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Britain’s better-than-expected quarterly GDP growth didn’t provide enough upward momentum for the…

Britain’s better-than-expected quarterly GDP growth didn’t provide enough upward momentum for the Pound, but the pound ended the week with a solid 0.71% gain

20220117
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Market Focus

The broad U.S. equity market closed the week mixed. The Dow Jones Industrial Average retreated 0.56% to close at 35911.81, the S&P 500 gained 0.8% to close at 4662.85, and the Nasdaq composite gained 0.59% to close at 14893.75. This week marks the beginning of earnings season, as companies release Q4 results from 2021. Goldman Sachs and Bank of America are among the bigger companies that will be releasing earnings results this week, then followed by Netflix and Procter & Gamble. The benchmark U.S. 10-year Treasury yield remains at 1.793%, while the 30-year Treasury yield sits at 2.127%.

On this week’s economic docket, China’s GDP figures, Britain’s CPI and unemployment data, the Eurozone’s CPI data, and the U.S. Initial Jobless claims figures are due for release. The U.S. equity markets will be closed on Monday, due to Martin Luther King Jr. day.

Main Pairs Movement

The Dollar Index rose 0.32% over the course of Friday’s trading. The dollar rose amid weaker than expected retail sales figures. Market participants may have interpreted the weak retail sales figure as a signal indicating a weaker U.S. economic environment, however with imminent rate hikes on the horizon and continuously rising bond yields, the Dollar seems unstoppable.

Cable lost 0.23% over the course of Friday’s trading. Britain’s better-than-expected quarterly GDP growth did not provide enough upward momentum for the Pound, but Cable ended the week with a solid 0.71% gain.

The Euro-Dollar pair retreated 0.35% over the course of Friday’s trading. The ECB’s president failed to provide any fuel for the recovery of the Euro.

Gold also faltered against the Dollar on Friday. The precious metal lost 0.27% against the Dollar.

Technical Analysis

GBPUSD (Daily Chart)

On Friday, a pack of solid UK macroeconomic data failed to underpin the British pound, which struggled to cling to the 1.3700 figure, falling during the New York session. At the time of writing, GBP/USD is trading at 1.3675. It is worth noting that the US Dollar Index reclaimed the 95.00 level, up some 0.25%, and is sitting at 95.05, underpinned by the rise of the US 10-year T-bond yield, which is up 1.75%, a gain of three basis points. Moreover, the dismal sentiment in the equity markets revived the demand for safe-haven assets, which is also in favour of the greenback.

On the technical front, after being rejected by the persistent 200 DMA resistance, Cable continued falling during Friday’s trading, heading to the next support line at 1.3600. The RSI for the pair reads 67.44, and has dropped out from the overbought territory. However, the pair might not necessarily bounce back as the dollar starts to price in the effect of the rate hike announcements by the Fed.

Resistance: 1.3737 (200 DMA), 1.3830, 1.3900

Support: 1.3600, 1.3500, 1.3400

EURUSD (Daily Chart)

The Euro selling has continued into the North American session, though the bearish intra-day momentum has eased for the moment, with the pair finding support above the psychologically important 1.1400 figure. At current levels around the 1.1415 mark, the pair is trading lower by about 0.4% and is over 0.6% lower versus its month highs in the 1.1480s. Apparently, the downbeat US data released on Friday didn’t scare of the dollar bulls, as they bet the Fed will focus more on the elevating inflation and the tight labour market, rather than the monthly Retails Sales or a non-deadly Omicron spread.

On the technical front, euro bears tested the 1.1400 support once, but was rejected. The pair is lingering around 1.1415 at the moment, and as the dollar strengthens, the downside risk increases. The RSI for EUR/USD has dropped from the 60s, suggesting the upside traction is diminishing. As previously mentioned, If the pair had managed to cling on to the 1.1400 threshold at the end of the week, then we could expect the pair to reach the next resistance level at 1.620. However, if it fails, the looming Fed’s hawkish monetary policies may push the dollar up, again dragging the Euro pair to the downside.

Resistance: 1.1620, 1.1700

Support: 1.1200, 1.1000, 1.0780

XAUUSD (Daily Chart)

Gold slipped for the second consecutive day amid dismal US economic data revealed on Friday. XAU/USD closed the day at $1,818 a troy ounce. During the New York trading hours, Gold failed to capitalize on negative readings on US Retail Sales and Industrial Production, and disappointing Consumer Sentiment. In the meantime, the US 10-year benchmark yield advanced firmly five basis points after sitting at 1.771%, heading to the weekly highs around 1.80%.

On the technical side, market sentiments toward the precious metal have remained slightly optimistic since Wednesday. However, the revived dollar strength is weighing on gold, making the dollar a better safe-haven asset than gold. The RSI for gold reads 54.75, showing that the demand for gold remains positive. The pair is now lying above its 20, 50 and 200 DMAs.

Resistance: 1830, 1860

Support: 1800, 1785, 1765

20220117
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The weekly jobless claims in the U.S unexpectedly rose by 23,000 and…

The weekly jobless claims in the U.S unexpectedly rose by 23,000 and the PPI rose 0.2%

20220114
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Market Focus

In two economic data releases on Thursday, the PPI rose 0.2%, well below expectations and down from a 1.0% gain in November. In the labour market, weekly jobless claims unexpectedly rose by 23,000, with economists citing the effect of the Omicron variable. The three major indexes ended lower on Thursday, with the Nasdaq leading a 2.5% loss, as investors took profits, especially in tech stocks, after a three-day rally, while several Fed officials talked about inflation and interest rate hikes. At the end of the market, the Dow Jones Industrial Average slipped 0.5% to 36,113.63 points, the S&P 500 index fell 1.4% to 4,659.02 and the Nasdaq Composite Index lost 2.5% to 14806.81. The top performers in the Dow Jones Industrial Average were Boeing, up 2.97%, Caterpillar, up 2.07%, and Walmart, up 1.42%. The worst performers in the session were Microsoft, down 4.23%, Salesforce, down 3.87%, and Apple, down 1.90%.

Rate-sensitive growth stocks such as technology have lagged market indexes. Among the S&P 500 sectors, the biggest losers of the day were technology, down 2.7%, the consumer discretionary index fell 2% and health care fell 1.63%. The best performers in the S&P 500 were Biogen, up 5.03%, Kroger, up 4.96% and American Airlines Group, up 4.54%. The worst performers were ServiceNow, down 9.31%, Lumen Technologies, down 7.67% and Bio-Techne, down 7.16%. On the other hand, in the health care sector, Moderna dipped more than 5%.

Main Pairs Movement

The dollar continued its losses on Thursday, but weakening risk appetite prevented the Greenback from falling further. The dollar’s intraday gains helped correct oversold conditions reached after Wednesday’s sell-off. The dollar index fell 0.2% to 94.791, its lowest since Nov. 10.

Sterling rose 0.11% to $1.372, its highest level since late October, as traders believed the UK economy could withstand a surge in COVID-19 cases and the Bank of England could raise interest rates again as early as next month.

EUR/USD hit 1.1481 and closed near 1.1460. The European economy is adapting to the coronavirus pandemic, ECB Deputy President Luis de Guindos said, and he expects inflation to fall below the ECB’s target in 2023 and 2024.

Gold retreated slightly to settle at around $1,820 an ounce, while crude oil prices were weighed down by weakness in the equities sector, with WTI at $81.70 a barrel and Brent at $84.07 a barrel.

Technical Analysis

GBPUSD (Daily Chart)

Cable surged for yet another day amid the weakness of the US dollar. The pair touched the daily high at 1.3749, and is now trading at around 1.3708 as of writing. It is said that the recent rally of the non-US currencies was due to a squeeze on the market’s excessive long-dollar positioning, as the recent depreciation of the Greenback has seemingly gone against the fundamentals.

On the technical front, the robust 200 DMA resistance forced Cable into a retracement back down just before mid-day on Thursday. The consolidating decline appeared to find support in Wednesday’s close near the 1.3700 level. The RSI for the pair reads 71.56, which is further in the overbought territory, indicating that a near-term correction is seemingly inevitable. Despite the potential headwinds, we believed that there’s still room for the Pound’s upside in the short term as long as the GBP/USD pair closes the week above its 200 DMA, but further catalysts are needed for the mid-to-long term growth of Cable.

Resistance: 1.3738 (200 DMA), 1.3830, 1.3900

Support: 1.3600, 1.3500, 1.3400

EURUSD (Daily Chart)

The EUR/USD pair advanced for the third consecutive day amid the worse-than-anticipated US Initial Jobless Claims and December PPI. ECB Vice President Luis de Guindos said the European economy is getting used to the coronavirus, adding that “perhaps inflation won’t be as transitory as forecast only some months ago.” Although he expects inflation to stay below the ECB’s target in 2023 and 2024, the investors still bet an early rate hike from the ECB when inflation loses control.

On the technical front, the Euro pair went up to around 1.1460 during today’s trading, but the upside momentum seems to be diminishing. The RSI for EUR/USD is still above 60, suggesting that the bulls are still in hope. If the pair managed to cling on the 1.1400 threshold at the end of the week, then we could expect the pair to reach the next resistance level at 1.620; however, if that fails, the Fed’s looking hawkish monetary policies may push the dollar up, again dragging the Euro pair to the downside.

Resistance: 1.1620, 1.1700

Support: 1.1200, 1.1000, 1.0780

XAUUSD (Daily Chart)

XAU/USD has pared back from early European session highs at the $1,828 mark in more recent trading, although it has for the most part, remained support above $1,820. Some traders have been disappointed at gold’s struggles to benefit from this week’s run of US dollar weakness. The winning streak has run out of steam ahead of this year’s $1830 highs.

On the technical side, market sentiments toward the yellow metal remain slightly optimistic. The remaining dollar weakness and the dismal equity markets underpinned the gold’s price at the short-term support of $1,820. The RSI for gold reads 56.80, showing that the demand for gold is still strong. The pair now lies above its 20, 50 and 200 DMAs.

Resistance: 1830, 1860

Support: 1800, 1785, 1765

20220114
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US CPI rose slightly in December above expectations, causing all major indices…

US CPI rose slightly in December above expectations, causing all major indices to rise

20220113
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Market Focus

The consumer price index rose 0.5% in December, slightly above expectations, taking the year-over-year consumer price index increase to 7% through December, in line with expectations and the fastest pace of growth since 1982. A drop in longer-dated U.S. Treasury yields on Wednesday also helped for most stock sectors. A sharp rise in U.S. 10-year yields has weighed on stocks in recent weeks, especially in interest-rate-sensitive growth sectors such as technology. At the end of the market, the Dow Jones Industrial Average rose 0.11% to 36,290.32 points, the S&P 500 index rose 0.28% to 4,726.35 and the Nasdaq Composite Index added 0.23% to 15,188.39 points.

Among the S&P 500 sectors, the biggest gainer on the day was materials, up nearly 1%, consumer discretionary up 0.6% and technology up 0.4%, while healthcare was the only loser. In the tech sector, Tesla rose 3.9%, ahead of Microsoft, Google, the latter rose more than 1%. The healthcare index was weighed down by shares of drugmakers Eli Lilly and Biogen, which fell 2.4% and 6.7%, respectively. On the other hand, the biggest drags on the Dow were Goldman Sachs, down 3% on the day, Morgan Stanley down 2.7% and their smaller rival Jefferies down 9% after missing quarterly earnings estimates.

Main Pairs Movement

The dollar plummeted and fell to a two-month low after the release of U.S. inflation data. December CPI was confirmed as expected at 7% year-on-year growth, while the core reading beat expectations by a whopping 5.5%. The news usually sparks risk aversion, but this time, it had the opposite effect. Because the data failed to provide any new impetus to the Fed’s policy normalization efforts, the dollar index dropped 0.7 % at 94.987, after falling to 94.907, its lowest since Nov. 11.

The Sterling rallied on a weaker dollar and continued to move north, having jumped to the 1.3700 level, its highest level since October.

EUR/USD also gained momentum from a weaker dollar, breaking out of a consolidation zone to hit 1.1400, its highest level since November.

Gold edged higher to settle at around $1,827 per ounce. Crude oil prices also rose, with WTI at $82.60 a barrel and Brent at $84.72 a barrel.

Technical Analysis

GBPUSD (Daily Chart)

Cable extended further north during Wednesday’s trades and is eyeing the next resistance level at 1.3830. The pair consolidated around similar levels in the Asian and European session, and surged aggressively after the US CPI data was released, which is generally in line with the expectations and thus pushed the rate-sensitive currencies like the Sterling to gain value. The pair now trades at around 1.3707, up around 0.44% from today’s open price.

On the technical front, GBP prices are moving further away from the long-term downside trajectory and are heading to their 200 DMA. The RSI indicator has just entered the overbought territory, and the correction pressure is expected to appear at around 1.3700. Cable is now experiencing a stream of short term optimistic buying amid the dollar’s weakness, and this risk-off market mood may last until March when the scheduled US rate hike is in effect.

Resistance: 1.3830, 1.3900

Support: 1.3600, 1.3500, 1.3400

EURUSD (Daily Chart)

After two months’ consolidation, the euro pair finally crossed over the robust 1.1400 resistance as the decent US CPI data lowered the investors’ guard about additional tightening potentials from the Fed. Despite no news from the ECB, market participants seem to bet high inflation and the spillover effect of the Fed’s dynamic will force the ECB to act. This is providing the shared currency with some degree of support by limiting the extent of USD-euro area rates discrepancy.

On the technical, the Euro pair surprisingly managed to break through the persistent downtrend line and the meaningful 1.1400 resistance. We can see that the RSI for EUR/USD has come above 60, indicating an overall bullish sentiment around the market. If the pair successfully closed beyond the 1.1400 threshold at the end of the week, then a fresh upside trend could be confirmed, leading the pair to the next resistance level at 1.620. However, if it fails, the euro will be back to the previous consolidation phase and keep falling in the near future when Fed raise rates.

Resistance: 1.1620, 1.1700

Support: 1.1200, 1.1000, 1.0780

XAUUSD (Daily Chart)

XAU/USD buoyed for the fourth consecutive day as the revealed US inflation is generally as expected, easing the rates hike fears and causing a decline to the US yields. The US 10-year Treasury yield is down almost two basis points, weighing on the greenback. At the time of writing, gold is trading at $1,826 per troy ounce post-New York trading hours.

As to technical, Gold’s price seems to be neutral-bullish biased, but downside risks remain, with the long-term downward sloping resistance still capping its upside outlook. The continuation of the dollar weakness and the cautious market mood has continued pushing the price of gold to its resistance at $1,830. The RSI for gold reads 58.92, showing that there is still room for the gold’s uplift. The pair now lies above its 20, 50 and 200 DMAs.

Resistance: 1830, 1860

Support: 1800, 1785, 1765

20220113
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