The month of March is setting up to become an eventful month in the forex market, with lots of key economic data to be released and many currency pairs now approaching interesting levels that we have not seen for quite some time.
First, let’s take a look at back at our analysis from the beginning of February. We pointed out that US dollar had been in decline for a long period of time already, and we were starting to see early signs of a reversal in the USD/AUD currency pair. The reversal did indeed happen, and it happened in a very strong way, as you can see in the chart below.
The AUD/USD pair is now approaching the level from its previous swing high, and just as we expected, the price shot up once it breached through the blue 20 day moving average line. At the current level, the risk:reward ratio of this trade is much lower and it may be better to look for other opportunities for the month ahead.
No break-out in gold…yet
The gold chart also looked interesting last month and we speculated on whether we were about to see a break higher in gold prices. The price of gold did indeed try to break through the resistance at the $1,350 level on two occasions, but it failed and fell back both times.
In fact, it now looks like the bears are taking control of the gold market in the near-term. At the time of writing, price is about to break down below the support level around $1,320, and we are likely to see a decline even further down. If prices continue down, the first support level for gold is found around $1,290 and the next one around $1,270.
Over the long-term, however, the healthy uptrend in gold that we have been in for the past two years is still intact, and long-term investors in gold need not worry at these levels. With increased volatility in the stock market, the fundamental case for gold is also most certainly still in place.
USD/JPY may fall further
When measured in terms of Japanese yens, the US dollar looks like it still has more room to the downside. The price has been trending down steadily since the beginning of the year, and it recently broke down through the support found around the 108 level.
USD/JPY is now trading at prices not seen since November 2016, which is a sign that this market is going through a period of significant change. The next support area now is found around the 104-level, meaning that the USD/JPY still has room to fall another 2.5%-3% from current levels.
Economic news for the month ahead
In terms of important economic news that could move markets in March, the Italian election on March 4 is the first thing that comes to mind. The race is still close, but the so-called “protest parties” have improved their standing in the polls significantly. Many of these are sceptical towards the euro. If one one these euroskeptic parties were to win the election, the euro will most likely enter into a sharp fall against most other currencies. If your trading style is based on technical analysis, it may be wise to stay away from any currency pair involving the euro around this date.
In Australia, the Reserve Bank of Australia’s interest rate statement will come out on March 5. This is a high-impact event for the Australian dollar, and technical traders who want to avoid unnecessary risk are advised to stay away from the AUD during the announcement.
On March 8, the Bank of Japan is expected to come out with its interest rate statement. This announcement also has great potential to move any markets involving the Japanese yen, such as the USD/JPY market we covered above.
Many other economic key figures are also scheduled to be released this month, so if you are trading other currency pairs like the EUR, CAD or NZD, make sure to stay up to date with a forex news calendar about everything that is going on in those markets. Forexfactory.com has a nice calendar, but there are many others out there to help you stay up to date on all scheduled news releases.