Nasdaq surged over 2% amid earnings seasons and slowing rate hike pace

What You Need to Know

Wall Street closed higher, fueled by the technology sector, and Nasdaq was up by 2.01% amid the earnings report period. Investors turned a blind eye, omitting the U.S. recession with thousands of jobs cut from major companies. All 3 major U.S. stock indexes extended the rally as investors were almost certain that the Fed would implement an interest rate hike of not more than 50 bps since the inflation in the country seems tamed. On the other hand, the U.S. authorities are in talks with the Chinese to cease importing Iranian oil for Iran’s nuclear sanction. Most of the Iranian oil is imported by China, stopping Iranian oil export and potentially tightening the oil supply globally. 

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

Prices as of 04:00 EET

Economic Calendar

Market Movements

DXY

The Dollar Index slipped against the most dollar-denominated currency to $102.017 on Monday. It dropped to a fresh 9-month low at one time, as the common currency found support from European Central Bank officials’ comments which signals an additional jumbo interest rate rises in Europe. as the European Central Bank governing council members Klaas Knot and Peter Kazimir both advocated for two more 50 basis point hikes at meetings in February and March. However, the market thinks the Fed’s most hawkish days are passed in the current cycle. Therefore, investors weighing the outlook for central bank policy depict the dollar at a disadvantage, given market bets on the Fed moving more slowly than its counterparts abroad.

The Dollar Index is trading lower and keeps testing the support level. However, MACD hovers below the zero line, indicating that the trend remains bearish. While RSI is trading at 46, indicating a neutral-bearish momentum ahead. 

Resistance level: 105.69, 109.06

Support level: 101.18, 97.70

XAU/USD

The gold market has been gaining, trading at its highest in 9-months at above $1930 as of writing. With the U.S. CPI reading has been falling lately, investors are bracing for a more dovish approach from the Fed not to mention that the global economic outlook is pessimistic. U.S. quarterly GDP data which is set to be released this Thursday ( 26 January) may be gauged by investors for the economic condition in the U.S. Gold, the safe-haven asset’s demand might surge when the economic condition is uncertain. 

Gold prices are trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated bullish momentum ahead, while RSI is constantly flowing above the 50 , suggesting the commodity is having a strong buying power.

Resistance level: 1957.27, 2005.06

Support level: 1916.15, 1878.36

EUR/USD

On Monday, the euro rose against the weakened dollar as European Central Bank officials’ comments signalled more rate hikes in the next cycle. Two officials, Klaas Knot and Peter Kazimir agreed on two more 50 basis point hikes in February and March. However, the ECB will keep raising interest rates quickly to slow inflation which remains far too high, ECB President Christine Lagarde said on Monday. According to economists, the euro was also supported by easing recession fears amid a fall in natural gas prices. 

EUR/USD is trading higher following the prior breakout above the previous resistance level at 1.0874 as of writing. MACD has illustrated increasing bullish momentum. However, RSI is at 56, suggesting it also remains in bullish momentum. 

Resistance level: 1.1107, 1.1207

Support level: 1.0711, 1.0585

BTC/USD

Bitcoin has extended its gains over the weekend ahead of celebrations for the Lunar New Year, it has steadily traded above $22000 and hitting psychological resistance level at $23000. The dollar index is trading in its 7-month low region and BTC is in well-position to take advantage of the dollar weakness. Deteriorating economic outlook in the U.S. may see the Fed to slow down its interest rate hike, the country’s inflation rate has been gradually falling lately firmer the investors’ believe the Fed may be dovish for upcoming monetary policy. A lower inflation outlook in the U.S. and China’s optimistic economic outlook may bolster the market demand in the cryptocurrency market. 

BTCUSD is trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is below the overbought zone, suggesting the BTC/USD might trade lower as the RSI retreated sharply from the overbought territory. It might have some technical retrace during these days as a correction. 

Resistance level: 23565, 24960

Support level: 21101, 19834

DOW JONES

The Dow surged 0.76% to 33629 points on Monday. Earnings reports of many companies gathered this week, causing the index to fluctuate greatly. According to economists, early fourth-quarter results show that the companies in the US equity benchmark are on track to miss expectations by 1% after they lowered their estimates. In addition, they said a recession is currently not priced into equity markets, JP Morgan’s strategist Marko Kolanovic said. Investors keep monitoring the upcoming earnings reports from big companies and the Fed’s rate hikes decision for further trading signals. 

The Dow edges higher on Monday as markets thought the Fed would increase the interest rate by only 25 basis points. While MACD illustrated diminishing bullish momentum, and RSI is at 52, suggesting the index remains neutral to bearish momentum in the short term. 

Resistance level: 34388, 36810

Support level: 31370, 28760

GBP/USD 

The pound retreated on Monday from a seven-month high against the dollar. The pair’s outlook remains strong, and it was helped by last week’s data showing the British economy was performing better than feared, which also drove expectations of more interest rate hikes. The pound has hit one time to a 7-month high of $1.2447. If the sustained break for the pound could stand firm, we could expect an upside trend in the recent term. Moreover, data showed British inflation eased to 10.5% last month, but it remains at a higher inflation level. Therefore it drove expectations for more rate hikes, leading to a pound upside.

GBP/USD has been trading higher and consolidating on the support level of $1.2302 recently. MACD is trading above the zero line, indicating the pair remains in bullish momentum. While RSI is trading at 56, it also indicates a bullish momentum ahead. 

Resistance level:1.2662, 1.3196

Support level: 1.2302, 1.1784

NAS100 

The NASDAQ index closed sharply higher by 2.01% to 11,364 points on Monday. Investors started a solid week with renewed enthusiasm for market-leading momentum stocks that were battered last year, buoyed by a surge in technology shares. The semiconductor sector led the index, which is considered a group ripe for a rebound. According to CME’s FedWatch tool, financial markets have already priced in a 99.9% likelihood of a 25 basis point hike as a conclusion of its two-day monetary policy meeting next week. Investors assuming a smaller rate hike help boost the stock market as well.

The outlook for the index remains neutral-bullish. MACD has illustrated an increasing bullish momentum. At the same time, RSI is trading at 69, indicating a bullish momentum ahead in the short term. 

Resistance level: 11997, 12647

Support level: 11445, 10469

CL OIL

Oil prices edged higher amid most of the Asian countries celebrating Lunar Chinese New year. The market is expecting the demand for oil to be higher, optimism over China, world’s top oil importer is picking up its economic growth after Covid-zero policy which was previously imposed for the past 3 years. Besides, the weakening dollar which makes the oil prices cheaper may further increase the demand for oil as well. On the other hand, G7 countries are tightening energy inflow from Russia and Russia is countering the oil sanction by refusing oil export to countries who impose a price cap. This policy imposed by one of the largest oil exporters potentially cut down the oil supply in the world. 

Oil prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is flowing above 50, suggesting the commodity might trade higher as the RSI stays above the midline. 

Resistance level: 84.43, 88.24

Support level:  79.08, 75.75