03.03.202612:10 Analisis Forex & Kajian: Markets continue to react nervously to the Middle East crisis (there is a possibility of further declines in the EUR/USD and GBP/USD pairs)

The war in the Middle East continues and, apparently, will only intensify for some time, which will undoubtedly be an important supporting factor, primarily for oil prices.

Thus, the war unleashed by the United States and Israel against Iran continues. Its escalation and intensification are being observed, which is a powerful factor influencing financial markets and may even affect the Federal Reserve's interest rate decision, as American media have been actively discussing.

As for the geopolitical Middle Eastern factor, for now we will move it to the background and focus on the overall market picture. Undoubtedly, market participants cannot ignore the conflict. The risk of the crisis expanding not only regionally but also militarily is already having a negative impact on stock markets and supporting the U.S. dollar. But this is not the only main reason; there is another factor pushing the dollar higher. This is the decline in expectations that the Federal Reserve will resume cutting interest rates in September rather than in June of this year, as previously assumed. The main reason for this is considered to be the outbreak of the conflict between the United States, Israel, and Iran. Business media believe that against this backdrop, the Fed will decide not to rock the boat by changing interest rates.

As for my opinion on this matter, I believe that if the official U.S. labor market figures to be published this Friday once again turn out to be extremely weak, and the subsequent inflation report also fails to show a decline, then the regulator will face a truly serious dilemma—whether or not to lower interest rates in late spring or early summer.

I believe that the central bank will not be able to dismiss the possibility of cutting rates and thereby helping the national economy amid the severe economic crisis currently being experienced by the United States. In such a scenario, the strengthening of the dollar will cease, and we can expect a resumption of its decline toward recent local lows.

What can be expected in the markets today?

Assessing the current factors influencing the markets, I believe that oil prices will continue rising toward the global target level of $100 per barrel. Gold will likely consolidate around current levels. Cryptocurrencies will continue to face pressure and decline, while the U.S. dollar will see limited gains.

Daily forecast:

EUR/USD

The pair has fallen below the 1.1640 level and is likely to continue declining toward 1.1570 and then to 1.1450. The level of 1.1612 may serve as a point for selling.

GBP/USD

The pair has fallen below the 1.3340 level and is likely to continue its decline toward 1.3175. The level of 1.3291 may serve as a point for selling.