U.S. economic data has beaten market estimates with quarterly GDP growth at 2.9%, a drop from 3.2% in the previous reading.

What You Need to Know

U.S. economic data has beaten market estimates with quarterly GDP growth at 2.9%, a drop from 3.2% in the previous reading. The labour market in the U.S. remains hot, with the initial jobless claims dropping to 186k from 192k the last week. The scenario is what the Fed is anticipating: cooling household spending to avoid squeezing the economy. On the other hand, Japan’s inflation has risen above 4%, beating market expectations. Because Japan’s inflation rate has stayed above its targeted inflation of 2% for 8 straight months, there is intense speculation from the markets that the BoJ may shift its current monetary policy. Elsewhere, Wall Street rallied with tech stocks and upbeat U.S. economic data; the sentiment has spread to the Asian market with the Hang Seng index climbing above 22500 for the first time since last June.

Look Out For

Current rate hike bets on 1st February Fed interest rate decision: 

25 bps (99.6%) VS 50 bps (0.4%) 

Market Overview

Economic Calendar

Market Movements

DXY

The dollar index gained 0.26% to 101.818 on Thursday as upbeat U.S. economic data showed the U.S. economy maintained a strong pace of growth. GDP data showed a better-than-expected figure of 2.9% annual rate in the fourth quarter of last year as consumer spending increased, while the GDP index decelerated to 3.5%. Meanwhile, the initial jobless claims data dropped 6,000 to a seasonally adjusted 186,000 for the week ended Jan. 21. Moreover, markets widely expect the Federal Reserve to increase rates by 25 basis points next Wednesday and maintain its hawkish stance for longer. 

Along with a narrow range of trading conditions, the dollar finally gained a little after the upbeat economic data was released. MACD illustrates a weak momentum. While RSI is trading at 47, it indicates a neutral-bearish momentum ahead. 

Resistance level: 103.44, 105.69

Support level: 101.18, 97.70

XAU/USD

Gold prices edged lower by 0.87% to $1932 against the strengthened dollar after the strong U.S. data indicated a likely slowdown limited losses in the safe-haven asset. Markets might think that a better-than-expected GDP figure will unlikely bring the U.S. into a bear market. However, the overall sentiment for gold is still positive, with the Fed expected to adopt a more dovish stance for the following rate hike decisions. The scenario would be negative for the dollar if the Fed increase just 25 basis points next Wednesday. Many traders still expect the gold to break the $2,000 level, provided the dollar must continue weakening. 

Gold prices dropped from a new high yesterday. Meanwhile, MACD has illustrated bullish momentum ahead, while RSI is at 51, suggesting the trend remains bullish momentum ahead. Investors suggest looking forward to the next resistance level of $1960.

Resistance level: 1960, 1998

Support level: 1917, 1870

EUR/USD 

U.S. economic data released yesterday favouring the Fed, where consumer demand is slowing and GDP growth is diminishing at a slow pace. This favourable scenario led the market to gauge that the Fed may keep its “soft landing “ approach for its upcoming monetary policy and changed the dollar a little last night. Besides, the chair of the ECB will be giving her speech later today. Any hawkish statement from her potentially inspired the Euro to trade higher against the dollar. 

EUR/USD has been trading sideways after it broke above its then-resistance level at 1.0778. Both indicators depict a bullish momentum loss for the pair where RSI flows closely to the 50 and the MACD stays flat near its zero line. 

Resistance level: 1.1048, 1.1238

Support level: 1.0785, 1.0615

BTC/USD

BTC had a technical retracement after hitting its5 month high at 23730. Yesterday U.S. economic data showed a positive sign for the economy with the GDP reading beating the market expectation, and the initial jobless claims number has dropped as compared to the previous week’s reading. Wall Street had a tech stock-inspired rally last night, suggesting that the risk appetite for the investor in the market has increased. BTC investors may use these factors to gauge its future price movement. 

BTCUSD is trading sideways in a more extensive price range after a surge of some 30% in the last two weeks. Indicators suggest a loss in bullish momentum for BTC where RSI has flowed to 50, and the MACD is dropping toward the zero line. 

Resistance level: 23765, 24878

Support level: 22529, 21767

DOW JONES

The Dow extended its gains as Tesla beat analysts’ expectations and investors digested a better-than-expected reading of fourth-quarter economic output, spurring risk-on sentiment in the global financial market. The Fed will schedule its meeting next week to decide on the next step for the monetary policy, and most investors expect it to increase by another quarter of a basis point, which is a smaller increment than its previous meetings.

The Dow is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 56, suggesting the index might extend its gains as the RSI stays above the midline. 

Resistance level: 34390.00, 35640.00

Support level: 32730.00, 30945.00

GBP/USD 

The pound was about flat on the day against the U.S. dollar, its first weekly loss against the U.S. currency since the week ending Dec 23. But it’s still on pace for its fourth-successive monthly rally against the dollar as investors compare the interest rate path in the U.S. and Britain. Markets believe that the Fed has, at most, half a percentage point more in hikes to go before rates peak shy of 5%. At the same time, the Bank of England has almost a full percentage point to go before UK rates top out at around 4.4% by August. Therefore, the pound dropped little compared to other national currencies on Thursday. 

The pound is crawling back to the previous high at $1.241. MACD is showing an increasing bullish momentum. While RSI is trading at 60, it indicates a bullish momentum ahead. 

Resistance level:1.2662, 1.3196

Support level: 1.2302, 1.1784

USDJPY

The Japanese Yen surged amid the high inflation environment in the Japanese region and continues to prompt speculation of tightening monetary policy. Inflation has been on an upward trend in Japan, which is expected to continue after the release of Tokyo CPI today. According to the Statistics Bureau, Japan’s Tokyo Core Consumer Price Index (CPI) notched from the previous reading of 4.0% to 4.3%, exceeding the market expectations of 4.2%. As the rising energy and food prices have been driving inflation higher, the cost of living is squeezing consumers. Speculators are betting that the Bank of Japan will need to tighten their policy in the future, sparkling market demand on the Japanese Yen.

USD/JPY is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 43, suggesting the pair might trade higher as the RSI rebounded sharply from the oversold territory. 

Resistance level: 131.60, 135.20

Support level: 127.15, 123.70

CL OIL

Oil prices edged higher yesterday, buoyed by expectations of global demand recovery over the backdrop against a string of upbeat economic data from the United States. According to the Bureau of Economic Analysis, the US economy grew faster than market expectations in the fourth quarter, sparking a positive outlook for the economic recovery. On the supply side, US refinery runs have fallen below the seasonal average due to inclement weather and unplanned outages affecting the oil supply. Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, are likely to hold a meeting on 1st February, though the volume for oil prices should remain steady as the group might endorse the current output level. Investors are advised to continue monitoring economic development and the output discussion meeting from OPEC+ to receive further trading signals.

Oil prices are trading higher while currently testing the resistance level. However, MACD has illustrated increasing bullish momentum, while RSI is at 53, suggesting the commodity will extend its gains after it successfully breakout as the RSI stays above the midline. 

Resistance level: 81.55, 86.15

Support level: 77.10, 73.25