31/01/2023 Daily Reports
- EUR/USD has been sent onto the backfoot as US stocks slide to fresh session lows led by the tech-focused Nasdaq which is down by more than 1% on Monday. At the time of writing, EUR/USD is losing around 0.2% and dropped from a high of 1.0913 to a low of 1.0850 recently printed.
- It’s a big week ahead and the markets are squaring up before major events such as the Federal Reserve, European Central Bank and the US nonfarm, Payrolls as the showdown and grand finale.
- Firstly, the Federal Reserve has been priced in by the markets for a 25 basis point hike but they are also factoring in a benchmark rate to peak at 4.93% in June, up from 4.33% now. there are also calls for the central bank to cut it to 4.52% by December. However, some analysts are of the mind that the market is wrong considering how tight the labour market is. Some Fed officials have been pushing back against market calls for a pivot and said that they will need to keep rates in restrictive territory for a period of time in order to bring down inflation.
- The EUR/USD pair is trading near the 1.0850, down for the day with bullish stance in daily chart. The pair still stabilized above 20 and 50 SMA, indicates bullish strength. Meanwhile, the 20 SMA continued accelerating north and developing far above longer ones, suggests bulls not exhausted yet. On upside, the immediate resistance is 1.0930, break above this level will extend the advance to 1.1000.
- Technical readings in the daily chart support the bullish stance. The RSI indicator is above 61. The Momentum indicator stabilizes in positive territory, indicating bullish potentials. On downside, the immediate support is 1.0830 and below this level will open the gate to 1.0760.
- GBP/USD losses ground in the New York session, ahead of a busy week in the global economic docket, with major central banks hosting monetary policy decisions. At the time of writing, the GBP/USD is trading at 1.2350, below its opening price by 0.37%.
- Traders now seem to have moved to the sidelines ahead of this week’s central bank event risks, which, in turn, fails to provide any meaningful impetus to the GB/USD pair. The Federal Reserve is scheduled to announce its decision at the end of a two-day policy meeting on Wednesday. This will be followed by the latest monetary policy update by the BoE on Thursday and will help determine the next leg of a directional move for the major.
- In the meantime, speculations that elevated consumer inflation will force the BoE to continue lifting rates offer some support to the British Pound. This, along with the underlying bearish sentiment surrounding the US Dollar, acts as a tailwind for the GBP/USD pair. In fact, the USD Index, which tracks the Greenback against a basket of currencies, languishes near a nine-month low amid bets for smaller rate hikes by the Fed.
- The GBP/USD offers bullish stance in daily chart. Cable stabilizes above 20 and 50 SMA, indicating bullish strength in short term. Meanwhile, the 20 and 50 SMA continues accelerating north and developing above 200 SMA, suggests bulls not exhausted yet. On upside, The immediate resistance is 1.2450 with a break above it exposing to 1.2580.
- Technical readings in the daily chart support the bullish stances. RSI indicator stabilizes around 57, while the Momentum indicator stabilizes above the midline, suggesting upward potentials. On downside, the immediate support is 1.2260, unable to defend this level will resume the decline to 1.2150.
- Gold price trades mostly sideways due to investors preparing for the US FOMC meeting, which will begin on Tuesday. Most analysts estimate the US Federal Reserve (Fed) would increase rates by 25 bps, though they will be looking for cues about future meetings. Therefore, the XAU/USD exchanges hands at $1,922.50 a troy ounce at the time of writing.
- Wall Street opened mixed ahead of an important week for the economy of the US. Last week’s data, led by the Advanced GDP release for Q4, stood at 2.9%, above estimates of 2.6% QoQ, portraying a strong economy. Nevertheless, it decelerated compared to Q3’s 3.2%, further confirmed by data from the US Department of Commerce. That said, financial analysts have priced in a 25 bps rate increase to the US Federal Funds rate.
- Another reason that justifies lower-size moves is inflation. The Fed’s preferred inflation gauge, the US Core PCE, came at 4.4% YoY, aligned with estimates but lower than November’s 4.7%. Inflation has fallen for four straight months, supporting some Fed officials expressing the need to lower the pace of rate hikes but emphasizing that no cuts are foreseen for 2023.
- Gold price stabilized around 1922.5, down for the day and bullish in the daily chart. The gold price still stabilized above 20 and 50 SMA, suggesting bullish strength in short term. Meanwhile, the 20 and 50 SMA continued accelerating north and developing above 200 SMA, indicating bulls not exhausted yet. On upside, the immediate resistance is 1950, break above this level will open the gate for more advance to 1982 area.
- From a technical perspective, the RSI indicator holds above the mid-line and stabilizes around 63, still on a bullish strength. The Momentum indicator continues developing in positive territory, suggests more upside potentials. On downside, the immediate support is 1911, below this area may resume the decline to 1895.
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- USD/JPY erases last Friday’s losses and reaches a new session high at 130.56, though slightly beneath the 20-day SMA, used as a barometer for short-term bias, which remains above the exchange rate. Therefore, the USD/JPY remains bearish despite trading at 130.45, above its opening price by 0.50%.
- Earlier in the day, a panel of academics and business executives urged the BoJ to make its 2% inflation target a long-term goal. The proposal reportedly also included the need to have interest rates rise more in line with economic fundamentals and normalize Japan’s bond market function. BOJ Gov Kuroda stated that its biggest responsibility was price stability and reiterated it is possible to achieve 2% inflation with wage growth and the current easy policy. USD/JPY declined to 129.19 but ended the day at around 130.50 amid broad US Dollar demand.
- A goodish pickup in the US Treasury bond yields widens the US-Japan rate differential, which, in turn, is seen weighing on the JPY and lending support to the USD/JPY pair. That said, a weaker risk tone, along with speculation that high inflation may invite a more hawkish stance from the Bank of Japan later this year, limit losses for the JPY. Apart from this, the underlying bearish sentiment surrounding the US Dollar keeps a lid on any meaningful upside for the major.
- The USD/JPY pair stabilized around 130.45, up for the day and bearish in the daily chart. The price maintains the downward slope and develops below all main SMAs, suggests bearish strength in short term. Meanwhile, 20 SMA continued accelerating south and developing below longer ones, indicating bears not exhausted. On upside, overcome 131.10 may encourage bulls to challenge 131.60, break above that level will open the gate to 133.00.
- Technical indicators still suggest the bearish strength. RSI fell to 47, while the Momentum indicator stabilize in negative territory, suggests downward potentials. On downside, the immediate support is 129.00, break below this level will open the gate to 128.00 area.
- DJI under the sell pressure in NY session, dropped from intraday high 34123 to low 33760. It recovered modestly in the last hour and ended Monday around 33830, indicates bearish sign in the hourly chart. Right now market is standing below 20 and 50 SMAs, suggests bearish strength. Meanwhile, 20 SMA continued accelerating south and developing below 50 SMA, suggests bears not exhausted yet. On upside, overcome 34250 may encourage bulls to challenge 34500, break above that level will open the gate to 34680.
- Technical indicators also suggest the bearish movement, developing below the mid-line. RSI stabilized around 42, while the Momentum indicator hovering well below the mid-line, suggests downward potentials. On downside, the immediately support is 33700, break below this level will open the gate for more decline to 33350 area.
- The Brent under the sell pressure on Monday, dropped from intraday high 87.38 area to low 84.63. It hold near the bottom and ended Monday around 84.92. The price still stabilized below 20 and 50 SMA, suggests bearish strength in the hourly chart. Meanwhile, the 20 SMA continued accelerating south and developing below longer ones, indicates bears not exhausted yet. On upside, overcome 87.00 may encourage bulls to challenge 89.20, break above that level will open the gate to 90.50.
- Technical indicators also suggest bearish movement, hovering below the midline. RSI drops to 37, while the Momentum indicator stabilizes in negative territory, suggests downward potentials. On downside, the immediately support is 83.70, break below this level will open the gate for more decline to 82.00 area.
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