What You Need To Know

Asian markets climbed encouraged by the Wall Street rally amid market optimism over soft-landing from the Fed. The dollar dropped to its lowest and traded below 102 for the 1st time since last May as investors bet that it is very likely the Fed will increase just 25 bps for the coming rate hike. Besides, speculative bond sellers in the market have pushed the Japanese bond yield beyond its bond yield control (YCC)  ceiling at 0.5% despite the BoJ intervening in the bond market by buying almost 5 trillion Yen worth of Bonds. Markets speculate that there is a chance for the BoJ to exit the YCC and increase interest rates; the Japanese Yen goes strong against most of its counterparts. 

Look Out For

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

25 bps (93.2%) VS 50 bps (6.8%) 

Market Overview

Economic Calendar

Market Movements

DXY

The Dollar Index, which trades its value against a basket of six major currencies, extends its bearish momentum as easing inflation expectations over the backdrop against the downbeat CPI data continue to boost risk appetite in the global financial market. Federal Reserve Bank of Atlanta President Raphael Bostic claimed he is leaning toward supporting a smaller interest-rate hike at the next FOMC meeting after Thursday’s report indicated a slowdown in inflation. “It suggests that inflation is moderating, and it provides some comfort for the Fed to move more slowly on the restrictive monetary policy”, Bostic said. 

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, 99.05

XAU/USD

Gold prices experienced their biggest weekly gains since October, as the US Dollar dipped to a seven-month low, and more signals pointed toward smaller rate hikes this year. The significant depreciation of the US Dollar will spur the market demand for the gold market as the dollar-denominated commodities become cheaper relative.

Gold prices are trading higher while currently testing the resistance level at 1920. MACD has illustrated increasing bullish momentum. However, RSI is at 74, suggesting the commodity is entering the overbought territory. 

Resistance level: 1920.00, 1980.00

Support level: 1870.00, 1820.00

EUR/USD

After the U.S. CPI report released last week, the Euro continues to be bullish against the dollar amid the weakening dollar. The market perceives the Fed will be more dovish after the CPI report is released and is expecting not more than 25 bps for the next rate hike. In addition, Euro sanctions on Russia’s oil production will take effect in Feb will potentially drive up the energy price in the economies. Hotter E.U. CPI report may expect the ECB to be more hawkish to tame inflation and Euro may continue to be bullish against the dollar. 

The Euro has gained and is trading at its highest since last April after the U.S. CPI data was released. The RSI constantly staying above the 60-level suggests that the buying power is strong over the week. However, the MACD flowing flat on the above depicts a slowdown in bullish momentum for the pair. 

Resistance level: 1.0988, 1.1150

Support level: 1.0743 1.0495

BTC/USD

BTC has surged to the pre-FTX crisis and traded above 21000 for the first time since early November last year. Investors believe that the price of BTC has bottomed previous week and rallied after the U.S. CPI report released last week. By tapping the benefit of a weakening dollar, the Funding rates of BTC which are the recurring payment for the perpetual contract market, hits its yearly high implies that traders for BTC are optimistic with BTC’s future price movement. 

For technical discussion, BTC has been extremely bullish after it broke its psychological resistance level at 17000 last week. The RSI has been constantly flowing in the overbought zone suggesting a strong buying power for BTC. The MACD turning flat yesterday after its surge above the zero line implies that the bullish momentum for BTC may ease slightly. 

Resistance level:21767, 22529

Support level: 20723, 19630

DJ30

The Dow experienced significant bullish momentum, with investors bracing for a less aggressive rate-hike decision from the Federal Reserve continued to stoke a shift in sentiment toward risky assets such as the equity market and oil. Market participants are now speculating a higher than 90% probability of a smaller rate hike during its next policy meeting. The US short-term Treasury yield hovered at its lowest level in nearly two years, providing a bigger-than-expected boost to the equity market.

The Dow is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 63, suggesting the index might trade higher as the RSI stays above the midline.

Resistance level: 34395, 35320

Support level: 32620，31165

GBP/USD 

The pound gained 0.86% to $1.2286 against the dollar on Friday as investors stayed optimistic about the CPI data last week. They prompted bets that the Federal Reserve will be less aggressive on the rate hikes path. Following the CPI report, the weakest dollar dropped further. Investors are suggested to keep an eye on the upcoming speech about the monetary policy from the BoE later today. It could be crucial data to influence the value of the pound. 

As we can see, the pair is moving upward due to the dollar continuing to weaken in the short term. The MACD line remains above zero line, indicating a bullish momentum ahead. While RSI is trading at 64, indicating the pair remains in bullish momentum. Investors can wait for the BoE’s speech for further order actions.

Resistance level: 1.2343, 1.2662

Support level: 1.1936, 1.1649

USDJPY

The Japanese Yen continues to outperform other currencies as market participants speculate that the Bank of Japan (BoJ) will revise its quantitative easing policy. At the same time, the US Dollar hovered in negative territory following the United States releasing its downbeat inflation report. Earlier, the monetary policy divergence between the Bank of Japan (BoJ) and the Fed, the Japanese Yen, had depreciated significantly as the narrowing interest rate differential between countries’ treasury yields. Nonetheless, rising Japan’s wages and inflation risk have boosted market expectations that the Bank of Japan will amend its yield control policy. With expectations of shifting policies, the Japanese Yen has begun to receive significant bullish momentum.

USDJPY is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum. However, RSI is at 30, suggesting the pair is entering the oversold territory. 

Resistance level: 131.30, 135.20

Support level: 127.15, 123.70

CL OIL

Oil prices surged by 2.4% to nearly $80 per barrel last Friday as investors stayed optimistic over China’s economic outlook. After three years of strict lockdown in China, the country is finally reopened. That is set to improve overall economic activity and mobility. And analysts predict that oil demand in the largest crude importer will likely hit a record as they forecast massive growth likely to have on the tourism and aviation sectors. In addition, tourism-reliant countries in Southeast Asia will also be among the first to notice, with developed economies also benefiting from the return of Chinese visitors. Besides, the sanctions between the EU and Russia are likely to see a great rerouting of global diesel flows. Therefore, the tensions in oil production might trigger the supply level, leading to an oil price rise in the short term.

Crude oil prices are trading in strong momentum in the short term. MACD has illustrated diminishing bearish momentum. While RSI is at 66, suggesting the commodity is entering overbought territory.

Resistance level: 81.30, 85.16

Support level: 77.00, 73.52