Daily Market Analysis from ForexMart

EUR/USD and GBP/USD trading plan for beginners on February 20, 2023​​​​​​​

Details of the economic calendar on February 17
Friday's U.K. retail sales data reflected a slowdown in the rate of decline from -6.1% to -5.8%. However, it should be taken into account that the previous data was revised negative from -5.8% to -6.1%.

The pound declined amid the statistical data.

Analysis of trading charts from February 17
EURUSD locally dropped below the level of 1.0650, but the quote did not manage to hold on to the new values. As a result, a pullback occured, which brought the quote back above the previously passed level. Based on the dynamics during the pullback period, there was a sharp reduction in the volume of short positions in the euro. Thus, the breakdown of the 1.0650 level might have been false.

GBPUSD failed to stay below the value of 1.1950. As a result, there was a reduction in the volume of short positions on the market, leading to a slowdown in the downward cycle, which caused a price pullback.

Economic calendar for February 20
Today, the macroeconomic calendar is empty, the publication of important statistics is not expected. It is worth noting that today is a non-working day in the United States on the occasion of a national holiday. For this reason, banks and stock exchanges are not working, which may adversely affect trading volumes.

EUR/USD trading plan for February 20
If the current pullback leads to strengthening of long positions in the euro, it may return the quote to the local high of the past week.

As for the downside scenario, the quote must first return below the level of 1.0650 and stay there in the daily period. In this case, the breakdown of 1.0650 will be confirmed on the market, which will open the way towards 1.0500.

GBP/USD trading plan for February 20
The area of the 1.2000 support level still puts pressure on sellers, despite the fact that it was locally broken by the price. Presumably, the current pullback-stagnation will play the role of accumulation of trading forces. This, in turn, will lead to new price hikes.

As for the signal values, the boundaries of the deviation from the 1.2000 psychological level will be 1.1950 and 1.2050. These values are highly likely to become the starting point for speculators. Note that the quote needs to hold beyond this or that value in the daily period.

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.

EUR/USD and GBP/USD trading plan for beginners on February 22, 2023

Details of the economic calendar on February 21
Particular attention was given to the preliminary assessment of business activity indices in Europe, Great Britain and the United States.

Details of PMI statistics:

The Eurozone manufacturing PMI fell from 48.8 to 48.5 in February, with a forecast of 49.5. Services PMI for the same period rose from 50.8 to 53.0, with a forecast of 51.5. And the composite PMI rose from 50.3 to 52.3, with a forecast of 51.0.

The euro did not win back the news flow in any way.

UK manufacturing PMI rose from 47.0 to 49.2, with a forecast of 47.5. Services PMI rose from 48.7 to 53.3, while composite PMI rose from 48.5 to 53.0.

The pound sterling reacted to the statistical data with a rise in value.

U.S. Manufacturing PMI rose from 46.9 to 47.8. Services PMI rose from 46.8 to 50.5 points, while composite PMI rose from 46.8 to 50.2 points.

The dollar reacted not quite typically to positive statistics.

Analysis of trading charts from February 21
Despite the local manifestation of speculative activity, the EURUSD currency pair continues to move within the level of 1.0650. This indicates a typical uncertainty of the direction of movement among market participants.

The GBPUSD currency pair was able to overcome the stagnation in the upper area of the 1.2000/1.2050 psychological level due to the upward momentum. This led to an increase in the volume of long positions on the pound sterling and a further rise of quotes to 1.2150.

Economic calendar for February 22
Today, the macroeconomic calendar is almost empty except for a few publications which are unlikely to attract the attention of large investors. However, familiarization with the FOMC protocol, which will be released at 19:00 UTC, may be informative.

EUR/USD trading plan for February 22
In order for the market to have a technical signal about the continuation of the current corrective trend, the quote needs to stay below the level of 1.0650 in the daily period. In such a situation, an increase in the volume of short positions on the euro is possible, which will lead to a decrease in the price to the level of 1.0500.

If the market moves in an alternative direction, the quote needs to rise above the level of 1.0750 to continue the upward trend. In this case, an increase to the level of 1.0800 is possible.

GBP/USD trading plan for February 22
Buyers face resistance at 1.2150, which leads to a decrease in the volume of long positions and stagnation-pullback in the market. In order to continue rising, the quote needs to be kept above the level of 1.2150 within a 4-hour period. If this level is not overcome, the quote may return to the 1.2000 support level.

GBP/USD: Breaking forecast on February 28, 2023

Yesterday, the greenback plunged on the back of disappointing macro statistics in the US. Thus, durable goods orders tumbled by 4.5% after surging by a downwardly revised 5.1% in the previous month. Figures had been expected to show a 3.5% decline. In this light, consumer spending in the US may soon drop, with its growth now slowing.

United States Durable Goods Orders:

Today's macroeconomic calendar is empty. The greenback has recently been bearish only when under the pressure from weak macroeconomic statistics. When the calendar was empty, the dollar either strengthened or traded sideways. The first scenario is unlikely to play out due to the greenback's current overbought status. Therefore, we may see a flat trend in the market today.

GBP/USD gained about 1% yesterday. Despite such a sharp price change, the quote is still hovering around a psychological level. In other words, the graphical picture on the chart remained almost unchanged.

Moving up, the RSI crossed line 50 on the H4 chart, signaling a bullish bias.

The Alligator's MAs are intertwined on the H4 chart, indicating a slower downward cycle.

Outlook

The pair is hovering in the 1.1950/1.2050 range, with the psychological level seen at 1.2000. It can be assumed that the current fluctuations near this mark will go on for a while. However, consolidation beyond one of the limits of the 1.1950/1.2050 range on the daily chart may reveal the pair's further movement.

Speaking of complex indicator analysis, there is a signal to buy in the short term and intraday in the wake of the recent impulse.

EUR/USD looking for direction as market faces uncertainty

Yesterday, the greenback lost almost 0.6% against its main rivals, including the euro.

On Monday, the US dollar stopped its four-day winning streak, giving away profits received in the previous session and rolling back to Friday's levels.

The recent jump in USD was driven by the US Personal Consumption Expenditure Price Index (PCE), which rose by 0.6% last month after increasing by 0.2% in December. In annual terms, the indicator accelerated by 5.4% after rising by 5.3% a month earlier.

"Inflation remains too high and the latest data reinforces my view that we still have a long way to go to bring inflation down to our 2% target," Boston Fed President Susan Collins said in a statement.

"The PCE price index report indicates that more effort will be needed from the Fed to put inflation on a sustained path down to 2%," Cleveland Fed President Loretta Mester said.

The latest data cast doubt on the assertions of Fed Chairman Jerome Powell about the start of a disinflationary process in the United States.

This sentiment seemed to be shared by most FOMC members and justified the central bank's decision to raise interest rates by 25 basis points at its monetary policy meeting on January 31-February 1 after a string of larger moves in 2022.

"If the Fed had received this data at the last meeting, it would probably have raised rates by 50 basis points, and Jerome Powell's stance at the press conference would have been very different," strategists at Cetera Investment Management said.

Fed officials speaking on Friday did not push for a return to last year's massive rate hikes, suggesting the central bank is content with a gradual tightening for now, despite signs that inflation is not declining as they had hoped.

It is expected that the Fed will increase the cost of borrowing by another 25 basis points at its next meeting on March 21-22.

However, some analysts see the possibility of raising rates by 50 basis points if inflation remains high and US economic growth is strong.

"We now believe that the likelihood of a 50 basis point Fed rate hike in March is much higher. We estimate the chances of such an outcome at about 60%," NatWest experts noted.

Barclays experts also do not rule out an increase in the cost of borrowing in the US next month by 50 basis points at once.

According to the CME Group, 76% of traders expect the Fed to hike the key rate in March of 25 basis points, while 24% predict a rise by 50 basis points.

The prospect of more robust US inflation, which requires more consistent monetary tightening from the Fed, saw Wall Street's key indicators suffer their biggest weekly losses of the year on Friday.

Over the past week, major US stock indices have lost an average of 3%.

"We have learned that US inflation is proving to be much more stubborn and US activity more resilient than we anticipated in December and January. It is clear that investors are now more serious about the statements of the Fed hawks and have priced in three more rate hikes of 25 basis points in March, May, and June," ING strategists said.

The derivatives market expects the Fed's key rate to peak at 5.4% this year, although a month ago the maximum rate was estimated at 5%.

Traditionally, the Fed raises the rate to support the US currency.

While the US stock market was knocked out by the PCE price index, the dollar hit seven-week highs at 105.30 on Friday and posted its biggest weekly gain since late September 2022, gaining more than 1.3%.

Meanwhile, EUR/USD came under bearish pressure on Friday and went down by about 0.5% to close the day near 1.0545. As a result, the pair lost about 150 pips.

On Monday, the greenback retested multi-week highs and approached 105.40 but failed to hold on to these levels and retreated, following the decline in US Treasury yields.

The demand for USD weakened after the release of disappointing data on US durable goods orders for January.

Last month, the indicator fell by 4.5% compared to December when it jumped by 5.1%.

In addition, renewed risk appetite has left USD on the sidelines.

American stock indices finished yesterday's trading with a moderate rise, recovering by 0.2-0.6% after a sharp decline in the previous week.

Taking advantage of the general weakening of the dollar, EUR/USD managed to recover from multi-week lows in the range of 1.0535-1.0530. The pair gained over 60 pips on Monday and closed in positive territory for the first time in five days, hitting 1.0610.

On Tuesday, the greenback sank to its lowest level since Thursday, reaching the area of 104.40. Later, it managed to win back all the daily losses, rising by about 0.2% from the previous close near 104.60.

The resumption of growth in Treasury yields on Tuesday after a modest retreat on Monday served as a tailwind for USD.

Deteriorating risk sentiment also helped the US dollar to recover.

The "rally of relief" after the correction in equity markets on Friday caused by a negative surprise in the US PCE price index turned out to be short-lived.

Wall Street's key indices were down again on Tuesday.

Traders continue to assess the risks of further tightening of the monetary policy by major central banks in the context of stubbornly high inflation.

Back in January, investors were confident that a slowdown in economic growth would prompt Fed officials to pause the cycle of aggressive rate hikes but strong data has since changed this view.

As a result, investors are reconsidering their soft-landing scenario and are worried that major central banks could tighten monetary conditions too much in response to positive data, triggering a deep recession.

"The market is aware that inflationary pressures in developed countries, namely in the US and the eurozone, are more stable than previously thought," Commerzbank said.

"This is a positive factor for the US dollar because the Fed is seen as being more proactive compared to the ECB. Thus, the EUR/USD levels near 1.1000 have not proved sustainable yet. The pair may struggle to stay above 1.0600 in the coming months," they said.

Nordea strategists expect EUR/USD to drop occasionally to 1.0300 until the summer.

"We assume that the Fed and other central banks will continue to raise rates more than previously expected to tighten financial conditions and reduce inflation. Thus, a rate hike by the Fed would support the dollar, and risk-free market conditions associated with higher interest rates could put pressure on equity markets, further boosting interest in the safe-haven greenback," they said.

Societe Generale believes that the EUR/USD pair will remain under downward pressure.

"The problem facing the ECB, as well as the Fed, is that it may have to extend the tightening cycle and thereby force a harder downturn in the economy. This could lead to a fall in stocks and credit markets. Since the beginning of the year, European securities have been outperforming their American counterparts, and the re-convergence will be a test of the prerequisites for the strengthening of the EUR/USD pair," bank economists said.

"The major currency pair has recently dropped by five figures over the past month on the back of a possible 60-basis-point rate hike implied Fed tightening. If the markets revise the rate forecast to 6%, it would be unwise to rule out further selling," they added.

Stronger-than-expected data from the United States boosted yields in the US more than anywhere else and pushed the dollar higher against most currencies for the first time since it hit a cyclical peak last September, analysts at Capital Economics said.

"While the resilience of the US economy will allow the dollar to remain strong in the near term, we hold the view that recessions in most advanced economies and reduced risk appetite will eventually be the factor that returns USD to its cyclical high later this year," they said.

Despite a recent bout of weakness, the greenback has gained 2.5% since early February and is close to posting its first monthly rise since last September.

The 10-year US Treasury yield could rise by about 40 basis points in a month.

The S&P 500 was down by more than 2% in February after a 6% jump in January.

The market is now waiting for data on the US consumer price index which will be released on March 14.

The data will have an impact on the Fed's policy on interest rates, as well as show whether the efforts of the central bank to slow inflation to the target level are bearing fruit.

If fresh numbers point to accelerating US disinflation, stock markets could turn bullish again, thus triggering a return to the dollar's downtrend.

"But if instead the data released during March confirm the worst-case inflationary no-landing scenario, the resulting March madness could send the 10-year Treasury bond yield above its most recent high of 4.25% on October 24 and the S&P 500 tumbling toward its bear-market low of 3,577.03 on October 12," Yardeni Research said.

In such a scenario, USD is sure to continue the uptrend and EUR/USD is set to decline.

"The repricing of the higher interest rate and reduced expectations of interest rate cuts later this year has breathed new life into last year's strong US dollar trading," MUFG Bank economists said.

They believe that the recent greenback bounce has room for further development in the near term.

"After a break above 105.00, USD could retest its yearly high of 105.63 and then the 200-day moving average in the area just below 106.50," MUFG Bank strategists said.

MUFG believes that the US dollar is the main driver of the EUR/USD exchange rate.

"We expect the pair to fall back to the support at 1.0330 near which the 200-day moving average runs," the experts said.

Meanwhile, analysts at Pantheon Macroeconomics believe that data on the consumer price index, which should be published before the next FOMC meeting, will dispel some of the market's fears.

However, investors are unlikely to willingly sell the US currency until they become familiar with the next consumer price index data.

In addition, the market admits that the path of inflation returning to the Fed's target of 2% may be longer and more tortuous.

"Inflation is likely to mean stability and upside potential for the US dollar in the near term, given the low unemployment rate. However, we expect this upside to be more limited, with EUR/USD targeting 1.0500 for the first half of this year," Bank of America said.

"We maintain our overall view on the currency market and believe that the overvaluation of the US dollar determines the long-term outlook, including our forecast of 1.1000 for the EUR/USD pair at the end of the year," they added.

On Tuesday, the major currency pair tried to extend the growth recorded on Monday but failed to maintain positive momentum amid deteriorating market sentiment.

The immediate obstacle for EUR/USD is seen at 1.0620 (the 50-day moving average), followed by 1.0660 (the 23.6% Fibonacci retracement level of the recent downtrend) and the psychological level of 1.0700.

On the other hand, a close below 1.0600 would trigger a drop to 1.0560 (20-day moving average) and then to 1.0520.

European stock markets show declines

Yesterday, European stock exchanges closed mostly with declines. The exception was the FTSE 100 index, which rose by 0.49%. All other indices dropped. The DAX index fell by 0.39%, the CAC 40 index decreased by 0.46%, the FTSE MIB lost 0.59%, and the IBEX 35 index slumped by 0.76%. The composite STOXX Europe 600 was down by 0.74%.

European indicators dropped after the release of the latest statistical data on inflation in Germany. According to last month's results, the growth in consumer prices in the country increased to 9.3% from January's level of 9.2%. This indicator exceeded the forecasts of experts, who projected a reduction of 9%.

In addition, France and Spain posted an upsurge in consumer prices over the past month.

Today, the statistical data for all eurozone countries will be published. According to the preliminary forecast, consumer price growth over the past month is expected to decrease to 8.2% from the January level of 8.6%, as well as core inflation is forecasted to maintain at 5.3%.

Skyrocketing inflation is causing fears among investors about a further increase in interest rates by the European regulator more than previously expected. According to analysts' forecasts, the interest rate is expected to rise by 0.5% this month from the current level of 2.5%. In the future, the rates may soar to 4% by February next year.

Another factor was the eurozone manufacturing PMI which dropped to 48.5 from 48.8 on a monthly basis. At the same time, this indicator was in line with preliminary forecasts.

At the same time, the growth of the UK manufacturing PMI was promoted by the release of the latest statistical data from China, which indicate the recovery of the country's economy as a result of the easing of restrictions since the beginning of 2023. In China, the industrial and service sectors expanded.

Among the British FTSE 100 companies, Rio Tinto rose by 4.6%, Glencore gained 3.5%, Anglo American increased by 3.3%, as well as BHP Group added 2.3%. All companies listed above demonstrated the highest gains.

The stocks of European companies were trading mixed. Thus, Siemens AG gained 0.4% due to the company's announcement about the creation of a new company Innomotics, which will start operating independently on July 1, 2023. This division will be engaged in the production of various types of engines and converters.

By contrast, Puma SE fell by 6.8% due to a more than five-fold drop in net profits in the last quarter to €1.4 million, while revenues rose by 24% to €2.2 billion.

In addition, the company's gross margin dropped to 44% as a result of higher promotional costs for products that need to be sold to make room in warehouses.

Just Eat Takeaway.com NV declined by 3.2% due to a sharp increase in net losses last year, which was the result of large write-downs totaling €4.6 billion after the revaluation of previously acquired assets.

On the contrary, Aston Martin Lagonda rose by 3.2%, despite the company's report of a 2.3-fold increase in the company's loss last year. One of the reasons for this was the weakening of the British currency against the US dollar.

Beiersdorf decreased by 0.5%, despite the increase in revenues last year by 10.2%, to €8.8 billion. At the same time, the company predicts a decline in sales growth this year.

Trading signals for GOLD (XAU/USD) on March 6-7, 2023: buy above $1,853 (200 EMA-21 SMA)

Early in the European session, gold is trading around 1,852.80, above the 200 EMA and above the 21 SMA. We can see a bullish bias but no signs of exhaustion.

According to the 4-hour chart, we can see that gold is entering an overbought zone. In the next few hours, gold could fall below 1,850. A technical correction toward the 21 SMA at 1,835 is likely.

Last week's US Durable Goods Orders came in worse than expected. As a result, XAU/USD rallied from the low of 1,804. The performance was about $50 of profit which could mean a change in trend in the short term, but before, we should wait for a technical correction.

This week, Chairman Jerome Powell will release the Federal Reserve's semi-annual monetary policy report. In the event that Powell communicates that it is unlikely that the interest rate increases by more than 0.50% again, the US dollar could be affected and could help gold resume its bullish cycle.

According to the technical chart, gold is in a key zone. If it consolidates above 1,853 in the next few days, it could reach 4/8 Murray at 1,875 and finally could reach the psychological level of 1,900.

According to the eagle indicator, gold is in an overbought zone (95-points). In case it trades below 1,850 we could expect it to consolidate around 1,843 (3/8 Murray). If it breaks below 1,835 (21 SMA), it could then fall until reaching the area of 1,818. At this level, gold left a GAP that still needs to be covered.

Our trading plan for the next few hours is to sell below 1,850, with targets at 1,843 and 1,835. On the other hand, in case the trade is above 1,853, we should continue buying with targets at 1,875 (4/8 Murray).

Breaking forecast for EUR/USD on March 9, 2023

Jerome Powell's speech led to a slump in the single currency and forced investors to revise their attitude toward the current state of affairs. Against the backdrop, all the macroeconomic reports were ignored yesterday. Notably, a lot of information was issued. Thus, the third estimate of the eurozone GDP was worse than the previous one. The economic growth contracted to 1.8% from 2.4%. This means that Europe may slip into a recession. Meanwhile, US employment increased by 242,000 instead of 191,000, thus pointing to further improvement in the US labor market. Both reports should have led to the appreciation of the greenback but the market got stuck. Investors are trying to predict the future actions of the Fed.

Today, the market is likely to remain stagnant if the forecasts for the US unemployment claims meet reality. A change is expected to be insignificant. Thus, the number of initial claims may increase by 2,000, whereas the number of continuing claims may drop by 5,000. Such figures will hardly revive the market. However, traders should keep in mind that the US dollar is overbought and it may unexpectedly drop.

The euro is stagnant but may rebound against the US dollar after a bearish rally recorded on March 7. Short positions have become overheated amid a sharp price change. This points to the euro's oversold conditions in the short-term periods.

On the one-hour chart, the RSI managed to leave the oversold area thanks to the current stagnation. On the four-hour and daily charts, the indicator is hovering in the lower area of 30/50, which points to the mainly bearish sentiment among traders.

On the four-hour and daily charts, the Alligator's MAs are headed downwards, which corresponds to the existing cycle. On the one-hour chart, the indicator is pointing to a pause in the downward cycle as MAs are intersecting each other.

Outlook

The current stagnation within the range of 40 pips could be considered an accumulation process. This, in turn, may spur an outgoing impulse, indicating the price direction.

The complex indicator analysis unveiled that in the short-term period, indicators are signaling mixed opportunities amid stagnation. In the intraday and mid-term periods, indicators are still providing a bearish signal.

Hot forecast for GBP/USD on 10/03/2023

At first glance, it is not surprising that the pound was able to show quite good growth yesterday, as the data on unemployment claims in the United States was not only worse than expected, but also pointed to a clear deterioration of the situation in the labor market. For example, the number of initial applications has grown by 21,000 instead of the expected 2,000. The number of new applications, which was expected to fall by 5,000, jumped by 69,000. It turns out that the data only confirmed the validity of this growth. While its main reason was because the pound was oversold. The most important thing is that all the labor market data is coming out in different directions and it is quite obvious that the content of the report, which will be published today by the U.S. Labor Department, will be very different from the forecasts. It is just not clear in which direction it will head.

The number of jobless claims (United States):

Anyway, the start of the trading day isn't going to be very good for the pound as the pace of industrial production decline is expected to accelerate from -4.0% to -4.8% in Great Britain. Moreover, monthly GDP data is not expected to be very encouraging either as it should show a -0.2% drop of the economy. So the British economy is steadily sliding into recession.

Industrial production (UK):

The main event not only of the day, but also of the week, is the report of the United States Department of Labor. If we proceed from current forecasts, which are the only ones we can rely on for the time being, then everything looks good. With a stable level of unemployment, 210,000 new jobs should be created outside of agriculture. This is enough to keep the unemployment rate, which is already incredibly low, stable. And results like that should help the dollar strengthen. The problem is that the data will most likely not match the forecasts. But it's hard to tell whether it will be better or worse. In other words, investors will not take chances and will wait for the report and then they will make their decision.

Unemployment Rate (United States):

GBPUSD reduced the volume of short positions around 1.1800. As a result, there was a slowdown in the bearish cycle, and then the quote reversed. This movement caused the pound to recover relative to its decline on March 7.

On the four-hour chart, during the process of recovery, the RSI crossed the 50 middle line and made its way upwards. This confirms the bullish sentiment.

On the same chart, the Alligator's MAs are intertwined with each other. This is the primary signal of the slowdown of the downward cycle. One the one-day chart, the indicator lines are directed downwards, which corresponds to the downward movement from the beginning of February.

Outlook

As a result, the quote returned to the lower limit of the horizontal channel (1.1920/1.2150) it had already passed. At the moment, the 1.1920/1.1950 area may serve as resistance, and in terms of technical analysis, this can reduce bullish sentiment on the pound. This in turn allows the price to rebound.

However, in case the bullish sentiment persists among traders, and the quote is able to stay above 1.2000, then the pound can rise further.

The complex indicator analysis in the short-term and intraday periods indicate an upward bias or bullish sentiment, this is because the price bounced from 1.1800.

Hot forecast for EUR/USD on 13/03/2023

All of the recent labor market data in the United States clearly indicated that the content of the Labor Department report would be very different from what had been predicted, and the only question was in which direction. Since all of this data showed different directions. This is exactly what happened. And everything went according to the negative scenario. The unemployment rate, which should have remained unchanged, increased from 3.4% to 3.6%. And so the dollar instantly began to lose its positions. And quite substantially at that. And it didn't matter that 311,000 new jobs were created outside of agriculture. Which is 101,000 more than it was forecasted. The very growth of the unemployment rate clearly points to the worsening situation on the labor market, the state of which bound the hands of the Federal Reserve, forcing it not only to raise interest rates, but even consider a 50 bps hike, despite the slowdown of inflation. In other words, the content of the United States Department of Labor report removes any questions about the extent of the upcoming refinancing rate hike, which will pass at the minimum bar. This is the main reason why the dollar weakened.

The unemployment rate (United States):

But the problems for the dollar seems to be just beginning, because on Friday night, Silicon Valley Bank announced bankruptcy, one of the second ten largest credit institutions in the United States. This is the biggest bankruptcy since 2008. Almost immediately thereafter, the Federal Reserve Bank of New York decided to close Signature Bank. According to the central bank's statements, the reason was systemic risks caused by massive deposit outflows. At this moment, events are developing in a typical way for a banking crisis - the bankruptcy of one bank entails a chain reaction, as the other banks that issued short interbank loans to the bankrupt credit organization face liquidity shortages and are not able both to return the funds already raised by them or provide credit resources to other financial institutions. If monetary authorities did not immediately intervene, other bankruptcies would follow. For this reason there is immediate talk of the need to turn on the printing press and provide immediate emergency aid to credit institutions. This is nothing but another iteration of quantitative easing, or trivial money emission. And a $1.1 trillion figure even came up. In addition, some media have already found the culprit in the bankruptcy of Silicon Valley Bank - the Federal Reserve. They say that the increase in interest rates has severely shaken the stability of the financial system. It's very reminiscent of an attempt to put pressure on the central bank to start cutting interest rates. As a result, both the prospect of switching on the printing press and reduction of the refinancing rate will weigh on the dollar and facilitate its further weakening. And the situation is so serious that Joe Biden is speaking about it today, and much will depend on the words of the President of the United States.

The euro strengthened in value by about 100 points against the U.S. dollar last Friday. This was caused by a massive reduction of dollar positions due to the release of the U.S. labor market report. As a result, the quote reached the local highs of the week.

On the four-hour chart, the RSI was in the overbought zone during the bullish momentum, which indicates that long positions could "overheat" in the short term. The RSI is moving within the 70 zone, which is also consistent with an overbought signal.

On the four-hour and one-hour charts, the Alligator's MAs are pointing upwards, which points to the bullish momentum. However, on the daily chart, it is still on the bearish cycle from the beginning of February.

Outlook

In this situation, keeping the price above 1.0700 might push the euro to rise further, ignoring the sign that it is overbought in the short term. However, things could change if the euro falls below 1.0650.

The complex indicator analysis unveiled that in the intraday and short-term periods, technical indicators are pointing to bullish sentiment due to the upward momentum.

Rally in euro and pound may end quickly

The unexpected crisis in the US banking sector has crushed all hopes for a new acceleration in the pace of interest rate hikes. Goldman Sachs economists said they no longer see the Fed raising rates next week, even after US authorities took steps to contain the crisis caused by the collapse of Silicon Valley Bank and Signature Bank. This caused two-year Treasury bond yields to fall by 18 basis points to 4.34%, reaching its sharpest three-day drop since October 1987. Expectations of a less aggressive policy stance and sharp demand for German bonds also affected the euro.

Most likely, Fed officials will announce a pause in interest rate hikes this week ahead of their meeting on March 21-22. Economists were expecting to see around 0.25% to 0.5% increase earlier, but everything changed since last Sunday, when US authorities had to act very quickly in order to contain the spreading of SVB's problem to other US banks. The Fed had to open an emergency line of credit, allowing banks to pledge a range of high-quality assets to obtain cash for a period of one year. They also pledged to fully protect uninsured depositors in SVBs, as well as relax lending conditions through the Fed's discount window. These measures should provide liquidity shortages to banks.

Now, the Fed is expected to raise the rate by a quarter point next week, which means that the peak will be around 5.1% in six months, slightly lower than the previously projected 5.74%.

The current situation is quite negative for dollar as it most certainly raises risk appetite. However, market players should keep in mind that if the crisis in the US banking sector is not solved quickly, it will spread to other regions, which will result in a collapse in other currencies such as euro and pound.

Ahead is an important US report, that is, the inflation data for February this year. Economists are predicting that the index will show a 0.4% increase, slightly lower than the previous month's 0.5%. Yearly data should be 5.5%, which is also lower than the 5.6% earlier.

Demand for euro has intensified after all the news, so buyers have a chance to continue building the new upward trend. However, the quote needs to stay above 1.0700 as only by that will euro go beyond 1.0730 and head towards 1.0770 and 1.0800. Should the quote decline below 1.0700, EUR/USD will slip to 1.0666.

In GBP/USD, bulls also control the market, but the quote needs to stay above 1.2130 so that pound could have the chance to break through 1.2170 and head towards 1.2215 and 1.2265. If bears manage to gain control, the pair may dip to 1.2080 and 1.2050.

Hot forecast for EUR/USD on 15/03/2023

The US media has already found the culprit in the banking crisis, and of course it is the Federal Reserve. They're saying that everything happened because the Fed has aggressively lifted interest rates. Supposedly, the main reason why two banks went bankrupt was because of the central bank. Now they are demanding that the Fed immediately start reducing interest rates and switch on the printing press and put out the fire with money. Furthermore, critics of the Fed have another reason to celebrate. Yesterday, we learned that US inflation slowed from 6.4% to 6.0%. It is decelerating for the eighth straight month, and in such circumstances, it will be very difficult for Fed Chairman Jerome Powell to explain the need not only to further raise interest rates, but also to do anything other than lower the refinancing rate.

Inflation (United States):

The dollar, on the other hand, will continue to be under pressure, as it loses ground not only because of the banking crisis in the United States and the clouds gathering over the Fed. Apparently, the banking crisis is already starting to spill over to Europe as well. We're talking about macro data, which are starting to point to more and more problems in the United States, and the stabilization of the situation in the euro area. In particular, the rate of industrial production decline in Europe should be replaced by growth from -1.7% to 0.5%.

Industrial production (Europe):

In the United States, the growth rate of retail sales should slow down from 6.4% to 4.3%. And if all of these forecasts are confirmed, the dollar will have no choice but to keep losing ground.

Retail Sales (United States):

The euro continued to rise against the U.S. dollar after a brief pullback. It passed 1.0700 earlier, which played the role of support, strengthening the bullish sentiment in the market.

On the four-hour chart, the RSI technical indicator is moving in the upper area of 50/70, which indicates bullish sentiment among traders. On the daily chart, the RSI recently climbed above the 50 midline, which indicates a change in sentiment.

On the four-hour and one-hour charts, the Alligator's MAs are headed upwards, which corresponds to the upward cycle from the middle of last week. On the daily chart, the primary signal will show change in trading sentiment, as the moving lines are intertwined with each other.

Outlook

The technical signal that shows change in sentiment, which indicates that the euro will gradually recover against the decline in February, will emerge if the price stays above 1.0800. Until then, that level will act as resistance, relative to which it is possible to reduce the volume of long positions on the euro.

The complex indicator analysis unveiled that in the intraday and short-term periods, technical indicators are pointing to bullish