Forex Fundamental Forecast | 24th February 2023

US Dollar (DXY)

Key news events to watch out for today GMT:

USD Core PCE Price Index 

Important things that happened recently: 

Interest rates for the US currently stand at 4.75% with the CPI data at 6.4%. Although the inflation growth data is still significantly above the central bank’s target level of 2-3%, the Federal Reserve has indicated that current monetary policy is getting close to sufficiently restrictive but would not consider the possibility of rate cuts. Preliminary Gross Domestic Product (GDP) q/q is at 2.9% while the unemployment rate is at 3.5%, signaling strength in the US economy and supporting the Federal Reserve’s current path in its monetary policy decisions. 

What we can expect today:

The overnight announcement of the US GDP came in at 2.7% instead of 2.9%, which was somewhat below expectations. As a result, the DXY initially fell, but the price sharply rebounded off the 104.40 price region to keep moving upward. The rise is expected to continue as long as the DXY remains above 104.55. Consider the Core PCE Price Index, which will be reported today (Forecast: 0.4% Previous: 0.3%), as a possible indicator of somewhat stronger inflation growth than expected. This may indicate that the Federal Reserve will need to raise interest rates more, which might cause the DXY to rise toward the next significant resistance level of 105.50.

 Forecast: Weak Bullish

The Euro (EUR)

Key news events to watch out for today:

No Key News Events 

Important things that happened recently:

Interest rates for the Eurozone currently stand at 3% with the CPI data at 10.1%. However, as the inflation growth data is still significantly above the central bank’s target level of 2-3%, the European Central Bank (ECB) has indicated that further interest rate increases should be expected, with 50bps anticipated for a period of time. Flash Gross Domestic Product (GDP) q/q is at 0.2% while the unemployment rate is at 6.5%, supporting the ECB’s current monetary policy decisions and forward guidance.

We can expect today:

Overnight, the EURUSD fell sharply lower, reaching the crucial price range and support level of 1.06. The DXY’s power played a major role in this swing lower. While a small retracement of the EURUSD’s price is expected, watch for the price to remain below 1.06 to indicate further downside potential into the next significant support level of 1.0490. But, watch out for potentially bumpy price action along the crucial support level as the market approaches the weekend.

Forecast: Medium Bullish

The Pound (GBP)

Key news events to watch out for today:

No Key News Events 

Important things that happened recently:

Interest rates for the UK currently stand at 4% with the CPI data at 10.1%. Although the inflation growth data is still significantly above the central bank’s target level of 2-3%, the Bank of England (BoE) has indicated that it was poised to slow the pace of future interest rate hikes with a division of members voting between holding and increasing the current interest rates. Final Gross Domestic Product (GDP) q/q is at -0.3% while the unemployment rate is at 3.7%, signaling continual weakness in the UK economy. 

We can expect today:

Due to the strength of the DXY, the GBPUSD fell lower overnight, reaching the 1.20 round number support level, much like the other major currency pairs. The fact that the price has remained above 1.20 may indicate that a firm support has been discovered at the round number level. This can cause the GBPUSD to retrace its steps back toward the 1.2050 and 1.21 price levels. Nonetheless, it is likely that the downside pressure will continue. Look for the GBPUSD to break through the 1.20 level and trade lower to the next important support level of 1.1850 if the DXY strengthens.

Forecast: Weak Bearish

The Swiss Franc (CHF)

Key news events to watch out for today:

No Key News Events 

Important things that happened recently:

Swiss Interest rates currently stand at 1.00% with the CPI data at 3.00%. Although the inflation growth data is along the central bank’s target level of 2-3%, the Swiss National Bank (SNB) hinted at further rate hikes to combat the spread of inflationary pressures. The Swiss Gross Domestic Product (GDP) is at 0.5% while the unemployment rate is at 2.00%, signaling continual weakness in the Swiss economy. 

What we can expect today:

The USDCHF price increased from the 0.9290 price range to near 0.9345, continuing its upward trend. Once more, the price volatility of the DXY has a significant impact on the USDCHF’s directional bias. Expect the USDCHF to momentarily retrace and perhaps retest the 0.9230 price level before moving higher once more. The round number level of 0.94 is the next significant obstacle for the USDCHF if it rises above the 0.9350 level.

Forecast: Weak Bearish

The Australian Dollar (AUD)

Key news events to watch out for today:

No Key News Events 

Important things that happened recently

Interest rates for the AUD currently stand at 3.35% with the CPI data at 8.4%. As the inflation growth data is still significantly above the central bank’s target level of 2-3%, the Reserve Bank of Australia (RBA) has indicated that further interest rate increases over the period ahead could be expected, with the outlook for inflation also anticipated to be rising. While the Gross Domestic Product (GDP) q/q is at 0.6% and the unemployment rate is at 3.4%, the RBA expects economic growth to moderate, due to a slowdown in the global economy. 

What we can expect today:

The AUDUSD remains under downward pressure as the price traded sharply lower, breaching the round-number support level of 0.68. The AUDUSD could maintain its downward trend and trade noticeably lower if the DXY keeps getting stronger. But, if the price drops below the 0.6750 price level, the next important support level is at 0.6660. Expect highly choppy price activity.

Forecast: Weak Bearish

The Kiwi Dollar (NZD)

Key news events to watch out for today:

No Key News Events 

Important things that happened recently:

Interest rates for the NZD currently stand at 4.75% with the CPI data at 7.2%. Although the inflation growth data is still significantly above the central bank’s target level of 2-3%, the Reserve Bank of New Zealand (RBNZ) has indicated that it was likely to hold back on further interest rate increases. Preliminary Gross Domestic Product (GDP) q/q is at 2% while the unemployment rate is at 3.3%, but the RBNZ is forecasting a recession from mid 2023.

What we can expect today

Due to the strength of the DXY pulling prices lower overnight, the NZDUSD was unable to maintain a move upward. If the round number support level is breached as the NZDUSD tries to break below the 0.62 price level, watch for a major breakout to the downside. The NZDUSD might trade below the 0.62 support level and toward the next important support level of 0.6075 if the DXY continues to gain strength.

Forecast: Weak Bearish

The Canadian Dollar (CAD)

Key news events to watch out for today:

No Key News Events 

Important things that happened recently:

Interest rates for the CAD currently stand at 4.50% with the median CPI data at 5.0%. As the inflation growth data is still significantly above the central bank’s target level of 2-3%, the Bank of Canada (BoC) is considering the need for further rate hikes in the future to curb further inflation growth. Gross Domestic Product (GDP) is at 0.7% while the unemployment rate is at 5.0%, signaling a potential for a slowdown in domestic demand as the monetary policy tightens. This has led the BoC to have an outlook that growth could stall in 2023. 

What we can expect today:

In spite of the DXY’s overnight rise, the USDCAD experienced relatively little price fluctuation. The USDCAD made a brief ascent to the 1.3580 price level before retracing sharply from the recent high. Before deciding on its next directional move, watch for the USDCAD to potentially revisit the 1.35 round number level once more. The next big resistance level, 1.3710, might be reached by the USDCAD if the DXY continues to climb.

Forecast: Weak Bearish

The Japanese Yen (JPY)

Key news events to watch out for today:

JPY BOJ Gov-Designate Ueda Speaks

Important things that happened recently:

According to the Bank of Japan’s most recent monetary policy announcement, the BoJ will keep short-term policy interest rates at -0.10% and buy unlimited amounts of 10 year JGBs. It is anticipated that the Yen will continue to depreciate versus the other major currencies because of the BoJ’s commitment to an ultra-loose monetary policy, which continues to deviate from the other central banks’ path of tightening monetary policy.

What we can expect today:

Overnight, the USDJPY rose higher to reach the 135.40 price region, but the upward movement was immediately retraced, and the pair is now trading back in the 134.80 consolidative zone. The market is anticipating potential remarks from BoJ Governor Designate Ueda regarding his position on the present monetary policy, hence the Japanese Yen is expected to experience significant volatility. A hawkish outlook and predictions of potential tightening could result in a significant strengthening of the Japanese Yen. This might cause the USDJPY to trade sharply lower, all the way to the crucial support level of 133.

Forecast: Weak Bullish