#EURUSD & #GBPUSD: Weekly Forecast 19-25 March 2023

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

The EUR/USD experienced wicked reversals last week which certainly tested the fortitude of traders and more risk events are likely in the coming days.

The EUR/USD closed the last week of trading near the 1.06640 mark, and the start of trading this past Monday began near the 1.06900 level. Traders participating in the EUR/USD know that is not the whole story, however. Swift price velocity was demonstrated most of the week and the coming days promise more hectic results as clarity and calm emotions remain in short supply.

A high of nearly 1.07600 was experienced in the early hours of Wednesday, but by the end of the trading day via technical charts, the weekly low was put in around the 1.05165 ratios. The behavioral sentiment is fragile and traders trying to get a feel for the markets via developing news are likely not feeling tranquil, considering they are hearing conflicting viewpoints and outlooks regarding the broad market nervousness.

European Central Bank delivered its Anticipated Rate Hike, What will the U.S Fed Do?

As expected the European Central Bank delivered a rate hike of 0.50% in the middle of last week, but it is the U.S Federal Reserve that all eyes will be on the 22nd of March. Taking into consideration the violent reactions in the banking sector via corporate share values, the U.S. Federal Reserve has a very difficult decision to make.

While inflation remains high and a legitimate concern for the global central banks, the unappealing prospect of raising borrowing costs could further hamper the corporate banking sector. It has become a chicken and egg question regarding the prospect of raising the Federal Funds rate this week. If the Fed increases its borrowing costs by 0.25% it might help fight inflation, but it may also cause harm in the corporate banking area and make growth not only hard to achieve because lending will become harder, but potentially dangerous if already ‘wounded’ banks are then hit with additional equity selling making them vulnerable financially.

Violent Reversals in EUR/USD Last Week could happen again this Week

If the U.S. Fed raises its interest rate by 0.25% instead of pausing, this will certainly cause a reaction in the EUR/USD.

The Fed did not give much clarity in the past couple of days regarding its interest rate stance.

It is quite possible the U.S. Federal Reserve wants to see how the Credit Suisse crisis in Europe is handled. The Fed is also watching First Republic Bank which is being hit by selling and poor bond action in the U.S.

EUR/USD Weekly Outlook:

The speculative price range for EUR/USD is 1.05060 to 1.07150

Traders are encouraged to monitor financial news in the coming days. However, speculators are also advised to listen attentively and try to eliminate noise. Meaning that traders need to keep their emotions steady and not let loud words scare them. Caution will certainly be needed when trading this coming week and the EUR/USD will fluctuate depending on what is taking place.

If Credit Suisse bank is able to find a business deal with UBS this may help stabilize emotions in the banking sector momentarily. Yet, other concerns abound. If the U.S. Federal Reserve does increase its interest rate by a quarter of a point on the 22nd of March, this may have already been digested into the Forex mindset. It seems wildly impossible the Fed would increase by 0.50% this coming week considering what is going on in the global banking sector, but if the central bank were to undertake this move strong selling of the EUR/USD could ensue.

If the U.S. Fed chooses to pause its interest rate hikes this month and says it is taking a wait-and-see approach regarding the health of the financial markets this could cause the EUR/USD to climb. What the Fed will do this coming week is not known. There are certain to be interesting debates within the halls and offices of the Federal Reserve building in Washington this week. Forex traders should be braced for more volatile price action. Risk management and narrow targets using take-profit orders are highly encouraged for day traders who choose to participate in the EUR/USD this week.

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

The GBP/USD delivered an oddly strong bullish trend last week as global financial markets largely became nervous, and traders may want to look at the currency pair with speculative eyes.

The GBP/USD finished last week’s trading around the 1.21725 ratios. Having started the week essentially near the 1.20700 mark the bullish outcome for the GBP/USD should be given attention by speculators. Yes, volatility did hit the GBP/USD last week and a low of 1.20085 was touched approximately on Wednesday. However, the currency pair was able to incrementally trade higher after this depth and came within sight of highs near the 1.22000 ratios before going into the weekend and suffering a slight reversal lower.

GBP/USD Traders should brace for the U.S Federal Reserve and the BoE

The crisis in banking confidence will no doubt continue into this week and that will certainly make for nervous trading GBP/USD conditions. However, from a speculative point of view, the rather robust results upward within the GBP/USD are intriguing. The currency pair finished its trading within the upper part of the weekly price range and was able to maintain a rather steady pace higher, which started on the 8th of March. Yes, global concerns regarding Credit Suisse and U.S. regional banks will continue to be heard in the coming days, but the buying in the GBP/USD which has been generated the past week and a half of the trading is worthwhile to consider.

The U.S. Federal Reserve will announce its interest rate decision this coming Wednesday and the Bank of England will follow on Thursday. Having taken a rather aggressive stance only two weeks ago, the U.S. Federal Reserve is now in a murkier position regarding what it will do with the Federal Funds rate on the 22nd of March. It is highly unlikely the Fed will hike by 0.50% this coming week, while it does seem possible a rise of a quarter of a point is potential. What does seem almost certain is that the Bank of England will hike the Official Bank Rate by 0.25% this week as forecast to 4.25%. There are no guarantees, but it is these estimates which are likely the power behind the GBP/USD moves recently.

• The GBP/USD has likely gained because financial houses which felt the U.S. Fed would be overly aggressive a couple of weeks ago are now reconsidering their outlooks.
• However, if the U.S Federal Reserve ‘only’ raises its interest rate by 0.25% this might have already been digested by the Forex markets.

Inflation is Important but the Health of the Global Banking Sector is Vital

The GBP/USD may continue to find some upwards movement based on the notion that financial houses may still be trying to get out of their overly aggressive USD positions. Meaning the GBP/USD two weeks ago may have been oversold based on the prospect the U.S Fed would increase by 0.50 on the 22nd of March because of its emphasis on inflation. However, the shadows now being cast by the banking sector crisis have made a large hike by the U.S central bank highly improbable. This likely set the stage for buying of the GBP/USD, but now speculators need to consider if the buyer has been overdone in the currency pair.

GBP/USD Weekly Outlook:

The speculative price range for GBP/USD is 1.20530 to 1.23010

Nervous market conditions are certainly going to continue this week as financial institutions try to find their equilibrium within equities and Forex. If the GBP/USD sells off this coming week it does appear technical support around the 1.20600 to 1.20500 may be able to prove durable. Having made solid gains the past few days and enjoyed a relatively strong bullish trend the past week and a half, the GBP/USD may see some selling as a short-term reaction.

However, traders who want to pursue bearish positions should not be overly ambitious. The ability of the GBP/USD to remain above rather moderate support levels last week indicates some bullish sentiment still may be possible in the currency pair. Traders looking for more upside potential in the GBP/USD would certainly get a boost if the U.S. Fed says it is going to pause its aggressive interest rate stance this week. While a 0.25% hike is a potential, the possibility that the U.S. Feds delivers an unclear message regarding near-term monetary policy this Wednesday could cause nervous and choppy conditions in the GBP/USD too.

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