Next week US CPI headlines the schedule of high importance data. This forecast considers how major currency pairs shape up ahead of the US CPI release
Traders have already pared rate hike odds of the Fed cutting in March and in early Q2 but the Fed has provided enough evidence that rates will come down this year, and that is likely to limit upside potential for the dollar in the absence of another massive surprise in incoming domestic data.
Retail sales is expected to have pulled back in January, as would be expected after the holiday season, and could help to subdue the dollar. Sentiment captured in the University of Michigan Consumer Sentiment Survey has been showing strong signs of improvement. If the report continues to paint a rosy picture, the dollar may experience a late rise into the end of the week, but I am expecting positive and negative effects to more or less balance out this week.Elevate your trading skills and gain a competitive edge. Get your hands on the U.S. dollar Q1 outlook today for exclusive insights into key market catalysts that should be on every trader's radar:/USD chart, price action tested the 1.0724 level but couldn’t hold near the prior level of support and subsequently retreated. Another test of the level may ensue in the coming week but the bearish fatigue may limit an extended move lower. The worsening economic outlook and data in Europe appears priced in already. The next move lower in EUR/USD is likely to come from a greater urgency to cut interest rates from ECB officials, something that has been missing. Instead, ECB members have tried their best to downplay any notions that the Bank will be forced into cutting rates before its peers . ZEW sentiment data on Tuesday is unlikely to shift significantly and may have a limited impact on the euro itself.The daily chart provides a more granular look at the market, currently testing channel resistance in what might prove to be a fifth consecutive daily rise. A rather stern zone of resistance around 1.0830/1 awaits the pair should we see it breakout of the ascending channel. Notable support and resistance for the pair points to a week where EUR/USD may react to incoming data intra-day but fail to follow through with added momentum.With the Bank of England seeing inflation return to target significantly faster than initially forecasted in November, you would be forgiven for thinking markets would position for imminent rate cuts. This has not been the case. Instead, lingering doubts about future progress on inflation within the policy setting committee keep markets guessing. Out of the prior three members who voted for another 25 basis point hike in December, two remained for the January meeting. Notably, one member voted for a rate cut and the remaining six were happy to keep rates on hold. The BoE projections also warned that while inflation ought to reach the target in 1H this year, it will remain above the 2% market for an extended period as sticky price pressures are likely to reemerge. Committee members still lack confidence in the inflation data and would prefer to see further progress before cutting the bank rate./USD on the weekly chart reveals frustration at the inability to breach above the significant 61.8% Fibonacci retracement of the 2021 to 2021 major decline at 1.2756. The level has been tested over and over and now the pair looks to have retreated, for now.GBP/USD threatened to breakdown, unable to extend the move beyond the 200-day simple moving average for long. However, the stern channel resistance suggests that apart from further consolidation potential, cable may attempt another move lower in the coming week. The neutral bias favours consolidation and this appears like the base case next week, although, high impact UK data makes a return with employment, inflation andThis article covers the three most liquid forex pairs but each has their own nuances that all traders need to be aware of. Find out how to approach trading each of these major pairs below:edges towards the infamous 150 marker after the Governor and Deputy Governor of the Bank of Japan confirm they are in no hurry to hike interest rates. This week, Deputy Governor Shinichi Uchida and Governor Kazuo Ueda reaffirmed the measured approach from the Board when it comes to the inevitable shift away from negative interest rate policy. Uchida’s comments are followed closely as he is known for dropping hints around key developments. USD/JPY continues to grind higher as markets distance themselves from notions of imminent rate changes stemming from the BoJ. The 150 marker is near-term resistance, with 146.50 appearing as support. Recent BoJ commentary and the notable lack of concern around the weakening yen opens the door for another test of 150.Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. Forex trading involves risk. Losses can exceed deposits. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. Information presented by DailyFX Limited should be construed as market commentary, merely observing economical, political and market conditions. This information is made available for informational purposes only. It is not a solicitation or a recommendation to trade derivatives contracts or securities and should not be construed or interpreted as financial advice. Any examples given are provided for illustrative purposes only and no representation is being made that any person will, or is likely to, achieve profits or losses similar to those examples. DailyFX Limited is not responsible for any trading decisions taken by persons not intended to view this material.
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