Dollar strength likely to drive EUR/USD, GBP/USD and NZD/USD lower
The dollar looks to dominate, as wider market declines bring risk-off moves for EUR/USD, GBP/USD and NZD/USD.
EUR/USD continues to fall as risk-off sentiment persists
EUR/USD has been losing ground over recent weeks, as market jitters translate into dollar strength. The declines seen in European equity markets this morning look to continue that theme, as the risk of higher interest rates dampens sentiment.
However, part of that comes via stronger economic data, with a welcome rise in purchasing managers index (PMI) surveys across Europe and the US only serving to raise concerns that the central banks will seek to tighten monetary policy further. The downtrend in EUR/USD seen over the course of February does remain in play here, with a rise through the likes of $1.0704 and $1.0804 required to bring a more positive picture into play.
GBP/USD at risk of bearish reversal after recent rebound
GBP/USD has been particularly interesting over the past 24-hours, with the pound proving to be a major outperformer after an impressive bounce in the services and manufacturing PMI surveys. Whilst the likes of the euro weakened on a similar move, the GBP reaction has been more optimistic given the fact that markets have been pricing in a major contraction and underperformance from the UK this year.
However, the selling pressure looks likely to resume before long, with market declines feeding dollar strength throughout the forex (FX) space. While GBP/USD has rallied into the 61.8% Fibonacci resistance level, there is a strong chance we see the bearish theme continue here. As such, a downturn looks likely here, with a rise through $1.227 required to bring a more positive outlook.
NZD/USD heading lower despite RBNZ rate hike
NZD/USD has seen precious little upside off the back of the Reserve Bank of New Zealand (RBNZ) rate hike, with the 50-basis point (bp) move largely priced in by markets. The forecast of a 9 to 12 month recession in New Zealand does highlight risk for markets, and that is reflected in dollar strength here.
With a bearish trend playing out of late, another move lower looks likely. A push up through the high of the week at $0.6261 would be required to bring a more positive outlook into play.
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