GBP/USD Weekly Forecast (07th February 2022 – 11th February 2022)

Fundamental view:

The British pound edged higher against the US dollar during the trading course of the week. US dollar weakness and the Rate hike from BoE are the major catalysts underpinning the move of the quote. The US Central bank policymakers diluted expectations of a hefty 50 basis points hike in March even with inflation at a 40-year high, Which weighed on US dollar. On the other hand, Bank of England hiked interest rates by 25 basis points and revealed that 4 out of the nine voting members argued for a 50 basis point increase. The decision itself was a hawkish surprise but Governor Bailey’s press conference was dovish in that He said that after being frontload with hikes now, after that he will stop and reassess.

Cable had a fall on Friday after upbeat US NFP data which added 457k new jobs which is very high than the expectation of -192k. And about UK PM Boris Johnson, how long he can hold on to the keys of No.10 Downing Street is questionable. 

In this week, US Nonfarm Payrolls and UK Markit/CIPS Construction PMI on 4th February boosted downtrend of the pair whereas UK Nationwide HPI yearly report on 1st February, US ADP Nonfarm Employment Change on 2nd February and BoE Interest Rate Decision on 3rd February boosted uptrend of the pair.

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

GBP/USD Weekly outlook:

Technical View:

Last week’s high was 0.45% higher than the previous week. Maintaining high at 1.3627 and low at 1.3386 showed a movement of 241 pips.

In the upcoming week we expect GBP/USD to show a bullish trend. The currency pair is trading above the 200 Simple Moving Average and the MACD trades to the upside. A solid breakout above 1.3640 may open a clean path towards 1.3754 and may take a way up to 1.3881. Should 1.3399 prove to be unreliable support, the GBPUSD may sink downwards 1.3272 and 1.3158 respectively. Chart formation of rounding bottom pattern in H4 chart favors prospects of a bullish trend. Bullish harami pattern formation escalates the expectation for a bullish trend.

Preference
Buy: 1.3529 target at 1.3753 and stop loss at 1.3393

 

Alternate Scenario
Sell: 1.3393 target at 1.3159 and stop loss at 1.3529

EUR/USD Weekly Forecast (07th February 2022 – 11th February 2022)

Fundamental view:

The Euro had largest weekly gain since March 2020 and reached fresh 2022 high of 1.1483. The Major currency pair was following the uptrend since the starting of the week due to broad US dollar weakness and soared after the ECB meeting. US Central bank policymakers diluted expectations of a hefty 50 basis points hike in March even with inflation at a 40-year high with their recent speech, which weighed on the US dollar. On the other hand, European Central Bank President Christine Lagarde with her hawkish tone surprised market players, following the release of a mildly dovish statement.  She expressed logical concerns on mounting price pressures, and said that “compared with our expectations in December, risks to the inflation outlook are tilted to the upside, particularly in the near term,” She also refrained from saying that a rate hike this year would be unlikely. Traders are expecting a possible rate hike by the end of 2022.

However, The US dollar came back on Friday with upbeat NFP data, US managed to add 467K new job positions, which is very high than the expectation of -192k. Meanwhile the Unemployment Rate ticked higher to 4%, while the Participation Rate jumped to 62.2%, signaling quite a healthy recovery in the sector. Overall, The Euro had a good week.

In this week, Eurozone GDP quarterly report on 31st January and US Nonfarm Payrolls on 4th February favored bearish trend whereas ISM Manufacturing PMI on 1st February, US ADP Nonfarm Employment Change, Eurozone CPI monthly report on 2nd February and ECB Interest Rate Decision on 3rd February favored bullish trend for the pair.

The major economic events deciding the movement of the pair in the next week are ECB President Lagarde Speech, Eurozone Industrial Production yearly report at Feb 07, ECB Supervisory Board Member Fernandez-Bollo Speech at Feb 08, US EIA Crude Oil Stocks Change, US WASDE Report at Feb 09, Initial Jobless Claims, Federal Budget Balance at Feb 10 and Michigan Consumer Sentiment at Feb 11.

EUR/USD Weekly outlook:

Technical View:

Last week’s high was 1.21% higher than the previous week. Maintaining high at 1.1483 and low at 1.1138 showed a movement of 345 pips.

In the upcoming week we expect EUR/USD to show a bullish trend. The currency pair is trading above the 200 Simple Moving Average and the MACD trades to the upside. A solid breakout above 1.1575 may open a clean path towards 1.1701 and may take a way up to 1.1920. Should 1.1230 prove to be unreliable support, the EURUSD may sink downwards 1.1011 and 1.0885 respectively. Chart formation of an ascending scallop pattern in H4 chart sets prospects for a bullish trend. Bullish harami formation in H4 chart escalates the expectation for a bullish trend.

Preference
Buy: 1.1448 target at 1.1784 and stop loss at 1.1225

 

Alternate Scenario
Sell: 1.1225 target at 1.0886 and stop loss at 1.1448

Bitcoin trades high in choppy trading conditions

  • Threat of rising inflation underpins the uptrend of the Crypto market.
  • Robert Kiyosaki, the highly successful author tweets Bitcoin is part of the path to “financial heaven.”
  • A bill introduced by A bipartisan group of U.S. House representatives favors the crypto currency.

 

Bitcoin edged higher against the greenback during Friday Asian session. Choppy trading conditions leads to uncertainty among investors, and many invest in the less volatile assets during the early phases of a tightening cycle (rising interest rates). And the threat of rising inflation might force central banks to drain liquidity from financial markets, which has underpinned the rise in cryptos over the past year. Meanwhile, Traders typically overweight bitcoin because of its lower risk profile relative to alternative cryptocurrencies (altcoins).

A bill introduced by US favors the Oldest cryptocurrency. A bill previously introduced by Washington Representative Suzan DelBene aims to exempt crypto users from paying taxes on transactions under $200.

According to a Tuesday draft of the Virtual Currency Tax Fairness Act of 2022, Washington Representative Suzan DelBene is seeking to amend the Internal Revenue Code of 1986 to exclude gains from certain personal transactions of virtual currency. If signed into law, the bill could stop the Internal Revenue Service, or IRS, from requiring U.S. filers to pay taxes on capital gains from crypto transactions of $200 or more.

Recent Tweet from Robert Kiyosaki also underpins the bullish trend of Bitcoin. Robert Kiyosaki, the highly successful author of the “Rich Dad Poor Dad” series of personal finance books, has suggested that the flagship cryptocurrency bitcoin ($BTC) is part of the path to “financial heaven,” along with precious metals gold and silver.

He tweeted “There are a million paths to financial heaven and a billion paths to financial hell.” Fed and Treasury destroying the dollar sending   billions of $ savers & uninformed to financial Hell. Go to financial heaven. Save gold, silver, & Bitcoin.”

It is worth noting that the government of El Salvador has rejected a recommendation by the International Monetary Fund (IMF) to drop bitcoin as legal tender in the country. This rejection also helps the Bitcoin.

BTC/USD 4 Hour Chart:

Support: 36406.9 (S1), 35861.0 (S2), 35453.9 (S3).

Resistance: 37360.0 (R1), 37767.1 (R2), 38313.0 (R3).

Amidst all the catalysts favoring the Bitcoin against the US dollar, we expect a bullish trend for BTC/USD.

Downbeat US ADP Employment change favors Gold

  • A report by the ADP Research Institute showing fall in the business payroll weighs on the US dollar.
  • Recent moves of the Fed officials to dilute the rate hike expectation also weighs on the greenback.
  • Market now pay attention to the European Central Bank and Bank of England meetings.

 

Gold trades higher against the greenback during the Thursday Asian session. This move can be related to the US dollar’s weakness since the traders shifted its attention from the hawkish fed. Moreover, downbeat US ADP Employment change for January also exerts downward pressure for US dollar.

A report by the ADP Research Institute portrayed that businesses’ payrolls fell by 301,000 last month, after a revised 776,000 gain in December and less than expectation of 5,03,000. It shows how the omicron variant has impacted on the American economy, and this will be weighed by the Federal Reserve as they decide on monetary policy.

The recent moves of the Fed officials to dilute expectations of a hefty 50 basis points hike in March by the U.S. central bank even with inflation at a 40-year high also weighs on the dollar.

The most hawkish St. Louis Federal Reserve President James Bullard said on Tuesday that he favors successive rate increases at the Fed’s March, May and June meetings. But he does not agree with the idea of starting with a half-percentage point hike in March and says that markets have already started to push up borrowing costs.

Moreover, Another hawk – Federal Reserve Bank of Kansas City President Esther George, said that the central bank should be cautious and could take less aggressive actions in raising interest rates by shrinking the balance sheet more forcefully.

Elsewhere, Nicholas Frappell, a global general manager at ABC Bullion said “The shift towards a more risk-on approach by investors is probably gold-negative, however, the resultant weakness in the dollar helps gold, and the decrease in US [treasury inflation-protected securities’] yields has provided support for gold.”

Traders now shift their attention to ECB and the BOE outcomes and looking on the latest strong fundamentals they will expect hawkish results, this could add to the downside pressure on the US dollar and favor gold.

XAU/USD 4 Hour Chart:

Support: 1796.9 (S1), 1787.4 (S2), 1780.4 (S3).

Resistance: 1813.3 (R1), 1820.3 (R2), 1829.8 (R3).

The cautious market sentiment ahead of ECB and BOE amid broad US dollar weakness favors the Bullion, we expect a bullish trend for XAU/USD.