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09.03.202323:52 विदेशी मुद्रा विश्लेषण और समीक्षा: EUR/USD. The dollar scares the euro into parity

Exchange Rates 09.03.2023 analysis

The dollar could not hold on to its highs, but that doesn't mean there won't be another attempt to break through the 106.00 level of the index. We have critical data coming up (NFP) and reputable analysts are writing about a revival of the dollar rally.

So, what to watch out for? The last speech of Federal Reserve Chairman Jerome Powell was full of hawkish sentiment. However, the markets haven't fully put this factor into quotes, otherwise the dollar would have soared higher. Apparently, they are not going to base their decisions on the labor market results, but by the inflation indicator instead, which is due next week.

What do we have at the moment?

Powell reiterated his message twice this week, that interest rates may need to be raised more and faster than previously thought. He also added that the size of the rate hike at the March meeting is undecided, it will depend on new data.

What did Powell have to say? Maybe it was just another cold shower for the markets, who stubbornly believe that monetary tightening is coming to an end. But it's unlikely that investors took the bait like they should have.

At least sentiment has not changed much. Investors still estimate the probability of a 50 bps rate hike at nearly 70%, with the remaining 30% pointing to a quarter point hike.

The focus now is on the Nonfarm Payrolls data. It is expected to slow to 205,000 from 517,000. However, this slide in growth looks more than normal, which means the dollar is unlikely to suffer.

After all, the unemployment rate is projected to remain steady at 3.4%, while average hourly earnings should accelerate to 4.7% from 4.4%.

The acceleration in wages may increase speculation that inflation may not be falling as fast as previously thought. Thus, market participants will want to raise their bets on a Fed rate hike. This will fuel the dollar.

Many analysts expect the dollar to rise, including technical strategists at Swiss bank Julius Baer, who have closed all short positions on the U.S. dollar.

Exchange Rates 09.03.2023 analysis

Julius Baer notes a fundamental shift in the greenback that has taken place in recent weeks against the backdrop of recent events.

"The U.S. dollar recovery will resume," the strategists write.

If we talk about the outlook for the euro, everything should be very clear given the looming strength of the dollar. Further losses are likely to occur for the euro.

On Wednesday, EUR/USD fell by 1.2%, as markets were digesting Powell's latest comments. Thursday's rise is more of a correction before a new fall.

As technical strategists at Julius Baer point out, if the dollar rally resumes, the euro will again face the issue of parity.

"The EUR/USD pair has rebounded only slightly from the February lows. Falling beyond 1.0500 will open the way back to parity," they said.

Exchange Rates 09.03.2023 analysis

As downside risks are increasing, Julius Baer downgraded the rating to neutral and advised traders to close all short positions on the dollar.

GBP/USD seems to have broken out of its descending triangle and the day before, it traded at 1.1805. The circular level survived and since then the pair has become steady and recovered somewhat on Thursday. As for the bullish sentiment, it is impossible to say for sure, for everything will depend on the dollar's mood and how it will accept the February labor market report.

Signs of a moderate bearish trend still remain in the GBP/USD pair, but it is near oversold conditions. Support is located at 1.1800, 1.1720.

Resistance is at 1.1900, 1.1950.

Natalya Andreeva,
Analytical expert of InstaSpot
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