Forex Fundamental Forecast | 23rd February 2023

US Dollar (DXY)

Key news events to watch out for today GMT:

USD FOMC Meeting Minutes

USD Prelim GDP q/q 

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 DXY steadily increased overnight, reaching a price level around 104.50 before retracing once more. The FOMC meeting minutes, which showed that members supported the 25 bps rate hike and some may have supported a 50 bps hike decision, were released, which served as the catalyst for the upward movement. Look for the DXY to consolidate at its current level or perhaps retrace further before trading upward again. It is currently trading at the 104.35 price level. The next significant resistance level is around 105.50 if the DXY breaks over 104.55.

 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:

The EURUSD fell sharply lower overnight, reaching the 1.06 round number support level. The EURUSD has recovered and is now trading at the 1.0625 price level, but the price was unable to continue its downward movement and breach the support level. If the DXY drops some more, expect the EURUSD to rise even higher. The nearest resistance level is at 1.0660.

Forecast: Weak 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:

The GBPUSD fell lower from the 1.2110 price level to conclude the trading session at the 1.2035 price level as the DXY rose over night. Look for the GBPUSD to potentially retest 1.21 before trading lower once more. The price is currently retracing higher at the 1.2070 price level. The recovery of strength on the DXY would be necessary for this downward movement. The GBPUSD might trade as low as the 1.20 round number support level if the price turns around after the pullback.

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 rose overnight to a high of 0.9315 before sharply turning around to trade near the 0.9292 price level early in today’s trading session. The USDCHF may experience downward pressure to trade as low as the 0.9260 price level if the DXY keeps trading lower.

Forecast: Weak Bullish

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 kept falling further overnight, approaching the 0.68 round number support level. Yet instead of breaking through the support, the price rallied and quickly retraced. The AUDUSD, which is currently trading in the 0.6830 price range, may briefly move higher to the 0.6850 price level before resuming its downward trend. The next important support level is at 0.6660 if the AUDUSD breaks below 0.68.

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

The NZDUSD, in contrast to the AUDUSD, avoided large swings to the downside because of support near the 0.62 price region. Watch for a potential breakout to the upside as the price oscillates between the 0.62 and 0.6250 price range. The NZDUSD could rise to the important resistance level of 0.63 if the price rises above 0.6250.

Forecast: Weak Bullish

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:

After moving upward from the previous day, the USDCAD stabilized overnight between the 1.3525 to 1.3570 price range. The 1.3570 price barrier held back the USDCAD’s rise despite the DXY’s strengthening. With the present price of 1.3525, watch for the USDCAD to complete the retracement and for the price movement to indicate a continuation of the upward trend. The next significant resistance level is around 1.3710 if the USDCAD breaks over 1.3570.

Forecast: Weak Bearish

The Japanese Yen (JPY)

Key news events to watch out for today:

No Key News Events 

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:

Notwithstanding the strength of the DXY, the USDJPY again challenged the 135-round number resistance level overnight but was unable to go higher. Look for the USDJPY to consolidate briefly before possibly breaking out to the upside. It is currently trading at the 134.80 price level. The next significant resistance level for the USDJPY is 138 if the price rises over the 135 price level.

Forecast: Weak Bearish