EUR/USD on the Rise: Germany’s Election Victory and Weak USD Support Gains

Market Overview

US Oil

Oil prices continue to decline amid  expectations that oil exports from  Kurdistan will resume after nearly two  years of suspension. Iraq has  confirmed that it has completed the  necessary procedures to transport  185,000 barrels per day through the  Iraq-Turkey pipeline. This development  could help resolve a prolonged dispute  and increase market supply, putting  downward pressure on oil prices.

Investors are also closely monitoring  the progress of Ukraine peace  negotiations, as a potential agreement  could lead to the lifting of sanctions on  Russian oil, further boosting global  supply. Former President Trump has  initiated talks with Russia without  inviting Ukraine and the EU, while the  EU is set to hold a summit on March 6  to discuss support for Ukraine.

Japan

The Japanese Yen remains stable around 149.3/USD after a strong rally  driven by higher-than-expected  inflation data, reinforcing expectations  that the BOJ will continue raising  interest rates. Japan’s 10-year bond yield has reached its highest level in 15  years, while the US dollar weakens  amid concerns over US economic  growth.

Capital Economics forecasts that the  BOJ will raise interest rates to 1.25% by  2026, pushing the 10-year JGB yield to 1.75% by the end of 2025, providing  support for the Yen. The US dollar is  weakening due to  weaker-than-expected economic data, increasing expectations that the Fed  will cut interest rates this year.

XAU/USD

Prediction: Increase

Gold prices continue their strong upward trend, hovering near the all-time high of $2,954.69. Currently, the price is consolidating around the $2,930 - $2,938 range after reaching its highest level last Thursday. Profit-taking pressure has emerged but has not yet altered the bullish structure. Investors should monitor key support levels to assess the potential continuation of the uptrend.

FUNDAMENTAL ANALYSIS

Monetary Policy & Fed Impact:

Interest Rates & Inflation: Markets are closely watching the PCE Index (the Fed’s preferred inflation gauge), set to be released on Friday. If inflation remains high, the Fed may keep interest rates elevated for longer, pressuring gold. However, recent U.S. economic data suggests slowing growth, which could prompt the Fed to consider rate cuts in 2025.

Slowing U.S. Economic Growth: February U.S. Services PMI dropped to 49.7 (below 50), signaling economic contraction. University of Michigan Consumer Sentiment Index plunged from 71.7 to 64.7, raising recession concerns and boosting demand for gold as a safe haven.

Impact of U.S. Trade Policies:

Tariffs & Trade War Risks: Former President Donald Trump announced plans to impose new tariffs, including on automobiles, semiconductors, and pharmaceuticals.

The U.S. has already imposed a 10% tariff on Chinese goods and a 25% tariff on steel and aluminum, increasing trade war risks, which could impact global growth and support gold prices.

Geopolitical Factors & Market Sentiment:

Russia-Ukraine Conflict: Trump unexpectedly acknowledged Russia’s invasion of Ukraine and stated that Kyiv is close to signing a mineral agreement with the U.S. to seek conflict resolution. This escalation further fuels market uncertainty, reinforcing gold’s status as a safe-haven asset. Physical Gold Demand: China & India: Physical gold demand has weakened due to record-high prices discouraging buyers. ETF & Central Banks: Despite this, Western central banks and gold ETFs continue to support prices through strong inflows.

TECHNICAL ANALYSIS

Key Resistance Levels

● $2,942.845 – Immediate resistance; price is currently consolidating here.

● $2,954.955 – All-time high. A breakout above this level could push the price towards $2,960 - $2,975.

Key Support Levels

● $2,929.996 – Nearest support, aligning with the EMA 34. Holding above this level would maintain the bullish trend.

● $2,906.251 – Key support level.

● $2,884.849 – Strong support, aligning with the EMA 89. A rebound from this level could present a buying opportunity.

● $2,850.545 – Critical support. If broken, a deeper correction could follow.

Technical Indicators:

EMA 34 & EMA 89: Price remains above both EMAs, indicating the bullish trend is still intact. A break below EMA 34 could lead to a short-term correction.

RSI: Currently at 56.10, suggesting neither overbought nor oversold conditions. This indicates market consolidation, awaiting new momentum for a breakout.

Trading Volume: Consolidation phase. A volume surge on a breakout could confirm trend continuation.

Gold remains in a strong bullish trend, with the $2,954.955 all-time high acting as a critical resistance. A break above this level could lead to further upside towards $2,975. However, investors should monitor economic data, Fed policy signals, and geopolitical developments as key drivers of gold’s next move.

EURUSD

Prediction: Increase

EUR/USD is in a short-term uptrend, currently trading above 1.05039 after reaching a 4-week high at 1.0516. The upside momentum is driven by the German Conservative Party's election victory and the weakening USD amid concerns over U.S. economic growth prospects.

FUNDAMENTAL ANALYSIS

Politics & Impact of the German Elections:

The German Conservative Party, led by Friedrich Merz, secured victory, boosting the euro. However, coalition formation may take time, creating some short-term uncertainty. Markets are also awaiting the EU summit on March 6, where leaders will discuss Ukraine aid and defense spending, potentially influencing market sentiment.

Monetary Policy & U.S. Economic Data:

The Fed maintains a cautious stance and is expected to cut rates in July. Core PCE (Fed’s preferred inflation gauge) will be released on Friday, expected to drop from 2.8% to 2.6%.

If the actual data is higher than expected, the Fed may delay rate cuts, putting pressure on EUR/USD.

U.S. bond yields are declining due to weak economic data, weakening the USD.

Market Sentiment & Global Equities:

DAX (Germany’s stock index) rose 1.1%, while EUROSTOXX 50 gained 0.4%, reflecting investor confidence in the Eurozone.

U.S. stocks (S&P 500, Nasdaq) rebounded ahead of Nvidia’s earnings report. Weaker USD, driven by concerns over U.S. economic growth, supports EUR/USD upside.

TECHNICAL ANALYSIS

Key Resistance Levels

● 1.05314 – Current resistance; a breakout could push the price towards 1.05691.

● 1.05691 – Strong resistance; breaking above this level would confirm a stronger bullish trend.

Key Support Levels

● 1.05039 – Immediate support; staying above this level keeps the uptrend intact.

● 1.04294 – Next key support, aligning with EMA 89; a dip to this level may present a buying opportunity.

● 1.03749 - 1.03398 – Strong support zone, where significant buying interest may emerge.

Technical Indicators:

EMA 34 (1.04582) & EMA 89 (1.04251): Price is trading above both EMAs, reinforcing the bullish trend.

RSI = 63.97: Strong bullish momentum, but nearing overbought territory, suggesting a possible short-term pullback before further gains.

Trading Volume: Remains high, indicating strong investor interest in EUR/USD. EUR/USD remains in a bullish trend, supported by Germany’s election results and a weaker USD. However, with RSI approaching overbought levels, a short-term pullback is possible before further upside. Traders should closely monitor Friday’s U.S. Core PCE data, as it could impact the Fed’s rate cut timeline and influence USD movements.

BTCUSD

Prediction: Decrease

Bitcoin remains under selling pressure after failing to hold above the $100,000 psychological level. Currently, BTC is trading around $95,801, showing a slight recovery after hitting a low of $94,888. However, the overall trend remains bearish, with key resistance levels above.

FUNDAMENTAL ANALYSIS

Bitcoin Fails to Break $100,000

BTC neared $99,500 but lacked the momentum to break $100,000, leading to strong profit-taking. Buyers are defending the $95,000 level, but if momentum doesn't return, the risk of a drop to $92,400 - $91,500 increases.

Montana Rejects Bitcoin Reserve Bill – A Negative Signal for BTC Adoption? The Montana House rejected the Bitcoin Reserve Bill (41-59), which aimed to make Bitcoin a state reserve asset.

This highlights the ongoing skepticism at the government level, despite 24 other U.S. states proposing similar bills.

The rejection may create short-term negative sentiment as investors hoped for broader Bitcoin adoption.

VanEck Proposes U.S. Holding Bitcoin to Counter Debt Crisis

VanEck's research suggests that if the U.S. buys 1 million BTC over 5 years, BTC's price could reach $21 million per coin by 2049, offsetting 18% of U.S. national debt.

While purely speculative, this scenario emphasizes BTC’s potential role as a strategic reserve asset, similar to gold.

Senator Cynthia Lummis supports this idea, but given BTC’s high volatility, this remains highly uncertain.

MicroStrategy – Preparing for Another Bitcoin Purchase?

MicroStrategy, which holds 478,740 BTC, recently rebranded to reinforce its commitment to BTC. Some analysts speculate that the company may soon resume buying BTC, having paused last week.

Historically, MicroStrategy’s BTC purchases have acted as a bullish catalyst, but its stock has fallen 7% this week, reflecting broader market corrections.

TECHNICAL ANALYSIS

Key Resistance Levels

● $97,750 – Immediate resistance, aligning with the 200 EMA (4H chart). A failure to break above this level could lead to further downside.

● $102,216 – Stronger resistance; a sustained break above $100,000 could trigger a new bullish phase.

Key Support Levels

● $95,000 – Critical support; BTC must hold this level to prevent further declines.

● $92,095 – Previous major support level tested multiple times since November 2024.

Technical Indicators:

EMA 34, EMA 89, EMA 200: BTC is trading below all three EMAs, indicating that the downtrend remains dominant.

RSI = 43.88: Below the neutral 50 level, confirming that bearish momentum is still in play.

Trading Volume: No significant spikes, suggesting BTC is in a short-term accumulation phase.

Bitcoin remains bearish, with resistance at $97,750 and $100,000 acting as critical barriers. Failure to reclaim $95,000 could accelerate a drop toward $92,400 - $91,500. Short-term sentiment remains cautious, with regulatory setbacks and failed breakouts weighing on BTC. However, potential institutional buying (e.g., MicroStrategy) could serve as a bullish catalyst if it materializes.

 

 

 

 

 

 

 

 

 

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