Forex trading is shaping up to be incredibly popular in March 2024.

Central bank decisions, seasonal trends, and geopolitical issues all have the power to drastically alter currency valuations.

Now is a great time to be a forex trader.

From South Africa’s Rand/ZAR to the US Federal Reserve announcement, Finxocap analyses the Forex market in March.

Forex Trading: Federal Reserve Announcement in March

The Federal Reserve is scheduled to release its next policy statement on March 20, and the bond market is almost certain that there won’t be a cut.

Fed Chair Jerome Powell is expected to leave rates as they are, according to CME’s FedWatch Tool, which calculates stakeholders’ expectations to be at 97%.

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Earlier in March, remarks by the Fed chief and some ECB officials whipped up expectations for the onset of interest-rate cuts to begin during the second quarter of 2024.

The probability of a cut of at least 25 basis points at the June meeting is now above 70%.

Forex Trading: Market Snapshot March

The US dollar index advanced a mild 0.21% to 102.90, and the Euro slipped by a mild 0.16%, trading at $1.0919 versus the dollar.

The Japanese yen tightened a trivial 0.01% versus the dollar to 147.02, despite having been under pressure.

A Reuters report suggested a greater number of Bank of Japan policymakers were beginning to lean towards ending its negative interest rate policy this month.

In addition, the latest round of data revisions has confirmed that Japan evaded recession, with growth in the December quarter revised up to an annualised rate of 0.4%.

The dollar index, which tracks the dollar’s value against a basket of other currencies, rose nearly 0.2% as markets digested inflation data from the US, due to be released on March 12.

Forex – All Eyes on US Bureau of Labor Statistics

The yield on the benchmark 10-year notes in the U.S. Treasury market also increased marginally by 0.4 basis points.

The yield reached 4.092% from 4.088% as of March 11. Yield on 2-year notes, considered a proxy of interest rate expectations, increased by 3.3 basis points to 4.5193%.

Traders and financial firms are watching the US Bureau of Labor Statistics (BLS) release on Tuesday, March 12 for the critical US Consumer Price Index (CPI) figures for February 2024.

The month-over-month (M/M) rise in headline prices is expected to accelerate to 0.4% for February from the previous 0.3%, while remaining consistent at 3.1% year-over-year (Y/Y).

The core CPI – which excludes the more volatile prices of energy and food, is expected to show a slower M/M rise of 0.3% in February, from January’s 0.4%, and a slower Y/Y deceleration from 3.9% to 3.7%.

Forex – South African Rand edges higher

The South African rand edged up on Monday, extending a gradual recovery seen in the previous week, despite a dearth of local economic news.

Prices of emerging market currencies against the dollar; the rand traded at 18.6750 versus the dollar, having managed an improvement of nearly 0.3% on March 11 compared to March 4.

The rand’s rise was partly underpinned by the price of gold which had reached record highs. Gold remained at similar levels on March 11.

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In March, South Africa is slated to release January data for gold, mining, and manufacturing production.

The Top-40 index ended the session 0.26% lower to 10.105%.

Forex markets – EUR/USD weaker

During the American trading session on March 11, the EUR/USD pair was adjusting lower towards the 1.0900, during a weak European session.

While the US Dollar is finding buyers, traders are seeing a cautious sentiment spread across markets following a weak start on Wall Street; this is in turn keeping the risk-sensitive euro/dollar under pressure.

The EUR/USD pair is trading within the confines of certain key Fibonacci levels, as it remains below the 61.8% Fibonacci retracement of the recent drop from 1.1139 to 1.0734 at 1.0970.

Daily technical analysis suggests that the pair continues to have the potential for more upside, as it remains above its cluster of moving averages. The 20-day Simple Moving Average (SMA) is on the verge of crossing above the longer-term averages, which have converged near 1.0830.

While a couple of technical indicators have backed off slightly, they remain above their respective midpoints, a sign that they haven’t given back much ground, and bullish momentum has not peaked.

Looking at the 4-hour chart, the short-term outlook remains bullish. To get some new upward momentum, the pair would need to overpower the afore-made Fibonacci resistance mark.

The indicators have settled above their midlines after they had pulled back from overbought terrain, showing a lack of selling pressure.

EUR/USD – Support/Resistance levels

The 20-day SMA has a strong bullish bias around the 50% retracement of the latest rally at 1.0917, while the longer-term moving averages trail far behind.

The levels of support/resistance to consider are 1.0915/1.0865/1.0820 for support and 1.0970/1.1010/1.1045 for resistance.

Forex trading – narrow trading range

As of Monday, the EUR/USD pair has been trading in a narrow range near its opening levels at 1.0940.

With neither much data on the economic calendar nor much firepower anywhere, the market is taking cover ahead of the US Consumer Price Index (CPI) report on March 12, due out in the middle of the next European trading day.

Demand for the shared currency has taken somewhat of a backseat to concerns about the economic future.

Forex – European Central Bank in Focus

The European Central Bank’s (ECB) various communications, from President Mario Draghi’s press conference for the July meeting to the member of the ECB Governing Council Peter Kazimir speaking to Bloomberg (he doubts the bank will cut rates) – have failed to stem the tide of mild worry about monetary policies and stubbornly elevated inflation risks.

The consensus forecast indicates that the annual inflation rate will remain unchanged at 3.1%, with the core inflation rate, which excludes food and energy prices, dropping from 3.9% to 3.7%.

Forex – GBP/USD selling pressure

The renewed selling interest triggered around the 1.2900 area put some pressure on the GBP/USD pair, which extended the overnight losses by intraday around the 1.2800 level across the London noon hour.

The market sentiment continues to deteriorate in favour of the USD, thus exerting downward pressure on the cable, especially ahead of a busy day of UK and US economic reports due March 12.

GBP/USD – Relative Strength Index Outlook

The Relative Strength Index (RSI) on the 4-hour chart, which previously went past 80 at the start of March, shows the GBP/USD could continue on an overall bullish trend.

The first potential support area comes in at 1.2840 level, followed by a 1.2790-1.2800 zone which includes the 20-period Simple Moving Average (SMA), a psychological number, and a static level.

Lower support is seen at the 1.2750 level which is a mid-point of the ascending channel.

In the resistance zone, the first significant resistance level will be around 1.2880, then 1.2900 – a psychological and technical resistance level, and 1.2940 – the key point of resistance in August 2023.

A slump when trading opened on Monday was the only blip before the GBP/USD pair ended a busy week strongly, with six days of gains.

The pair finished up more than 1.5% over the previous week, helped by sustained selling across the US dollar that took GBP/USD to its best weekly gain since November 2023.

Forex – NFP pushing USD

The report on Nonfarm Payrolls (NFP) that came out on March 8 showed that the US Bureau of Labor Statistics (BLS) logged higher-than-expected employment numbers.

For February 2024, US employers added 275,000 jobs against what was expected to be a 200,000 showing.

The BLS data also showed that in the previous month, January 2024, the tally was lower than what was initially reported.

Other details of last Friday’s report revealed lower annual wage inflation and a jump in the unemployment rate, but the labour force participation rate was unchanged.

However, market expectations, as measured by the CME FedWatch Tool show a 95% likelihood that the Fed will cut rates in June 2024.

Forex – UK Labour data, US CPI

On March 12, the UK will publish labour market figures and US the Consumer Price Index (CPI).

Risk sentiment could propel GBP/USD in the lead-up to the printing of the numbers.

US stock index futures suggesting a queasy open on Wall Street would see a bit of resilience to the USD sustained unless we see a flight to safety as the American session opens up today, which in turn should see some adjustments as far as the pair is concerned.

Forex – USD/JPY in freefall

Since peaking in mid-February, the USD/JPY pair has been in freefall; since February 14, it has given up nearly $4.00 and is presently quoted in the high 146.00s.

The prospect that the Bank of Japan (BoJ) might lift its base interest rates from their current negative levels, could mean the end of three decades of stagnation for the world’s third-biggest economy.

The yen rally is also being backed up by a weakening US Dollar, hit by the market betting that the US Federal Reserve is likely to start cutting interest rates.

These movements suggest that the USD/JPY pair lost a lot of value very quickly, indicating that it may be in a short-term downtrend, which would make going ‘short’ more attractive.

However, a few issues arise from this bearish view, specifically that following such a drastic decline in the past few sessions, the pair has moved into oversold territory according to the Relative Strength Index (4-hour chart) and therefore a potential rebound might be on the cards.

Forex – USD/JPY Trading Outlook

When the RSI breaches the oversold zone, its general signal is that traders should not open further bearish bets, but not get out of existing short positions.

Experts believe that in this scenario, they should close short and begin to think about covering and going long only when the RSI rises above the oversold zone.

If the new pair recovers, it can soon face resistance, in the vicinity of 147.60-148.00; it is here that the 100 and 50-day Simple Moving Averages (SMA) are located, respectively.

After a potential short-term rebound (yellow dashed line), the pair appears set to resume its short-term downtrend too, and may even retest its March 8 lows of 146.48.

Below the 146.48 lows, a break could push the pair towards support at 146.22 and the 200-day SMA, with the possibility of lower levels at 145.89, the low from February 1.