What You Need To Know

The U.S. CPI data declined to 6.5% in yearly basis in December from 7.1% in November which is in line with the market expectation that the consumer price growth in the U.S. has seemed to peak. The slowest inflation rate in a year is convincing that the Fed may downshift to a smaller rate hike although it is still far away from the Fed’s 2% targeted inflation rate. The dollar index plunged by nearly 1% and traded below 103 for the first time in 7 months. In addition, BTC has surged more than 11% this week as the economic outlook became more optimistic and boosted investors’ risk appetite. 

Look Out For

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

25 bps (93.2%) VS 50 bps (6.8%) 

Market Overview

Economic Calendar

Market Movements

DXY

The US Dollar extends its bearish momentum significantly following the headline rate of inflation in the United States dipping to its lowest level since late 2021 in December, sparking hopes that the Federal Reserve will soon slow down its aggressive rate hikes decisions. According to the US Bureau of Labor Statistics, the Consumer Price Index fell by 0.1% from November, prompting the annual change to 6.50% from the previous reading of 7.1%, aligned with the market consensus. According to CME FedWatch Tool, the probability of a 25-basis point rate hike by the Fed in February skyrocketed to 91% after the data, from the previous reading of 77%.

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 34, suggesting the index might extend its losses as the RSI stays below the midline.

Resistance level: 105.20, 108.35

Support level: 101.30, 99.05

XAU/USD

Gold prices breached the psychological level of $1900 per troy ounce for the first time in eight months after the US Consumer Price Index eased as economist forecast in December. The US Dollar continues to experience aggressive selling pressure as speculations of a Fed pivot towards a hawkish stance faded, underpinning the dollar-denominated gold.

Gold prices are trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 72, suggesting the commodity is entering the overbought territory.

Resistance level: 1915.00, 1960.00

Support level: 1870.00, 1810.00

EUR/USD

The U.S. CPI report came in line with the market consensus and it is convinced that the consumer prices growth rate has peaked in the U.S. The CPI declined to 6.5% in yearly basis in December from 7.1% in November, which is the lowest reading in a year. The anticipation for the Fed to be more dovish in the upcoming monetary policy pushed the dollar index lower and is traded below 103 lowest since last June. The Euro has taken advantage of a weaker dollar and relatively Hawkish ECB statements earlier to advance to its highest since last April. The Euro CPI data will be released next week, if the reading is hotter than forecasted then it is expected the pair to continue its bullish trend. 

The Euro has gained and is trading at its highest since last April after the U.S. CPI data was released. The indicators show a promising indication with a bullish bias for the pair. The RSI has surged into the overbought zone, suggesting that the buying power is strong. The MACD flows upward steadily depicting the bullish momentum is still intact. 

Resistance level: 1.0988, 1.1150

Support level: 1.0743 1.0495

BTC/USD

BTC pushed to its highest and traded above 19000 for the first time since the collapse of the FTX last November. The U.S. CPI data aligned with the market consensus which led to a brighter outlook for investors. A cooler inflation data and investors are hoping for a soft landing from the Fed; a dovish approach from the Fed is favouring the riskier asset, including the cryptocurrency market. The risk appetite for investors has increased, and the cryptocurrency market’s trading volume has been increasing over the week. BTC has surged more than 11% this week after breaking its psychological resistance level at 17000. 

For technical discussion, BTC touched the 19000 level for the first time since the collapse of FTX suggests BTC is riding on strong bullish momentum. The RSI has constantly been surging recently suggesting a strong buying power for BTC. There is also a bullish bias indication shown from MACD as both MACD and signal lines have been moving up this week. 

Resistance level: 19630, 20723

Support level: 18465, 17746

DJ30

The Dow edged higher by 0.64% to 34,189 points on Thursday as CPI data in December bolstered expectations of less aggressive interest rate hikes from the Federal Reserve. The U.S. CPI data fell for the first time since 2020, giving some hope that inflation was now on a sustained downward trend. It is a positive sign and will benefit the stock market. Investors can keep an eye on the fourth-quarter earnings from the U.S. big bank, which will be released on Friday. While the U.S. big banks are predicting to report lower fourth-quarter profits as lenders stockpile funds to prepare for an economic slowdown. 

As we can see, the index is trying to stand firm above the resistance level at 34110 to spike further. MACD is trading above the zero line, indicating bullish momentum ahead. At the same time, RSI is trading at 64, suggesting bullish momentum ahead.

Resistance level: 35320，36811

Support level: 34110，32619

GBP/USD 

The pound gained 0.53% to $1.2204 against the dollar on Thursday as U.S. CPI data is cooling down, prompting bets that the Federal Reserve will be less aggressive on the rate hikes path. The U.S. CPI data reassured the Fed policymakers that price pressures were easing, increasing the possibility of a slowdown in interest rate hikes, but they signalled that the central bank’s target rate was still likely to rise above 5%. Following the CPI report, the weakest dollar dropped as much as 1%, and the pound went up. Investors are advised to keep an eye on the upcoming UK GDP data, which will be released later today. It’s crucial data to determine the following movement of the pound to break its resistance level at $1.2302.

As we can see, the pair still hovers within the range in the short term. The MACD line remains above zero line, indicating a bullish momentum ahead. While RSI is trading at 58, indicating the pair remains in bullish momentum. Investors can wait for the UK GDP data for further order actions. 

Resistance level: 1.2302, 1.2662

Support level: 1.1784, 1.1458

USDJPY

Rising expectations toward policy-shifting from the Bank of Japan continued to spark positive prospects for the Japanese Yen. According to Reuters, economists expect the Bank of Japan (BoJ) will likely increase its inflation forecasts next week and review the side effects of its quantitative easing program during the next week’s policy meetings. Meanwhile, they may also take additional steps to correct distortions in the yield curve. Core Consumer Prices Index, a leading indicator of the nationwide inflation rate, rose faster than expected by 4.0% in December from a year earlier, exceeding the central bank’s 2% goal for a seventh straight month.

USDJPY is trading lower following the prior breakout below the previous support level. MACD has illustrated diminishing bullish momentum, while RSI is at 33, suggesting the pair might trade lower as the RSI stays below the midline.

Resistance level: 131.30, 138.25

Support level: 126.40, 121.30

CL OIL

Oil prices surged by another $1 a barrel yesterday, buoyed by easing reading of US Consumer Prices in December and optimism over China’s demand outlook. The US Consumer Price Index declined by 0.10%, indicating that inflation is now downward while diminishing the odds of more aggressive restrictive monetary policy from the global central banks. Meanwhile, the US Dollar slumped to a 9-month low. A weak US Dollar can insinuate demand for oil as dollar-denominated commodities become cheaper on a relative basis.

Crude oil prices are trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 63, suggesting the commodity is entering overbought territory.  

Resistance level: 81.55, 86.15

Support level: 77.10, 73.25