Last week, the US Dollar Index closed at 103.45 ahead of the weekend, while gold fell to $2,155, facing bearish pressure. Large-scale attacks in Ukraine targeted at least three Russian refineries, amplifying tensions. US President Biden magnified concerns alongside Israel, urging strengthened governmental stances. Both the US Consumer Price Index (CPI) and Producer Price Index (PPI) unexpectedly exceeded expectations, with the market widely anticipating the Federal Open Market Committee (FOMC) decision this week to maintain interest rates. Bitcoin, after a significant sell-off, retreated to $69,200 but major players are actively supporting the market.

The US dollar saw a strong resurgence last week, sparked by a series of interest rate hikes, fueling market speculation. With inflation steadily rising, the dollar index surged, prompting investors to prepare for this week's Federal Reserve meeting, where the new "dot plot" may indicate only two rate hikes this year instead of the previously anticipated three. The main upside risk for the dollar lies in the dot plot's adjustment, yet even so, if the Fed continues to emphasize the crucial role of upcoming data, the market finds it difficult to believe this will have a long-term impact on forex, as these data are expected to begin showing some signs of weakness.

Gold retreated alongside silver and platinum testing new highs, with gold closing near $2,160; silver rose above $25, and the gold/silver ratio partially dropped below 86; platinum attempted to stabilize above $950. After a relatively calm week following the breakout of historical highs, the gold market seems somewhat ahead of itself and is expected to undergo further adjustments. Gold remains relatively stable, with traders monitoring the strengthening dollar and notable rise in government bonds. Silver tests new highs, with the gold/silver ratio dropping below 86. The robust decline in the gold/silver ratio remains a key positive driver for silver in the near term. Platinum continues to struggle to hold above $925 - $935 resistance levels. The platinum market is on the rise, which is favorable for platinum.

In the energy sector, the International Energy Agency raised its forecasts for oil demand to levels not seen since November last year. Additionally, it benefited from the evolving dynamics of the Russia-Ukraine crisis. If the recent upward trend continues, it may have implications beyond the energy markets, potentially complicating plans for central banks to cut interest rates this summer. WTI crude oil rose 3.89% last week to $81.02, a near four-month high. Brent crude oil futures fell by $0.08/barrel, a decrease of 0.09%, closing at $85.34/barrel.

The three major US stock indices closed lower before the weekend, with the S&P 500 dragged down by tech stocks. This week, the S&P 500 fell 0.13% to 5,117.09 points; the Dow Jones fell 0.02% to 38,714.77 points; and the Nasdaq fell 0.73% to 15,973.17 points. Among them, the Nasdaq and S&P 500 both saw a second consecutive weekly decline, while the Dow saw a third consecutive weekly decline.

Last week, the US Treasury market experienced turbulence, with yields across all maturities generally rising. As market expectations adjusted, the prospect of a Fed rate cut this year dimmed. The 10-year Treasury yield saw its largest weekly increase in nearly five months, rising to 4.303%, an accumulation of 21.5 basis points, roughly the largest weekly increase since late October last year, while the 2-year Treasury yield surged to a two-month high of 4.721%, up 23.7 basis points, the largest weekly increase since mid-January. 30-year US Treasury bonds saw a slight decline of 1.6 basis points to 4.427%, but still recorded the largest weekly increase since early January.

Bitcoin hit a mid-week low of $65,600 on Friday, and while it made efforts to recover, a pullback is likely this week. Salvadoran President Nayib Bukele reported that the country has moved most of its Bitcoin investment portfolio into cold wallets stored in the country's physical gold reserves.

Outlook for the Week:

Some new possibilities are seen from some not-so-stellar data this week. It may ultimately contribute to achieving the desired balance, bringing inflation closer to the Federal Open Market Committee's target.

Central banks worldwide will be in focus this week, with the Bank of Japan and the Reserve Bank of Australia announcing rate decisions on Monday, the Federal Reserve on Wednesday, and the Bank of Mexico, Bank of England, and Swiss National Bank on Thursday.

The Bank of Japan is more likely to raise rates in April, but the Swiss National Bank may surprisingly follow suit akin to the European Central Bank (which might cut rates in June). The Bank of Mexico may also unexpectedly cut rates. If not, the next opportunity would be in May, too close to the June 2nd election for a completely independent central bank to signal policy changes. Markets are reconsidering a Fed rate cut in June, providing some support for the dollar.

Strong US inflation data supports the dollar and US yields, while also backing the view of a Fed rate cut in June. On the other hand, EUR/USD and GBP/USD retreated from recent highs, and with the Bank of Japan potentially raising rates this week, the yen remains in focus.

After recent gains, gold is expected to decline this week. Given the speed of gold's breakout and historical highs near $2,200, a correction seems warranted, and profit-taking ahead of Wednesday's Fed decision would be reasonable.

The oil market rebounded significantly over the past week, indicating strong levels. If this upward momentum continues this week, WTI could eventually reach $95/barrel at some point this year. OPEC will meet on June 1st to discuss production levels for the second half of 2024, with expectations that, as crude oil prices strive to maintain barrel price increases, the oil cartel will continue to move closer to cutting losses.

With the retreat of overly inflated stocks and economic funds coming in, the US stock market, including the S&P 500, may fall to its lowest level since the pandemic collapse. This year's slow economic funds imply a potential overall market decline of 49% from currently overvalued levels. Despite improvements in market and economic prospects, some strict commentators still believe the stock market will crash and the economy will rapidly deteriorate.

To prevent excess liquidity, the People's Bank of China withdrew a net 94 billion yuan (approximately $13 billion) from the banking system before the weekend, while maintaining the one-year policy loan rate at 2.5%. This marked the first time since November 2022 that the PBOC withdrew cash from the banking system, indicating its use of monetary policy to boost growth and its willingness to support the yuan. It is expected that the PBOC's policy space for relaxation will be limited before global central banks start cutting interest rates, as yuan stability remains a policy objective, and further interest rate differentials will increase depreciation pressure. The PBOC may reduce reserve requirements in the coming months before lowering MLF rates.

Overview of Important Events and Economic Data for the Week: (Beijing Time)

Important Events:

Monday (March 18th): China's State Council Information Office holds a press conference on the state of the national economy.

Tuesday (March 19th): Reserve Bank of Australia announces interest rate decision; RBA Governor Philip Lowe holds a monetary policy press conference; Bank of Japan Governor Haruhiko Kuroda holds a monetary policy press conference; Bank of Japan announces interest rate decision.

Wednesday (March 20th): European Central Bank President Christine Lagarde delivers a speech; Federal Reserve announces interest rate decision.

Thursday (March 21st): Bank of Canada releases minutes of March monetary policy meeting; Federal Reserve Chairman Jerome Powell holds a monetary policy press conference; Bank of England announces interest rate decision and publishes meeting minutes.

Friday (March 22nd): Reserve Bank of Australia releases Financial Stability Review.

Overview of Economic Data:

Monday (March 18th): Eurozone January seasonally adjusted trade balance (billion euros); Eurozone February Harmonized CPI YoY - final (unadjusted); Eurozone February Core Harmonized CPI YoY - final (unadjusted).

Tuesday (March 19th): Japan 3-month policy balance rate (%); Australia March cash rate (%); Eurozone March ZEW Economic Sentiment Index; US February Housing Starts MoM (%); US February Building Permits MoM - preliminary (%); US February Core CPI YoY - unadjusted (%); Canada February Bank of Canada Core CPI MoM (%).

Wednesday (March 20th): UK February CPI YoY (%); UK February Retail Price Index YoY (%); UK February Non-Seasonally Adjusted Input PPI YoY (%); US EIA Crude Oil Inventories Change (thousand barrels) as of March 15th week; Eurozone March Consumer Confidence Index - preliminary.

Thursday (March 21st): Japan February Non-Seasonally Adjusted Trade Balance (billion yen); Australia February seasonally adjusted unemployment rate (%); Australia February Employment Change (thousand people); Eurozone March Markit Manufacturing PMI - preliminary; UK March Markit Manufacturing PMI - preliminary; UK March Bank of England Base Rate (%); US Q4 Current Account Balance (billion US dollars); US Initial Jobless Claims for the week ending March 16th (thousand); US March Philadelphia Fed Manufacturing Index; US March Markit Manufacturing PMI - preliminary.

Friday (March 22nd): Japan February National CPI YoY (%); UK March GfK Consumer Confidence Index; UK February seasonally adjusted Retail Sales MoM (%); Germany March IFO Business Expectations Index; Canada January Retail Sales MoM (%).

USD Index: Last week saw a rebound in the US dollar, recovering from recent losses.

The trend of the US dollar index last week showed a pattern of decline followed by recovery, rising to a near one-week high of 103.50 (a weekly gain of 0.7%) against the backdrop of rising US Treasury yields since December lows. Previously, sentiment data from the University of Michigan weakened. On the positive side, industrial production data exceeded expectations. Additionally, popular inflation data was released last week. The resilience of strong economic indicators and the cautious stance of the Federal Reserve on hasty easing provide potential for the dollar's recovery. This week, all investors' focus will be on the latest forecasts from the Federal Open Market Committee (FOMC), which may add further attractiveness to the dollar. Despite ongoing US inflation, upcoming data will continue to determine the timing of the easing cycle (expected in June). Investors have overlooked the rise in inflation rates, as mixed labor market data seemed to overshadow the inflation rate. This week's FOMC dot plot may also realign market expectations. Following recent data releases, the likelihood of a rate hike in June has further decreased, with the market currently estimating a 60% chance of a 35 basis point rate hike by the end of the first half of the year.

From a technical perspective, in the latter part of last week, the US dollar index rebounded, recovering from recent losses. The index is currently approaching a resistance zone formed by 103.50 (last week's high), 103.65 (trend line extending down from the February high of 103.96), and 103.69 (200-day moving average). The relative strength index (RSI) shows a positive slope but remains in negative territory (49.07), indicating that bears still have control, but bulls are gaining momentum. The US dollar index is currently below the 50-day (103.54) and 200-day (103.69) moving averages, indicating a strong downward trend, which further exacerbates bearish sentiment. Downside targets include 103.00 (a psychological level) and 102.79 (50.0% Fibonacci retracement level from 100.61 to 104.96). The next test will be the previous week's low of 102.35 to 102.28 (61.8% Fibonacci retracement level). On the upside, the first level to reclaim is 103.28, the 55-day moving average, and 103.30 (38.2% Fibonacci retracement level), breaking above which would target the 200-day moving average level of 103.71.

Conclusion for the Week: Consolidation below moving averages may suggest a short-term bearish outlook, offsetting any bullish attempts. Although bulls are gradually gaining the upper hand, widespread selling momentum conveys strong downward pressure. The bearish outlook will remain unchanged until the RSI climbs into the bullish zone and the MACD histogram switches to the green zone.

Range for the Week: 102.35--104.00.

Strategy for the Week: Selling the USD index on rallies is advisable this week.

WTI Crude Oil: Breaks Above Previous Resistance Level of 80.00-80.30; Hits a 3-Month High

The International Energy Agency (IEA) has revised its annual oil demand growth forecast, which still significantly differs from OPEC's projections. Attacks by Houthi militants on shipping vessels have forced many tankers to avoid the corridor, opting for longer but safer routes around the southern tip of Africa. Traveling longer distances, typically at faster speeds, may increase fuel consumption and reduce/delay supplies. The IEA attributed an additional revision of 110,000 barrels per day to the growth in oil demand, bringing the total to 1.3 million barrels per day, citing the attacks in the Red Sea by Houthi militants and improved prospects in the United States. Despite short-term boosts provided by shipping concerns, the IEA warned of economic headwinds bringing uncertainty to the outlook. On the supply side, the agency noted a more prominent position for non-OPEC suppliers but believed the OPEC+ extension of production cuts would help balance the situation. In summary, the current changes have shifted the supply-demand equation from surplus to a slight deficit.

WTI crude oil futures continue to trade within a broader upward channel. Similar to Brent crude oil charts, WTI has rebounded significantly from key levels around the 200-day moving average at $78.03 and $77.87 (the 38.2% Fibonacci retracement level from $93.94 to $67.94). At present, WTI crude oil trading prices are above the psychological level of $80.00 and the high point of $80.30 from March 1st, with the next upside level appearing at $80.94 (the 50.0% Fibonacci retracement level). The next level to watch for resistance is near $83.10 (the upper trend line of the rising wedge on the weekly chart), followed by $84.00 (the 61.8% Fibonacci retracement level). On the downside, the first support level to consider is $78.50 (the upper trend line of the rising wedge), with the recent key support area located near $78.03 (the 200-day moving average). A break below this level would test the $76.48 level (10-week moving average).

Conclusion for the Week: WTI crude oil prices are entering a dynamic not seen since 2013 when a significant weakness in the US dollar provided room for oil prices to rise to $100. Considering the current interest rate cuts and dovish stance by the Federal Reserve, more upside potential may be imminent. While $100 remains distant, opportunities are on the rise.

Range for the Week: $76.48—$83.10.

Strategy for the Week: Buying on dips in WTI crude oil can be considered for this week.

Spot Gold: Increased Volatility Expected as U.S. Election Approaches

Last week's release of economic data led consumers to lower their expectations of a rate cut by the Federal Reserve, resulting in increasing pressure on precious metals. Gold prices remained stable last week but recorded their first weekly decline after three consecutive weeks of gains. Gold has already absorbed the positive impetus from expectations of interest rate cuts. If inflation starts to rise again, it would mean policymakers would have to maintain tighter monetary policy for a longer period. Gold does not particularly favor a high-interest-rate environment, but if rates remain high due to overheating inflation, investors may naturally turn back to gold. On the other hand, expectations of persistent inflation keep pressure on gold prices as the Federal Reserve maintains pressure for higher interest rates. This non-yielding precious metal is also used as a hedge against inflation. The upcoming U.S. presidential election this year poses risks for future policies. With the stock market seemingly hitting historic highs amid economic and geopolitical tensions, investors may become more cautious of downside risks compared to upside potential. As the U.S. election approaches, expectations for uncertainty may increase. Safe-haven scenarios in the stock market may provide support for gold prices.

From recent technical trends, after experiencing all recent gains, gold may have an opportunity to decline this week. The weekly chart shows that gold is currently running near the top of a large ascending wedge around $2,184. At present, gold faces resistance near $2,180 - $2,184. Over the past four trading days, the precious metal has been trading within the range of $2,150 to $2,184, indicating hesitancy among market participants. The 14-day Relative Strength Index (RSI) has retreated significantly from its peak near 84.60 to 67.80, but the upward momentum remains active. If gold sellers regain control and continue to break below last week's support low of $2,150, further downside towards $2,142.70 (23.6% Fibonacci retracement level from $1,973.00 to $2,195.20) cannot be ruled out. Below that, $2,125.00 will serve as a static support for buyers. On the other hand, if gold undergoes another wave of technical correction, bulls may be more confident in attacking resistance levels at $2,200 and $2,215 (150.0% Fibonacci retracement level from $2,081.50 to $1,810.50). Previously, $2,180 - $2,184 will be a hurdle for gold to rebound.

Conclusion for the Week: Gold lost attractiveness last week and retreated to the $2,150 region. The benchmark 10-year U.S. Treasury yield rose to 4.3%, making it difficult for gold to hold its ground. However, expectations of a future rate cut by the Federal Reserve have not prevented gold from rising in the future.

Range for the Week: $2,125.00—$2,184.00.

Strategy for the Week: Consider buying gold on dips this week.

Spot Silver: Strong Demand for Silver in the Near Term

Due to the anticipation of interest rate cuts by the Federal Reserve spurred by U.S. data, U.S. Treasury yields continued to rise, causing the price of silver to fall below $25.00 per troy ounce. Silver prices pulled back last week from a three-month high of $25.16 to $25.44 before the weekend. The slightly bearish trend in silver prices occurred as expectations for a rate cut provided new clues, despite the mixed results of the U.S. Producer Price Index (PPI) and February retail sales data. Although the initial release of inflation (CPI) and (PPI) data for February was strong, the results may encourage the Federal Reserve to maintain a hawkish stance. Additionally, market attention is focused on developments in the U.S. banking sector. However, with improved expectations for a rate cut at the June meeting of the Federal Reserve, silver prices saw significant buying midweek, with the probability of a rate cut in June increasing to 65%, approaching previous data expectations. FEDWATCH shows that the probability of a rate cut by the Federal Reserve in June is 64.3%, with the year-end rate potentially falling to 4.5%. The European Central Bank indicated that short-term money market rates would be close to the deposit rate, and the minimum reserve requirement would remain at 1%. It will lower the main refinancing rate (MRO) on September 18 to narrow the spread with the deposit rate to 15 basis points.

Silver prices rebounded to a three-month high of $25.44 last week, showing strong demand for silver in the near term. Silver rebounded near the minor double bottom formed around $24.00, supported by strong buying from bulls, along with the 10-day ($24.39) and 5-day ($24.72) exponential moving averages trending upward. The 14-period Relative Strength Index (RSI) is trading in the bullish range of 65.00-70.00, indicating strong upward momentum. Although currently near $25.00, silver remains in an uptrend. Prices may be driven up to the $25.30 (midline of the daily chart uptrend channel) and $25.44 (last week's high) regions. The next targets would be the December 4 high of $25.91 and the psychological level of $26.00. On the other hand, if bears intervene and push silver prices lower to $24.55 (lower boundary of the uptrend channel) and below $24.39 (10-day moving average), the first key support level would be $24.07, the low of March 13. Once broken, the next stop would be $24.00 (psychological level and last Tuesday's low).

Conclusion for the Week: From a technical perspective, silver touched a low of $24.00 last week, except for the update of Fitch Ratings' global economic growth estimate, without any fundamental news emerging. This provided support for silver, below the $25.00 level, which may open the door for further upside.

Range for the Week: $24.00—$25.90.

Strategy for the Week: Consider buying silver on dips this week.

AUDUSD: With improving relations between Australia and China, the momentum of the Australian Dollar/US Dollar pair gains new impetus.

Towards the end of last week, the Australian Dollar/US Dollar continued its downward trend for the third consecutive day, reaching a low of 0.6557. Stronger-than-expected U.S. Producer Price Index (PPI) and Consumer Price Index (CPI) data propelled the U.S. dollar higher and pushed the U.S. Dollar Index back above 103.00. This depreciation of the Australian Dollar/US Dollar exchange rate was fueled by the prospect of when the Federal Reserve might begin cutting interest rates, further complicating the outlook. The widespread selling pressure led the Australian S&P/ASX 200 index to its lowest level in three weeks. The Reserve Bank of Australia maintains its stance on possible further rate hikes, with its policy decision scheduled for this week. On the other hand, developments in the Chinese economy are expected to have further implications for the Australian Dollar. While stimulus measures in China may provide short-term relief, sustained improvement in economic indicators is crucial for the strength of the Australian Dollar and may trigger a significant uptrend in the Australian Dollar/US Dollar pair. Additionally, against the backdrop of improving relations between Australia and China, China's announcement of potentially lifting tariffs on Australian wine adds new momentum to the Australian Dollar/US Dollar pair.

On the daily chart, the 14-day Relative Strength Index (RSI) of the Australian Dollar/US Dollar pair traded from 62.00 at the beginning of last week to around 48.00 in negative territory, indicating a gradual weakening of short-term bullish momentum. Immediate support lies near 0.6540 (30-day moving average) and 0.6528 (61.8% Fibonacci retracement level of the range from 0.6442 to 0.6667). Breaking below this level may bring downward pressure on the Australian Dollar/US Dollar pair, with potential support at psychological level 0.6500 and 0.6495 (76.4% Fibonacci retracement level). On the positive side, the currency pair may encounter resistance near the 9-day moving average at 0.6585 and 0.6581 (38.2% Fibonacci retracement level), with psychological resistance before 0.6600. Breaking above this level may lead the currency pair to retest last week's high at 0.6638, followed by the key level of 0.6650.

Conclusion for the Week: Given the inconsistent timing of adjustments in monetary policy by the Reserve Bank of Australia and the Federal Reserve, the Australian Dollar may gather momentum later this year, potentially driving the Australian Dollar/US Dollar pair further upward. The pair may aim for the significant milestone of 0.7000 in the near future.

Range for the Week: 0.6500-0.6650.

Strategy for the Week: Consider buying the Australian Dollar on dips this week.

USD/JPY: The Bank of Japan is set to signal on Tuesday; an interest rate hike at the April meeting

The USD/JPY pair slightly retreated from the one-week high of 148.84 touched last Friday. Japan's largest companies have fully responded to the EU's wage increase demands, confirming once again the market's expectations of a change in the Bank of Japan's policy stance. This, along with the generally weak risk sentiment, has been a key factor providing some support for the safe-haven yen. Meanwhile, Bank of Japan Governor Kuroda offered a slightly pessimistic assessment of the economy earlier last week, dashing hopes of a rate hike at the March 18-19 meeting. Additionally, as expectations grow for the Federal Reserve to maintain higher rates for longer to combat inflation, the U.S. dollar rose for the fourth consecutive trading day last week, helping to limit the downside for the USD/JPY exchange rate. With the Bank of Japan beginning to enter a hiking cycle, the yen may finally breathe a sigh of relief, with the Bank of Japan set to signal on Tuesday and likely to raise interest rates at the April meeting, following the announcement that wage growth in the largest union exceeded 5%. With wage growth reaching its highest level in thirty years and inflation exceeding 2%, Japan's era of negative interest rates is coming to an end. However, it is expected that the Bank of Japan will not embark on a large-scale hiking cycle. The Bank of Japan is expected to adopt a "slow and steady" approach to hiking rates to ensure that inflation remains around 2%. Therefore, as long as the Federal Reserve and the European Central Bank maintain their rates, the yen is unlikely to strengthen significantly.

From a technical standpoint, the USD/JPY broke above the key levels of the 100-day moving average at 147.50 and subsequently the 148.00 level, which is seen as a key trigger for bullish traders. However, oscillators on the daily chart, while recovering from lower levels, have yet to confirm a bullish bias. Hence, any further upside is more likely to encounter strong resistance near 149.20 (February 29 low), which has now turned from support to resistance. However, some subsequent buying pressure could trigger aggressive short-covering moves and push the USD/JPY currency pair back towards the psychological level of 150.00. On the flip side, the 148.00 level and subsequently the 100-day moving average (currently around 147.50) are likely to provide immediate support. A convincing break below could leave the USD/JPY vulnerable, accelerating towards 146.81 (38.2% Fibonacci retracement level of the range from 140.24 to 150.88) and entering the monthly low volatility zone around 146.50-146.45. The latter is close to the very important 200-day moving average at the 146.35 level.

Conclusion for the Week: The Bank of Japan is set to announce its policy decision on Tuesday, with the results of the two-day Federal Open Market Committee (FOMC) meeting in the U.S. following shortly after on Wednesday. This, in turn, will play a crucial role in determining the near-term direction of the USD/JPY currency pair.

Range for the Week: 147.50 - 150.00.

Strategy for the Week: Consider selling the USD on rallies.

GBP/USD: The pound may continue to see mild bearishness this week

Like most currencies, the pound took a hit from unexpectedly high U.S. producer prices, and the inevitable chain reaction of whether inflation should be declared defeated and rates cut sooner rather than later. The market has seen expectations for when the Fed will start cutting borrowing costs this year being pushed back. The current favored moment, June, is now under the spotlight. The Fed will announce its March rate decision on Wednesday, and with stakes so high, trading across the entire forex world is expected to be quite sluggish until the news is out. A day later, on March 21, the Bank of England will convene. Its last Monetary Policy Committee meeting ended without a rate discussion, and the same outcome is expected this week. While inflation is certainly far lower than its terrifying peaks, wage settlements remain extremely robust, and the Bank of England may again call for more time to assess the situation. Much will likely depend on the UK's official inflation data for February, which will be released the day before the Monetary Policy Committee makes its decision. The hope for a rate cut persists. The pound market will be closely watching if the split among the nine-member group from last month will reoccur. As early as February, one member favored a rate cut, two favored a hike, and six preferred no intervention.

The 14-day Relative Strength Index (RSI) on the daily chart plummeted from a high of 65.00 early last week to around 55.80 near the end of the week, remaining below 40, reflecting a bearish bias. The key resistance level is at 1.2750 (38.2% Fibonacci retracement level of the range from 1.2518 to 1.2894). If the GBP/USD fails to recover this level, bears may seek to maintain control. In this scenario, 1.2706 (50% Fibonacci retracement level) and 1.2700 (psychological level) could be support levels. Meanwhile, 1.2661 (61.8% Fibonacci retracement level) may be seen as the next support area before 1.2648 (200-day moving average). On the other hand, if the GBP/USD manages to stabilize above 1.2750, then 1.2800 (psychological level) and 1.2805 (23.6% Fibonacci retracement level) could be the next recovery targets. Further upward momentum could challenge the previous high of 1.2894.

Conclusion for the Week: The Fed's tone this week may be more cautious than the market hopes, which could make progress for pound bulls more difficult. Given this possibility, the rating for GBP/USD this week is mildly bearish.

Range for the Week: 1.2648 - 1.2894.

Strategy for the Week: Trading strategy may consider buying the pound on dips.

EUR/USD: The Fed's implementation of fewer rate cuts will boost the dollar

EUR/USD traded within a range of less than one hundred pips from 1.0870 to 1.0960 towards the end of last week. The catalysts appeared to be a mix of better-than-expected U.S. macroeconomic data and comments from the Chief Economist of the European Central Bank, Philip Lane, delaying expectations of an early rate cut.

Regarding potential scenarios, traders should not be surprised if the Federal Open Market Committee (FOMC) takes a slightly more hawkish stance considering the upward risks to inflation, which were clearly evident in the latest CPI and PPI reports released a few days ago. Despite the Fed indicating its intention to start easing policy restrictions at some point in 2024, the lack of progress on disinflation, coupled with economic resilience, may force the institution to postpone the start of the easing cycle and hint at a reduced magnitude of rate cuts during this period. Currently, the market expects rates to fall by about a quarter of a percentage point by year-end. If policymakers indicate an intention to implement fewer rate cuts than currently priced in, we may see a rise in the yield curve, especially after the New York Empire Manufacturing Index came in below expectations at -20.9, compared to forecasts of -2.4, from the previous -7. This data has tempered expectations for the Fed to maintain elevated rates over the short term, thereby boosting the dollar, as previous rates attracted more inflows of capital.

On the daily chart, EUR/USD broke below the lower boundary of the upward channel at 1.0885, while the 14-day Relative Strength Index (RSI) indicator, although in positive territory, plummeted from a high of 65.60 last Wednesday to a low of 53.50 towards the end of last week, indicating that bearish pressure is building. On the downside, a strong support area seems to have formed around 1.0864 (20-day moving average) to 1.0865 (38.2% Fibonacci retracement level of the range from 1.1139 to 1.0694). If the currency pair breaks below this level and begins to use it as resistance, then 1.0837 (200-day moving average) may be seen as the next bearish target before 1.0800 (psychological level). On the other hand, key resistance levels are at 1.0965 (midpoint of the upward channel) and 1.0969 (61.8% Fibonacci retracement level). If the currency pair manages to stabilize above these levels, sellers may lose momentum. In this case, 1.1000 will be seen as a key resistance level on the upside.

Conclusion for the Week: EUR/USD is being driven by a rebound in the dollar, while some dovish comments from ECB officials have provided little reason for the market to continue holding euros. EUR/USD may still face moderate pressure ahead of the Federal Open Market Committee (FOMC) meeting.

Range for the Week: 1.0800 - 1.1000

Strategy for the Week: Considering buying the euro on dips remains viable this week.

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