a result, an outgoing momentum should emerge that may indicate the price's succeeding direction.

In terms of the complex indicator analysis, we see that in the short-term and intraday periods, the indicator is providing a mixed signal because of stagnation. In the mid-term period, the indicators are moving in the direction of the upward cycle from the previous fall.

EUR/USD and GBP/USD trading plan for beginners on January 30, 2023

Details of the economic calendar on January 27
The economic calendar was almost empty on Friday. No important reports were published in the EU, the United Kingdom, and the Unites States.

However, it was possible to highlight the U.S. Pending Home Sales Index, which grew by 2.5% in December. Despite the positive data, no one paid attention to them.

Analysis of trading charts from January 27
The EURUSD currency pair has been within the sideways movement of 1.0840/1.0930 throughout the past week. This amplitude indicates the process of accumulation of trading forces, where, in the light of upcoming economic events, it will be won back in the form of price leverage.

Despite the fact that the GBPUSD currency pair had a wider amplitude compared to EURUSD, in general terms, everything is the same. The borders of price fluctuations are clamped between the values of 1.2300 and 1.2440, where the quote has been moving for almost two weeks. In fact, this price movement, as well as for the euro, indicates the process of accumulation of trading forces. Otherwise, a full-blown correction would have already occurred in the market.

Economic calendar for January 30
The economic calendar is traditionally empty on Monday. No important reports are expected. But do not be discouraged as the heat will begin at the middle of the week: the results of the Fed meeting, followed by the ECB, the Bank of England, inflation in the EU, and U.S. Department of Labor report. We expect high volatility in the financial markets.

EUR/USD trading plan for January 30
In this situation, where there is a price movement looped in a sideways range, it is appropriate to work according to the method of breaking through one or another stagnation border. As a result, with a high degree of probability, an outgoing impulse will arise, which will lead to the completion of the flat, indicating the subsequent movement.

Based on the above, consider two possible scenarios:

The upward move will be relevant if the price holds above 1.0940 in a four-hour period. This move will lead towards the 1.1000 psychological level.

The downward move will be applied if the price holds below 1.0840 in a four-hour period. This move could initially push the euro towards 1.0800. After that, a transition to the full-blown correction stage is possible.

GBP/USD trading plan for January 30
Based on the fact that the flat still takes place in the market, the tactics of working by the method of breaking through one or another range boundary is considered the most optimal.

Let's concretize the above:

The downward move will be relevant if the price holds below the level of 1.2300 in a four-hour period. This step can lead to the formation of a full-blown correction.

The upward move is taken into account in case of a stable holding of the price above the value of 1.2450 in a four-hour period. This move will indicate a continuation of the upward trend.

What's on the charts
The candlestick chart type is white and black graphic rectangles with lines above and below. With a detailed analysis of each individual candle, you can see its characteristics relative to a particular time frame: opening price, closing price, intraday high and low.

Horizontal levels are price coordinates, relative to which a price may stop or reverse its trajectory. In the market, these levels are called support and resistance.

Circles and rectangles are highlighted examples where the price reversed in history. This color highlighting indicates horizontal lines that may put pressure on the asset's price in the future.

The up/down arrows are landmarks of the possible price direction in the future.

AUD/USD. A black streak for the Australian dollar

A "black streak" came for the AUD/USD bulls after a streak of gains. The pair was rising almost the entire week and hit 0.7147, a seven-month high. But traders couldn't keep it at the level of the 71st figure: the price went down for the second day and tested the 69th price level. Although, it is worth taking note of the fact that the pair is losing ground not only because of the greenback's strength ahead of the Federal Reserve meeting.

Australia: Labor market and inflation
In exactly one week's time, the Reserve Bank of Australia will hold its meeting on February 7. Therefore, traders are not only discussing the outcome of the Fed meeting, but are also preparing for the announcement of the RBA's verdict.

See also: You can open a trading account here
AUD/USD. A black streak for the Australian dollar
Take note that last week, the pair received strong support from Australian inflation. Data on consumer price index growth in Australia turned out to be in the green zone, surprising market participants. For example, the monthly CPI indicator rose to 8.4% in the twelve months to December (with a forecasted increase to 7.6%). As for Q4 as a whole, all indicators were also in the green zone, exceeding analysts' expectations. In particular, Australia's annual rate of inflation has risen to a record high of 7.8% (with the forecast of 7.5%). The indicator continued the uptrend that it demonstrated throughout last year. The CPI rose 1.9% in the December 2022 quarter, while most experts had forecast a decline to 1.6% (after 1.8% in the third quarter). Core inflation in Australia (weighted average CPI) in quarterly terms also exceeded forecasts, coming in at 1.7%.

The inflation report "revived" the aussie after the previous labor market report. This report, on the contrary, turned out to be very controversial. The growth rate of the number of employed people fell to -14,600, while the growth rate was forecasted to +27,000. After the report, there were rumors in the market that the RBA might take a break in hiking rates in the beginning of spring. Unexpectedly strong inflation refuted these rumors, and the pair managed to conquer the resistance level of 0.7000.

The decline was due to investors' concerns over the actions of the Australian central bank. In my opinion, these fears are exaggerated.

The next steps of the RBA
Let me remind you that after the previous (December) meeting, RBA Governor Philip Lowe said that the central bank does not follow the pre-planned course: according to him, "the size and timing of future rate hikes will continue to be determined by incoming data and the Board's assessment of the outlook for inflation and the labor market". And while the labor market has generally "let down" the bulls, rising Australian inflation clearly speaks in favor of further rate hikes.

In this context, another phrase from Lowe is also noteworthy - that "the Board's priority is to return inflation to target over time".

One would assume that the central bank would slow the pace of rate hikes. But in this case, the RBA played ahead of the curve, lowering the rate to 25 points ahead of many of the leading central banks in the world. That's why this issue was off the table months ago.

As for rumors that the RBA may pause in monetary tightening, first of all, representatives of the central bank have repeatedly denied such intentions, and secondly, inflation indicators have offset the "dovish" talk, even amid weak "Australian Nonfarm".

Conclusions
The Australian dollar, in my opinion, unreasonably yields to pressure from the US currency. Certainly, ahead of the announcement of the results of the Federal Reserve's February meeting, it is detrimental and even dangerous to open any trading positions on the pair. But if the Fed does not ally with the greenback, the upward route for the pair's bulls will be open, even despite some doubts regarding the RBA's further actions. The bullish target will be 0.7150 again.

Technically speaking, the pair is between the middle and the upper lines of the Bollinger Bands indicator on the D1 chart, as well as above all lines of the Ichimoku indicator, which demonstrates a bullish "Parade of Lines" signal. In other words, technically, the pair retains the potential for further growth, to the major resistance level of 0.7150 (the upper line of the Bollinger Bands indicator on D1). A breakdown of this level will open the way to the area of the 72nd figure.

Aggressive Fed rate hike is ending

Euro rose above 1.1000 after the Fed signaled a change in their stance on monetary policy. Their statements during yesterday's meeting were more dovish compared to December, with interest rates increasing by only 25 basis points to a range of 4.5%-4.75%.

At first, markets did not react much to the news as everyone was waiting for the speech of Jerome Powell. But when the Fed Chairman confirmed that they will no longer be aggressive in terms of interest rates, risk appetite surged. The decision was kind of in line with what everyone was expecting, that is, a more optimistic view of inflation and the economy. Of course, Powell was not objectively dovish, but neither was he overly hawkish, which was enough for the market.

Speaking to reporters on Wednesday, Powell said they are forecasting "a couple more" rate hikes, but are ready to adjust their plans if price pressures eased faster than expected. When asked about easing conditions in financial markets that could complicate the central bank's path to return to its 2.0% inflation target, he did not sound particularly concerned.

The 25 basis point hike that was made yesterday was another step towards policy normalization after a half-point rate hike in December and four giant hikes of 75 basis points before that. Most likely, the soft inflation data in recent months has been persuasive enough for the Fed to consider suspending their rate hike campaign. Although the committee continues to cite high prices, the hint of two more 25 basis point hikes confirms market expectations of a final rate hike of 5.25%.

During the press conference, Powell admitted that the US economy is now in an era of disinflation with cooling price pressures. He stressed that more data is needed before they can declare victory, but did not specify how much they need to ensure that inflation is on the right track.

In terms of the forex market, demand for euro surged, but buyers need to protect 1.1000 in order to maintain the chance of rising above 1.1050. Possible price levels in such a situation are 1.1090 and 1.1125. In the event of a decline, EUR/USD could move below 1.1000 and head towards 1.0960 and 1.0920.

For GBP/USD, the sideways trend persists, so buyers need to return above 1.2420 to regain their advantage. Only the breakdown of this resistance level will strengthen the hope of a rise towards 1.2470, after which it will be possible for the pair to reach 1.2540. If pressure returns and sellers take control of 1.2350, the pair will fall to 1.2290 and 1.2230.

EUR/USD. The Fed hit the dollar, the ECB hit the euro

The European Central Bank increased the interest rate by 50 points at this year's first meeting, while announcing a 50-point hike at the next meeting in March. Despite such hawkish results of the February meeting, the euro came under pressure. The single currency retreated from a multi-month price peak (1.1034) and returned to the area of the 9th figure. Anomalous, at the first glance, market reaction is due to several factors.

Spring is near
If you assess the February meetings of the Federal Reserve, Bank of England and ECB, you can take note of one general characteristic. On the one hand, central banks declared the continuation of a hawkish course, but on the other hand, they made it clear that aggressive monetary policies are coming to an end. That's why the dollar was under attack at the end of the Fed meeting, the pound was under pressure by the end of the BoE meeting, and the euro was losing ground by the results of the ECB meeting. At the same time, traders actually ignored the fact that the central banks announced further steps to monetary tightening.

For example, ECB President Christine Lagarde without any vague wording, which is considered "straightforward", announced that the ECB intends to raise interest rates by another 50 basis points during the next meeting in March. According to her, the disinflationary process hadn't begun, despite the slowdown in the overall consumer price index (core inflation continues to show an uptrend).

It would seem that such straightforward hawkish verbal signals should have served as a springboard for the euro. But instead of growth to the resistance level of 1.1090 (the upper line of the Bollinger Bands indicator on the weekly chart), the price turned 180 degrees and was marked in the area of the 8th figure, followed by the retreat to the area of the 9th price level.

Why did this happen?
First of all, Lagarde, while announcing monetary tightening in March, questioned the further growth of interest rates. According to her, after the March decision "the ECB will evaluate the subsequent path of monetary policy." At the same time, market expectations (in particular, currency strategists at Danske Bank and a number of other large conglomerates) are more hawkish. The assumed scenario includes a 50-point hike in March and a 25-point increase at the next meeting (by 50 points according to some other analysts). Therefore, Lagarde's "wrap-up" sentiment was negatively received by EUR/USD bulls. The single currency was under pressure as traders took the ECB's message as a sign that the central bank nears the end of its rate hike cycle. In my opinion, the market adequately assessed the situation and correctly perceived the signals of the ECB.

Secondly, the ECB head emphasized her stance on problematic aspects - in particular, she said that economic activity in the European region has slowed down noticeably. At the same time, "high inflation and tighter financing conditions, these headwinds dampen spending and production,". Such comments put pressure on the euro.

Nevertheless, despite the euro's negative response, the EUR/USD pair did not collapse into the area of 7-6 figures, but only retreated from the multi-month price high to the base of the 9th price level. The underlying reason for such stress tolerance is that Lagarde tried to maintain a balance in her rhetoric. On the one hand, she announced a "guaranteed" 50-point hike in March, on the other hand, she questioned further steps towards tightening. On the one hand, Lagarde complained about the slowdown in economic activity; but then she also admitted that the European economy has been more resilient than expected. Moreover, according to forecasts, the economy will show signs of recovery in the coming quarters. At the same time, the ECB head pointed to the optimism of entrepreneurs (obviously referring to the PMI and ifo indices), stable gas supplies to Europe and reduced interruptions.

Conclusions
Figuratively speaking, the scales are back in equilibrium again: The Fed put pressure on the dollar, and the ECB put almost as much pressure on the greenback. The bulls couldn't conquer the 10th figure, the bears couldn't pull the price down to the 7th figure (and even failed to get a foothold at the 8th price level). Now everything will depend on the values of the key macroeconomic indicators, first of all, in regards to inflation. If core inflation in the European region persistently climbs up, the ECB may raise the rate not only in March but also at the next meeting. The US faces a similar situation: the Fed chief has declared a hawkish course, "tying" the scope of monetary tightening to the dynamics of key inflation indicators. Each inflation report and each inflation component (both in the US and Europe) will be viewed through the prism of further central bank actions.

Following the Fed and ECB meetings, the pair remained in the 1.0850-1.0970 range within which it has been trading for several weeks. In my opinion, in the mid-term perspective, the pair will fluctuate in the given price range, alternately pushing back from its limits, reacting to the current information flow.

EUR/USD: euro seeks growth opportunities as US dollar remains under pressure from statistic data

The US currency began this week on the back foot. USD retreated significantly after an earlier upsurge triggered by US labor market data. The euro took advantage of the situation and once again rebounded, trying to consolidate its past gains.

On Monday, February 6, the US dollar extended its Friday rally, which began after the release of strong labor market data. However, USD could not overtake EUR. On Friday, February 3, the US dollar index (USDX) jumped and tested the three-week high at 102.7.

As the greenback surged, US stock futures declined considerably. The release of strong US labor market data prompted investors to avoid risky assets, and sent USD higher, as it indicated that the Fed's policy expectations should be reconsidered. Market participants are expecting the regulator to continue its hawkish policy and put the peak interest rate at 5%-5.25%. According to preliminary estimates, this could be achieved with two additional hikes. Analysts say that the non-farm payrolls for January show that the US labor market is overheated. This would give the Fed more room for further rate hikes, experts say.

In the meantime, the European currency rallied after dropping on Friday by 1%. At the beginning of the new week EUR rose against USD and hit 1.0796. EUR/USD traded at 1.0790 early on Monday, February 6, trying to hold on to its gains. FX strategists at TD Securities believe the pair will move near 1.0800, but may retreat to the low of 1.0600 in the near future.

According to the US Bureau of Labor Statistics, unemployment in the United States dropped unexpectedly by 0.1% in January, reaching an all-time low of 3.4%. Experts expected the rate to rise to 3.6%. The latest data shows that employment rose by 894,000 in January, while the number of unemployed declined by 28,000. At the same time, the number of non-farm payrolls rose by 517,000, far exceeding forecasts. The non-farm payroll report for December 2022 was also revised upward.

According to estimates, the number of new jobs in the US economy was almost three times higher than expected. The unexpected growth gave the American economy a new impulse, experts noted. In January, the world's largest economy added 517,000 jobs. This is almost twice as much compared to 223,000 new jobs registered in December 2022.

In addition, average hourly earnings in the US rose by 0.3% last month. Last December average hourly earnings increased by 0.4%. As a result, year-on-year wage growth declined to 4.4% from 4.8% in the previous month. According to current data, public sector employment in the U.S. increased substantially, with 74,000 new jobs added.

Business activity in the US service sector also picked up in January. After a brief dip in December 2022, the index was back above the key level of 50 points, which separates growth from decline. As a result, the ISM Services PMI went up noticeably and advanced to 55.2 points from 49.6 points in November 2022. Recall that in November last year this indicator was 49.6 points.

The current macroeconomic data supported the US dollar, which gained 1% against the euro at the end of last week. However, on Monday, February 6, USD reversed course. As a result, the European currency got the upper hand, recouping its earlier drop.

Analysts believe that upcoming retail sales data in the eurozone may change this situation. Earlier, the euro decreased after the ECB made its decision on interest rates, only to increase after the statements made by the Federal Reserve. Last week, Fed chairman Jerome Powell suggested that there were only two rate hikes left for the regulator. In addition, the head of the Federal Reserve made it clear that the regulator may likely change its monetary policy interest rate, as the rate could reach its peak in 2023 (5%-5.25%).

Amid this situation, analysts noted that the market has become "tired" of endless USD sell-offs. This trend has been continuing throughout the last four months. This might lead to a corrective pullback of EUR/USD by 3%-4%, experts argue. In case of such a scenario, market participants will be able to take their current profits and balance their investment portfolios.

EUR/USD and GBP/USD trading plan for beginners on February 8, 2023

Details of the economic calendar on February 7
The macroeconomic calendar was empty. No important reports were released in the EU, the United Kingdom, and the Unites States.

In this regard, investors and traders focused on the incoming information and news flow. Federal Reserve Chairman Jerome Powell spoke before the Economic Club of Washington, where he once again pointed out the hawkish position of the regulator. However, the markets ignored Powell's words, perhaps due to the fact that all his statements were already known from the recent Fed meeting.

The main theses from Powell's speech:

- inflationary pressure is decreasing

- there is still a lot of work to be done

- interest rates need to be raised further

- national employment report was much stronger than expected

- monetary policy is still not sufficiently restrictive

- if the data continues to come out stronger than expected, the Fed will raise the rate even more

- 2% inflation target will not change

- inflation to fall significantly in 2023

- the labor market is strong because the economy is strong

- no decline in service sector inflation yet

- no decline in real estate inflation so far, expected in 2H 2023

- in order to fully reduce inflation, easing in the labor market is necessary

- if strong labor market reports or reports of higher inflation continue, the Fed may need to raise rates more than the markets are laying

- The Fed will respond to incoming statistics

Analysis of trading charts from February 7
The EURUSD currency pair reached 1.0670 during the downward cycle, where there was a reduction in the volume of short positions. As a result, the market rebounded slightly above 1.0750, but this movement did not lead to anything cardinal. So far, all this reminds of the stagnation that arose at the stage of the downward cycle.

The GBPUSD currency pair, despite the manifestation of local activity, continued to move within the area of the 1.2000 psychological level. This price stagnation may well indicate a realignment of trading forces, which will eventually play into the hands of speculators.

Economic calendar for February 8
Today, the macroeconomic calendar is again empty. No important reports are expected in the EU, the United Kingdom, and the Unites States.

In this regard, investors and traders will continue to focus on the incoming information and news flow.

EUR/USD trading plan for February 8
Based on the euro's oversold status due to the strong price action the days before, the current stagnation-pullback is a justified move in the market. At the same time, the update of the correction low points to the continuing downward mood among traders in the market.

In this situation, the technical signal about the completion of the corrective move may be the price holding above the level of 1.0800 in a four-hour period.

As for the downward scenario, a prolonged corrective move may occur when the price holds below 1.0660.

GBP/USD trading plan for February 8
In this situation, special attention is paid to two values, these are 1.2100, where holding above it for at least a four-hour period may indicate the completion of a corrective move, and 1.1950, if the price holds below this value in the daily period, it may prolong the current downward cycle.

Until the above technical signals are confirmed, the market will continue to have variable turbulence along the 1.2000 psychological level.

EUR/USD: Breaking forecast on February 13, 2023

At the beginning of the previous week, Fed Chair Jerome Powell said that there was a need for more rate hikes. Meanwhile, ECB member Isabel Schnabel gave vague answers to questions about interest rates in an interview on Friday. Thus, we can see how the stance of the two regulators differs. That adds more pressure on the euro. At the same time, a predictable ECB is what investors need right now. Above all else, the market believes that the European regulator will be the first to cut rates this year. Therefore, the greenback goes up in price. Nevertheless, the dollar is significantly overbought. So, a correction in the market is needed. Given that the macroeconomic calendar is empty today, now is the perfect time for it. However, taking into account the rhetoric of the central banks, technical factors might not be enough for triggering a correction. Without macro statistics, the market will simply consolidate near the current levels.

Moving down, EUR/USD hit a new low, and the corrective move went on from the high of the medium-term trend.

The RSI technical indicator is moving down between lines 30 and 50 in the 4-hour time frame, which indicates a corrective move. In the daily time frame, the RSI is near the levels of October last year, which reflects strong bearish sentiment in the market.

The Alligator's moving averages (MA) are headed down in the 1-hour, 4-hour, and daily time frames, signaling a corrective move from the high of the upward cycle.

Outlook

At this point, consolidation below 1.0650 in the 4-hour time frame at least could cause an increase in selling volumes, which in turn could prolong the corrective move.

Alternatively, if the downtrend cycle slows, the price may retrace and come to a standstill.

Based on complex indicator analysis, there is a sell signal for short-term and medium-term trading due to a correction continuation.

Trading signal for GOLD (XAU/USD) on February 15-16, 2023: buy above $1,856 (221 SMA - bearish channel)​​​​​​​

Early in the Asian session, gold is trading around 1,853.79, below the 21 SMA, and below the 3/8 Murray. It is likely that the bearish force in gold could be running out and a technical bounce could follow.

Yesterday during the American session, gold reached the support of 1,843 (3/8 Murray) in light of the US inflation data. Since then, the metal has been rebounding and reached the top of the downtrend channel which has been underway since February 2 but could not break it.

A sharp break above this downtrend channel could be a signal for a sustained gold rally. The price could hit 5/8 Murray at 1,906.

The key to buying should be to wait for XAU/USD to consolidate above the 200 EMA and 4/8 Murray around 1,875. From there, the instrument could reach 1,900 and 1,937(6/8 Murray).

Conversely, below 1,858, we would expect gold to continue to consolidate but for a clear continuation of the bearish move, we should wait for a daily close below 3/8 Murray located at 1,843 (3/8 Murray).

If in the next few hours, gold consolidates above the daily pivot point located at 1,854 and 1,856 (21 SMA) or above 1,843, we could expect it to reach 1,865 (top of the bearish channel) and 4/8 Murray at 1,875.

Technical Analysis of EUR/USD for February 16, 2023

Technical Market Outlook:

The EUR/USD pair has been seen moving lower after the bounce from the level of 1.0656 had been capped at 50 MA on H4 time frame chart. The High Tide candlestick pattern was followed by Bearish Engulfing candlestick pattern and then Marubozu candle was done as well. The market is in progress of the ABC corrective cycle and now the wave C in being developed. So far the wave C had reached the level of 1.0656 again, but a breakout is imminent. When the corrective cycle is done, the next target for bears is the technical support located at 1.0622. The momentum remains weak and negative, so all bounces are being used by bears to sell the EUR for a better price. Please keep an eye on the level of 1.0787 because this is the key short-term technical resistance.

Weekly Pivot Points:

WR3 - 1.07422

WR2 - 1.07078

WR1 - 1.06916

Weekly Pivot - 1.06734

WS1 - 1.06572

WS2 - 1.06390

WS3 - 1.06046

Trading Outlook:

Since the beginning of October 2022 the EUR/USD is in the corrective cycle to the upside, but the main, long-term trend remains bearish. This corrective cycle might had been terminated at the level of 1.1033 which is 50% Fibonacci retracement level. The EUR had made a new multi-decade low at the level of 0.9538, so as long as the USD is being bought all across the board, the down trend will continue towards the new lows.