Wall Street’s “Fear and Greed” index has dropped to a one-year low, prompting optimism in the U.S. equity markets

What You Need to Know

The currency market is calm as it awaits the interest rate decision announcements from major central banks like the Fed, ECB and BoE this week. All eyes will be on these central banks to see if their focus will be on taming high inflation or shifting focus on preventing economic recession. On the other hand, global equities markets are enjoying higher volatility with Asian markets trading volume back to normal after returning from Lunar New Year. Meanwhile, the U.S. equities market is showing an optimistic sign where the VIX index, Wall Street’s “fear and greed index”,  fell below 18 for the first time in a year. Elsewhere, a winter storm is expected to hit Texas and may freeze its oil and gas pipelines, a disruption in the oil supply may bolster oil prices coupled with China’s stronger demand after the Lunar New year.

Look Out For

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

25 bps (99.9%) VS 50 bps (0.1%) 

Market Overview

Economic Calendar

Market Movements

DXY

The Dollar Index seesawed near the crucial support level ahead of the FOMC meeting. On the other hand, Friday’s Nonfarm payroll is expected to show pessimistic reading, with the market expectations of 185,000 jobs created in January, slowing from the previous reading of 223,000 during the last month. At the same time, US Personal Consumption expenditures, excluding food and energy, so-called core PCE, increased by 0.30%, aligned with the market expectations while showing the slowest annual rate increase since October 2021. Market participants are widely expecting a 25-basis point rate hike at Wednesday’s FOMC meeting, slowing the aggressiveness of the rate hike decision for a second consecutive meeting.

The Dollar Index is trading flat while currently hovering the support level. MACD has illustrated increasing bullish momentum, while RSI is at 36, suggesting the index might trade higher in short-term as the RSI rebound from the oversold territory.

Resistance level: 103.45, 105.70

Support level: 101.20, 97.70

XAU/USD

Gold prices are traded flat near $1925 as investors await the key United States data and the Fed’s monetary policy decision. Apart from the Federal Reserve concerns, the US monthly job report for January will also be another important catalyst for gold traders. Economists predict that the headline Nonfarm Payrolls (NFP) is expected to ease to 185K from the previous reading of 223K, while the unemployment rate might notch from 3.5% to 3.6%. Worse-than-expected readings will likely spark dovish expectations on the Federal Reserve, underpinning the dollar-denominated gold.

Gold prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 46, suggesting the commodity might trade lower as the RSI stays below the midline. 

Resistance level: 1960.50, 1998.35

Support level: 1917.70, 1870.40

EUR/USD 

The pair traded sideways, awaiting interest rate decisions from the Fed and the ECB  later this week. The Fed is likely to increase the interest by 25 bps, the lowest increment as compared to last year’s rate hikes. However, it is not sure for the upcoming rate decision from the ECB; the market consensus is a 50 bps rate hike from the ECB, but a fear of market recession may lead the ECB to reconsider its previous Hawkish stance. Investors may gauge the Euro price movement by referring to data that will be released ahead of the interest rate announcement from the ECB, including German GDP, German unemployment change, and ECB CPI. 

EUR/USD has been trading sideways after it broke above its then-resistance level at 1.0778. Both indicators depict a bullish momentum loss for the pair with RSI hovering near 50 and the MACD crossing below the zero line. 

Resistance level: 1.1048, 1.1238

Support level: 1.0785, 1.0615

BTC/USD

BTC gained more than 4% over the weekend, with institutional Bitcoin holders optimistic that its value may hit its all-time high this year. The crypto fear and greed index has also reflected the risk appetite of the crypto investor has significantly increased; the index rose to 61 from 25 last month where zero means extreme fear and 100 represents extreme greed. Besides, the Fed is almost certain to raise the upcoming rate by just 25 bps which will continue to weaken the dollar and BTC could take the advantage to edge higher. 

BTC is climbing toward its psychological resistance level at $24000 at a slower pace. The RSI is flowing near the overbought zone above 60 and the MACD has rebounded from above the zero line, suggesting that the bullish momentum is building in progress. 

Resistance level: 23765, 24878

Support level: 22529, 21767

DOW JONES

The Dow extended its gains, buoyed by a better-than-expected economic outlook and easing inflation risk. After the latest numbers from the US Personal Consumption Expenditures (PCE) showed the slowest annual rate increase since October 2021, the markets responded in a big way. In particular, the US 10-year treasury yield fell spectacularly while US equity markets continued to stand their ground. Investors are advised to closely monitor Fed Chair Jerome Powell’s post-policy press conference and further jobs data from the United States for trading signals.  

The Dow is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 59, suggesting the index might extend its gains as the RSI stays above the midline. 

Resistance level: 34390.00, 35640.00

Support level: 32730.00, 30945.00

GBP/USD 

Pound Sterling surged ahead of the monetary policy decision from the Bank of England. Core inflation, which excludes food and energy, has been stuck around 6% in the United Kingdom for the past nine months as the wage-price spiral continues to pressure the companies. Market participants speculate that the bank’s Monetary Policy Committee will increase rates by 50 basis points to 4% on Thursday. Investors will continue to scrutinise for indications of monetary decisions from the Bank of England in future.  

GBP/USD is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 62, suggesting the pair might trade lower as the RSI retreated sharply from the overbought territory. 

Resistance level:1.2420, 1.2835

Support level: 1.2005, 1.1485

USDJPY

Choppy volatility for USD/JPY, especially investors, is awaiting the Fed interest rate decision announcement, which will be made on Wednesday this week. The market may already be priced in that the Fed has a high chance to increase the rate by 25 bps which led the dollar index to trade in its lowest region in 7 months. On the other hand, there is an intense speculation that the BoJ may shift its monetary policy from an Ultra-loose monetary policy since the inflation rate in Japan has hit 4%, the highest in 41 years and is expected to rise in the time to come. 

USD/JPY has been trading sideways with a minimal price range between 129.21 to 130.86 for the past week. The RSI hovering closely at the 50-level depicts a neutral signal for the pair, and the MACD flowing flat suggests a neutral signal. 

Resistance level: 131.01, 133.09

Support level: 128.83, 127.19

CL OIL

Oil prices edged lower amid indications of Russian solid oil supply offset the hopes of a rapid recovery in Chinese demand. According to Reuters, oil supply from Russia’s Baltic ports is expected to increase by 50% this month from December, as sellers try to fulfil strong demand in Asia following the Chinese authorities reopening the economy. Meanwhile, critical illness Covid-19 cases in China are down by 72% from a peak early this month, while daily deaths due to Covid-19 have dropped by 79% from their peak, boosting expectations of a recovery in oil demand. OPEC+ delegates will meet this week to review crude production levels, with sources from the OPEC+ members expecting no change to the current output policy.

Oil prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 45, suggesting the commodity might trade lower as the RSI stays below the midline.  

Resistance level: 82.30, 85.15

Support level: 79.90, 78.10