The European Central Bank and Bank of England has both implemented 50 bps hikes following a quarter-pointer from the Fed

What You Need To Know

After a quarter-point hike from the Fed, both ECB and BoE raised half a point in interest rate as the market expected. Both the British Pound and Euros plunged as the economic outlook in the region is relatively pessimistic; signs of a slowdown in inflation led the market to gauge that the rate hike may be further easing for both central banks, and worry over economic recession suppressed both currencies as well. Besides, gold prices trading low as risk-on sentiment in Wall Street optimism over the central bank’s dovish tilts in monetary policy and investors sold off safe-haven assets. Meanwhile, the oil prices continue its bearish trend as China’s PMI shows its economic recovery is not happening just yet, and U.S. crude inventories increased significantly signalling a drop in oil demand in the country.

Look Out For

The week’s major US economic focus after the FOMC meeting will be the US jobs report for January on Friday. The Nonfarm Payrolls is expected to indicate that the employers added 185,000 jobs during the month, while the US unemployment rate might come in at 3.6%. Investors are advised to continue monitoring further economic data from the US region to gauge for the US Dollar trend.

Market Overview

Economic Calendar

Market Movements

DXY

The US Dollar rebounded from its nine-month low as the market sentiment is now focusing on another major event of the week. The Nonfarm Payroll, which will be released at 15:30 (GMT+2) on 3rd February 2023, will be the main catalyst for the investors to evaluate the economic performance in the United States. On the other hand, data on Thursday indicated that the number of Americans filing new claims for unemployment benefits (Initial Jobless Claims) unexpectedly declined last week, indicating that the labour market in the United States remained solid despite higher borrowing costs and major layoffs in the tech sectors.

The Dollar Index is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum. RSI is at 62, suggesting the index might trade higher after it successfully breakout as the RSI stays above the midline.

Resistance level: 102.55, 103.45

Support level: 101.80, 100.85

XAU/USD

Gold prices retreated from a nine-month high at $1960 due to profit-taking. The US Dollar rebounded yesterday as investors reassessed the economic outlook after the major central banks announced their monetary policy. The stronger US dollar has put pressure on the dollar-denominated gold on a relative basis. As for now, investors are advised to continue scrutinising the jobs data from the United States for further trading signals.

Gold prices are trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 43, suggesting the commodity might extend its losses toward support level as the RSI stays below the midline.  

Resistance level: 1960.00, 2000.00

Support level: 1905.00, 1870.00

EUR/USD 

The Euro retreated on Thursday due to profit-taking after the European Central Bank (ECB) increased its interest rates by a widely expected 50 basis points. Meanwhile, ECB President Christine Lagarde signalled that the rate hikes will likely persist beyond next month, echoing the message from the Fed Chair Jerome Powell a day earlier. The headline inflation has declined rapidly since peaking at a record 10.60% in October, with the latest Euro area inflation coming in at 8.50% in January 2023.

EUR/USD is trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 60, suggesting the pair might extend its losses as the RSI retreated sharply from the overbought territory.

Resistance level: 1.1000, 1.1315

Support level: 1.0685, 1.0295

BTC/USD

After the Fed raised the interest by a quarter point which is in line with what the market expected and Wall Street turned to risk-on sentiment, proved by the U.S. equities market performance and sold off in safe-haven assets like gold. The sentiment also spread to the cryptocurrency market and sent Bitcoin to hit $24000 but the bullish momentum did not last long. The momentum seems to be exhausted and pulled back to below the 24000 level; perhaps the IMF’s warning over the pessimistic economic outlook in the Euro region dragging BTC prices lower. The U.S. Non-farm Payroll is set to be released today; a better-than-expected reading from the data may fend off the recession worry but may spur the USD higher which may pressure BTC prices as a result. 

BTC couldn’t hold its bullish momentum after it hit its recent high, trading over $24000 and pulled back to $23456 as of writing. The RSI has dropped to near 50 while the MACD turned flat with both indicators suggesting that the bullish momentum is diminishing at the moment. 

Resistance level: 23765.00, 24878.00

Support level: 22529.00, 21767.00

DOW JONES

The Dow Jones index slipped 0.11% to 34,053 points on Thursday, mainly dragged down by most big healthcare stocks, whereby UnitedHealth Group (UNH.N) shares fell 5.3% after the U.S. government proposed Medicare Advantage reimbursement rates below market estimates. Besides, Merck (MRK.M) shares fell 3.3% after the drugmaker forecasted its earnings below Wall Street estimates and dragged on the blue-chip index. At the same time, markets were still digesting the Fed’s policy decision on Wednesday and comments from Powell. The comments are likely to encourage investors to change their risk appetite. Investors could expect the U.S. shares markets to fluctuate in the short term.

MACD has illustrated neutral-bullish momentum ahead. While RSI is trading at 56, it indicates a neutral-bullish momentum ahead. 

Resistance level: 34388, 35639

Support level: 32731, 30945

GBP/USD 

Pound Sterling dipped after the Bank of England (BoE) monetary decisions, with investors reassessing the economic outlook in the United Kingdom. The Bank of England (BoE) raised its benchmark interest rate by 50 basis points on Thursday, signalling that the interest rates were nearing the peak as the labour market and inflation began to ease. The Monetary Policy Committee voted 7-2 in favour of a second consecutive 50 basis point rate hike, increasing its benchmark interest rates to 4%. Meanwhile, the central bank projected that the annual CPI inflation in the United Kingdom would fall to around 4% toward the end of this year. In addition, the Bank of England (BoE) also forecasted that the UK economy would likely contract slightly throughout 2023, as rising costs for raw materials and market interest rates restrict consumer spending. 

GBP/USD is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 47, suggesting the pair might extend its losses as the RSI retreated sharply from the overbought territory. 

Resistance level: 1.2420, 1.2835

Support level: 1.2000, 1.1485

USDJPY

The yen rose 0.3% to 128.52 and traded near a nine-month high to the dollar, even though recent data pointed to more pressure on the Japanese economy. The Fed rate hikes decision as expected, and it said it would likely keep raising interest rates to curb inflation. Investors could expect the pair to fall further as the overall trend remains weak. At the same time, markets are awaiting January’s nonfarm payrolls report, due on Friday. The yen stands to benefit from a pivot by the Fed, given that it will widen the gap between risky and low-risk debt yields. 

The pair’s overall momentum is still weak, trading near a nine-month low. MACD has illustrated diminishing bullish momentum, while RSI is at 37, suggesting the pair might extend its losses toward the support level as the RSI stays below the midline. Investors are suggest to focus on the next support level of 126.73.

Resistance level: 130.70, 134.45

Support level: 126.75, 123.90

CL OIL

Oil prices extended their losses as the US Dollar rebounded from the previous day’s low due to technical correction. Meanwhile, market participants are still digesting the inventory reports. With all things looking equal, the sixth straight weekly increment in US oil dragged down this black commodity’s appeal. According to the Energy Information Administration (EIA), the total crude build had increased to 34.5M barrels over the past six weeks. On the other hand, the rate hikes decisions from several major central banks (Fed, ECB & BoE) and recessions fears continue to act as a headwind for oil prices.

Oil prices are trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 38, suggesting the commodity might trade higher as technical correction since the RSI rebound sharply from the overbought territory.  

Resistance level: 78.10, 79.95

Support level: 76.05, 73.70