What You Need to Know

Oil prices fend off the worry over the relatively pessimistic U.S. economic data released a day earlier and gained about 2% last night. Investors are still optimistic over China’s economic growth this year, and the drop in U.S. crude oil inventories compared to the previous month spurred oil prices. Although Fed’s officials reiterated the need for a higher interest rate to curb the inflation rate; these Hawkish comments from the Fed do not stimulate the dollar to trade higher. On the other hand, gold prices rose to its highest trading above the 1930 level for the first time since last April; a dovish monetary policy and growing recession risk may be the catalyst for the gold price to advance. 

Look Out For

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

25 bps (96.4%) VS 50 bps (3.6%)  

Market Overview

Economic Calendar

Market Movements

DXY

The Dollar Index, which trades its value against a basket of six major currencies, hovered around a crucial support level following the United States releasing its mixed reading of economic data. On a positive note, the Department of Labor reported that the US Initial Jobless Claims unexpectedly fell last week, indicating another month of solid job growth, continued labour market tightness, and even the acceleration of layoffs in the technology industry. Nonetheless, the gains experienced by the US Dollar were capped by pessimistic housing data. According to the Census Bureau, US Buildings Permits came in at 1.330M, missing the market forecast of 1.370M.

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, 99.45

XAU/USD

Gold prices renewed their bullish momentum from a two-day losing streak as heightening uncertainty over a debt crisis and the potential recession continues to stoke a shift in sentiment toward safe-haven commodities. According to Reuters, the US government debt hit its $31.4 trillion limit yesterday as the Republican-controlled House of Representatives and President Joe Biden failed to make any consensus on lifting the debt ceiling, which could prompt a fiscal crisis in a few months. The prospect of disagreement could prompt a downgrade of the US credit rating. Schumer, the Senate’s top Democrat, warned, “Political brinkmanship with the debt limit would be a massive hit to local economies; Millions of people would be suffering from an economic crisis.”

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 73, suggesting the commodity is entering overbought territory.  

Resistance level: 1980.00, 2050.00

Support level: 1920.00, 1870.00

EUR/USD

Christine Lagarde, the Chair of the ECB gave a speech yesterday at the World Economic Forum (WEF) and addressed several keynotes for the Euro economy. She addressed that the economic condition is better than the market feared and the labour market is vibrant. She also reiterated that the ECB is determined to bring down the inflation rate to 2% and will stay the course with the rate hike. On the other side, several Hawkish statements released from the Fed official stressing that higher interest rate is needed to curb the inflation in the U.S. The pair may be moving sideways until central banks from either side announce its following interest rate policy. 

The indicators show a relatively neutral signal for the pair’s future movement. The RSI has been pondering near the range at 50-level after it dropped from the overbought zone. The MACD has also declined to near the zero line and stayed flat. Both indicators suggest that the pair may be trading sideways until further catalysts stimulate the pair.

Resistance level: 1.0988, 1.1150

Support level: 1.0743 1.0495

BTC/USD

After the BTC price technical correction, BTC has once again traded above 21000. The initial jobless claim in the U.S. beat the forecasted number and is lower than the previous month reading suggesting that the economic condition in the U.S. is optimistic. On the other hand, the Euro CPI index has dropped to a single digit which also eases the sentiment in the Euro market. Adding that China has opened up its economy and fueled the region’s economic growth, these factors may have spurred BTC prices to rise. 

The RSI has rebounded from the 50-level suggesting that the selling pressure has ended. Besides, the MACD has constantly been moving downward from above approaching the zero line indicating that the bullish momentum is diminishing. 

Resistance level:21767, 22529

Support level: 20723, 19630

DOW JONES

The Dow fell yesterday following US benchmark 10-year Treasury yields bouncing from four-month lows. Investors remain concerned that the aggressive monetary stances from central banks could push the global economy into a slowdown. Boston Fed President Susan Collins claimed that the Fed would increase its interest rate to above 5% until inflation stabilises. Meanwhile, other Fed officials are also more tilted toward a hawkish stance as the current inflation is still unable to reach the Fed’s 2% target. On the other hand, the US government debt hit its $31.4 trillion borrowing limit as the Republican party and President Joe Biden’s Democrats disagreed on lifting the debt ceiling. Failure to solve the issue could lead to another financial breakdown in the coming months.

The Dow is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish  momentum, while RSI is at 44, suggesting the index might extend its losses toward support level. 

Resistance level: 34390.00, 36810.00

Support level: 31370.00, 28760.00

GBP/USD 

The pound edged up by 0.51% to $1.2389 against the dollar on Thursday as upbeat UK inflation data signal that the Bank of England may have to raise more rates. The recent GDP data showed the British economy is holding up better than feared, adding pressure to the BoE to keep rising rates. However, the overall outlook remains neutral to bullish, keeping an eye on the coming BoE announcement for further trading signals. 

As we can see, the pound remains strong in line with expected economic data. MACD has illustrated the pair staying in bullish momentum in the short term. At the same time, RSI is trading at 69, which indicates a bullish momentum ahead. 

Resistance level:1.2662, 1.3000

Support level: 1.1936, 1.1649

USDJPY

The Japanese Yen surged on speculation that the Bank of Japan may still amend its yield control range, despite the recent hawkish tone from the monetary report. Meanwhile, Japan’s core consumer prices in December surged by 4.0% from a year earlier, doubling the central bank’s 2% goals and reaching a fresh 41-year high, according to the Statistics Bureau. High inflation data continue to assert further inflationary pressures, keeping alive market expectations that the Bank of Japan (BoJ) will soon tighten its monetary policy and allow the interest rates to rise more.

USDJPY is trading lower following the prior retracement from the resistance level as technical correction. MACD has illustrated diminishing bullish momentum, while RSI is at 46, suggesting the pair might trade lower as the RSI stays below the midline. 

Resistance level: 131.60, 135.20

Support level: 127.15, 123.70

CL OIL

Oil prices rose by 3.53% to $81 per barrel on Thursday as investors stay optimistic about China’s oil demand. China consumption has been picking up after the top crude importer abandoned its covid restriction, with signs of increased buying by refiners in the physical market. According to JP Morgan’s analysts, they predict consumption will continue to rise to a new record of 16 million barrels a day. They expect a strong recovery after the end of the Lunar New Year holiday, indicating that oil demand might increase during the Lunar New Year Holiday. 

As we can see, the overall trend remains strong, and the prices keep testing its resistance at $81.00. MACD is trading above the zero line, indicating bullish momentum. While RSI is trading at 61, suggesting bullish momentum ahead. 

Resistance level: 85.16, 93.77

Support level: 76.97, 73.52