IC Markets Europe Fundamental Forecast | 21 March 2025
What happened in the Asia session?
The Asia session was marked by cautious trading and mild movements in major currency pairs, influenced by the aftermath of recent central bank decisions. The US Dollar Index (DXY) showed signs of recovery, bouncing off from 103.31 to trade near 103.92, gaining about 0.48% in the session. This bounce came after the Federal Reserve maintained its projection for two rate cuts in 2025, which initially caused some dollar weakness.
USD/JPY faced slight bearish pressure, hovering around 147.81, influenced by Japan’s ongoing economic concerns. The New Zealand dollar (NZD) showed strength, trading above 0.5720, supported by a weaker USD and positive sentiment. EUR/USD experienced a mild pullback, trading near 1.0830, after reaching a five-month high in the previous session
What does it mean for the Europe & US sessions?
The European and U.S. forex sessions, this recovery in the DXY could provide short-term support for the USD against major currencies. EUR/USD is likely to test support near 1.0760, with potential downward pressure if the DXY strengthens further. GBP/USD is expected to trade cautiously near 1.300, with support at 1.2909 and resistance at 1.3010. Traders will also monitor CAD movements during the US session, as Core Retail Sales and Retail Sales data are set for release at 12:30 PM GMT, potentially driving USD/CAD volatility
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
With no major economic events scheduled, the US Dollar Index (DXY) is expected to trade within a technical range, influenced by recent Federal Reserve signals and broader market sentiment.
Key Levels on the H4 Timeframe:
Support at 103.20, where buyers may step in to prevent further decline.
Resistance at 104.10, a key barrier that, if breached, could push DXY toward 105.00.
The DXY’s bearish outlook persists, trading near 103.50. Recent Fed projections for rate cuts in 2025 continue to weigh on the dollar
Central Bank Notes:
- The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25 to 4.50% on 19 March 2025
- The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. The economic outlook remains uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
- Recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. However, inflation remains somewhat elevated.
- The March Summary of Economic Projections (SEP) maintains the projection of two rate cuts in 2025 totaling 50 basis points, consistent with the previous quarter’s forecast.
- GDP growth forecasts were revised upward for 2025 (2.1% vs. 2% in the December projection), while remaining steady at 2% for 2026. PCE inflation projections have been adjusted slightly higher for 2025 (2.5% vs. 2.4%) and 2026 (2.1% vs. 2.0%).
- In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of its goals.
- The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Beginning in April, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25 billion to $5 billion. The monthly redemption cap on agency debt and agency mortgage-backed securities will be maintained at $35 billion.
- The next meeting is scheduled for 29-30 April 2025.
Next 24 Hours Bias
Weak Bullish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
With no major economic events scheduled, Gold (XAU/USD) is expected to trade within a technical range, influenced by recent Federal Reserve signals and broader market sentiment. The precious metal remains supported by its recent bullish momentum, having reached a new all-time high above $3,052.5 on Thursday.
Key Levels on the H4 Timeframe:
Support at $3,025, where buyers may step in to maintain bullish momentum.
Resistance at $3,056, a key barrier that, if breached, could push Gold toward $3,070.
Gold’s bullish outlook persists, trading near $3,035. Recent Fed projections for rate cuts in 2025 and ongoing geopolitical tensions continue to support gold prices.
Next 24 Hours Bias
Weak Bearish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
With no major economic events scheduled, AUD/USD is expected to trade within a technical range, influenced by recent market sentiment and its bearish trend. The pair is currently trading near 0.6290.
Key Levels on the H4 Timeframe:
Support at 0.6274, where buyers may step in.
Resistance at 0.6330, a barrier that, if breached, could push AUD/USD toward 0.6400.
The pair’s bearish outlook persists, with recent Fed projections and trade policy concerns weighing on sentiment.
Central Bank Notes:
- The RBA reduced the cash rate by 25 basis points to bring it down to 4.10% on 18 February, marking the first rate cut since November 2020.
- Financial conditions are restrictive, which is weighing on demand and is helping to bring down underlying inflation; growth in private demand has been subdued.
- Underlying inflation has moderated over the past three quarters with trimmed mean inflation easing to 3.2% over 2024 and it is expected to reach the 2–3% target range in early 2025, which is sooner than expected at the time of the November Statement.
- The unemployment rate declined a little in late 2024 to 4% with much of the strength in the labour market underpinned by strong employment growth, which has also bolstered household incomes.
- The announcement of tariffs between the United States and other major economies poses challenges to the global outlook but the scale and incidence of the tariffs and their effects remain highly uncertain – which may itself delay some investment until the outlook becomes clearer.
- Economic activity strengthened in China but growth there is still facing structural headwinds while domestic economic growth is forecast to pick up and the labour market is forecast to remain tight.
- If the cash rate follows the market path, underlying inflation is projected to be a little above 2.5% over most of the forecast period. The anticipated recovery of GDP growth and lingering tightness in labour market conditions are expected to sustain some upward pressure on inflation.
- Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment.
- The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions, paying close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
- The next meeting is on 1 April 2025.
Next 24 Hours Bias
Weak Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
With no major economic events scheduled, NZD/USD is expected to trade within a technical range, influenced by recent market sentiment and its bearish trend. The pair is currently trading near 0.5765.
Key Levels on the H4 Timeframe:
Support at 0.5771, where buyers may step in to prevent further decline.
Resistance at 0.5829, a key barrier that, if breached, could push NZD/USD toward 0.5890.
The pair’s bearish outlook persists, with recent technical analysis suggesting a potential test of the resistance area near 0.5765 before continuing its downward movement
Central Bank Notes:
- The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 50 basis points bringing it down to 3.75% on 19 February, marking the fourth consecutive rate cut.
- The Committee assessed that annual consumer price inflation remains near the midpoint of the MPC’s 1 to 3% target band; inflation expectations are at target and core inflation continues to fall towards the target mid-point.
- Economic activity in New Zealand remains subdued and with spare productive capacity, domestic inflation pressures continue to ease. Price and wage-setting behaviours are adapting to a low-inflation environment while the price of imports has fallen, also contributing to lower headline inflation.
- Economic growth is expected to recover during 2025 as lower interest rates will encourage spending, although elevated global economic uncertainty is expected to weigh on business investment decisions. Higher prices for some key commodities and a lower exchange rate will increase export revenues and employment growth is expected to pick up in the second half of the year as the domestic economy recovers.
- Global economic growth is expected to remain subdued in the near term as geopolitics, including uncertainty about trade barriers, is likely to weaken global growth. Global economic activity is also likely to remain fragile over the medium term given increasing geoeconomic fragmentation.
- Consumer price inflation is expected to be volatile in the near term, due to a lower exchange rate and higher petrol prices. Nevertheless, the Committee is well placed to maintain price stability over the medium term.
- The economic outlook remains consistent with inflation remaining in the band over the medium term, giving the Committee confidence to continue lowering the OCR. If economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.
- The next meeting is on 9 April 2025.
Next 24 Hours Bias
Weak Bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
With no major economic events scheduled, USD/JPY is expected to trade within a technical range, influenced by recent market sentiment and the pair’s recent bearish trend. The pair is currently trading near 148.90.
Key Levels on the H4 Timeframe:
Support at 148.10, where buyers may step in to prevent further decline.
Resistance at 149.50, a key barrier that, if breached, could push USD/JPY toward 147.30.
Central Bank Notes:
- The Policy Board of the Bank of Japan decided on 19 March, by a unanimous vote, to maintain the following guidelines for money market operations for the inter-meeting period:
- The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.
- The Bank will continue its plan to reduce the amount of its monthly outright purchases of JGBs, aiming to reach about 3 trillion yen by January-March 2026.
- Japan’s economy has continued to recover moderately, with some sectors showing improvement. Exports and industrial production have remained relatively stable, while corporate profits continue on an improving trend and business sentiment maintains a favorable level.
- The employment and income situation has shown moderate improvement, with private consumption on a moderately increasing trend despite ongoing impacts from price rises.
- On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) has been in the range of 3.0-3.5 percent recently. Services prices continue to rise moderately, reflecting factors such as wage increases, while the effects of cost pass-through from past import price rises have diminished.
- Inflation expectations have continued to rise moderately, with underlying CPI inflation gradually increasing toward the price stability target of 2%. The virtuous cycle between wages and prices continues to strengthen, with businesses increasingly reflecting higher costs in selling prices.
- Japan’s economy is expected to maintain growth above its potential rate, supported by moderately growing overseas economies and the intensifying virtuous cycle from income to spending, underpinned by accommodative financial conditions.
- The next meeting is scheduled for 19 June 2025.
Next 24 Hours Bias
Weak Bearish
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
With no major economic events scheduled, EUR/USD is expected to trade within a technical range, influenced by recent market sentiment and the pair’s recent bullish trend. The pair is currently trading near 1.0841.
Key Levels on the H4 Timeframe:
Support at 1.0766, where buyers may step in to prevent further decline.
Resistance at 1.0950, a key barrier that, if breached, could push EUR/USD toward 1.0950.
Central Bank Notes:
- The Governing Council reduced the three key ECB interest rates by 25 basis points on 6 March to mark the fifth successive rate cut.
- Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 2.65%, 2.90% and 2.50% respectively.
- The Council acknowledged that monetary policy was becoming meaningfully less restrictive, easing borrowing costs for businesses and households with inflation projected to average 2.3% in 2025, 1.9% in 2026, and 2.0% in 2027, while core inflation also neared the 2% target.
- Although domestic inflation remains elevated due to delayed wage and price adjustments, wage growth is moderating.
- Economic growth forecasts were revised downward to 0.9% for 2025 and 1.2% for 2026, reflecting weak exports and investment.
- The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities.
- The ECB remains data-dependent and will adjust its policy as needed to ensure inflation stabilizes around its 2% medium-term target without committing to a specific rate path.
- The next meeting is on 17 April 2025.
Next 24 Hours Bias
Weak Bearish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
With no major economic events scheduled, USD/CHF is expected to trade within a technical range, influenced by recent market sentiment and the pair’s recent bearish trend. The pair is currently trading near 0.8851.
Key Levels on the H4 Timeframe:
Support at 0.8757, where buyers may step in to prevent further decline.
Resistance at 0.8865, a key barrier that, if breached, could push USD/CHF toward 0.8872.
If the SNB delivers the expected rate cut, the CHF may initially weaken against major currencies. However, the franc’s reaction will largely depend on the SNB’s forward guidance and any comments on potential currency intervention. The recent strength of the euro against the franc, driven by improved eurozone growth prospects, may factor into the SNB’s decision-making process.
Central Bank Notes:
- The SNB eased monetary policy by lowering its key policy rate by 25 basis points, from 0.50% to 0.25% on 20 March 2025, marking the fifth consecutive reduction.
- Underlying inflationary pressure has decreased further this quarter.
- Inflation in the period since the last monetary policy assessment has again been lower than expected, decreasing from 0.7% in November to 0.3% in February, primarily due to lower electricity prices.
- In the shorter term, the new conditional inflation forecast is slightly higher than December: 0.3% for Q2 2025, 0.4% for 2025 overall, and 0.8% for 2026 and 2027, based on the assumption that the SNB policy rate remains at 0.25% over the entire forecast horizon.
- GDP growth in Switzerland remains moderate, with the services sector continuing to show slightly stronger growth, while manufacturing faces challenges.
- The SNB anticipates GDP growth of around 1.0% to 1.5% for 2025.
- The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
- The next meeting is on 19 June 2025.
Next 24 Hours Bias
Weak Bullish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
With no major economic events scheduled, GBP/USD is expected to trade within a technical range, influenced by recent market sentiment and the pair’s bullish trend. The pair is currently trading near 1.2975.
Key Levels on the H4 Timeframe:
Support at 1.2808, where buyers may step in to prevent further decline.
Resistance at 1.3046, a key barrier that, if breached, could push GBP/USD toward 1.3100.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 7 to 2 to reduce the Bank Rate by 25 basis points (bps) to bring it down to 4.50% on 6 February 2025, while two members preferred to reduce it by 50 bps.
- The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024. On 18 December 2024, the stock of UK government bonds held for monetary policy purposes was £655B.
- CPI inflation was 2.5% in 2024 Q4 as domestic inflationary pressures moderated but remained somewhat elevated while some indicators eased more slowly than expected. Higher global energy costs and regulated price changes are expected to push up headline CPI inflation to 3.7% in 2025 Q3, even as underlying domestic inflationary pressures are expected to wane further.
- While CPI inflation is expected to fall back to around the 2% target thereafter, the Committee will pay close attention to any consequent signs of more lasting inflationary pressures.
- GDP growth has been weaker than expected at the time of the November Monetary Policy Report, and indicators of business and consumer confidence have declined – GDP growth is expected to pick up from the middle of this year.
- The labour market has continued to ease and is judged to be broadly in balance. Productivity growth has been weaker than previously estimated, and the Committee judges that growth in the supply capacity of the economy has weakened.
- Based on the Committee’s evolving view of the medium-term outlook for inflation, a gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate and it will continue to monitor closely the risks of inflation persistence and what the evolving evidence may reveal about the balance between aggregate supply and demand in the economy.
- Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further and the Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.
- The next meeting is on 8 May 2025.
Next 24 Hours Bias
Weak Bearish
The Canadian Dollar (CAD)
Key news events today
Core Retail Sales m/m (12:30 pm GMT)
Retail Sales m/m (12:30 pm GMT)
What can we expect from CAD today?
Today, the Canadian dollar (CAD) is expected to experience volatility due to the release of Core Retail Sales m/m and Retail Sales m/m data at 12:30 pm GMT. If both figures exceed expectations, CAD may strengthen against major currencies. Conversely, disappointing data could lead to downward pressure on CAD. USD/CAD, currently trading near 1.4316, will be closely watched around key levels: support at 1.4235 and resistance at 1.4399.
Central Bank Notes:
- The Bank of Canada reduced its target for the overnight rate by 25 basis points bringing it down to 2.75% on 12 March; this marked the seventh consecutive meeting where rates were reduced.
- The bank announced its plan to complete the normalization of its balance sheet, ending quantitative tightening, and will restart asset purchases in early March, beginning gradually so that its balance sheet stabilizes and then grows modestly, in line with growth in the economy.
- The Governing Council noted that the economy grew more than expected in the fourth quarter of last year, spurred by past rate cuts but growth is now expected to slow at the turn of the year due to increasing trade conflict with the United States.
- Employment growth strengthened in November through January and the unemployment rate declined to 6.6%. In February, job growth stalled. While past interest rate cuts have boosted demand for labour in recent months, there are warning signs that heightened trade tensions could disrupt the recovery in the jobs market. Meanwhile, wage growth has shown signs of moderation.
- Inflation remains close to the 2% target. The temporary suspension of the GST/HST lowered some consumer prices, but January’s CPI was slightly firmer than expected at 1.9%. Inflation is expected to increase to about 2½% in March with the end of the tax break. The Bank’s preferred measures of core inflation remain above 2%, mainly because of the persistence of shelter price inflation. Short-term inflation expectations have risen in light of fears about the impact of tariffs on prices.
- While economic growth has come in stronger than expected, the pervasive uncertainty created by continuously changing U.S. tariff threats is restraining consumers’ spending intentions and businesses’ plans to hire and invest.
- While monetary policy cannot offset the impacts of a trade war, the Governing Council will carefully assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs.
- The Council will also be closely monitoring inflation expectations and is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
- The next meeting is on 16 April 2025.
Next 24 Hours Bias
Weak Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
With no major economic events scheduled, WTI crude oil is expected to trade within a technical range, influenced by recent market sentiment and ongoing supply-demand dynamics. The commodity is currently trading near $68.50 per barrel.
Key Levels on the H4 Timeframe:
Support at $65.72, where buyers may step in to prevent further decline.
Resistance at $70.37, a key barrier that, if breached, could push WTI toward $71.37.
Next 24 Hours Bias
Weak Bullish
