Today BaybanNFA will be sharing dynamic forecast of foreign exchange market and summarize the impact of the past market.
As all investors know, the information on short term foreign exchange forecasts has great reference value. Foreign exchange investment cannot guarantee stable profit without making any loss, but investors are able to manage risk control and reduce the loss rate. Exit at the right time is critical, and good foreign exchange risk management practices can prevent you from falling into the trap. BaybanNFA is providing you risk protection. If you set your stop loss moderately, insist on logical thinking but not manipulated by emotions and manage the risk control of each transaction, these help to gain profit steadily. So, in February, how will the foreign exchange market dynamics look like? Next, BaybanNFA will analyze the foreign exchange trend in February 2021 for everyone.
The euro/dollar currency war against censorship can easily last for several years. By 2020, the US economy “shrank” by 3.5%. This is almost the first negative indication since 2009, and also the biggest decline since World War II. However, investors expect low interest rates and large cash injections into the US economy (Donald Trump at $900 billion and Joe Biden at $1.9 trillion), bind with the successful implantation of COVID -19 vaccine will help it resume growth in 2021. This will happen gradually.
Compared with the United States, support for the Euro economy is much smaller, with only 750 billion Euros. Therefore, the growth of Euro GDP will be more moderate, expecting a 1.5% increment. And the vaccination rate here is lower than abroad. If bind with the European Central Bank’s efforts to weaken the euros, investors can expect that euro/dollar will be under certain pressure. However, US Treasury Secretary Janet Yellen said that every effort will be made to prevent this from happening.
After the EUR/USD pair 1.2055-1.2185 traded sideways for two and a half weeks, the technical indicators were in a state of confusion, and there were no clear signals in either direction. 65% of experts forecast despite many circumstances, the US dollar will continue to lose positions in February and the currency pair will return to 1.2200-1.2300. The target is to reach high at 1.2350 and the nearest resistance at 1.2185 on January. The nearest support at 1.2055 while the main target for the bears is around 1.1800-1.1900.
There will be many more important events occurring in the coming week. US business activity and labor market data will be released on 1st February, Monday and 3rd February, Wednesday. Preliminary GDP data will be found in the Euro consumer market on 2nd February and the following day. Finally, on 5th February, data on the number of new jobs created outside the agricultural sector (NFP) in the United States will be released traditionally. The indication is expected to increase from -140K to +85K, which may cause the dollar to strengthen in the short term.
The pound rose sharply earlier. This aspect was driven by a rebound in risk appetite. On the other hand, data showed that the smooth progress of the British vaccination program also became a factor supporting the pound’s rise, especially against the euro. Nevertheless, in addition to the volatility caused by risk sentiment, the main focus of pound traders will be on the monetary policy report to be published by the Bank of England on 4th February. Since the last monetary policy report in November last year, the outlook for the pound sterling has changed significantly due to the third round of the British blockade. However, although the UK’s growth is expected to be lowered in the short term, the UK Monetary Policy Committee stated that the impact of the blockade on economic activities is fading.
However, perhaps the most interesting highlight in the monetary policy report will be the review from the Bank of England regarding the negative interest rate policy. In this regard, although the Bank of England may think that negative interest rates are operationally feasible, this does not necessarily mean that the central bank will let the boots of negative interest rates fall, because Governor Bailey said that negative interest rates are a highly controversial topic. As of now, as the overnight index swap (OIS) market shows that negative interest rates are unlikely to occur before 2022, the main response that the Bank of England may take may adjust its asset purchase plan. The author believes that the possibility of negative interest rates is quite low and will be the last resort the Bank of England chooses to use.
From the perspective of the volatility market, the implied volatility of GBP/USD seems to have risen slightly reflecting the upcoming risk event, but the trading volume does not show signs that the GBP is facing significant risks. The pound’s weekly risk reversal indicator is also biased towards call-buy, which is consistent with the recent trend of the pound.
The EUR/GBP trend is still moving towards the downside, as the rebound momentum continues to fade. Last week, the alignment of the euro exchange rate revealed dissatisfaction with the appreciation of the euro, and the suspension of vaccines developments also reduced the attractiveness of the euro. For the euro, liquidity risks caused the euro/pound pair further down to between 0.8860 to 0.8900.
The USD/JPY pair – 70% of experts believe they will continue to move south. However, the echelon has now been changed, and the upper boundary of the mid-term descending channel will now become its support line. The main resistance is at 105.00, and the support is at 104.00, 103.55 and 103.00. The remaining 30% of analysts expect that the currency pair will be able to rise even higher and reach around 105.70-106.10.
The US dollar – Indian rupee pair seems to be ready to enter February, and its bearish trend remains unchanged. However, the speculators’ perspectives are tested due to the sudden appearance of the US dollar/Indian rupee since August 2020. Although speculators hope to gain insights on the future direction of the US dollar/Indian rupee, the currency pair has proven tended to a lower price through a one-month chart in January.
The forecast speculative price range for the US dollar/Indian rupee in February is between 72.5800 to 73.7600. In late December and late January, the support level of 72.8600 has proved difficult to achieve. Observe in between 72.7700 to 72.7100 if this level proven fragile and the price continues to fall. If these marks are penetrated continuously, it be will followed by a large-scale and rapid value test.
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