AUD/USD Price Analysis – February 27, 2023
Daily Price Outlook
The AUD/USD pair is currently trading at 0.6728, representing a 0.04% increase in the last 24 hours. After reaching its lowest point in seven weeks, the pair has started to show signs of strength with an increase in bids.
Implications for the Australian Economy and AUD
On February 26, the Australian Bureau of Statistics published its report on Company Operating Earnings Q/Q. According to the report, the gross operating profits of companies increased by 10.6% seasonally adjusted, compared to the expected 1.8% increase.
This report is considered a reliable indicator of the economy's state, as companies are immediately impacted by market conditions, and changes in their earnings can serve as a forecast for future economic activities such as spending, hiring, and investment.
The unexpected increase in gross operating earnings of companies benefited the AUD, which saw gains in response.
US Dollar Index Impact on AUD/USD
The US Personal Consumption Expenditures received attention as the PCE Price Index rose to 5.4% YoY, while the Core PCE Price Index climbed to 4.7% YoY, higher than analysts' predictions and the previous year's figures. The Core PCE Price Index is the Fed's preferred inflation gauge and its increase supports the hawkish attitude of the minutes.
Despite recent gains, the US Dollar Index (DXY) is consolidating with marginal losses at 105.15. The DXY bulls acknowledged hawkish Fed bets and updated the multi-day high, but the lack of major data and events over the weekend triggered the latest price drop.
Upcoming Australian CPI report
Investors will closely monitor the release of the monthly retail sales figures, the primary indicator of consumer spending, on February 27. The data is crucial since consumer spending constitutes the majority of total economic activity. In addition, the market is also anticipating the release of the Current Account data, which has a direct impact on currency demand.
On February 28, the focus will be on the Australian Bureau of Statistics Consumer Price Index (CPI) figures, which reached an all-time high of 8.4% year-over-year last month, according to the data. The market expects this report to indicate a decline to 8.1%.
Moreover, the Reserve Bank of Australia (RBA) has not yet given any indication that it plans to pause its current run of rate hikes. However, the hawkish stance of the Australian central bank was not as robust as that of the Federal Reserve (Fed), which has dampened the growth of AUD.
Fundamentals in the Spotlight Today
The following economic data releases scheduled for today have the potential to significantly impact the pricing of US stock markets:
* Core Durable Goods Orders m/m is expected to show a 0.1% increase.
* Durable Goods Orders m/m may experience a 3.7% decrease.
* Pending Home Sales m/m is anticipated to grow by 0.9%.
AUD/USD Price Chart - Source: Tradingview
AUD/USD Intraday Technical Levels
Support Resistance
0.6726 0.6739
0.6719 0.6745
0.6712 0.6752
Pivot Point: 0.6732
AUD/USD – Technical Outlook
From a technical standpoint, the AUD/USD pair has broken below a symmetrical triangle pattern that previously provided support at the 0.6780 level. Currently, the pair is finding support at the $0.6700 mark, and a break below this level could expose the AUD to the $0.6650 level.
Both the RSI and MACD indicators support a downtrend as they are holding under 50 and 0, respectively. On the other hand, the AUD/USD's resistance levels are currently at $0.6745 or $0.6780.
GBP/USD Price Analysis – February 27, 2023
Daily Price Outlook
The GBP/USD pair is currently trading at 1.1959, which reflects a 0.13% increase. The pair has recovered slightly after experiencing two weeks of consecutive drops and has now seen some modest gains during the intraday period, reaching a new high for the day.
MPC Member Broadbent to Speak
On Sunday, February 26, Dominic Raab, the UK's Deputy Prime Minister, expressed optimism about an agreement with the European Union to address post-Brexit trading rules applied to Northern Ireland. Raab stated that the nation "is on the cusp" of striking a new Brexit agreement with Northern Ireland, and negotiations with the EU have made excellent progress.
The optimistic sentiments surrounding the EU-UK Brexit deal on the NI protocol are incentivizing traders before the official announcement. GBP/USD is currently trading at 1.3869, up by 0.12%.
Traders are also awaiting today's speech by Ben Broadbent, the Deputy Governor of the Bank of England, for a clearer direction on GBP. Broadbent will provide the conference's opening comments at the BoE Agenda for Research in London.
UK Final Manufacturing PMI: What to Expect from the Upcoming Release
The market is anticipating that the Bank of England will raise the benchmark interest rate by 25 basis points twice in March and April, reaching a maximum of 4.5%. However, some members of the BoE leadership are concerned that a significant increase in rates could result in an economic slowdown.
Meanwhile, business activity data in the UK is showing bullish signs, with the Composite PMI Index potentially rising from 48.5 to 53.0 points this month, despite predictions of 49.0. It's worth noting that these are preliminary figures, and the final ones will be released on March 1 and 3.
How the Pound is Responding to a Weakening Dollar?
The headline PCE Price Index has increased to 5.4% YoY, causing significant attention to US Personal Consumption Expenditures (PCE). In addition, the more significant Core PCE Price Index, which is the Fed's preferred inflation indicator, has risen to 4.7% YoY from 4.6% the previous year and 4.3% to experts' expectations.
Despite this, the US Dollar Index (DXY) is holding onto slight losses at 105.15 as it consolidates its most recent gains. Furthermore, the United States 10-Year Bond Yield has also fallen around 0.39% in 24 hours, trading at 3.934.
The DXY bulls have acknowledged hawkish Fed bets while updating the multi-day high. However, the absence of significant data and events triggered the recent fall in the price.
Fundamentals in the Spotlight Today
These releases have the potential to significantly affect the pricing of US stock markets today.
* Core Durable Goods Orders m/m is expected to show a 0.1% increase
* Durable Goods Orders m/m may experience a 3.7% decrease
* Pending Home Sales m/m is anticipated to grow by 0.9%.
GBP/USD Price Chart - Source: Tradingview
GBP/USD Intraday Technical Levels
Support Resistance
1.1942 1.1962
1.1933 1.1973
1.1922 1.1982
Pivot Point: 1.1953
GBP/USD – Technical Outlook
On a technical level, the GBP/USD pair has broken below a symmetrical triangle pattern that was providing support around the $1.1995 level.
As a result of this breakout, the pair is now heading toward its next support level around $1.1920, which is acting as a double bottom support.
If the pair manages to find support at this level, it may rebound, and a break above $1.1920 could send the GBP/USD price toward the $1.1845 level.
S&P500 (SPX) Price Analysis – February 27, 2023
Daily Price Outlook
The S&P500 stock market index is currently trading at $3,970.04, down 1.05% in the last 24 hours. Investors are becoming increasingly worried about the potential for aggressive interest rate hikes, which has contributed to the recent downward trend. Despite a series of positive economic data, the S&P 500 has experienced a 2.7% drop for the week.
Fed to Raise Interest Rates
Recent economic data has led to predictions that the Federal Reserve may need to keep interest rates higher for an extended period to achieve its 2 percent inflation target.
On February 24, the latest inflation measure, core monthly personal consumption expenditures, showed a higher-than-expected increase in prices, rising 0.6% month-on-month and 4.7% year-on-year. This news has caused American stocks to fall for three consecutive weeks, following a strong start to the year.
The S&P is also declining due to the Fed's indication that it may raise rates in the long term, with inflation being a primary concern.
Geopolitical Concerns and SPX: How Global Tensions Affect the S&P 500
The Chinese government proposed a 12-point plan aimed at ending the war between Ukraine and Russia. The plan includes a call for a ceasefire and a gradual de-escalation of the situation to pave the way for peace negotiations.
China's foreign ministry announced the proposal on February 24, which coincides with the one-year anniversary of Russia's invasion of Ukraine. The plan also includes lifting Western sanctions against Russia, creating humanitarian corridors to evacuate civilians, and ensuring grain exports after disruptions caused a surge in global food prices last year.
Despite the proposal, leaders from Germany and the European Union criticized China's plan, citing geopolitical concerns that had a negative impact on market sentiment. The S&P 500 also declined due to the rising geopolitical tensions.
Upcoming Corporate Earnings: What to Expect from Key Companies
Investors will be monitoring a range of economic data reports and corporate earnings in the upcoming week. Some notable companies scheduled to release their earnings this week include Target (NYSE:TGT), Costco (NASDAQ:COST), Lowe's (NYSE:LOW), and Macy's (NYSE:M).
In addition, the durable goods orders report is expected on February 27.
While only 6% of the S&P 500 will be reporting earnings, investors will be paying close attention to data from large retailers, which will provide important insights into the state of consumer spending and the impact of inflation on businesses and consumers.
S&P500 Intraday Technical Levels
Support Resistance
3978.24 4037.35
3944.16 4062.38
3919.13 4096.46
Pivot Point: 4003.27
S&P500 – Technical Outlook
Technically speaking, the S&P 500 (SPX) is in a bearish trading pattern and has fallen to $3,990. It recently broke an upward channel at $4,100, which has contributed to the current downtrend.
The SPX's current support level is at $3,950, backed by a double-bottom pattern. However, if the support level is breached, the S&P 500 may decline further, possibly to $3,885.
On the flip side, the S&P 500's resistance level stands at $4,000 or $4,075. Today's release of the US Preliminary GDP is highly anticipated and could significantly impact the pricing of the US stock markets.
At 1:30 pm, the release of USD Core Durable Goods Orders m/m is expected to show a 0.1% increase, while USD Durable Goods Orders m/m may experience a 3.7% decrease. At 3:00 pm, USD Pending Home Sales m/m is anticipated to grow by 0.9%. These releases have the potential to significantly affect the pricing of US stock markets today.
GOLD Price Analysis – February 24, 2023
Daily Price Outlook
The XAU/USD is currently trading at $1,826.68, reflecting a 0.24% increase over the past 24 hours. Although gold prices saw a slight gain, they were on track to close the week with losses for the fourth consecutive week due to the persistent uncertainty surrounding US monetary policy.
US Preliminary GDP Figures and Their Impact on Gold Prices
On February 23, the US Bureau of Economic Analysis (BEA) released the second estimate, revealing that the actual Gross Domestic Product (GDP) of the US increased at an annualized rate of 2.7% in the fourth quarter, falling below both the market forecast of 2.9% and the initial estimate.
As a result, the US Dollar Index (DXY) experienced a slight decrease, trading at 104.53, down 0.07% in 24 hours. However, gold prices showed some recovery as US fourth-quarter GDP numbers were revised downward.
Softer US Treasury Bond Yields: What It Means for Gold
Over the past three days, US benchmark Treasury bond yields have been falling, despite ongoing concerns about a recession and rising Federal Reserve (Fed) rates. The rates on 10-year Treasury bonds (US10Y) have decreased by almost 3.87%.
The recent drop in the US Treasury bond yield is due to the lack of additional evidence supporting the hawkish Fed concerns. Meanwhile, gold prices have experienced a recovery due to the falling US Treasury bond rates.
Focus on the Upcoming Personal Consumption Expenditures Price Index
Later in the day, all eyes are on the Personal Consumption Expenditures Price Index, which is the Federal Reserve's preferred measure of inflation. The Core PCE Price Index is expected to confirm that inflation remained high in January, with analysts predicting a 4.3% increase from the same time last year.
The Federal Reserve aims to combat inflation and has given few indications that it will continue to raise interest rates to achieve this goal. Additionally, higher yields increase the opportunity cost of holding non-yielding assets such as gold, which is unfavorable for the precious metal.
Gold (XAU/USD) Intraday Technical Levels
Support Resistance
1816 1832
1809 1841
1800 1848
Pivot Point: 1825
Gold (XAU/USD) – Technical Outlook
Gold prices have slipped to the $1,820 support zone, as the downward channel and descending triangle pattern on the 4-hour timeframe continue to exert selling pressure.
If the $1,820 double-bottom pattern is broken, gold prices may fall to the $1,810 or $1,799 support zones. Although the RSI and MACD indicators are still in the selling zone, the MACD is forming smaller histograms, indicating a weaker selling bias. Additionally, the 50-day simple moving average is around $1,830, which may act as a resistance level to the upside.
Market participants are closely watching the Core PCE Price Index m/m and New Home Sales as strong US data figures usually weigh on gold prices.
Related:
USD/JPY Price Analysis – February 24, 2023
Daily Price Outlook
The USD/JPY exchange rate is currently trading at 134.29, reflecting a 0.16% decline over the past 24 hours
Weekly US Unemployment Claims and Preliminary Q1 2023 GDP Report
In the second estimate of the fourth-quarter GDP growth rate report, which was released on February 23, it was reported that GDP expanded by 2.7% quarter-over-quarter, which was slightly below the consensus forecast of 2.9%.
Meanwhile, according to the Labor Department, the number of individuals filing new claims for unemployment benefits decreased unexpectedly in the week ending February 18, falling from 195,000 to a seasonally-adjusted 192,000. Since early January, the number of initial claims for unemployment benefits has remained consistently below 200,000.
Following the release of US economic statistics, the US dollar is fluctuating between gains and losses. The dollar index, which compares the dollar to six important peers, slightly decreased by 0.02% to 104.55.
Expectations for Fed Rate Hikes in 2023
According to the minutes of the FOMC's first policy meeting of the year, all members agreed that additional rate hikes would be necessary to reach the inflation targets. The report did mention that a few participants were in favor of raising rates by 50 basis points, but no further details were provided.
Meanwhile, the standard 10-year US Treasury bond yield saw a minor rebound from daily lows but ultimately closed lower. Traders have acknowledged the possibility of the Federal Reserve continuing its aggressive rate-hike trajectory, which has contributed to a slight increase in the value of the dollar.
Japan's CPI Rises as Expected, Putting Pressure on Bank of Japan
According to statistics released on February 23, the national core consumer price index, which excludes volatile items like fresh food, increased by 4.2% in January, up from 4% in the previous month and in line with market forecasts. In addition, the national CPI inflation, including volatile items, rose to 4.3% in January, compared to 4% in December.
Consumer inflation in Japan rose as expected in January due to higher commodity prices and strong domestic demand. The release of inflation data caused the Yen to strengthen, which put additional pressure on the Bank of Japan to tighten its monetary policy.
The statements of new Bank of Japan (BOJ) Governor Kazuo Ueda are being closely watched. Ueda believes that the BOJ's current policy of monetary easing is appropriate, as inflation has not been able to reach the central bank's 2% target on a regular and steady basis. He believes that retaining an ultra-loose monetary policy is reasonable.
Despite the new governor's defense of the easy money policy, the Japanese Yen continued to strengthen.
USD/JPY Intraday Technical Levels
Support Resistance
134.19 135.22
133.75 135.81
133.16 136.25
Pivot Point: 134.78
USD/JPY – Technical Outlook
The USD/JPY pair is currently receiving immediate support at the 134.400 level and is gaining further support near the 134.380 level. If it breaks below this level, the next support area is around 134, which acted as support on February 20, 2023.
The upward channel signals a bullish bias in the market, with USD/JPY's resistance remaining at 135 or 135.45. Later today, the market will be focused on a speech by MPC Member Tenreyro and US New Home Sales.
Related:
GBP/USD Price Analysis – February 24, 2023
Daily Price Outlook
The GBP/USD pair is currently trading at $1.2023, which represents a 0.08% increase over the last 24 hours. Although the pair is trading slightly higher, there remains some uncertainty in the pricing action surrounding the dollar. Despite this, the pound has managed to make modest gains against the dollar.
The Impact of the US Economy on USD: Trends and Analysis
The release of mixed US economic indicators has caused the US dollar to fluctuate between losses and gains. The dollar index (DXY), which measures the dollar against six major peers, decreased by 0.07% to 104.52.
On the one hand, Q4 GDP came in at 2.7%, which was lower than the expected 2.9%, and Q3's 3.2%, suggesting that the economy was slowing more quickly than anticipated. This raised concerns that rising borrowing costs may be dampening growth and suggested that the US Federal Reserve may adopt a less aggressive stance, which would be negative for the USD.
On the other hand, the Fed's preferred inflation indicator, Core PCE Prices, showed signs of price stickiness in Q4 by coming in at 4.3%, which was higher than the expected 3.9% but still below Q3's 4.7%. This could prompt the Federal Reserve to take a more hawkish stance to combat inflation, which would be positive for the US Dollar.
UK Consumer Confidence: Latest Trends and Insights
According to a report on February 23, GfK's consumer confidence indicator increased by seven points to a minus 38, higher than the forecasted -43. This marked a 10-month high, but it was still very close to the historic lows caused by the cost-of-living issue. Additionally, it was the fastest growth rate since March 2021.
In February, UK household confidence reached its highest level in nearly two years as indications surfaced that the worst period of inflation in four decades would ease.
However, this suggests that spending is likely to continue, which could concern the Bank of England as it decides how much to increase interest rates in its fight against inflation. The actual GfK Consumer Confidence figure came in higher than expected, which benefitted the GBP.
MPC Member Catherine Mann Addresses Interest Rates and Inflation
On February 23, External BOE MPC Member Catherine Mann stated that interest rates in the UK must continue to rise in order to prevent inflation from persisting for too long. Mann, a well-known hawkish member, supported further tightening at upcoming meetings and ruled out the possibility of a pivot in the bank's monetary policy.
As a result, the GBP saw a slight increase in value as another hawkish statement from the BoE's Mann supported the currency.
GBP/USD Intraday Technical Levels
Support Resistance
1.1980 1.2064
1.1944 1.2112
1.1897 1.2147
Pivot Point: 1.2028
GBP/USD – Technical Outlook
The GBP/USD pair is currently trading sideways, maintaining a narrow range between the $1.1990 and $1.2075 levels. On the 2-hour timeframe, a symmetrical triangle pattern has formed, indicating investor indecision and causing Sterling to trade within a tight range.
If the pair breaks above the $1.2075 mark, it may reach resistance levels of $1.2145 or $1.2220. However, the RSI and MACD indicators are still showing a downtrend, and the 50-day simple moving average is holding steady around the $1.2050 level.
If the pair breaks below the $1.1990 mark, it could lead to a bearish trend, with the Sterling potentially dropping to $1.1920.
Later today, market attention will be on a speech by MPC Member Tenreyro and US New Home Sales.
Related:
S&P500 (SPX) Price Analysis – February 23, 2023
Daily Price Outlook
The S&P500 stock market index is currently trading at $3,991.05, down 0.16% within the last 24 hours. The index is experiencing a decline as investors grow increasingly apprehensive about potential aggressive interest rate increases, following the release of positive US economic data in recent times.
Impact of Hawkish FOMC Minutes on SPX
The Federal Reserve's recent meeting minutes revealed that the officials are prepared to continue raising interest rates in order to curb the increasing inflationary pressures. The majority of Fed policymakers believed that a 25 basis point hike was appropriate, while only a few supported a 50bp rate increase to control the rising inflation.
Furthermore, the hawkish stance of the Fed minutes was supported by the fact that several members believed there was a high likelihood of a recession in 2023. As a result, the S&P 500 is falling as the Fed's indication of a willingness to raise rates, in the long run, has raised concerns about inflation.
Geopolitical Concerns Weigh on S&P 500
Russian President Vladimir Putin recently met with Chinese diplomat Wang Yi in Moscow. The two officials vowed to strengthen relations between Russia and China, stating that their close relationship in the economy, politics, and culture is not subject to outside criticism.
However, the close ties between China and Russia have raised geopolitical concerns, especially with the US opposing such actions.
The ongoing conflict between the US and China has also fueled new concerns about the Ukraine-Russia war. As a result, the S&P 500 has continued to decline amid growing geopolitical worries.
Economic Warnings from Walmart and Home Depot
The retail sector may face a challenging year ahead, as indicated by the outlooks of Walmart and Home Depot. Walmart reported better-than-expected earnings in the Holiday quarter on February 21, citing cost-conscious consumers seeking lower-priced food, gifts, and home products.
Home Depot, which also announced its fiscal fourth-quarter earnings on the same day, gave similar guidance. The home improvement company anticipates flat same-store sales as consumers limit spending due to increasing inflation and interest rates.
The negative outlooks from both retailers have contributed to a drop in the S&P 500, adding to concerns about the rapid rise in interest rates and high inflation.
S&P500 Intraday Technical Levels
Support Resistance
3969.98 4005.98
3957.84 4029.84
3933.98 4041.98
Pivot Point: 3993
S&P500 – Technical Outlook
From a technical standpoint, the S&P 500 (SPX) is currently trading bearish, having dropped to the $3,990 level. It has broken an upward channel at the $4,100 level, which has strengthened the downtrend so far.
SPX's current support level is at $3,950, which is also supported by a double-bottom pattern. A break below this support level may cause the S&P 500 to drop further toward the $3,885 mark.
On the other hand, the resistance level remains at the $4,000 or $4,075 mark. Today's release of the US Preliminary GDP is highly anticipated and could significantly impact the pricing of the US stock markets.
Related:
GOLD Price Analysis – February 23, 2023
Daily Price Outlook
The XAU/USD pair is currently trading at approximately $1,820, and following the recent release of the Federal Open Market Committee (FOMC) meeting minutes, the price of gold has entered a downward trend, experiencing a sell-off.
Investors are closely monitoring the market for any potential signs of economic recovery, which could further impact the price of gold. While the XAU/USD pair has experienced a recent decline, it remains to be seen how future economic developments will shape its trajectory.
As the market continues to evolve, it will be important to keep a close eye on any shifts in the XAU/USD pair's price, as well as any relevant market indicators or economic data that could impact its movement.
US Dollar Strengthens
The US dollar has strengthened recently as a result of positive economic reports indicating the strength of the American economy. The US Dollar Index (DXY) has increased to $104.52.
Expectations of a 50 basis point rate hike have also contributed to the dollar's rise, although the US Treasury Yield has remained relatively stable. The US 10-Year Treasury is currently at 3.92%, down 0.003 in the past 24 hours.
The Federal Reserve's comments about the possibility of rising interest rates have increased the opportunity cost of owning gold, which is a non-yielding asset. As a result, the price of gold has been affected, with recent news of the FOMC minutes accelerating a sell-off and causing the gold price to trend downward.
Fed Meeting Minutes Show Hawkish Stance
The Federal Reserve released the minutes of its latest Monetary Policy Meeting on February 22, revealing that all participants agreed that more rate increases are necessary to meet the inflation target.
According to Federal Reserve Bank of New York President John Williams, the Fed is committed to achieving a 2% inflation rate in the coming years. The hawkish Fed minutes were further strengthened by comments indicating that some participants supported a 50 basis point rate hike and that some members believed a recession could occur in 2023.
The likelihood of prolonged rate increases, as indicated by the hawkish Fed minutes, is putting pressure on the price of gold.
China and Russia Strengthen Strategic Partnership Amid Geopolitical Concerns
Wang Yi, China's top diplomat, met with Vladimir Putin in Moscow to reinforce the close ties between the two countries just before the one-year anniversary of the start of the Ukrainian War. Wang Yi declared they were prepared to strengthen their strategic partnership with Russia and stated that their relations would not suffer from pressure from outside nations. Putin emphasized the importance of working together with China and expressed optimism about Xi Jinping's visit to Moscow.
Geopolitical tensions over China and Russia have heightened, causing a rush to safety and boosting the US Dollar while weighing down on XAU/USD.
Gold (XAU/USD) Intraday Technical Levels
Support Resistance
1817 1840
1809 1854
1795 1862
Pivot Point: 1832
Gold (XAU/USD) – Technical Outlook
On Thursday, gold bounced off the support level of $1,820 and formed a bullish engulfing candle, indicating a bullish bias. The immediate resistance for gold is at the $1,835 or $1,845 marks, levels that are extended by a double top pattern.
Although the RSI and MACD indicators are still in the sell zone, the MACD is forming smaller histograms, indicating a weaker selling bias. Additionally, the 50-day simple moving average is around $1,835, which may act as a hurdle to the upside.
Market participants are closely watching the US GDP figures, which are due to come out at 1:30 pm (GMT) today. Strong US GDP figures typically weigh on gold prices.
Related:
EUR/USD Price Analysis – February 23, 2023
Daily Price Outlook
The EUR/USD pair is currently trading at $1.0623, representing a low point in comparison to the previous day's range. This dip comes after three consecutive days of traders selling the pair short, suggesting a bearish sentiment in the market. It is worth noting that factors such as economic data, central bank decisions, and geopolitical events can all impact the currency pair's value and direction in the short and long term.
German CPI Data on the Horizon
Recent figures show that German consumer prices rose by 1.0% in February, following a decrease of 0.8% in the previous month. This led to a total increase of 8.7% in the yearly total, surpassing January's gain of 8.6%.
The German IFO Business Climate Index rose from 90.2 in January to 91.1 in February. However, the Current Economic Assessment decreased to 93.9 points in February, compared to 94.1 points in January and an expected 95.0 points.
Investors are now anticipating the final year-to-year CPI data, which is scheduled for release on Thursday, February 23, to gauge market sentiment. If the data exceeds expectations, it may further support the ECB's hawkish outlook and potentially drive up the value of the EUR.
US Federal Reserve Officials Discuss Rate Hikes to Meet Inflation Targets
According to the Monetary Policy Meeting Minutes of the Federal Open Market Committee (FOMC), all participants agreed that rate hikes are necessary to meet the inflation target.
On February 22, St. Louis Fed President James Bullard stressed the importance of stabilizing inflation towards 2% this year. Federal Reserve Bank of New York President John Williams also noted that price stability is crucial, and the Fed is focused on achieving the 2% target over the coming years. A few participants even supported a 50 basis points (bps) rate hike.
The US Federal Reserve meeting minutes revealed that officials are committed to taking a more gradual approach to raising interest rates in order to effectively manage inflation, which caused the dollar to rise. As a result, the dollar index increased by 0.40% to reach 104.57, although it dropped off from the day's high.
EUR/USD Trends Lower as Market Awaits US Q4 Prelim GDP Data
Later in the day, a revised figure for US fourth-quarter GDP is expected. If this figure provides further indications of economic resilience, it may give the Fed greater flexibility to continue raising interest rates. The anticipated annualized GDP figure is expected to remain unchanged at 2.9%.
If the US GDP figures turn out to be positive, it may give a boost to the US Dollar Index (DXY). However, it would be premature to predict the impact of this on the pair at this time.
EUR/USD Intraday Technical Levels
Support Resistance
1.0582 1.0647
1.0558 1.0688
1.0517 1.0712
Pivot Point: 1.0623
EUR/USD – Technical Outlook
The EUR/USD pair has broken through the double bottom support area at the $1.0625 level, and is now trending lower towards the next support level at $1.0580.
The violation of the descending triangle pattern is usually a signal of a strong bearish market, historically keeping the pair in a bearish trend. However, the EUR/USD pair is showing signs of a potential rebound, as it pulls back to retest the major resistance level of $1.0625.
The RSI and MACD indicators are still indicating a downtrend, along with the 50-day simple moving average holding around the $1.06560 level.
On the upside, if the $1.0665 level is broken, the EUR/USD pair may move toward the $1.0685 or $1.0725 levels. The market will be closely monitoring the Prelim GDP q/q from the US to determine future trends.
Related:
EUR/USD Analysis – February 22, 2023
Daily Price Outlook
The EUR/USD pair is currently trading at $1.0657, reflecting a modest gain of 0.10% over the past 24 hours. This positive movement can be attributed to the rise in market players' risk appetite, leading to a recovery in the value of the currency pair.
EUR/USD Awaits Fed Meeting Minutes
The US dollar has maintained its stability this week following the release of the latest economic data which shows that the US economy is performing better than expected. However, the US Dollar Index started to give back some of its previous gains after the PMI report was released, and the DXY dropped to its low point of 104.02 for the day.
The US DXY is currently facing challenges in its attempt to recover from a recent corrective move, despite the renewed risk-on sentiment among investors. Meanwhile, market participants are eagerly awaiting the release of the Federal Open Market Committee (FOMC) minutes.
In addition, the latest data gives reason for the Fed to pursue a more aggressive Fed rate path. Investors are expecting the Fed to continue raising interest rates for an extended period to reach the desired level of inflation.
The EUR/USD may face increased selling pressure due to today's main news events, which are the FOMC member speeches and the release of the Fed meeting minutes.
ECB Plans to Raise Interest Rates Despite Headline Inflation Slowdown
Christine Lagarde, the president of the European Central Bank (ECB), stated that inflation in the Eurozone is decreasing. However, she reiterated the ECB's plan to raise the key rates by 50 basis points (bps) at the upcoming policy meeting. Lagarde also indicated that the Eurozone is not currently experiencing a wage-price spiral.
Additionally, the Eurozone is scheduled to release the Final HICP Inflation figure for January on February 23, and it might be revised upwards. This development may strengthen the possibility of the European Central Bank raising interest rates by 50 basis points the following month. Moreover, it may reinforce the belief that the ECB will need to implement further measures beyond March.
Therefore, the data released this week could potentially benefit the Euro bulls.
EUR/USD Intraday Technical Levels
Support Resistance
1.0626 1.0686
1.0602 1.0722
1.0566 1.0746
Pivot Point: 1.0662
EUR/USD – Technical Outlook
The EUR/USD pair is currently trading within a narrow range of $1.0665, with support at the $1.0640 level. A downward movement may occur if the immediate support level of $1.0625 is breached, leading to additional selling opportunities until the $1.0615 level.
The RSI and MACD indicators are indicating a downtrend, but the upward trendline is providing support for the pair at the $1.0640 level. The formation of a symmetrical triangle pattern on the 2-hour timeframe suggests that investors are indecisive, possibly due to the FOMC meeting minutes that are set to be released later today.
On the upside, if the $1.0665 level is broken, the EUR/USD pair may move toward the $1.0685 or $1.0725 levels. The market will be closely monitoring the FOMC meeting minutes to determine future trends.