Created on February 24, 2025

• The British pound initially tried to break above the 200-day EMA on Friday but has given back those gains to show signs of weakness.
• By doing so, it is a technical trade.
• I think this is as much a technical trade as anything else, given the 200-day EMA’s strong influence on market behavior.
• However, it’s also worth noting that Friday’s PMI data impacted the market—manufacturing PMI in the UK came in lower than expected, while services PMI was higher than anticipated but included negative revisions.

In the United States, we have seen services PMI come out lower than anticipated, but manufacturing coming out higher to previous announcements. So pretty mixed story here. And I think at this point in time, you have to look at this through the prism of whether or not we are actually a little overextended, which I think that might be part of the case here as well. Ultimately, I think we need to watch this area between the 200-day EMA and the 50-day EMA for potential consolidation.

Is This Enough Info?

I don’t know that we have enough information to get moving longer term one way or the other at the moment, but I certainly am cognizant of the fact that a move above maybe 1.2750 or even 1.28 could open up a much bigger move, but that is a significant resistance barrier that will have to be dealt with and will more likely than not be very difficult to deal with for those who are trying to send the market higher.

On the downside, if we were to break down below the 1.25 level, I think at that point in time, the British pound falls under serious pressure, and this would probably be a pro-US dollar move across the forex world. So we’ll see how that plays out. But this is how I see the British pound at the moment. I think it is in a state of flux. We’ll have to see whether or not the trend changes or if this was just simply a relief rally.

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Created on February 24, 2025

• The US dollar has initially tried to rally a bit during the trading session on Friday, but has given back gains as the inflation numbers were a bit of a mixed bag and therefore, we start to focus on the Bank of Japan again.
• After all, people are assuming that the Bank of Japan will find a reason to tighten monetary policy this year.
• And while that’s probably true, the reality is that the interest rate differential is going to be huge for quite some time.

With that being the case, I think you’ve got a situation where traders will start to look at this through the possibility of trying to see if this area that we are in right now actually holds. If it does not, then the US dollar is probably plunging back down to the 142 yen level. This nonsense coming out of the Federal Reserve and the Bank of Japan has made trading very difficult. And then of course, people are worried about the tariff wars. So, I think volatility is going to get worse, not better. Japan increasing its interest rate to 0.75% isn’t much of a big deal, but traders right now are worried about the rate of change.

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Federal Reserve

The question then becomes will the Federal Reserve start cutting later this year? Maybe they do, maybe they don’t, and if they don’t, then eventually the Japanese yen will have to give up some of these gains. Right now though, it’s obvious that the US dollar is basically flat on its back when it comes to the yen, so while I don’t like buying this USD/JPY pair, I certainly wouldn’t sell it quite yet either below the 148 yen level, then I think we start to see a pretty significant acceleration to the downside. At this juncture, I think a lot of questions are still out there, and I do think this is one of the more difficult pairs to trade at the moment, as the fundamentals suggest more interest rates in Japan and inflation, but the inflation in the United States is very unlikely to go anywhere.

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• EUR/USD started the new week on a bullish note and rose above 1.0500.
• The CDU/CSU, led by Friedrich Merz, won the German election.
• Improving risk mood could help EUR/USD push higher.

EUR/USD edged lower on Friday and closed the previous week marginally lower. The pair opened on a bullish note and climbed above 1.0500 early Monday as investors reacted to the outcome of the German election outcome. Although the pair inches lower in the European morning, the technical outlook and the improving risk sentiment suggests that it could post additional gains in the near term.

The CDU/CSU, led by Friedrich Merz, won the German election by securing about 28.6% of total votes, while the far-right AfD came second with 20.8%. Finally, Olaf Scholz’s SPD received 16.4% of votes to drop to third. The Euro gathered strength as these results offered no major surprises. Experts now expect a two-party coalition to be formed with CDU/CSU and SPD.

In the second half of the day, the US economic calendar will not feature any high-impact data releases that could influence the US Dollar’s (USD) valuation in a noticeable way.

Meanwhile, US stock index futures were last seen rising between 0.3% and 0.45%. A bullish opening in Wall Street could make it difficult for the USD to stage a rebound and support EUR/USD.

On Tuesday, the Conference Board will release the US Consumer Confidence Index data for February.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart holds above 50, suggesting that the bullish bias remains intact.

EUR/USD faces the first resistance area at 1.0500-1.0510 (round level, Fibonacci 78.6% retracement of the latest downtrend). Once the pair flips that area into support, 1.0550 (static level) could be seen as the next resistance level before 1.0600 (beginning point of the downtrend).

Looking south, supports could be spotted at 1.0440 (Fibonacci 61.8% retracement), 1.0390-1.0400 (100-period Simple Moving Average (SMA), 50-day SMA, Fibonacci 50% retracement of the latest downtrend) and 1.0375 (200-period SMA).

The EURJPY pair formed some negative waves on last Friday by targeting 155.80 level, to confirm its surrender to the domination of the previously suggested bearish bias, while the contradiction between the major indicators might force the price to form some sideways trades until gathering the additional negative momentum to ease the mission of breaking 155.35 level and reach the additional negative stations at 154.45 and 153.60.

On the other hand, rallying above 158.90 and settling above it confirms postponing the negative attack to start forming correctional bullish waves to target 160.00 and 160.80 levels before any attempt to reach the additional negative stations.

The expected trading range for today is between 155.35 and 157.60

Trend forecast: Bearish

Natural gas price provided some temporary negative waves yesterday to keep its stability within the bullish channel by consolidating above 3.980$ support line, to notice forming bullish wave and settling near 4.330$.

Also, stochastic return to the overbought areas will provide the price with the additional positive momentum to assist to renew the bullish attempts that might target 4.680$ followed by 4.820$ levels soon.

The expected trading range for today is between 4.220$ and 4.680$

Trend forecast: Bullish

Despite forming minor bullish channel recently, the GBPCHF price frequent consolidation below 1.1420$ barrier decreases the chances of resuming the rise now, to notice forming correctional bearish rebound by touching 1.1355.

We notice stochastic exit from the overbought areas to increase the temporary negative pressures on the price and allow us to suggest more decline to target 1.1320 and 1.1285$ levels soon.

The expected trading range for today is between 1.1320 and 1.1400$

Trend forecast: Bearish

I wrote on 16^th February that the best trade opportunities for the week were likely to be:

• Long of the NASDAQ 100 Index. This fell by 2.48% over the week.
• Long of the S&P 500 Index following a daily close above 6118.71. This fell by 1.77% over the week.
• Long of Gold in USD terms (also known as XAU/USD) following a daily close of spot Gold above $2,926. This set up on Tuesday, but the price ended the week practically unchanged from there.
• Long of Corn futures (CORN etf can also be used) following a daily close of the next ZC future at or above 498. This set up on Tuesday, but the price ended the week 2.19% lower.
• Long of Coffee futures (COFF etf can also be used) following a daily close of the next C future at or above 425.10. This did not set up.

The weekly loss of 6.44% equals 1.29% per asset. However, my weekly forecast of rising Yen crosses helped make up some of this loss (3.91%).

Last week saw several data releases affecting the Forex market:

1. US FOMC Meeting Minutes – this was slightly hawkish, with the Fed showing to be in no rush to lower rates, with further progress on inflation required before any further cuts to be made.
2. UK CPI (inflation) – this was higher than expected, showing an annualized rate of 3.0% compared to an expected 2.8%, which was hawkish for the British Pound.
3. Canadian CPI (inflation) – the headline rate showed a month-on-month increase of 0.1% which was expected, but other inflation metrics ticked a fraction higher.
4. Australian Wage Price Index – a fraction lower than forecast, which is very marginally dovish for the Aussie.
5. Reserve Bank of Australia Policy Meeting – cut rates by 0.25% as expected.
6. Reserve Bank of New Zealand Policy Meeting – cut rates by 0.50% as expected but also a slight dovish tilt as the Bank made clear the pace of any further cuts would be much slower.
7. UK Retail Sales – the month-on-month increase was much stronger than expected, rising by 1.7% rather than the forecasted 0.4%, suggesting there is still strong consumer demand, bolstering the higher rate view.
8. US, French & German Flash PMI Services & Manufacturing – nothing very notable here.
9. US Unemployment Claims – almost exactly as expected.
10. Canadian Retail Sales – this showed a considerably stronger increase than expected month-on-month, 2.5% instead of the forecasted 1.5%, suggesting there is still strong consumer demand, bolstering the higher rate view.

Last week’s key takeaways were:

1. Despite the hawkish tilt on US monetary policy, and the long-term bullish trend, the greenback declined over the week, while shows a kind of weakness in the USD right now.
2. US stock markets made record highs before dropping quite strongly at the end of last week.
3. The Japanese Yen saw strong gains last week on strong Japanese economic data, which boosted expectations of Bank of Japan rate hikes.
4. Rate cuts continue at many major central banks, even though global inflation seems to be mostly a bit stronger than expected, while the US Federal Reserve has essentially paused rate cuts and the Bank of Japan is positioned to make rate hikes, placing the JPY and USD as divergent currencies from the pack.
5. President Trump is taking a more conciliatory line on tariffs, stating that the EU is being “very nice” while also positioning to impose some reciprocal tariffs on other countries.
6. The Trump administration has continued talks with Russia over Ukraine, which triggered a boost in risk-on sentiment, although the sentiment is patchy as we saw at the end of last week.

It seems that any flow into safe havens is going to the Japanese Yen and maybe Gold.

A few commodities have been breaking to new record highs, although only Gold and Corn truly look strong.

The coming week has a lighter schedule of releases, so we are likely to see a lower level of activity and volatility in the Forex market.

The coming week’s important data points, in order of likely importance, are:

1. US Core PCE Price Index
2. US Preliminary GDP
3. German Preliminary CPI
4. German Federal Election Result
5. US CB Consumer Confidence
6. Australia CPI
7. Canadian GDP
8. US Unemployment Claims

Monday is a public holiday in Japan.

For February 2025, I forecasted that the EUR/USD currency pair would decline in value. The performance so far is shown below.

Last week, I forecasted that the following currency pairs would fall in value over the week:

This was a good and profitable call.

This week, I forecast that the following currency crosses will rise in value over the coming week:

The Japanese Yen was the strongest major currency last week, while the Euro was the weakest, putting the EUR/JPY currency cross and other Yen crosses in focus. Volatility decreased last week as expected, with only 26% of the most important Forex currency pairs and crosses changing in value by more than 1%. It is likely to decline again over the coming week.

You can trade these forecasts in a real or demo Forex brokerage account.

Last week, the US Dollar Index again moved lower after invalidating the long-term bullish trend the previous week, following a major bearish reversal a few weeks ago near the resistance level at 110.00.

It seems clear that the dominant price action is bearish, while the long-term trend is mixed: the price is below its level of 3 months ago but above its level of 6 months ago. However, it looks increasingly as if this trend is over, despite new US tariffs and a more hawkish Fed which is still grappling with inflation which stubbornly remains above its 2% target, leading to the Fed signaling it is not likely to cut rates any time soon.

The Dollar is likely to continue falling over the coming week, although the bearish momentum has slowed down.

After making a new record earlier in the week, the S&P 500 index made a deep bearish retracement at the end of the week. The weekly candlestick closed very near its low, which is a sign of short-term bearish momentum.

Despite this recent bearishness, he linear regression analysis applied to the daily price chart below shows that the current bullish trend has been driving this market for almost 2 years, which is a relatively mature bull market.

The price is still not far from its record high, and it has continued to make new record highs quite frequently, so I think if we see a recovery to new highs, it will make sense to look for a new long trade entry here.

The USD/JPY currency pair printed a large bearish weekly candlestick, closing near its low, and making its lowest weekly closing price in almost 4 months. The price seems to have become established below the big round number at ¥150. These are all bearish signs.

The driver here is the newly strong Japanese Yen, which has begun to jump dramatically every time Japanese economic data is released which shows the return of wage inflation, which is the key driver for pushing the Bank of Japan into further rate hikes after more than 15 years with an ultra-dovish monetary policy. Strong Japanese CPI and PMI data recently have helped boost the Yen.

The US Dollar has been weak lately despite strong fundamentals. Although this weakness may be somewhat hard to explain, it is useful as it gives a pair with a cheap spread here to trade to exploit Yen strength.

Despite the bearish momentum seen here backed by fundamentals and sentiment, the short-term moving averages remain above the long-term ones, which makes me want to wait a bit longer before entering any new short trades here.

Gold advanced again during the week to reach a new all-time high above $2,950 per ounce. However, the price truly moved little during the week, unable to really make a bullish breakout. However, the price is not falling either, so the dominant bullish trend should still be respected.

This trend may see a relatively slow rise, but we can see how steadily and strongly Gold gained over the past year, so this looks likely to be a solid trend.

I am not sure that Gold will reach $3,000 per ounce over the coming week, but this target is certainly in sight now.

Gold seems to be doing well in the current market environment, where both risky and some safe-haven assets are performing well – Gold plays a role as both.

I’d ideally like to see a new record high daily closing price before entering any new long trade – above $2,939.39. However, I am long of Gold right now and as the price is so close to this level, it could be worthwhile being long anyway without waiting for a new high closing price.

Corn futures have been breaking to new highs recently, with the price of Corn trading at a new multi-month high price a couple of weeks ago. However, last week saw a decline.

Many analysts question the bullish trend here, seeing the recent jump in corn prices as an essentially seasonal development, and sure to end soon. This may be true, but I think when trading commodities it is better to be guided by the price than by your own preferred fundamental supply and demand scenario logic.

I think Corn is a buy only if it makes a new daily high closing price, and to me it looks 50-50 whether this will happen or not soon.

I will be prepared to enter a new long trade only if we see Corn futures make a new 6-month high closing price at the end of any day over the coming week, above 502.

I see the best trading opportunities this week as:

• Long of the S&P 500 Index following a daily close above 6141.60.
• Long of Gold in USD terms.
• Long of Corn futures (CORN etf can also be used) following a daily close of the next ZC future at or above 502.

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MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.