#EURUSD & #GBPUSD: Weekly Forecast (26th March - 1st April 2023)
EUR/USD: Weekly Forecast 26th March - 1st April
The EUR/USD was hit by a large wave of violent trading last week, which likely had many day traders shaking their heads in frustration as price velocity proved cruel.
The EUR/USD hit a high of nearly 1.09300 on Thursday of last week as the currency pair mounted an upwards attack, which essentially was ignited on Monday when the 1.06340 vicinities were briefly seen and speculators started to become buyers. However, fast and choppy conditions prevailed most of last week, and until late Thursday it seemed as if financial houses were positioning for a weaker USD based on the potential the U.S Federal Reserve might be forced to put the brakes on future interest rate hikes.
While concerns regarding Credit Suisse seemingly were brushed to the side in Europe and the EUR/USD climbed, the currency pair hit highs on Thursday which were last seen in early February. However, things took a bad turn for the worse when financial markets suddenly began to focus on the European corporate banking sector. This began with murmurs that bond trading in corporate banks like Deutsche Bank were showing weakness.
Deutsche Bank which has been under financial shadows for a handful of years suddenly started to be sold off swiftly in the equities markets. Many European corporate banks started to follow the downward path on Friday. Why is this important for the EUR/USD trading results? Because it likely was a prime mover in the reversal lower of the EUR/USD this past Friday as risk-averse assets were sought.
U.S Federal Reserve and European Central Bank have Issues to face this Coming Week
Both the U.S. and European banking sectors will likely continue to have shadows fall on their corporate banking sectors this week. Questions about balance sheets are becoming stubborn. The EUR/USD which saw it hit highs last Thursday suddenly experienced a wave of nervous selling taking place. The price velocity of the EUR/USD was noteworthy much of last week, and day traders hopefully were using risk-taking tools such as taking profits and stopping losses to get out of positions quickly.
More volatility should be expected in the coming days in the EUR/USD. The ability to produce a solid bullish trend last week certainly underscored the belief the U.S. Fed will have to limit its hawkish interest rate stance and possibly start lowering borrowing costs later this year. But fears in the corporate banking sector will continue to be heard as this week starts. Plenty of eyes will remain on Deutsche Bank. Both the Federal Reserve and European Central Bank could be pressed into the spotlight if the financial markets remain focused on corporate banking weakness and potential exposures.
Economic Data from the U.S and Europe Coming and could affect the EUR/USD
- Germany will release its Preliminary Consumer Price Index results on Thursday, providing inflation statistics.
- The U.S. will release its Final Gross Domestic Product numbers on Thursday, delivering insight regarding U.S. growth.
- Weekly Unemployment Claims will also come from the U.S. on Thursday, layoffs have been getting attention in the media again and these numbers could stir the market.
EUR/USD Weekly Outlook:
The speculative price range for EUR/USD is 1.05125 to 1.08910
After rather impressive and dangerous trading results last week, speculators should be braced for more volatility to come. While the highs attained in the EUR/USD highlighted positive momentum for the currency pair upwards and what could happen if financial markets are calm, the reversal lower on Friday showed what happens when risk-averse trading is triggered.
Support levels should be watched, particularly if corporate banking news from Europe remains troubling. The 1.07200 level could prove important, and if it crumbles the 1.07000 mark could become a target quickly. If nervousness heightens, lower values like 1.06700 should be watched. A move below this level would likely mean European banking news has caused more worries.
Traders looking for more upside from the EUR/USD cannot be blamed, but if this movement occurs it may only be sparked if financial markets find tranquil waters. Traders looking for last Thursday’s highs to be hit again may be overly ambitious. Forex like the broad marketplace has a high degree of nervous sentiment currently, for the EUR/USD to reverse higher in a strong manner it will take positive news to develop. Solid risk management is urged in the coming days.
GBP/USD: Weekly Forecast 26th March - 1st April
The GBP/USD turned in a choppy week of results as trading within the currency pair reflected the nervous behavioral sentiment being generated in the broad marketplace.
The GBP/USD hit a high of nearly 1.23430 on Thursday of last week after the Bank of England essentially copied the U.S Federal Reserve and increased its Official Bank Rate by 0.25% to 4.25%. While the actions of the Bank of England were expected and likely fueled the surge of buying for the GBP/USD, things took a turn on Friday as corporate banking fears crept into the psyche of the marketplace again.
Central Banks are working under Shadows as Suspicions Rise in Corporate Finance
The rather polite highs made in the GBP/USD last week showed that financial houses believed the BoE would mirror the policy of the U.S Federal Reserve and issue tough rhetoric regarding inflation. In fact the Bank of England actually warned companies to stop raising prices last week. However, like the Federal Reserve, the BoE managed to show its lack of dealing with reality. Inflation while coming from higher prices being charged to consumers at the end of the supply chain is a result of the costs of production having launched upwards. The point is both the Fed and BoE do not seem to have a real grasp on how to curb inflation yet and seem to be fighting losing battles.
- And while inflation continues to cause problems, the corporate banking sector continues to cause worries.
- Technical traders may not want to hear about it, but concerns regarding Deutsche Bank this past Friday saw volatility mount in Forex and cause a flight to safe havens, meaning the USD got stronger because of fear escalating.
Support Levels Proved Durable Last Week but Could Prove Vulnerable if things get Dangerous
While the GBP/USD sank on Friday to depths slightly below the 1.21900 level early in the day, the currency pair did push higher at the end of the day. The last two weeks of trading have seen the effects of nervous behavioral sentiment cause volatility in Forex and this week could prove to be reactionary too. While support levels certainly held and the lows last week were seen on Monday as the GBP/USD climbed upwards, this is because financial houses suspect the U.S Federal Reserve will be hard-pressed to continue to hike interest rates moving forward, nervousness regarding the corporate banking sector remains a real problem.
GBP/USD Weekly Outlook:
Speculative price range for GBP/USD is 1.20950 to 1.23350
Traders should expect to see choppy trading continue in the days ahead because it is unlikely the shadows darkening the corporate banking sector are about to disappear quickly. Speculators may be tempted to believe support levels should be durable in the GBP/USD around the 1.22000 level technically, but if fragile sentiment starts to boil, the currency pair could see lows tested again if financial houses seek risk adverse positions, meaning support could crumble.
If the 1.21900 level is brushed to the side the next test lower for the GBP/USD could be the 1.21700 mark. If this ratio is broken lower it likely means something has gone wrong in the corporate banking sector and folks are reacting by purchasing of the USD. It does look like a low of around 1.21000 could prove sturdy. Traders are advised to be prudent and monitor developing news in the coming days closely.
The ability of the GBP/USD to climb higher last week was not a great surprise, but the reversal lower is a reminder broad market conditions are fragile. If calmer waters are found and the financial world is able to comfort investors and speculators it is possible the GBP/USD could resume a climb higher and the 1.23000 ratios would certainly be a target. However, traders should not get overly confident too early, and use realistic take-profit orders to cash out winning bets. Technically the GBP/USD is in the middle of its mid-term price range when a three-month chart is looked upon. Speculative traders should remain cautious in the coming days and remain alert while using risk management.
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