Archive for Forex and Currency News

Week Ahead: AUD to pare 2023’s surge?

By ForexTime

The Australian Dollar has been the best-performing G10 currency against the US dollar so far in 2023.

AUDUSD currently also boasts a year-to-date advance of more than 3.7% at the time of writing.

 

And the Aussie’s performance could be impacted by the Reserve Bank of Australia’s first policy meeting of the year, to be held amidst these other potential market-moving events over the coming week:

Monday, February 6

  • AUD: Australia January inflation, 4Q retail sales
  • EUR: Germany January inflation, December factory orders; Eurozone December retail sales

Tuesday, February 7

  • AUD: Reserve Bank of Australia rate decision
  • EUR: Germany December industrial production
  • USD: Fed Chair Jerome Powell interview
  • US President Joe Biden delivers State of the Union address

Wednesday, February 8

  • USD: New York Fed President John Williams speech
  • Earnings by Disney, Uber

Thursday, February 9

  • SEK: Sweden rate decision
  • GBP: BOE Governor Andrew Bailey speech
  • USD: US weekly initial jobless claims
  • Pepsico quarterly earnings

Friday, February 10

  • JPY: Japan January PPI
  • CNH: China January CPI and PPI
  • AUD: RBA releases updated quarterly economic forecasts and policy outlook
  • GBP: UK December/4Q GDP, industrial production; BOE Chief Economist Huw Pill speech
  • USD: US February consumer sentiment
  • CAD: Canada January unemployment

 

The RBA is set to trigger a hike of 25 basis points (bps) next week.

If so:

  • that would be the RBA’s fourth consecutive 25bps hike, and would be half the size of the 50bps hikes delivered on four separate occasions between June and September 2022.
  • the RBA would’ve raised its benchmark cash rate by a cumulative 325bps over the past 12 months (assuming next week’s hike is indeed 25bps), bringing its Cash Rate Target up to 3.35% from the record low of 0.10% just 10 months ago.

In other words, next week’s hike may be the RBA’s last in a policy tightening campaign that began back in May 2022.

 

Why is the RBA easing up on its rate hikes?

The RBA even contemplated pausing its rate hikes even at its December policy meeting, for fear of doing too much damage to the Australian economy.

Recall that central banks hike interest rates in order to “destroy demand” and subdue inflation.

And there have been enough signs that the RBA hikes are taking their toll:

  • December’s mortgage approvals slumped 4.2%, while retail sales contracted 3.9% (vs. Nov)
  • Unemployment edged higher to 3.5% in December, while 14,600 jobs were lost that month
  • Inflation is expected to have peaked at 8.4% in December, and should moderate over the course of 2023 (look out for the RBA’s updated forecasts on Friday, Feb 10th).

 

How might the RBA’s decision impact AUDUSD?

  1. If the RBA grows more concerned about incurring too much damage on its economy and opts for a:
    • smaller-than-25bps hike next week (perhaps just 15bps?)
    • leaves it cash rate unchanged, or …
    • strongly suggests that the end of its rate-hiking campaign is truly close at hand

… any of the above “dovish” outcomes may prompt the unwinding of some of AUD’s stellar year-to-date gains.

Look out for initial support at AUDUSD’s 21-day simple moving average (SMA) which currently sits just around the psychologically-important 0.7000 level.

 

  1. However, if the RBA suggests it can’t yet pause its rate hikes, given that December’s consumer price index (CPI) exceeded expectations at 8.4% to mark a 32-year high, that should translate into more AUD strength.Recall that, generally, the economy that can better withstand interest rates moving higher tends to see its currency strengthen.

    Aussie bulls could then take such “hawkish” cues by the RBA to launch AUDUSD closer towards the early-June peak at 0.72830.

 

At the time of writing, Bloomberg’s FX model points to a 71% chance that AUDUSD trades within the 0.6925 to 0.7199 range over the next one-week period.

 

Why has AUD been soaring?

One word = China.

Australia is very much exposed to China, with the latter accounting for about 40% of Australia’s exports ranging from wine, lobsters, and of course, coal.

As China-Australia trade tensions thaw, the land Down Under stands to reap the benefits as the world’s second largest economy continues with its reopening.

Furthermore, the Australian economy is expected to fare much better in 2023 and be the exception to the forecasted global recession this year, as recently predicted by the IMF.

Hence, such optimism has seen AUD advance against all of its G10 peers since the start of the year, with AUDUSD yesterday punching its way to its highest levels since June, before easing slightly.

However, prices have been consolidating around the 50% Fibonacci retracement level for AUDUSD’s peak-to-trough performance over the past two years.

 

But before next week’s RBA decision, markets must first digest today’s US jobs report!

Note that the support/resistance levels above are derived from AUDUSD’s price action at the time this Week Ahead article is published, hours before the release of the US nonfarm payrolls due later today (Friday, February 3rd).

Signs that the US jobs market is weakening:

  • lower-than-forecasted 189,000 jobs created in January
  • higher-than-expected 3.6% unemployment rate

… would burnish hopes that the Fed has to pause its rate hikes sooner rather than later.

Such expectations might potentially drag the US dollar lower while offering a boost to AUDUSD.

In other words, today’s NFP report could have major sway on AUDUSD’s performance, even before the RBA would have its potential say on the Aussie.


Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Murrey Math Lines 02.02.2023 (USDCHF, XAUUSD)

By RoboForex.com

USDCHF, “US Dollar vs Swiss Franc”

On H4, the quotes are nearing the oversold area, while the RSI has already got to its own. As a result, a test of 0/8 (0.9033) is expected, followed by a bounce off it and growth to the resistance level of 2/8 (0.9155). The scenario can be cancelled by a downward breakaway of the support level of 0/8 (0.9033). In this case, the pair may keep falling, and the quotes might drop to -1/8 (0.8972).

USDCHF_H4
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

On M15, the upper line of VoltyChannel is too far away from the current price, so growth of the quotes can only be marked by a bounce off 0/8 (0.9033) on H4.

USDCHF_M15
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

XAUUSD, “Gold vs US Dollar”

On H4, the quotes are above the 200-day Moving Average, which indicates prevalence of an uptrend. The RSI has broken through the resistance line. So, the quotes are expected to rise above 7/8 (1968.75) and grow as far as the resistance level of 8/8 (2000.00). The scenario can be cancelled by a downward breakaway of the support level of 6/8 (1937.50). This might bring the quotes down to 4/8 (1875.50).

XAUUSD_H4
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

On M15, the upper line of VoltyChannel is broken away, which means an uptrend and high probability of further growth of the quotes.

XAUUSD_M15

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

The Analytical Overview of the Main Currency Pairs on 2023.02.02

By JustMarkets

The EUR/USD currency pair

Technical indicators of the currency pair:
  • Prev Open: 1.0861
  • Prev Close: 1.0989
  • % chg. over the last day: +1.17 %

The euro area’s overall inflation rate fell sharply in January from 9.2% to 8.5% year-on-year, while the core indicator was unchanged from the previous month at 5.2%. Earlier data showed that the Eurozone Manufacturing PMI Index reached a five-month high of 48.8, up from 47.8 the previous month. Although the manufacturing sector remains in contraction territory (below 50), the data indicate that the worst of the recession is over. Today traders will focus on the ECB monetary policy meeting, where a 0.5% rate hike is expected.

Trading recommendations
  • Support levels: 1.0967, 1.0923, 1.0875, 1.0834, 1.0801, 1.0781, 1.0710, 1.0650, 1.0597
  • Resistance levels: 1.1017, 1.1077

The trend on the EUR/USD currency pair on the hourly time frame is still bullish. The Euro is getting stronger on the background of the decreasing interest rate differential between the US Federal Reserve and the ECB. The MACD indicator is overbought, and the price has deviated strongly from the moving averages. Under such market conditions, buy trades are best considered after correcting to the nearest support levels. The first such level is 1.0969, but confirmation in the form of a false breakdown is necessary. Sell deals can be considered from the resistance level of 1.1017, but better with a confirmation in the form of a reverse initiative.

Alternative scenario: if the price breaks down through the support level of 1.0834 and fixes below it, the downtrend will likely resume.

EUR/USD
News feed for 2023.02.02:
  • – Eurozone ECB Monetary Policy Statement at 15:15 (GMT+2);
  • – Eurozone ECB Interest Rate Decision at 15:15 (GMT+2);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
  • – Eurozone ECB Press Conference at 15:45 (GMT+2);
  • – Eurozone ECB President Lagarde Speaks at 17:15 (GMT+2).

The GBP/USD currency pair

Technical indicators of the currency pair:
  • Prev Open: 1.2316
  • Prev Close: 1.2372
  • % chg. over the last day: +0.45 %

The UK Manufacturing PMI rose from 46.7 to 47. Annual home price growth slowed to 1.1% from 2.8% in December, with prices now 3.2% below their August peak. These are encouraging signs that the real estate market is recovering. But there are new problems on the horizon: strikes. Yesterday, Britain faced one of the biggest strikes in a decade. Teachers, machinists, civil servants, and bus drivers did not go to work. People are demanding higher wages amid record rises in the cost of living. The Bank of England will hold its monetary policy meeting today, where a 0.5% rate hike is also expected.

Trading recommendations
  • Support levels: 1.2343, 1.2311, 1.2263, 1.2220, 1.2080, 1.2000, 1.1928
  • Resistance levels: 1.2416, 1.2446, 1.2519

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bullish. The price is trading above the moving averages again. The MACD indicator is in the positive zone, and buyers’ pressure is prevailing again. Under such market conditions, it is better to look for buy deals on intraday time frames from the support level of  1.2343, but with confirmation in the form of initiative on the lower time frames. Sell trades are better to look for from the resistance level of 1.2416, but it is also better with a confirmation in the form of a reverse initiative or a false breakout because the level has been tested before.

Alternative scenario: if the price breaks down through the 1.2311 support level and fixes above it, the downtrend will likely resume.

GBP/USD
News feed for 2023.02.02:
  • – UK BoE Inflation Report at 14:00 (GMT+2);
  • – UK BoE Interest Rate Decision at 14:00 (GMT+2);
  • – UK BoE Monetary Policy Statement at 14:00 (GMT+2).

The USD/JPY currency pair

Technical indicators of the currency pair:
  • Prev Open: 130.08
  • Prev Close: 128.95
  • % chg. over the last day: -0.87 %

Fed officials have largely abandoned their hawkish views. But Jerome Powell denied cutting rates later in the year and indicated that the central bank would continue on its path of “fighting inflation.” The dollar index reacted to this news by falling because, despite further rate hikes, the Fed is nearing the end of its tightening cycle. And given the fact that the Bank of Japan is likely to start the process of monetary policy normalization this year, the USD/JPY outlook looks towards the downside, as the Japanese yen will start to strengthen on the background of the policy change.

Trading recommendations
  • Support levels: 128.16, 127.53, 126.19
  • Resistance levels: 129.05, 130.58, 131.10, 130.61, 131.58, 132.37, 132.95, 133.23

From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. The price is trading below the moving averages. The MACD indicator has become negative, there is seller’s pressure inside the day, but the price has reached the support level. Buy trades are best sought from the level of 128.16, but only with confirmation on the lower time frames. Sell deals can be searched from the resistance level of 129.05, provided that there is a reverse reaction.

Alternative scenario: If the price fixes above the resistance level of 131.58, the uptrend will be renewed with a high probability.

USD/JPY
There is no news feed for today.

The USD/CAD currency pair

Technical indicators of the currency pair:
  • Prev Open: 1.3303
  • Prev Close: 1.3289
  • % chg. over the last day: -0.10 %

The Canadian dollar is a commodity currency and is dependent on instruments such as the dollar index and oil. The US dollar declined yesterday as the US Fed’s tightening slowed, while oil prices also fell more than 3% as oil inventories rose and the OPEC+ countries decided to leave production levels unchanged in the expectation that Chinese demand will pick up. The Canadian reacted to this news with volatility. At the moment, the midterm picture is toward the further decrease of the USD/CAD quotes.

Trading recommendations
  • Support levels: 1.3281, 1.3212
  • Resistance levels: 1.3326, 1.3379, 1.3428, 1.3445, 1.3496, 1.3520, 1.3554, 1.3595

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bearish. The price is trading below the moving averages. The MACD indicator is in the negative zone, there is seller’s pressure inside the day, but there are signs of divergence. Now the price has reached the support level. Under such market conditions, buy trades can be considered from the 1.3281 support level, but with additional confirmation in the form of impulse initiative on the lower time frames. Sell deals should be considered from the resistance level of 1.3326, subject to a reverse reaction.

Alternative scenario: if the price breaks out and consolidates above the resistance level of 1.3428, the uptrend will likely resume.

USD/CAD
There is no news feed for today.

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.

Murrey Math Lines 01.02.2023 (USDJPY, USDCAD)

By RoboForex.com

USDJPY, “US Dollar vs Japanese Yen”

On H4, the quotes are under the 200-day Moving Average, which indicates prevalence of a downtrend. The RSI has bounced off the resistance line. As a result, 3/8 (129.68) is expected to be broken away, after which the quotes should fall to the support level of 2/8 (128.12). The scenario can be cancelled by rising over the resistance level of 4/8 (131.25), which might lead to a trend reversal and growth to 5/8 (132.81).

AUDUSD_H4
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

On M15, a new breakaway of the lower border of VoltyChannel will increase the probability of further decline of the price.

AUDUSD_M15
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

USDCAD, “US Dollar vs Canadian Dollar”

On H4, the quotes are under the 200-day Moving Average, which indicates prevalence of a downtrend. The RSI has bounced off the support line. As a result, we should expect a downward breakaway of 2/8 (1.3305) and further falling to the support level of 0/8 (1.3183). The scenario can be cancelled by rising above 3/8 (1.3366), after which the pair may rise to 4/8 (1.3427).

USDCAD_H4
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

On M15, the lower line of VoltyChannel is broken away. This indicates presence of a downtrend and a high probability of further falling of the price.

USDCAD_M15

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Mid-Week Technical Outlook: Exotics & Minors In Focus

By ForexTime 

The next few days promise to be incredibly eventful and volatile for financial markets thanks to major central bank decisions, earnings from tech titans, and key economic reports.

Caution remains the name of the game across markets as investors adopt a guarded approach towards riskier assets with all eyes on the Fed rate decision this evening. In Europe, shares edged higher but US equity futures slipped amid the growing tension and anticipation. Looking at currencies, the dollar has slipped against G10 majors while gold prices staged a sharp rebound from the $1900 region.

Over the past few weeks, we have been covering the dollar and other major currencies but today our attention falls not only on exotics but minor currency pairs. In the FX universe, a minor refers to non-USD currency pairs while exotics are the currency of a developing economy paired with another major. Exotics are notoriously known to be far less liquid than majors and explosively volatile…

While minors and exotics may be less popular than majors and often experience more wild swings thanks to less liquidity, they could still offer trading opportunities. So if you want a quick break from the dollar and other major currency pairs, check out the trading setups below.

GBPJPY trapped within a range

The GBPJPY remains trapped within a 300-pip range with resistance at 162.00 and support at 159.00. A breakout/down could be on the horizon with the correct fundamental spark. On Thursday, the Bank of England is expected to hike interest rates by 50 basis points to tame inflation.  The outcome of the meeting may have an impact on the GBPJPY in the near term. Talking technicals, a breakdown below 159.00 may open a path toward 156.00. Should prices push back above 162.00, the GBPJPY could attack 164.00.

EURJPY ready to resume selloff?

The technical bounce on the EURJPY could be over if prices fail to conquer the 141.50 level. Bears remain in some control with prices respecting a choppy bearish channel on the daily charts. A decline back under the 200-day Simple Moving Average could trigger a selloff towards 139.00 and 138.00, respectively. If prices can break above the 50-day SMA at 142.00, then a move toward 144.00 could become reality.

USDZAR set to slip?

It remains a choppy affair with the USDZAR as the currency swings between losses and gains. Prices seem to be in a wide range with some support found at 17.20. A strong breakdown below this level could encourage a move below the 50-day SMA and 200-day SMA at 16.95. Should prices experience a rebound, the first point of interest will be at 17.50 and 17.74, respectively.

EURAUD breakout/down?

As the subtitle says, the EURAUD can either experience a strong technical bounce from 1.5270 or break down below this point to hit 1.5070. The trend looks flat on the daily charts but prices are trading below the 100 but above the 200-day Simple Moving Average. Should 1.5270 prove to be reliable support, a move back toward 1.5670 after breaking through 1.5450.

AUDNZD bulls in control 

This currency pair remains firmly bullish on the daily timeframe. There have been consistently higher highs and higher lows while the MACD trades to the upside. A solid breakout and daily close above 1.1000 could encourage a move higher towards 1.1150 and 1.1250, respectively. Should 1.1000 prove to be reliable resistance, prices may sink back towards 1.0900.


Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Japanese Candlesticks Analysis 31.01.2023 (USDCAD, AUDUSD, USDCHF)

By JustMarkets

USDCAD, “US Dollar vs Canadian Dollar”

On H4, the pair has formed a Hammer reversal pattern. Currently, the pair is going by the signal in an ascending wave. The goal of the correction will be 1.3465; later the pair may bounce off it and continue the decline. However, the price may drop to 1.3310 without pulling back to the resistance level.

USDCAD
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

AUDUSD, “Australian Dollar vs US Dollar”

On H4, the currency pair has formed a Hanging Man reversal pattern. Currently, the instrument is going by the signal in a descending wave. The goal of the pullback might be 0.6975. Upon testing the support level, the quotes may bounce off it and continue growing. However, the price may grow to 0.7100 and continue the uptrend without testing the support level.

AUDUSD
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

USDCHF, “US Dollar vs Swiss Franc”

On H4, at the support level the pair has formed a Dodji reversal pattern. Currently, the pair is going by the signal in an ascending wave. The goal of the pullback might be 0.9295. Upon testing the resistance level, the pair may bounce off it and continue the downtrend. However, the quotes may fall to 0.9195 without correcting to the resistance level.

USDCHF

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.

US debt default could trigger dollar’s collapse – and severely erode America’s political and economic might

By Michael Humphries, Touro University 

It’s a case of déjà vu all over again on the debt ceiling debate.

Republicans, who regained control of the House of Representatives in November 2022, are threatening to not allow an increase in the debt limit unless they get unspecified spending cuts in return. In so doing, they risk pushing the U.S. government into default.

Brinkmanship over the debt ceiling has become a regular ritual – it happened under the Clinton administration in 1995, then again with Barack Obama as president in 2011, and more recently in 2021.

As an economist, I know that defaulting on the national debt would have real-life consequences. Even the threat of pushing the U.S. into default has an economic impact. In August 2021, the mere prospect of a potential default led to an unprecedented downgrade of the the nation’s credit rating, hurting America’s financial prestige as well as countless individuals, including retirees.

And that was caused by the mere specter of default. An actual default would be far more damaging.

Dollar’s collapse

Possibly the most serious consequence would be the collapse of the U.S. dollar and its replacement as global trade’s “unit of account.” That essentially means that it is widely used in global finance and trade.

Day to day, most Americans are likely unaware of the economic and political power that goes with being the world’s unit of account. Currently, more than half of world trade – from oil and gold to cars and smartphones – is in U.S. dollars, with the euro accounting for around 30% and all other currencies making up the balance.

As a result of this dominance, the U.S. is the only country on the planet that can pay its foreign debt in its own currency. This gives both the U.S. government and American companies tremendous leeway in international trade and finance.

No matter how much debt the U.S. government owes foreign investors, it can simply print the money needed to pay them back – although for economic reasons, it may not be wise to do so. Other countries must buy either the dollar or the euro to pay their foreign debt. And the only way for them to do so is to either to export more than they import or borrow more dollars or euros on the international market.

The U.S. is free from such constraints and can run up large trade deficits – that is, import more than it exports – for decades without the same consequences.

For American companies, the dominance of the dollar means they aren’t as subject to the exchange rate risk as are their foreign competitors. Exchange rate risk refers to how changes in the relative value of currencies may affect a company’s profitability.

Since international trade is generally denominated in dollars, U.S. businesses can buy and sell in their own currency, something their foreign competitors cannot do as easily. As simple as this sounds, it gives American companies a tremendous competitive advantage.

If Republicans push the U.S. into default, the dollar would likely lose its position as the international unit of account, forcing the government and companies to pay their international bills in another currency.

Loss of political power too

Since most foreign trade is denominated in the dollar, trade must go through an American bank at some point. This is one important way dollar dominance gives the U.S. tremendous political power, especially to punish economic rivals and unfriendly governments.

For example, when former President Donald Trump imposed economic sanctions on Iran, he denied the country access to American banks and to the dollar. He also imposed secondary sanctions, which means that non-American companies trading with Iran were also sanctioned. Given a choice of access to the dollar or trading with Iran, most of the world economies chose access to the dollar and complied with the sanctions. As a result, Iran entered a deep recession, and its currency plummeted about 30%.

President Joe Biden did something similar against Russia in response to its invasion of Ukraine. Limiting Russia’s access to the dollar has helped push the country into a recession that’s bordering on a depression.

No other country today could unilaterally impose this level of economic pain on another country. And all an American president currently needs is a pen.

Rivals rewarded

Another consequence of the dollar’s collapse would be enhancing the position of the U.S.‘s top rival for global influence: China.

While the euro would likely replace the dollar as the world’s primary unit of account, the Chinese yuan would move into second place.

If the yuan were to become an a significant international unit of account, this would enhance China’s international position both economically and politically. As it is, China has been working with the other BRIC countries – Brazil, Russia and India – to accept the yuan as a unit of account. With the other three already resentful of U.S. economic and political dominance, a U.S. default would support that effort.

They may not be alone: Recently, Saudi Arabia suggested it was open to trading some of its oil in currencies other than the dollar – something that would change long-standing policy.

Severe consequences

Beyond the impact on the dollar and the economic and political clout of the U.S., a default would be profoundly felt in many other ways and by countless people.

In the U.S., tens of millions of Americans and thousands of companies that depend on government support could suffer, and the economy would most likely sink into recession – or worse, given the U.S. is already expected to soon suffer a downturn. In addition, retirees could see the worth of their pensions dwindle.

The truth is, we really don’t know what will happen or how bad it will get. The scale of the damage caused by a U.S. default is hard to calculate in advance because it has never happened before.

But there’s one thing we can be certain of. If Republicans take their threat of default too far, the U.S. and Americans will suffer tremendously.The Conversation

About the Author:

Michael Humphries, Deputy Chair of Business Administration, Touro University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Trade of the Week: GBPUSD ready to rock

By ForexTime

In recent sessions, GBPUSD has been relatively quiet, trading just below a key resistance level.

But such relative calm could be pierced this week as markets pit the policy signals out of two major central banks against each other:

the US Federal Reserve (a.k.a. the Fed) vs. the Bank of England (BOE).

First, a quick refresher on how FX markets tend to react to central bank policy moves.

Generally, the central bank that can keep raising its interest rates further while its economy can withstand those higher rates (relative to another central bank’s benchmark rates/economy) typically sees its currency strengthen.

READ MORE: (September 2022) Why FX markets react to central banks

 

And on that premise, GBPUSD has climbed by more than 2.5% so far this year.

The price consolidation seen in the above chart also suggests this FX pair’s next move may be a big one, depending on how the Fed and the BOE act over the coming days.

According to Bloomberg’s FX forecast model, there’s a 72% chance that GBPUSD trades within the 1.2182 – 1.2614 range this week.

Whether this FX pair (nicknamed “cable) goes up or down is likely to depend on which central bank can convince markets that it’s got more rate hikes in store for 2023.

What are markets expecting the Fed and the BOE to do?

Overall, the BOE is expected to hike by a larger amount compared to the Fed:

  • This week: BOE to hike by 50bps vs. the Fed’s forecasted 25bps hike
  • This year: BOE expected to hike by 100bps in total (including this week’s expected hikes), compared to the Fed’s forecasted remaining hikes of 50bps

 

Depending on how much either central bank deviates from the above-listed scenario, that may well determine the size of GBPUSD’s move this week.

Overall, if the BOE confirms this week that it can officially out-hike the Fed, not just this week but also over the coming months, that could trigger the next leg up for GBPUSD.

 

However, we could be in for a SURPRISE this week, if the:

  • BOE hints that it’s almost done with its own rate hikes, for fear of incurring too much damage to the UK economy.
  • Fed reiterates its intentions to keep sending US interest rates higher than the 5% peak that markets are forecasting.

    After all, Fed Chair Jerome Powell has often said he wants today’s Fed to avoid the mistakes from the 1970s, when the then-Fed eased up on its rate hikes too soon.

The above scenario (dovish BOE + still-hawkish Fed) may then trigger GBPUSD into unwinding some of its recent gains.

 

Key levels for GBPUSD:

RESISTANCE

  • 1.24511: this marks the 61.8% Fibonacci retracement level from GBPUSD’s 2022 peak-to-trough action.

    Although Pound bulls were fought back at this level in mid-December, they are biding their time once more and consolidating just below this key technical level, awaiting hawkish cues from the BOE to help GBPUSD breach this initial resistance level.

  • 1.265: this area resisted GBPUSD upside at both ends of May 2022, and may do so again in the near future.

 

SUPPORT

  • Upper 1.22 region: cycle highs from early August 2022
  • 1.218: around where GBPUSD’s 50-daysimple moving average (SMA) currently lies.

 

At the time of writing, from current levels just below 1.24, Bloomberg’s FX model is pointing to a slightly likelier chance that GBPUSD would dip below 1.22 (16.5% chance) rather than breach the 1.26 mark (15% chance).

Amid rising expectations for heightened immediate volatility for GBPUSD, it’s increasingly evident that FX markets are on tenterhooks, eager to react to the latest clues out of the Fed and the BOE this week.


Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Ichimoku Cloud Analysis 30.01.2023 (AUDUSD, GBPUSD, NZDUSD)

By RoboForex.com

AUDUSD, “Australian Dollar vs US Dollar”

AUDUSD is testing the signal lines of the indicator. The instrument is going above the Ichimoku Cloud, which suggests an uptrend. A test of the upper border of the Cloud at 0.7005 is expected, followed by growth to 0.7315. An additional signal confirming the growth will be a bounce off the lower border of the bullish channel. The scenario can be cancelled by a breakaway of the lower border of the Cloud and securing under 0.6930, which will mean further falling to 0.6840.

AUDUSD
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

GBPUSD, “Great Britain Pound vs US Dollar”

GBPUSD is testing the resistance level. The instrument is going above the Ichimoku Cloud, which suggests an uptrend. A test of the upper border of the Cloud at 1.2350 is expected, followed by growth to 1.2685. An additional signal confirming the growth will be a bounce off the lower border of the ascending channel. The scenario can be cancelled by a breakaway of the lower border of the Cloud and securing under 1.2245, which will mean further falling to 1.2135.

GBPUSD
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

NZDUSD, “New Zealand Dollar vs US Dollar”

The currency pair is squeezed inside the Triangle pattern. The instrument is going above the Ichimoku Cloud, which suggests an uptrend. A test of the upper border of the Cloud at 0.6470 is expected, followed by growth to 0.6665. An additional signal confirming the growth will be a bounce off the lower border of the Triangle pattern. The scenario can be cancelled by a breakaway of the lower border of the Cloud and securing under 0.6405, which will mean further falling to 0.6310. The growth can be confirmed by a breakaway of the upper border of the Triangle pattern and securing above 0.6550.

NZDUSD

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

The Analytical Overview of the Main Currency Pairs on 2023.01.30

By JustMarkets

The EUR/USD currency pair

Technical indicators of the currency pair:
  • Prev Open: 1.0889
  • Prev Close: 1.0867
  • % chg. over the last day: -0.20 %

The core Personal Consumption Expenditure Price Index declined from 4.7% to 4.4%. This indicator is on the US Federal Reserve’s list of monitored inflation indicators and influences monetary policy. It is clear that inflationary pressures in the US are declining, and the peak of inflation is behind us. The next move is up to the US Fed. A 0.25% rate hike this week is pretty much a done deal. The only uncertainty remains as to when the Fed will make its last rate hike and take a long pause.

Trading recommendations
  • Support levels: 1.0834, 1.0801, 1.0781, 1.0710, 1.0650, 1.0597, 1.0535
  • Resistance levels: 1.0882, 1.0926

The trend on the EUR/USD currency pair on the hourly time frame is still bullish. The price is forming a price range again, which makes it difficult to find good entry points. The MACD indicator is in the negative zone, the sellers’ pressure remains, but it is weak. Under such market conditions, buy trades are best considered from the support level of 1.0833 with confirmation in the form of a false breakdown on intraday time frames. Sell deals can be considered from the resistance level of 1.0882, but better with a confirmation in the form of a reverse initiative.

Alternative scenario: if the price breaks down through the support level of 1.0801 and fixes below it, the downtrend will likely resume.

EUR/USD
News feed for 2023.01.30:
  • – Spanish Consumer Price Index (m/m) at 10:00 (GMT+2);
  • – Germany GDP (q/q) at 11:00 (GMT+2).

The GBP/USD currency pair

Technical indicators of the currency pair:
  • Prev Open: 1.2397
  • Prev Close: 1.2393
  • % chg. over the last day: -0.03 %

There will be a lot of economic data on the UK this week. The main event will be the Bank of England’s monetary policy meeting, where an interest rate hike of 0.5% is expected. The British pound has been holding steady during the last trading week, but economists are not optimistic about the prospects of the UK economy and forecast a decrease in the quotes in the near future. According to experts, the UK economy is already in recession, and raising the rate will only increase the negative pressure.

Trading recommendations
  • Support levels: 1.2344, 1.2292, 1.2263, 1.2220, 1.2080, 1.2000, 1.1928, 1.1875, 1.1684
  • Resistance levels: 1.2413, 1.2446, 1.2519

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is still bullish. The price forms a narrow price range. The MACD indicator has become inactive, and buying pressure is decreasing, with liquidity narrowing into a triangle. This often happens before an impulse movement. Under such market conditions, it is better to look for buy trades on intraday time frames from the support level of 1.2344 but with a confirmation in the form of a false breakdown. It is better to look for sell trades from the resistance level of 1.2413, but it is also better to confirm in the form of a reverse initiative because a false breakout has already occurred.

Alternative scenario: if the price breaks down through the 1.2263 support level and fixes above it, the downtrend will likely resume.

GBP/USD
There is no news feed for today.

The USD/JPY currency pair

Technical indicators of the currency pair:
  • Prev Open: 130.21
  • Prev Close: 129.83
  • % chg. over the last day: -0.29 %

Despite good economic data last week showing US GDP and Michigan sentiment outperforming expectations, the USD/JPY quotes were unable to move above 131.00. This suggests that investors are anticipating dollar weakness ahead of this week’s interest rate decision. Also, last week the IMF suggested that the Bank of Japan (BoJ) should be prepared to end economic stimulus quickly if inflation continues to rise and provide clear guidance to the market on any future policy changes.

Trading recommendations
  • Support levels: 129.05, 128.16, 127.53, 126.19
  • Resistance levels: 130.27, 130.58, 131.10, 130.61, 131.58, 132.37, 132.95, 133.23

From the technical point of view, the medium-term trend on the currency pair USD/JPY is still bearish. The price is trading in the price corridor. The MACD indicator has become inactive, but within the day, sellers prevail. It is better to look for buy trades from the support level of 129.05, but only with confirmation on the lower time frames. Sell deals can be searched for from the resistance level of 130.27 in case of a false breakout.

Alternative scenario: If the price fixes above the resistance level of 131.58, the uptrend will be renewed with a high probability.

USD/JPY
There is no news feed for today.

The USD/CAD currency pair

Technical indicators of the currency pair:
  • Prev Open: 1.3315
  • Prev Close: 1.3310
  • % chg. over the last day: -0.04 %

OPEC+ countries will meet this week. Delegates expect the advisory committee of ministers to recommend that production levels remain unchanged as global demand shows signs of potential recovery. Given current production and increasing Chinese demand, fundamentally, this could serve as the basis for a further rise in oil prices. Rising oil prices contribute to the strength of the Canadian currency.

Trading recommendations
  • Support levels: 1.3303, 1.3212
  • Resistance levels: 1.3376, 1.3428, 1.3445, 1.3496, 1.3520, 1.3554, 1.3595, 1.3632

From the point of view of technical analysis, the trend on the USD/CAD currency pair is bearish. The price is trading at the level of moving averages. The MACD indicator is in the negative zone, but there is a divergence. The return of the price above the trend line may provoke a sharp rise in quotes. Under such market conditions, buy trades can be considered when the price returns above 1.3325, but with additional confirmation in the form of an impulse initiative. Sell deals should be considered from the resistance level of 1.3376, but only with confirmation.

Alternative scenario: if the price breaks out and consolidates above the resistance level of 1.3513, the uptrend will likely resume.

USD/CAD
There is no news feed for today.

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.