#EURUSD and #GBUPSD: Weekly Forecast 19-25 February 2023

EUR/USD: Weekly Forecast 19th February - 25th February

The EUR/USD hit lows this past Friday not seen since the first week of January 2023, this as behavioral sentiment turned nervous regarding U.S Federal Reserve monetary policy.

The EUR/USD hit a low of nearly 1.06140 this past Friday before seeing a slight reversal higher take place as the currency pair went into the weekend limping. The EUR/USD will begin this week’s trading near the 1.06945 level and speculators who have carried bullish optimism the past few months likely are readjusting their outlooks. The fundamental culprit for the downturn in the EUR/USD was U.S. inflation reports last week.

The U.S. published a rather stubborn Consumer Price Index on Tuesday which didn’t show inflation was slowing as much as anticipated by many financial houses. To make matters worse for day traders who kept their bullish optimism alive with long positions going into last Thursday, Produce Price Index statistics from the U.S. proved stronger than anticipated. This sent the EUR/USD to lower depths and by early Friday the Forex pair was testing bearish values not seen since the first week of January.

The U.S Federal Reserve Tried to Warn Financial Houses and many did not listen

When the U.S. Federal Reserve raised its interest rate more than a couple of weeks ago, the U.S. central bank warned it remained nervous about inflation. On the 1st of February, bullish traders on the EUR/USD were not paying much attention and were skeptical about the Federal Reserve’s interest rate outlook which warned more hikes could be coming in the mid-term.

While the rhetoric of the March interest rate hike to come of another 0.25% was accepted easily, many financial houses remained hopeful the Fed would be proven wrong and have to reverse policy sooner rather than later. Things however have not gone as anticipated by EUR/USD bullish speculators since February 3rd. Now, after two rather significant inflation reports from the U.S last week showing higher prices remain a concern, a downturn in the EUR/USD has taken place.

The 1.07300 EUR/USD Looks like a Distant Goal in the Short-Term

• Only a couple of weeks ago the EUR/USD seemed optimistic like it could challenge the 1.09000 and 1.10000 levels relatively easily as bullish momentum was embraced.
• Aggressive U.S Federal Reserve monetary policy which has warned about interest rates above 5.00% appears realistic in the mid-term.
• Preliminary Gross Domestic Product numbers will be published in the U.S. this Thursday, and if stronger growth than expected is shown, the EUR/USD could produce more sales.

EUR/USD Weekly Outlook:

The speculative price range for EUR/USD is 1.05900 to 1.07750

The ability of the EUR/USD to turn in a reversal higher before closing this past Friday was intriguing. However, if negative behavioral sentiment remains strong, the EUR/USD could find that surpassing the 1.07300 level is difficult in the coming days.

Traders who suffered last week if they were pursuing buying positions of the EUR/USD, assuming U.S inflation would show it was weaker certainly got hurt and likely knocked out of their long positions. If the EUR/USD opens nervously on Monday and starts to challenge lower levels like the 1.06700 to 1.06500 range, this could be a bearish signal. While the EUR/USD definitely achieved a solid bullish run higher in the past few months, selling pressure has been strong since early February.

Traders should remain cautious and take into account the GDP numbers coming from the U.S. this Thursday because the outcome of this report will cause volatility. Stronger than expected Retail Sales data in the U.S. last week was also a surprise, and if growth numbers coming this week via the GDP are also strong, the U.S. Fed will use this as ammunition to continue to raise interest rates in the mid-term. If hikes of another 0.50% to 0.75% from the U.S. central bank are factored into the EUR/USD this could cause additional bearish selling. The 1.06300 to 1.06150 ratios should be watched carefully.

Yes, reversals higher are certain to be seen, but the question is if they can sustain momentum in the EUR/USD in the near term. A weaker-than-expected GDP number from the U.S. could help bullish activity in the EUR/USD. However, before this –if it - occurs bullish speculators should remain realistic and not overreach for targets that are too high. The 1.07300 ratios should be watched to see if it can be challenged, surpassed and sustained this week.

GBP/USD: Weekly Forecast 19th February - 25th February

The GBP/USD suffered a strong downturn once again last week after U.S. inflation data dealt with a combination of reports that surprised skeptics of the U.S Federal Reserve.

On Tuesday this past week, the GBP/USD was happily moving higher as strong buying was being demonstrated, as financial houses and traders embraced the notion a weaker-than-expected U.S Consumer Price Index report would soon be published. On the 14th of February, yes, Valentine’s Day, the GBP/USD was touching the 1.22700 ratios with fast bullish activity, when suddenly trading outlooks went from cheerful optimism and returned to potentially dark shadows.

Following in the wake of the U.S CPI data which showed American inflation remained stubborn and confirmed the U.S Federal Reserve’s rather aggressive monetary policy rhetoric a couple of weeks before, the GBP/USD started to sell off. By Wednesday morning the GBP/USD was trading below the 1.19900 level, this before it started to reverse higher and attained a high on Thursday around the 1.20775 mark. Apparently, some skeptics about U.S. inflation remained and the GBP/USD was able to find some buying support.

Technical traders were likely starting to dream of a higher GBP/USD again if they held bullish outlooks and believed another dose of inflation data from the U.S. on Thursday would deliver better inflation news. However, following the brief high displayed by the GBP/USD early on Thursday, the U.S. released its Producer Price Index figures and this time there was no mistaking the road signs warning about strong U.S. inflation. Not only did the PPI numbers come in with a stubborn result, but they also came in actively higher than anticipated.

GBP/USD hit depths not seen since the first week in January on Friday

On early Friday the GBP/USD fell below the 1.19200 ratio and bullish speculators of the Forex pair who were holding out were likely forced out of long positions. Yes, the GBP recovered as Friday moved on, and it finished the week near the 1.20390 vicinities where it will start trading on Monday morning. The notion the U.S. Federal Reserve will raise interest rates in March and potentially soon after that is almost a certainty.

• Having broken important support near the 1.20000 ratios on Wednesday, Thursday, and Friday of last week with incrementally lower depths in succession is not a bullish sign for the GBP/USD.
• Financial houses and traders who believed inflation would show it is declining in the U.S. were dealt strong punches, and the U.S. central bank is now in a position where it can be expected to likely raise interest rates over the mid-term.

Interest Rate over 5.00% likely from the U.S Federal Reserve in the Mid-Term

GBP/USD traders now have to find their equilibrium once again. Having sustained a solid bullish trend since the dog days of political upheaval in the U.K. this summer and early this fall, the GBP/USD climbed significantly and achieved a rather steady buying cycle. However, moving forward in the near-term nervous sentiment regarding the U.S. Fed outlook will affect the GBP/USD and support levels will be watched carefully. Traders may want to keep in mind there is a banking holiday in the U.S. on Monday, which will affect volumes and may make the GBP/USD slightly more volatile if uneven transactions are encountered.

GBP/USD Weekly Outlook:

The speculative price range for GBP/USD is 1.18450 to 1.22210

The 1.20000 is now an important psychological mark for the GBP/USD. Bearish and bullish traders will be keen to see if this level can be sustained early this week. If the 1.20000 is proven vulnerable, traders may believe there will be additional selling action, which could come within sight of lower values displayed last week. Traders should not be overly ambitious and be willing to cash out winning wagers when they are accomplished.

Looking for the GBP/USD to suddenly break below the 1.19000 mark may seem too far. This Tuesday the U.K. will publish PMI readings and on Thursday the U.S. will release Preliminary GDP data. Both of these reports will affect the GBP/USD and cause volatility. The Bank of England will no doubt be a position to follow the U.S. Federal Reserve’s monetary policy lead and raise interest rates too over the mid-term. This could provide some behavioral sentiment strength for the GBP/USD regarding buying, but it is not guaranteed.

If the GBP/USD can sustain value above the 1.20000 ratios over the near term and go into Tuesday’s U.K. Purchasing Managers Index reports with calm price action, the GBP/USD could find some bullish momentum with a report that meets expectations. However, speculators should expect this week to provide more fireworks, particularly if the U.S. Gross Domestic Product numbers come in with a better outcome than expected. If the U.S. growth numbers are stronger, this could send the GBP/USD lower again.

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