The new month sets off with an upbeat risk-on mood, as the dollar retreats below a monthly high.
Dollar
The greenback rolls into midweek having continued its advance, reaching levels last seen around January 6 2023, before pulling back sharply. Bullish Factors driving this mixed mood in the U.S currency can be attributed to a risk averse financial market in the beginning of the week, mostly driven by geopolitical tensions between the West and Russia, as well as a continued hawkish rhetoric from the FED. Bearish factors driving the current price, can be attributed to the Softer U.S data that was released this week as the Consumer Confidence dropped for the second consecutive month to 102.9 versus 106.0 prior, as well as easing Chicago & Richmond PMI data for the month of February. Looking ahead into the new month, there is undoubtedly a cautious mood as investors reassess their positions and brace for the key economic data lined up during March, consisting of the Fed Chairman Jerome Powell’s speech and The Fed’s monetary policy meeting.
Technical Analysis (D1)
In terms of market structure, Current Price action has formed a potential reversal pattern in the form of a descending channel. The pattern has been partially validated as an impulsive break of structure continues to move to the upside as bulls take control of the narrative. Henceforth price could remain bullish if buyers can defend the key 101.32 area. Conversely, if sellers break through the above mentioned support level, the narrative could shift towards the bears.
Euro
The Euro enters the new month on slightly better footing after the biggest monthly drop in February since September 2022. Factors driving what could be a “corrective recoil” and inviting fresh bulls, can be linked to hot inflation data coming from Spain and France, which have reinforced the hawkish sentiments around the ECB’s next move concerning interest rate decisions. Looking ahead, the European common currency will be likely driven by global inflation concerns as well as dollar dynamics amid hawkish FED speak.
Technical Analysis (D1)
In terms of market structure, Current price has briefly pierced the key the 1.092 area but retreated back below the resistance area. The way in which price approached this area in the form of an ascending channel gives bears the possibility of driving price after the breakout. Conversely if the bulls can sustain the pressure, price could break above the level and continue the uptrend if it invalidates the resistance area in an impulsive wave.
Pound
The Pound begins the new month finding some interest from buyers as price finds support on the key 1.201 level. Factors driving this buying interest from investors can be linked to the broad risk-on mood characterising this week, as well as the speech expected today from BoE Governor Andrew Bailey. The speech cannot be overstated in terms of its importance to potential bullish investors, as there is an air of expectation that Mr Bailey will deliver a hawkish undertone because of the current double-digit inflation figures that continue to permeate through the British economy. Therefore investors will be looking for clues about which direction monetary policy will take, and this will likely drive the directional bias for the week in as far as the Pound is concerned.
Technical Analysis (D1)
In terms of market structure, the bulls have been in control of the narrative and price has tested the key 1.244 level and has since pulled back forming a potential bearish double top. As price retests this peak formation again, two scenario’s present themselves. Namely, If the area is defended by sellers in this current bear flag continuation pattern it could result in the potential reversal pattern being validated. Conversely, if buyers break above the area, price will continue to remain bullish in the near term.
Gold
Gold heads into the middle of the week registering fresh intraday highs as interest from bulls begins to enter the fray. Factors driving this exuberance can be linked to the world’s largest industrial player and gold consumer, registers the best manufacturing data in a decade. While the reopening of China after strict lockdowns benefits the yellow metal, Dollar dynamics will still be keeping a lid on gold prices, as high inflation data still looms, leading to hawkish rhetoric still remaining in the ether from the FED.
Technical Analysis (D1)
In terms of market structure, current price action has slightly breached a significant resistance at the $ 1 949 area creating a new high before retreating back into the range. If sellers can defend this area and maintain the impulsive break of structure, price could, continue to move below the new High and validate the potential reversal pattern forming in the form of an ascending channel. However if buyers maintain their interest, price could break above and remain bullish towards the $1 998 level, which represents the previous lower-high.
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Ofentse Waisi
Market Analyst
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