A New Round of Decline Could Begin

Forex

Summary:

Despite the Eurozone's GDP growth in Q4 of 2024, the economies of key member states remain sluggish. Meanwhile, declining retail sales data within the Eurozone suggest easing inflationary pressures, potentially paving the way for future monetary policy rate cuts.

SELL EURUSD

EXP

TRADING

1.04549

Entry Price

0.99900

1.05450

1.04567 -0.00439 -0.42%

0.0

Pips

Flat

0.99900

Exit Price

1.04549

Entry Price

1.05450

Fundamentals

Last Friday, Eurostat released data indicating that the Eurozone's Q4 2024 GDP grew by 0.1% QoQ, surpassing the initial estimate of zero growth. This revision is attributed to the inclusion of data from a broader range of member states. However, performance varied significantly across major economies. The Netherlands and Spain showed robust growth, approximately 0.4% and 0.8% respectively, while Germany and France, key Eurozone economies, exhibited weakness in certain sectors, with some areas contracting. Furthermore, employment data revealed a slowdown in growth, decreasing from 0.2% in the previous quarter to 0.1%, suggesting some strain on the labor market.

Meanwhile, the Eurozone's retail sales figures for December are noteworthy. Some data points indicate a decline in retail sales MoM, suggesting a pullback in consumer spending following a period of heightened consumption. This development presents a short-term economic headwind, but it also signals a potential easing of inflationary pressures, which could provide room for future monetary policy rate cuts. This scenario increases the likelihood of a further decline in the Euro's value in the near future.

Technical Analysis

In the 1D timeframe, the EURUSD has entered a consolidation phase following a significant prior decline. The short-term trend suggests a range-bound fluctuation between 1.050 and 1.020.

On the upside, a break of the critical resistance level at 1.050 could potentially trigger upward momentum for the EURUSD.

On the downside, the EURUSD is currently showing signs of weakness below the 1.050 resistance, increasing the likelihood of a short-term decline. A decisive break below the key support level at 1.020 would open up further downside potential, initiating a new wave of substantial decline.

Trading Recommendations

Trading Direction: Sell

Entry Price: 1.0460

Target Price: 0.9990

Stop Loss: 1.0545

Valid Until: March 4, 2025 23:00:00

Support: 1.0410, 1.0177, 1.0000

Resistance: 1.0513, 1.0532, 1.0629

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The NZD/USD continues its upward momentum, bolstered by a weaker US Dollar and market optimism after President Trump delays reciprocal tariffs.

BUY NZDUSD

EXP

TRADING

0.57100

Entry Price

0.58000

0.56500

0.57384 -0.00229 -0.40%

0.0

Pips

Flat

0.56500

Exit Price

0.57100

Entry Price

0.58000

The New Zealand Dollar (NZD) is riding a wave of positivity as it extends its winning streak for the third consecutive day, trading around 0.5740 early on Monday during the European session. This bullish momentum has been bolstered by a combination of factors, including improved market sentiment, a delayed tariff decision from US President Donald Trump, and weakening US economic data that has raised fresh speculation about a potential interest rate cut by the Federal Reserve later in the year.

Monday’s trading session has seen relatively thin liquidity as the US financial markets remain closed for Presidents’ Day, but the momentum for the NZD/USD remains intact as investors react to the broader market dynamics.

A key catalyst for the NZD/USD’s positive performance has been a disappointing retail sales report from the United States. Data released last Friday by the US Census Bureau showed a sharp 0.9% drop in retail sales for January, following a revised 0.7% increase in December. The decline was notably steeper than the expected 0.1% contraction, raising concerns over the health of the US economy and igniting further speculation that the Federal Reserve may cut interest rates later this year, despite ongoing inflation concerns.

This data has weighed heavily on the US Dollar, with the US Dollar Index (DXY) tracking its performance against six major currencies sliding for the third consecutive session. As of the latest update, the DXY hovers around 106.70, continuing its downward trajectory as weaker-than-expected US economic data pushes Treasury yields lower. Yields on the 2-year and 10-year US Treasury bonds now stand at 4.26% and 4.47%, respectively, providing further evidence of market skepticism regarding the Federal Reserve’s ability to maintain its hawkish stance in the face of slowing economic activity.

Adding to the positive sentiment surrounding the NZD/USD pair, President Trump announced the postponement of reciprocal tariffs that were initially set to take effect soon. This move is seen as an attempt to ease tensions between the US and its trade partners, particularly China, and it has provided a much-needed reprieve for global markets. The delay in tariff implementation has helped bolster investor confidence, contributing to a weakening of the US Dollar as risk appetite returns.

The focus now shifts to the Reserve Bank of New Zealand (RBNZ), which is scheduled to meet on Wednesday. The central bank is widely expected to cut its official cash rate (OCR) by 50 basis points, bringing it down to 3.75%. This move follows the RBNZ’s continued efforts to stimulate economic activity amid sluggish growth. The market is also anticipating a signal from the central bank regarding a more gradual pace of rate cuts in the coming months, with expectations that the OCR could reach 3.0% or 3.25% by the end of the year.

Interestingly, New Zealand’s economy appears to be showing signs of recovery in certain sectors. The Business NZ Performance of Services Index (PSI) for January showed a positive uptick, rising to 50.4, up from a revised 48.1 in December. This marks a return to slight expansion in the services sector after ten months of contraction, providing a more optimistic outlook for the New Zealand economy heading into 2025.

Technical Analysis

From a technical perspective, the NZD/USD has managed to break through the critical psychological resistance level at 0.5700, a move that had previously been holding the pair in consolidation for several months. This breakthrough is seen as a bullish signal, suggesting that the NZD/USD could continue to push higher in the near term.

However, the pair is facing some immediate resistance at the 0.5738 level, where the price has struggled to make further gains. Despite this, a retracement has taken place, testing the broken resistance, which could now act as a key support level for buyers looking for an entry point. If this level holds, the NZD/USD could aim for the next key resistance at 0.5800. A break above this level would open up the potential for a further rally, with the next target coming in at 0.5910.

TRADE RECOMMENDATION

BUY NZDUSD

ENTRY PRICE: 0.5710

STOP LOSS: 0.5650

TAKE PROFIT: 0.5800

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

EUR/USD retraces toward 1.0450 as the US Dollar gains momentum following dovish remarks from Fed officials, signaling a prolonged pause in interest rate hikes.

BUY EURUSD

EXP

TRADING

1.04647

Entry Price

1.06000

1.03920

1.04567 -0.00439 -0.42%

0.0

Pips

Flat

1.03920

Exit Price

1.04647

Entry Price

1.06000

EUR/USD experienced a notable correction on Tuesday, slipping toward 1.0450 during the European session, as it failed to maintain ground above the psychological resistance level of 1.0500 in the previous trading days. The drop came as the US Dollar, tracked by the US Dollar Index (DXY), found renewed buying interest after having recently reached a two-month low. The Greenback rebounded to approximately 107.00 at the time of writing, supported by the Federal Reserve’s firm stance on keeping interest rates unchanged for an extended period.

The recent pullback in EUR/USD was driven largely by renewed strength in the US Dollar, following a series of statements from several Federal Reserve officials reinforcing the view that monetary policy adjustments are not imminent. On Monday, remarks from key Fed members underscored a cautious approach to tightening, suggesting that there is no immediate need for further policy shifts. This dovish outlook added weight to the Greenback, particularly after the Fed signaled that rates would likely remain at current levels for the time being.

Fed Governor Michelle Bowman, speaking at the American Bankers Association conference, emphasized the need for greater confidence in the continued progress of inflation reduction before considering any policy changes. She noted that a steady interest rate stance for now would allow the central bank to observe additional economic indicators and better gauge the effects of the administration’s policies. Bowman’s comments reflected the Fed’s wait-and-see approach as it seeks clarity on both inflation trends and broader economic dynamics.

Philadelphia Federal Reserve President Patrick Harker echoed similar sentiments, stressing that there are sufficient reasons to keep the policy rate steady at this point. He pointed to resilient economic growth, a balanced labor market, and persistent inflationary pressures as factors that support the current policy stance. Harker remained optimistic about the potential for inflation to ease gradually but refrained from providing a specific timeline for any future policy shifts.

Investors are now looking ahead to Wednesday’s release of the minutes from the Federal Open Market Committee (FOMC) meeting held in January. The minutes will provide deeper insight into the Fed’s thinking and its future policy direction, especially as the central bank paused its monetary tightening cycle last month. In the meeting, Fed Chair Jerome Powell indicated that any further adjustments to monetary policy would depend on seeing “real progress in inflation or at least some weakness in the labor market.” This cautious language has fueled expectations that the Fed will maintain its current rate range of 4.25%-4.50% for a longer period.

The US Dollar's resurgence has placed additional pressure on the Euro, which has struggled to make significant gains in the face of the Greenback's strength. While the European Central Bank (ECB) has maintained a relatively hawkish tone regarding its policy outlook, there are concerns that external factors, such as global trade dynamics, could continue to weigh on the Eurozone economy. ECB President Joachim Nagel recently warned that President Trump’s tariffs, which are expected to target Germany more heavily, could expose the country to greater economic vulnerability. Nagel’s comments highlight the risks posed by trade policy uncertainties, which could complicate the ECB’s efforts to navigate inflation and economic growth.

Technical Analysis

Technically, EUR/USD is currently testing a pullback support level around 1.0456, which coincides with the 23.6% Fibonacci retracement. This level is seen as a key potential turning point for the pair, with some traders looking for a bounce from this point. The entry level for a potential long position is identified at 1.0465, with a stop loss placed just below 1.0392, an overlap support level near the 61.8% Fibonacci retracement. A potential take profit target is seen at 1.0600, a resistance level aligning with a pullback scenario.

Looking ahead, the focus will remain on the US economic data and any further commentary from Fed officials, which could provide more clarity on the central bank’s future policy direction. The market’s response to the FOMC minutes will be crucial in determining whether the USD can maintain its upward momentum or if EUR/USD will find support at these levels and attempt to stage a recovery.

TRADE RECOMMENDATION

BUY EURUSD

ENTRY PRICE: 1.0465

STOP LOSS: 1.0392

TAKE PROFIT: 1.0600

Risk Warnings and Disclaimers

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Winkelmann

Commodity

Summary:

Gold continues to benefit from safe-haven demand amid tariff trade wars and geopolitical tensions, but profit-taking has complicated its short-term trajectory, necessitating caution when considering buying at the uptrend.

SELL XAUUSD

Close Time

CLOSED

2906.80

Entry Price

2850.00

2916.00

2935.98 -3.28 -0.11%

92.0

Pips

Loss

2850.00

2916.05

Exit Price

2906.80

Entry Price

2916.00