By JustMarkets
A 0.5% rate hike is almost guaranteed at the ECB’s March meeting, and investors are focused on how the ECB will further shape monetary policy. This week’s negative inflation data from France, Spain, and Germany have prompted markets to assess a longer cycle of tightening monetary policy that will see the deposit rate peak at 4%. Bank of France Governor François Villeroy de Galhau said Wednesday in Paris that the final rate should be reached no later than September. Eurostat will publish Eurozone inflation data today. Analysts forecast that overall inflation will fall from 8.6% to 8.3%, while core inflation will remain at an annualized rate of 5.3%.
The trend on the EUR/USD currency pair on the hourly time frame is bearish. But the price is approaching the priority change level. The MACD indicator has become positive, and buyers’ pressure is increasing. Under such market conditions, buy trades are best considered from the support level of 1.0644 or 1.0595, but with confirmation on the intraday time frames. Sell deals can be considered from the resistance level of 1.0704 under a false breakout or an impulse return of the price below the 1.0644 level.
Alternative scenario: if the price breaks down through the resistance level of 1.0704 and fixes above it, the uptrend will likely resume.
Over the last month, the index of business activity in the UK manufacturing sector has slightly increased from 49.2 to 49.3. The dynamics of recovery can be traced for the whole quarter, but production is still in contraction territory for more than seven months. Bank of England Governor Andrew Bailey warned yesterday that there is “no easy way out” of the UK cost of living crisis, and further interest rate hikes may be needed to combat inflation. Bailey also added that the final decision on interest rates would depend on the latest inflation data.
From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. At the moment, the price is trading below the moving averages. The MACD indicator has become negative. Within the day, sales prevail, but their pressure decreases. Under such market conditions, it is better to look for buy deals from the support level of 1.1984, but better with confirmation. It is better to look for sell deals from the resistance level of 1.2087 but with a confirmation in the form of a false breakout.
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Alternative scenario: if the price breaks out through the 1.2147 resistance level and fixes above it, the uptrend will likely resume.
Bank of Japan (BOJ) board spokeswoman Nakagawa said Wednesday that the central bank should maintain an ultra-soft monetary policy for now, as the economy has not yet reached a steady 2% inflation target. Ms. Nakagawa also added that more time is needed to assess whether the Bank of Japan’s December decision to extend the limits of its 10-year bond yield target will be enough to correct market distortions caused by active bond purchases. Investors are putting pressure on the Bank of Japan to lock in yield control, but so far, the situation remains unchanged.
From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. But the price formed a false breakout area above the resistance level of 136.55. Now this area will act as an obstacle for the bulls. The MACD indicator is in the positive zone, but signs of divergence are still observed in several time frames. Under such market conditions, buy trades are best sought from the support level of 135.60 or 135.04, but only with confirmation. Sell deals can be sought from the 136.55 level, but with additional confirmation in the form of a reverse initiative on the lower time frames.
Alternative scenario: if the price fixes below the 134.04 support level, the downtrend will be resumed with a high probability.
Oil prices rose on Wednesday as China’s January manufacturing activity data was above expectations and served as an indicator of energy demand from the world’s largest crude oil importer. The Canadian dollar is a commodity currency, so rising oil prices tend to accompany a strengthening Canadian. Other data showed that Canada’s Manufacturing Purchasing Managers’ Index (PMI) was 52.4 in February, up from 51.0 in January and the highest reading since last July. The report said the pace of growth in output and new orders is the fastest since last May as companies continue to add new jobs. This is another growth driver for the Canadian currency.
From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The price is trading at the level of the moving averages and forming a wide-volatile corridor, which makes it difficult to find good entry points. The MACD indicator has become inactive. Under such market conditions, it is worth looking for buy trades from the support level of 1.3582, but only with a confirmation in the form of a false breakdown. Sell trades may be sought from the resistance level of 1.3664 or 1.3700, but only with a confirmation of a false breakout and short targets. A false break is very important for the price reversal because there is liquidity grabbing behind the level.
Alternative scenario: if the price breaks down and consolidates below the support level of 1.3513, the downtrend will likely resume.
By JustMarkets
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
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