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Pound and Yen Struggle as Traders Eye Crucial PCE Data, Bitcoin Fights for Recovery- TraderFactor

Pound and Yen Struggle as Traders Eye Crucial PCE Price Data, Bitcoin Fights for Recovery

EUR/USD Slips Amidst Escalating Risk Aversion

A Cautious Mood Prevails

In the European trading hours of Friday morning, the EUR/USD exchange rate succumbed to bearish forces, tumbling to a five-week low, dipping below the 1.0850 mark. Market sentiment was predominantly cautious, with investors peering ahead towards the release of US Personal Consumption Expenditures (PCE) inflation data. This trepidation provided a leg up for the US Dollar while simultaneously exerting downward pressure on the Euro.

ECB’s Steady Approach

The European Central Bank (ECB) held its ground post-January policy meeting, opting to keep key interest rates steady, a move largely anticipated by market forecasters. The accompanying statement revealed no remarkable deviations from prior language. In the follow-up media briefing, ECB President Christine Lagarde avoided pinpointing any timelines for potential policy shifts and reiterated the prevailing view that discussions of rate reductions were still untimely. Despite this, Lagarde acknowledged the retreat in wage growth alongside an expectation for a gradual inflation decline as the year 2024 unfolds.

Euro’s Resilience Wanes

The immediate response to the ECB’s steadfast stance saw the Euro displaying a modicum of resilience. However, as the session progressed, the currency’s inability to entice buyers became apparent. Concurrently, a risk-off mood spread through the markets, highlighted by a steep drop in US stock index futures, which bolstered the USD’s standing and placed additional strain on EUR/USD.

US Economic Outlook Brightens

As traders await the PCE Price Index data, other economic reports from the US paint a robust picture. The GDP exhibited a surprising spurt, growing at an annualized pace of 3.3%, significantly outpacing analyst expectations set at 2%, and providing further impetus to the US Dollar’s ascent.

Analysts Lean Towards Selling

In the spot forex market, the asset EUR/USD is currently facing downside pressure, and the trading recommendation stands at a SELL position. The entry point or pivot price for this trade is set at 1.0860. Traders looking to take profit should keep an eye on target levels of 1.0820 and 1.0800. It is advised to risk no more than 2% per trade to manage exposure effectively.

This trade recommendation is intended for intraday trading, meaning that it is expected to be concluded within the same trading day. The suggestion to sell is supported by technical indicators, specifically the Relative Strength Index (RSI), which indicates that there may be continued bearish momentum for the currency pair. Traders should monitor the market closely and ensure they are comfortable with the associated risks before entering the trade.

EURUSD 4H Chart

Please note that due to market volatility, some of the key levels may have already been reached and scenarios played out.

Sterling Struggles as Traders Anticipate US Inflation Data

GBP/USD Under Pressure

The British Pound has found itself on shaky ground against the US Dollar, remaining under the 1.2700 threshold as market participants eagerly await the forthcoming US PCE inflation figures. The early hours of Friday’s European session have not been kind to the GBP/USD pair, which has seen a decline beneath this key level. Despite the lack of immediate signs of deepening bearish momentum, the Pound’s inability to retake 1.2700 keeps potential buyers at bay.

US Economic Optimism Lifts the Dollar

The American currency has enjoyed a robust performance following encouraging US economic data. Thursday’s session was particularly uplifting for the Dollar due to a report by the Bureau of Economic Analysis, which revealed that US GDP growth exceeded anticipations, hitting an annual rate of 3.3% for the fourth quarter’s preliminary reading. This figure notably surpassed the projected 2% growth, injecting strength into the USD against its major counterparts.

Pivotal PCE Price Index Ahead

As the day unfolds, all eyes are set on the release of the Personal Consumption Expenditures (PCE) Price Index for December. Recent GDP statistics indicated that the PCE Price Index maintained a steady 2% quarterly rise, aligning with both prior trends and current market projections. Consequently, traders do not foresee any dramatic revelations from the monthly inflation figures.

Market Mood May Influence Currency Dynamics

The broader market mood could play a crucial role in shaping currency movements as US stock index futures point towards a lower opening. A downtick in Wall Street could pave the way for sustained USD dominance, complicating any bullish recovery efforts for the GBP/USD exchange rate as the week concludes.

Technical Outlook and Trading Recommendation

The GBP/USD currency pair faces a challenging intraday landscape characterized by downward tendencies. The recommendation is to adopt a SELL strategy, with an entry point at 1.2735. Targets for taking profits are identified at the 1.2680 and 1.2660 levels.

Traders should consider managing their risk exposure by limiting it to 2% of the trade amount and focusing on intraday timeframes within the volatile spot market. Notably, the resistance marker at 1.2735 emerges as a critical juncture; should the pair fail to breach this line, the likelihood of a descent below 1.2680 could increase.

GBPUSD 4H Chart

Please note that due to market volatility, some of the key levels may have already been reached and scenarios played out.

Yen Weakened by Soft Tokyo Inflation Data as Focus Shifts to US PCE Index

The Japanese yen is facing headwinds due to a weaker-than-expected Tokyo Core Consumer Price Index (CPI), with attention now turning to the upcoming US Personal Consumption Expenditures (PCE) Price Index data.

Yen Undermined by Domestic Inflation Data

With the release of Japan’s inflation figures, the yen found itself on the back foot. The latest statistics revealed that Tokyo’s CPI growth decelerated more than anticipated in January, slipping below the Bank of Japan’s (BoJ) goal of 2%. This marked the first instance in almost two years where inflation has retreated below this benchmark, offering support to the central bank’s stance that inflationary pressures would subside in the near future. The data served to dampen the yen’s strength, contributing to the currency’s subdued performance against the US dollar.

Hawkish BoJ Hints Fail to Rally Yen

Despite the weaker inflation figures, the yen received some support earlier in the week when the BoJ hinted at a more hawkish direction. The bank indicated that conditions were aligning for an eventual roll-back of massive stimulus measures and a move away from negative interest rates. However, this shift was not enough to offset the impact of the soft CPI data. Additionally, the global risk aversion driven by geopolitical uncertainties and a murky economic outlook has provided some ground for the yen’s status as a safe-haven asset.

USD/JPY Pair Gains Amid Bullish Dollar

As traders navigate through mixed signals, the USD/JPY pair remains elevated. A strong US dollar continues to bolster the pair’s position, aided by expectations that the Federal Reserve may maintain a less dovish stance than initially anticipated. Market participants are holding their breath for the US PCE Price Index release, which could offer insights into the Federal Reserve’s monetary policy trajectory and potentially shape the near-term dynamics for the USD/JPY currency pair.

Looking Ahead: US PCE Price Index in Spotlight

Investors now look ahead to the US PCE Price Index data for potential market-moving information. As the Fed’s preferred gauge for inflation, the PCE report could stir volatility in the currency markets, especially if the findings deviate from market expectations. Whether the data will reinforce or challenge the prevailing bullish sentiment for the US dollar is yet to be seen, but the outcome will undoubtedly influence the course for the USD/JPY pairing in sessions to come.

USD/JPY Climbs Higher on Bullish Sentiment and Technical Support

The USD/JPY pair is exhibiting bullish behavior in the intraday spot market, buoyed by a robust ascending trend line that suggests a strong buy signal. With the entry price set at a pivot of 147.35, the upward momentum is anticipated to continue, targeting prospective profit levels at 147.90 and extending further to 148.25.

The relative strength index (RSI) corroborates this optimistic scenario, hinting at a sustained advance. Traders are advised to allot a risk threshold of 2% per trade to maintain a balanced risk management strategy.

USDJPY 4H Chart

Please note that due to market volatility, some of the key levels may have already been reached and scenarios played out.

Bitcoin Struggles to Regain Footing After Plunge Below $40,000

The Drop and Its Ripple Effects

In a dramatic turn of events, the cryptocurrency market has seen Bitcoin slide below the critical $40,000 threshold, an occurrence that sparked a significant number of liquidations across trading platforms. The latest data indicates that over 487,000 wallets holding up to a single Bitcoin were affected, highlighting the market’s sensitivity to such pivotal price movements.

Rangebound Trading Ahead of Halving Event

As the crypto community counts down to the much-anticipated Bitcoin halving event set for April, the BTC price has been confined to a narrow corridor near the $40,000 mark. This stagnation comes shortly after the SEC’s nod to Bitcoin Spot ETFs, which initially stirred optimism but subsequently led to heightened volatility. Retail investors, especially those with less than one Bitcoin, appear to be divesting, as evidenced by the declining number of Bitcoin wallets since last October.

Recent Highs and Current Challenges

After reaching a two-year peak of $48,989 on January 11, Bitcoin faced a harsh correction, falling to this year’s low of $38,555. The asset has since strived to claw back, hovering around the psychologically important $40,000 level. The initial enthusiasm following the SEC’s approval of Bitcoin Spot ETFs has now given way to a divided trading community, with sentiments mixed on the future course of BTC’s value.

Market Sentiment and Trading Recommendations

Amidst the uncertainty, some market analysts from Santiment suggest adopting a contrarian approach to capitalize on the evolving price dynamics.

Intraday View for BTC/USD

The current intraday analysis for BTC/USD is optimistic, provided that the support level at 39,550 holds. The recommendation stands to buy, with an entry pivot at 39,550 and potential to rise above the 40,000 mark. Traders are advised to limit their risk to 1% per trade.

The RSI remains above 50, and the MACD is in positive territory, offering a bullish signal. In addition, Bitcoin’s price rests comfortably above both the 20 and 50-period moving averages, reinforcing the positive outlook for the short term.

BTCUSD 4H Chart

Please note that due to market volatility, some of the key levels may have already been reached and scenarios played out.

Disclaimer:

All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance. 

Author

  • Zahari Rangelov

    Zahari Rangelov is an experienced professional Forex trader and trading mentor with knowledge in technical and fundamental analysis, medium-term trading strategies, risk management and diversification. He has been involved in the foreign exchange markets since 2005, when he opened his first live account in 2007. Currently, Zahari is the Head of Sales & Business Development at TraderFactor's London branch. He provides lectures during webinars and seminars for traders on topics such as; Psychology of market participants’ moods, Investments & speculation with different financial instruments and Automated Expert Advisors & signal providers. Zahari’s success lies in his application of research-backed techniques and practices that have helped him become a successful forex trader, a mentor to many traders, and a respected authority figure within the trading community.

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