What You Need to Know

US PMI data rose 1.6 points to 46.6, and the gauge of input prices climbed for the first time since May but was still below the benchmark of 50. Asian stock markets stumbled in early trade, while U.S. and European equity markets slump as a downbeat earning report from Microsoft. On the other hand, eurozone business activity experienced modest growth in January, and service-sector activity in Germany expanded for the first time since June. A more robust economy will prompt the European Central Bank to increase interest rates to tame inflation aggressively. In addition, Oil prices retreated as API data showed an increase of 3.378M barrels during the week ended 20 January, indicating excessive supply.

Look Out For

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

25 bps (98.6%) VS 50 bps (1.4%) 

Market Overview

Economic Calendar

Market Movement

DXY

The US Dollar edged lower as expectations of a dovish tone from the Federal Reserve. At the same time, upbeat economic data from other regions, such as Japan, the UK and Eurozone, strengthened the case for more interest rate hikes from other central banks. As a comparison, the manufacturing and services sectors from the US region have suffered from a downturn since September. Fed fund futures predicted only 25 basis points of a rate hike from the Federal Reserve during the FOMC meeting in early February.

The Dollar Index is trading lower and keeps testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 34, suggesting the index is entering the oversold territory.  

Resistance level: 105.20, 108.35

Support level: 101.30, 99.45

XAU/USD

The weak US Dollar, with investors bracing for a dovish tone from the Federal Reserve, continues to underpin dollar-denominated gold. In addition, rising recession risks had stoked a shift in sentiment toward safe-haven assets such as gold. S&P Global predicted that the business activity in the United States would be softened to the slowest growth rate in the next three months as rising wages, expenses and borrowing costs continue to cap the economic growth.

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 the overbought territory.

Resistance level: 1980.50, 2050.30

Support level: 1920.00, 1870.00

EUR/USD

The Euro surged following the surveys showing eurozone business activity experienced modest growth in January, and service-sector activity in Germany expanded for the first time since June. A more robust economy will prompt the European Central Bank to increase interest rates to tame inflation aggressively. Market participants expected the European Central Bank (ECB) to deliver another 50-basis point interest rate hike at each of its next two policy meetings, spurring bullish momentum on the Euro.

EUR/USD is trading higher following the prior breakout above the previous resistance level at 1.1140. However, MACD has illustrated diminishing bullish momentum, while RSI is at 68, suggesting the pair is entering overbought territory.

Resistance level: 1.1140, 1.1455

Support level: 1.0760, 1.0385

BTC/USD

Bitcoin dropped 3% to $22557 at the time of writing. Bitcoin eyes the first two-day drop of 2023 as lower-than-forecast earnings report from the technology sector, Microsoft Corp, which dented wider investor sentiment. The analyst said the disappointing outlook on technology stocks is still strongly correlated with cryptocurrency. In the short term, we could expect the pair to begin to reverse themselves as hedge funds might reenter short position after taking the weekend off., or it might just be a profit-taking session as a recent technical retrace. Both ups and downs movement is possible at the moment. 

BTCUSD is trading lower following the prior retracement from the resistance level. The pair could remain consolidating on the support level of 22500 until further breakout. MACD has illustrated diminishing bullish momentum, while RSI is sliding from the overbought zone of 70 to 51, indicating a diminishing bullish momentum as well. 

Resistance level: 25068, 28254

Support level: 22502, 21433

DOW JONES

The Dow experienced its third-straight day of bullish momentum as investors digested positive quarterly results following the earnings season, becoming the leading market catalysts for the US equity market. The truck manufacturing company PACCAR appreciated by more than 8% after announcing its quarterly results that beat market expectations. Meanwhile, the Dow received further bullish momentum amid hopes of slower rate hikes from the Federal Reserve, which holds its monetary policy meeting next week. Investors are advised to continue monitoring further economic indicators to gauge the likelihood decision from the Federal Reserve.

The Dow is trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 53, suggesting the index might extend its gains as the RSI stays above the midline. 

Resistance level: 34390.00, 35640.00

Support level: 32730.00, 31370.00

GBP/USD 

The pound dropped 0.66% to $1.2328 on Tuesday amid downbeat PMI data. As data showed, economic activity weakened further in January, heightening the risk that Britain could fall into recession this year. Moreover, private sector economic activity fell as businesses blamed high BoE interest rates, strikes and weak consumer demand for the slowdown. Besides, composite PMI data dropped to 47.8 from 49.0 in December, reading below 50, indicating downbeat business conditions. However, a fall in output this year will weigh on the BoE’s rate hike decision on Feb.2. markets expect rates to rise to 4%from 3.5% to tackle double-digit inflation and to a peak of around 4.5% later this year. 

The pound is still consolidating on the support level of $1.2302 recently. MACD is showing a diminishing bullish momentum. While RSI is trading at 46, it indicates a neutral-bearish momentum ahead. 

Resistance level:1.2662, 1.3196

Support level: 1.2302, 1.1784

USDJPY 

With the Bank of Japan’s (BoJ) latest decision to maintain its quantitative easing policy, the Japanese Yen suffered from renewed selloff from investors. However, several investors still expected the central bank to shift its policy to combat spiking inflation. The stronger-than-expected Japanese inflation reading further pressured the Bank of Japan to abandon its yield curve control policy. According to the Bank of Japan (BoJ), Core inflation in Japan surged to 3.1% in December, its highest level over three decades.

USD/JPY is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 45, suggesting the pair might extend its gains as the RSI rebounded sharply from the oversold territory. 

Resistance level: 131.60, 135.20

Support level: 127.15, 123.70

CL OIL

Oil prices retreated following US crude stockpiles hitting another multi-million-barrel increment last week. According to the American Petroleum Institute (API), US oil inventories increased by 3.378M barrels during the week ended 20th January, exceeding the market expectations of about 1 million barrels. In addition, global recession risks continue to linger in the financial market, with S&P Global predicting that the business activity in the United States will be softened to the slowest rate in three months as rising inflation risk and borrowing costs continue to jeopardise the economic momentum.

Oil prices are trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 45, suggesting the commodity might extend its losses as the RSI stays below the midline.  

Resistance level: 81.55, 86.15

Support level: 77.10, 73.25