GBP/USD Weekly Forecast (7th March2022 – 11th March 2022)

Fundamental view:

The British pound traded downside against the US dollar having reached a lowest level of 3 months at 1.3201. The war is the major catalyst in dragging the sterling down. Leaders from all the West’s nations have asked President Vladimir Putin to put a halt to the war, but of no use. On Thursday, Putin said that he aims to reach its goals and will continue no matter what. while Putin agreed on the creation of safe corridors to evacuate civilians, he persisted in bombing Ukrainian cities. Headlines relating to the Russia-Ukraine war underpinned risk sentiment and in the absence of any top-tier economic releases from the UK, risk aversion wave ruled the market. Amidst the stagflation, soaring oil prices also undermined the cable.

Meanwhile, Fed Chair Jerome Powell maintained his hawkish stance in testimony at the semi-annual monetary policy report, confirming a 25 bps rate hike next week while showing the Fed’s openness for a series of rate hikes over the year. This underpinned the US bulls.  Market will also remain wary of oil price action and any significant impact on the Bank of England’s (BOE) monetary policy expectations in the next week.

In this week, UK Nationwide HPI monthly report on 2nd March and US ISM Non-Manufacturing PMI on 3rd March boosted bullish trend whereas UK Markit/CIPS Services PMI on 3rd March and Fed Chair Powell Testimony on 2nd and 3rd March boosted bearish trend for the pair.

The major economic events deciding the movement of the pair in the next week are US JOLTS Job Openings, US EIA Crude Oil Stocks Change, US WASDE Report at Mar 09, US Initial Jobless Claims, Federal Budget Balance at Mar 10, UK Manufacturing Production monthly report, UK GDP monthly report and Michigan Consumer Sentiment at Mar 11.

GBP/USD Weekly outlook:

Technical View:

Last week’s high was 1.48% lower than the previous week. Maintaining high at 1.3437 and low at 1.3202 showed a movement of 235 pips.

In the upcoming week we expect GBP/USD to show a bearish trend. The currency pair is trading below the 200 Simple Moving Average and the MACD trades to the downside. Should 1.3142 proves to be unreliable support then the pair may fall further to 1.3054 and 1.2907 respectively whereas a solid breakout above 1.3377 will open a clear path upward to 1.3524 and then will further raise up to 1.3612. Chart formation of triple top pattern in H4 chart favors prospects of a bearish trend. Bearish engulfing pattern formation escalates the expectation for a bearish trend.

Preference
Sell: 1.3225 target at 1.3001 and stop loss at 1.3382

 

Alternate Scenario
Buy: 1.3382 target at 1.3611 and stop loss at 1.3225

EUR/USD Weekly Forecast (7th March2022 – 11th March 2022)

Fundamental view:

The Major currency plummeted against the greenback and has hit a low of 1.0885, the lowest level since May 2020 in this week. The War acted as the main driver in the drop of the pair. Leaders from all the West’s nations have asked President Vladimir Putin to put a halt to the war, but of no use. On Thursday, Putin said that he aims to reach its goals and will continue no matter what. While Putin agreed on the creation of safe corridors to evacuate civilians, he persisted in bombing Ukrainian cities. It has impacted the financial markets intensely. Commodity price especially gas and oil prices has skyrocketed. EU shares with business exposure to Russia plummeted, although those related to defense and cyber security rose sharply.

Worldwide central bankers noted that the Russian-Ukrainian war would worsen inflation. The European Central Bank released the accounts of its latest meeting that portrayed that members believed a scaling-back of monetary accommodation should commence, adding that members believe that inflation was likely to continue higher-than-predicted for longer. Market is expecting chances of an ECB hike from 2023 to later this year. Meanwhile, Fed Chair Jerome Powell reiterated his support for a 0.25% rate hike, also showed readiness for a 0.50% rate-lift if needed in the March meeting, during the second round testimony the previous day. While portraying the market implications from Powell’s comments, CME’s FedWatch Tool marks around 89% odds favoring the same rate-lift in the next month’s Fed meeting.

In this week, Eurozone CPI monthly report on 28th February and US ISM Non-Manufacturing PMI on 3rd March favored uptrend whereas Eurozone  Markit Manufacturing PMI on 1st March and Fed Chair Powell Testimony on 2nd and 3rd March favored downtrend for the pair.

The major economic events deciding the movement of the pair in the next week are Eurozone Employment Change quarterly report at Mar 08, US JOLTS Job Openings, US EIA Crude Oil Stocks Change, US WASDE Report at Mar 09, ECB Interest Rate Decision, ECB Monetary Policy Press Conference, US Initial Jobless Claims, Federal Budget Balance at Mar 10 and Michigan Consumer Sentiment at Mar 11.

EUR/USD Weekly outlook:

Technical View:

Last week’s high was 1.28% lower than the previous week. Maintaining high at 1.1246 and low at 1.0885 showed a movement of 361 pips.

In the upcoming week we expect EUR/USD to show a bearish trend. The currency pair is trading below the 200 Simple Moving Average and the MACD trades to the downside. Should 1.0793 proves to be unreliable support then the pair may fall further to 1.0658 and 1.0432 respectively whereas a solid breakout above 1.1154 will open a clear path upward to 1.1380 and then will further raise up to 1.1515. Chart formation of a descending and inverted scallop pattern in H4 chart sets prospects for a bearish trend. Bearish engulfing formation in H4 chart escalates the expectation for a bearish trend.

Preference
Sell: 1.0927 target at 1.0659 and stop loss at 1.1025

 

Alternate Scenario
Buy: 1.1025 target at 1.1239 and stop loss at 1.0927

Ukraine crisis weighs on Bitcoin

  • Choppy market condition due to worsening Russia – Ukraine crisis weighs on the king crypto.
  • Moscow’s recent actions breaks trust on the peace talks.
  • Hawkish Fed Chair Powell comments on the rate hike and the recent risk aversion wave favors the USD bulls.

 

Bitcoin dropped against the greenback during Friday trading session as Choppy market conditions dominated the cryptocurrency landscape as the global economy continues to face challenges on multiple fronts and uncertainty about the future weighs heavily on asset prices.

Russia’s shelling of the Ukrainian nuclear power plant in Zaporizhzhia, which is one of the largest in Europe, puts pressure on the market sentiment. Even if the radiation fears were turned down and the fire-safety team took control of the matters, The recent steps from Moscow defies the peace talks that agreed on the safe passage of Kyiv’s civilians the previous day.

The geopolitical tension weighs on the crypto market. Billionaire Russian oligarch Oleg Deripaska said “The economic pressure Western sanctions are putting on Russia is worse than anything the country has encountered before and will have lasting repercussions” “The crisis will be most severe for a minimum of three years,” he said at an economic conference Thursday, according to reports. “Take the 1998 crisis and multiply it by three.”

Meanwhile, Fed Chair Jerome Powell reiterated his support for a 0.25% rate hike, also showed readiness for a 0.50% rate-lift if needed in the March meeting, during the second round testimony the previous day. While portraying the market implications from Powell’s comments, CME’s FedWatch Tool marks around 89% odds favoring the same rate-lift in the next month’s Fed meeting.

However, the hawkish comment from Powell couldn’t find support from the US data but highlight today’s US jobs report for February.

Moving on to US data, US ISM Services PMI eased at 56.5 against the expectation of 65.6  in its latest release but the second-tier job data and Factory Orders came in positive on Thursday favoring the USD.

BTC/USD 4 Hour Chart:

Support: 41200.0 (S1), 40292.0 (S2), 38736.4 (S3).

Resistance: 43663.7 (R1), 45219.2 (R2), 46127.3 (R3).

Worsening of Russia – Ukraine jitters weighs on the market sentiment and risk-aversion wave favors the US dollar bulls. We expect a bearish trend for BTC/USD.

Hawkish Fed impacts gold

  • Gold is under modest selling pressure expectations of a ceasefire between Russia and Ukraine.
  • The testimony of Federal Reserve (Fed) chair Jerome Powell underpinned the gold.
  • Apart from Russia – Ukraine talks, Traders await US Initial Jobless Claims and ISM Services PMI due later today.

 

The yellow metal is trading up and down within a tight range between 1921.00 – 1934.00 levels in the cautious market ahead of Russia – Ukraine peace talks.

Investors expect that Russia may prefer a truce now, as its economy has melted down on sanctions from the Western leaders. The negotiation talks between Russia and Ukraine today seem to bring more clarity for the Western leaders that either they impose more sanctions on Moscow or gauge options to support the world economy from the Ukraine crisis.

On Wednesday, the Ukrainian military has shown fierce resistance to Russian military troops. This led to the rebound in the risk-off impulse, However the safe-haven gold failed to benefit amid the US dollar’s strength.

Federal Reserve Chair Jerome Powell said he supports a traditional 25-basis-point rate hike during the March 15-16 policy meeting. This reduced the odds of an aggressively tightening policy, however; the hopes of a 50 bps interest rate hike are still live.

In a rare move, Powell gave an overview of the upcoming March meeting “Coming into this meeting, let’s say before the Ukraine invasion, the committee was set to raise our policy rate. The first of what was to be a series of raises expected for this year. Every meeting was live. Decisions would be based on incoming data and evolving outlook,” Powell told U.S. lawmakers. “I also expected we would make great progress on our plan to begin to shrink the balance sheet. The question now really is, how the invasion of Ukraine, the ongoing war, the response from nations around the world, including sanctions, might have changed that expectation.”

However, the certainty of a 25 bps interest rate hike was expected to push the gold prices higher but improvement in the risk appetite of investors mitigated the strength of the precious metal against the greenback.

Apart from the Russia-Ukraine negotiation talks remaining a major driver, Market will also focus on US Initial Jobless Claims and ISM Services PMI, which are due later today.

XAU/USD 4 Hour Chart:

Support: 1912.0 (S1), 1895.7 (S2), 1877.7 (S3).

Resistance: 1946.2 (R1), 1964.2 (R2), 1980.5 (R3).

Gold remains under modest selling pressure as trader’s perceived riskier asset with expectation of ceasefire between Russia and Ukraine. We expect a bearish trend for XAU/USD.