What You Need to Know

Over the past week, investors speculate that the BoJ may be widening its YCC range as speculative bond sellers have pushed the yield above its YCC’s ceiling. The Japanese Yen has been strong against other major currencies ahead of the BoJ interest rate decision in the past week but lost its momentum after the decision was released. The yen plunged after the BoJ announced the ultra-low interest rates, including its 0.5% cap for 10-year bond yield unchanged. On the other side, ECB officials hint at considering a slower pace of rate hike as the inflation rate in the region is back to a single digit. Elsewhere, Oil prices push higher amid optimism over China’s economic growth; the total open interest for oil futures contracts has risen to its highest since last June.

Look Out For

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

25 bps (93.7%) VS 50 bps (6.3%) 

Market Overview

Economic Calendar

Market Movements

DXY

The Dollar Index rebounded during the early Asian financial session as investors dip-buying on the US Dollar following the Bank of Japan’s announcement to maintain their aggressive quantitative easing program. Meanwhile, investors will be scrutinising for fresh hints about the Fed’s interest rate policy plans from a series of Monetary Policy Committee speaking throughout the week. After announcing four consecutive 75 basis point hikes, the Fed is expected to slow the pace to 50 basis points at its last meeting in December.  

The Dollar Index is trading lower following the prior breakout below the previous support level. MACD has illustrated increasing bearish momentum, while RSI is at 36, suggesting the index might extend its losses as the RSI stays below the midline. 

Resistance level: 105.20, 108.35

Support level: 101.30, 99.50

XAU/USD

The gold market traded flat yesterday, hovering around eight-month highs as investors still await more cues from a string of economic data due this week. Investors will continue to scrutinise the key readings on inflation from Euro and UK zone, US retail sales and industrial production data to gauge whether the world’s largest economies are facing a potential recession due to restrictive monetary policy.

Gold prices are trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 70, suggesting the commodity is entering the overbought territory. 

Resistance level: 1920.00, 1980.00

Support level: 1870.00, 1820.00

EUR/USD

The pair was trading at ease and hovering around its then resistance level and current support level at 1.0761. ECB policymakers hinted at a more dovish approach for upcoming monetary policy while a 50 bps hike in February remained likely and a higher chance of a 25 bps increment in March. This will happen if the inflation rate in the Eurozone is easing; investors may gauge the Eurozone CPI data, which will be released later today. Besides, the U.S. PPI index is set to be released today as well; a more relaxed reading will firm the belief that the Fed will stick to its soft landing approach in monetary policy. 

The indicators have shown a relatively pessimistic sign for the pair. The RSI has fallen to the 46-level as of writing, giving a neutral signal and implying that the buying momentum has vanished. The MACD has also dropped from above and is approaching the zero line, depicting the bullish momentum vanishing. 

Resistance level: 1.0988, 1.1150

Support level: 1.0743 1.0495

BTC/USD

BTC prices have been steadily held above 21000 despite it is currently consolidating after surging for some 26% since last week. The rising cryptocurrency market capitalization to hitting the $1 trillion mark implies that the investors’ confidence in the market is re-installed. The Crypto fear and greed index has moved from a fear level last week to a neutral level this week has also boosted investors’ confidence in this asset class. In addition, the U.S. PPI index which will be released later today may have spurred BTC prices if the reading is relatively relaxed. 

After gaining some 26% over the week, BTC is consolidating but is trading in an uptrend channel. The RSI has fallen but remained in the overbought zone suggesting that the buying power is resilient. The MACD depicts a slowdown in bullish momentum as both the MACD and the Signal lines are moving downward. 

Resistance level:21767, 22529

Support level: 20723, 19630

DOW JONES

The Dow slumped yesterday as a pessimistic earnings report from Goldman Sachs continued to spark a spillover effect toward the equity market. Goldman Sachs Group Inc dipped by 6.44% yesterday following the bank releasing its significant drop in quarterly profit, leading to the biggest drag on the Dow.  The bank’s net income fell by 69% to $1.2 billion, as the rising recession risks as well as inflation uncertainty affect the corporate profit margins. 

The Dow is trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 57, suggesting the index might extend its losses toward support level. 

Resistance level: 34395.00, 35320.00

Support level: 32620.00, 31165.00

GBP/USD 

The pound went up 0.60% to $1.2258 on Wednesday, supported by upbeat UK job data. The UK job data showed a tight labour market and accelerating pay growth, adding to the Bank of England’s inflation worries. Therefore, markets hope for a rate raise in the coming monetary policy decision. Investors are suggested to focus on the UK CPI data on Wednesday as it is expected to be the next catalyst for the pound’s value.   

As we can see, the pound remains strong on upbeat economic data. MACD has illustrated a bullish momentum ahead. At the same time, RSI is trading at 58, which indicates a bullish momentum ahead. 

Resistance level: 1.2343, 1.2662

Support level: 1.1936, 1.1649

USDJPY

The Japanese Yen slumped significantly following the Bank of Japan releasing their monetary policy report. The central bank claimed they would maintain the 10-year Japanese Government bond yields to fluctuate around plus and -0.5 percentage points from the target level. Meanwhile, the bank vowed to continue with a large-scale bond purchasing program and conduct fixed-rate purchasing operations. In addition, the bank will continue with its quantitative monetary easing program with yield curve control, with the target goal of achieving a 2% inflation rate.

USDJPY is trading higher while currently testing the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 45, suggesting the pair will extend its gains after it successfully breakout. 

Resistance level: 131.60, 135.20

Support level: 127.15, 123.70

CL OIL

Oil price rises as energy demand in China improves this year as China’s GDP has provided a positive catalyst to the oil price, which increased by 2.9% in Q4, higher than the expectation of 1.8%. Giving confidence to the markets that Chinese demand overshadowed its risk-off sentiment. Besides, data shows China’s oil refinery output in 2022 dropped by 3.4% from a year earlier for its first annual decline since 2001, though daily December oil throughput rose to the second-highest level of 2022. A weakening dollar makes dollar-denominated oil less expensive for other currency holders.

As we can see, the overall trend remains strong, and the prices keep testing their resistance of $81.00. MACD is trading above the zero line, indicating bullish momentum. While RSI is trading at 64, suggesting bullish momentum ahead. 

Resistance level: 81.00, 85.16

Support level: 76.97, 73.52