US President Joe Biden and his Ukrainian counterpart Volodymyr Oleksandrovych Zelenskyy talked about Russia on Thursday, per CNN. The news stated that Biden told Zelenskyy that a Russian invasion is now highly certain.
US President Biden also said that the US is looking into additional macroeconomic assistance for Ukraine.
Elsewhere, Biden pushes for a United Nations (UN) Security Council meeting on Monday to discuss the Russia-Ukraine issues. The US leader also reiterated his warning to Russia if it invades Ukraine.
The news weighs on the riskier assets while keeping WTI crude oil prices afloat, around $86.80 at the latest.
Read: AUD/USD bears eye sub-0.7000 zone on strong USD ahead of US PCE Inflation
- On Thursday, the NZD/USD plunged to levels not seen since November 2, 2020.
- Risk-aversion in the financial market spurred demand for safe-havens like the USD, weighed on the NZD.
- US Stocks finished in the red, led by the S&P, the less damaged was the Dow Jones Industrial.
- The NZD/USD is downward biased, and a break below 0.6500-11 might send the pair tumbling to 0.6478.
The New Zealand dollar extends its free fall for the sixth consecutive day against the US dollar, plunging close to 300-pips from 0.6850 down under the 0.6600 figure. As the New York session winds down and the Asian session begins, the NZD/USD is trading at 0.6583 at the time of writing.
Risk aversion hurts the prospects of risk-sensitive peers like the NZD
The market sentiment is downbeat. Factors like the hawkish Federal Reserve, which said that might raise interest rates “soon,” in the monetary policy statement, did not have an impact. However, when US central bank Chair Jerome Powell said at the presser that “the committee is of a mind to raise the federal funds rate at the March meeting assuming that the conditions are appropriate for doing so,” those were the words that caused volatility in the market.
Cash stock indices in the US ended with losses. The S&P 500 fell in the session 1.4%, finished at 4326.51, while technology stocks, reflected by the Nasdaq Composite, fell for the second straight day 0.54%, down to 13,352.78, while the less damaged Dow Jones, was almost flat a 0.02% loss, finishing at 34,169.78.
Sector-wise, the leading gainers were energy, utilities, and consumer staple, up some 1.24%, 0.78%, and 0.58% each. Contrarily, the hardest hit by the sell-off were consumer discretionary, real estate, and industrials, falling 2.27%, 1.75%, and 0.93%, respectively.
In the meantime, the US Dollar Index finished up 1.272%, sitting at 97.220, while the 10-year US T-bond yield ended at 1.803%, down five basis points.
A light Asian economic docket, referring to New Zealand data, featured the ANZ NZ consumer confidence, which came at 98, in line with the previous reading. Meanwhile, Japan’s Consumer Price Index (CPI) and Australia Producer Price Index (PPI) will be featured at 23:00 and 23:30 GMT, respectively.
NZD/USD Price Forecast: Technical outlook
The NZD/USD broke a downslope trendline of a descending channel (probably a bullish flag). The result of that emphasized the pair as downward biased, exposing September 24, 2020, a daily low at 0.6511. The closeness of the aforementioned price level to the 0.6500 figure would make the 0.6500-11 region the NZD/USD first support. A breach of it would open the door for further losses. The following demand zone would be August 20, 2020, 0.6487, followed by June 20, 2020, cycle low at 0.6478.
- AUD/USD braces for the biggest weekly fall since August, recently stabilizing near two-month low.
- Markets tried to digest hawkish Fed signals, yields eased but couldn’t help equities, gold.
- US Q4 Advance GDP, Jobless Claims came in stronger to fuel USD, Durable Goods Orders couldn’t harm the buck
- Aussie PPI, risk catalysts to entertain traders with eyes on US Core PCE Inflation.
AUD/USD stays on the way to post the biggest weekly loss in five months, taking rounds to 0.7030-35 during early Friday morning in Asia.
The Aussie pair dropped to December 2021 bottom following the heaviest daily fall in a month the previous day as the US dollar cheered the hawkish Fed verdict. The upside momentum gained support from a slump in gold prices while ignoring mixed equities and a pullback in the US Treasury yields.
Global traders matched expectations of favoring the US dollar against almost everything after the Federal Reserve (Fed) indirectly confirmed the March rate hike and cited room for more lift-offs.
The hawkish expectations gained support from the Advance Q4 US GDP, up 6.9% annualized versus 5.5% market consensus and 2.3% prior. On the same line was the US Initial Jobless Claims for the week ended in January 21that came in 206K compared to 260K expected and 290K previous. It should be noted, however, that the US Durable Goods Orders for December dropped by -0.9% for December, below -0.5% market consensus.
Elsewhere, China's slowest industrial profit growth in nine months and softer Westpac Leading Index for Australia also weighed on the AUD/USD prices. On the same line were softer-than-previous readings of the Aussie Export Price Index and Import Price Index for Q4.
Other than the data and Fed, escalating geopolitical fears concerning the Russia-Ukraine issue also drown the risk barometer AUD/USD prices. Recently, US President Joe Biden told Ukrainian President Volodymyr Oleksandrovych Zelenskyy that a Russian invasion is now highly certain, per CNN. Also backing the risk-off mood was news from China’s Evergrande as the struggled real-estate firm said it is targeting a restructuring proposal within six months.
Amid these plays, equities reversed initial gains and closed with losses while the US 10-year Treasury yields ended Thursday’s North American trading session with four basis points (bps) of a downside to 1.80%. Further, gold prices slumped over 1.0% to below $1,800 whereas the US Dollar Index (DXY) rose to the highest levels last seen during July 2020.
Looking forward, Australia’s Q4 Producer Price Index, expected 0.3% QoQ versus 1.1% prior, will decorate the calendar in Asia but major attention will be given to the US Core PCE Price Index figures for December as they’re considered the Fed’s preferred version of inflation. Markets expect a 4.8% YoY figure versus 4.7% prior.
Read: US PCE Inflation Preview: Dollar rally has more legs to run
A clear downside break of a horizontal area from August, surrounding 0.7100, directs AUD/USD towards 2021 bottom of 0.6993. However, any further weakness will not hesitate to challenge the 61.8% Fibonacci Expansion (FE) of the pair’s declines from late June 2021 to January 2022, around 0.6920.
Apple (AAPL) reported earnings after the close on Thursday. Earnings per share (EPS) came in at $2.10 versus the estimate of $1.89. Revenue was $123.9 billion versus the estimate for $118.66 billion.
Apple (AAPL) stock forecast
Apple (AAPL) stock is trading at $162.40 in Thursday's aftermarket, a change of 2% versus the regular session close of $159.16.
Apple chart, daily
- EUR/USD bulls moving in at the lows for the day.
- Bulls have an eye on the weekly M-formation and prospects of a significant correction.
EUR/USD is set to close off a bearish week towards a test of 1.11 the figure after breaking out of the bearish weekly wedge to the downside. The following illustrates the potential for a downside continuation on the lower time frames while keeping note of the potential for a significant correction to the upside medium term.
EUR/USD weekly chart
The weekly chart has imprinted an M-formation. This is a reversion pattern and could be a significant theme for the technical outlook in the medium term. The 38.2% Fibonacci retracement level has a confluence with the prior lows that would be expected to at together as a firm resistance structure. Meanwhile, there is still room for a run to test 1.11 the figure, however.
EUR/USD H1 chart
The price has left a bottoming formation given the wicks and subsequent upside correction. The irregularity of the price action is also bullish.
However, we have seen more commitments from the bears since the lows which leave prospects of a downside continuaiton towards 1.11 the figure for the sessions ahead. With that being said, the combination of month-end flows and the choppy price action, the risk-reward is hardly attractive at this stage of the bearish flow.
- GBP/USD is consolidating in the 1.3380 level after dipping under 1.3400 for the first time in over a month.
- Hawkish BoE expectations may be supporting sterling, which outperformed most of its G10 peers even though it succumbed to the dollar.
GBP/USD fell to one-month lows on Thursday underneath the 1.3400 level after slumping below resistance in the 1.3450 area earlier in the session, weighed by a buoyant dollar in wake of Wednesday’s hawkish Fed meeting and strong US GDP data. The pair is now consolidating in the 1.3380 area, practically bang on a level of resistance turned support from back in mid-December, where it trades lower by about 0.6% on the day. Those losses, though extensive, are modest compared to many of sterling’s G10 peers; AUD is down 1.2%, SEK and NZD are down 1.1%, EUR and CHF are down around 0.9%. Sterling’s performance puts it roughly in line with that of the loonie and yen, both of which are also down about 0.6% on the day versus the buck.
While then yen’s comparatively strong on the day performance compared to most of its G10 peers can likely be attributed to choppy US equity market conditions and US yield curve flattening, GBP and CAD may be finding central bank support. Recall that the BoC on Wednesday, while disappointing some calls for a 25bps hike, signaled a rate hike would soon be coming in March (as the Fed did). Meanwhile, investors expect the BoE to lift interest rates by 25bps to 0.25% next Thursday following strong labour market and inflation data for December. While the likes of the euro, Aussie and kiwi have recently broken out to multi-month/year lows, sterling still remains some way above its December 2021 lows just under the 1.3200 area.
Looking ahead, it seems likely that the US dollar’s broad post-Fed rally may have some legs with the Fed seemingly the most intent on monetary policy tightening for some time (i.e. since 2018). Friday’s Core PCE inflation data for December is likely to reinforce that. That keeps GBP/USD downside risks alive, even in the face of BoE hawkishness. Traders should remember to keep an eye on the UK political situation as a UK PM Boris Johnson resignation remains a strong possibility as the partygate scandal drags on. Whilst analysts have so far mostly shrugged off the impact of this political noise on GBP, it surely can’t be helping sterlings cause. Short/medium-term bears will likely be targetting a test of the aforementioned December lows at some point in Q1 2022.
- AUD/USD is in the hands of the bears, but a meanwhile correction can not be ruled out.
- 0.7000 is calling the bears while the 0.7050/'60s could be re-tested first.
Following a break of daily trendline support, AUD/USD has been in the hands of the bears in a sharp and decisive impulse on the daily chart which could be destined to test the December swing lows:
AUD/USD daily chart
Since the break of the trendline support, the price retested the old support area and was subsequently resisted which led to a downside continuation as follows:
The bears are well and truly in control and a daily close below the midpoint of the 0.70 area could indicate that the path of least resistance will continue to be to the downside for the rest of the week.
With that being said, a bullish correction on the lower time frames could be in order first:
The M-formation is a risk for bears considering the high probability that the price will revert back to, or towards the neckline of the pattern. The 38.2% Fibonacci could come under pressure in this regard before the next wave of selling occurs at a discount from current levels. This puts the 0.7050/'60s on the map for the remaining sessions ahead for the week in the first instance. On the other hand, should the bears commit prior to there, then 0.7000 could be seen first.
- The shared currency slides against the Japanese yen, down 0.26%.
- The EUR/JPY is neutral-downward biased, though a break under 128.24 would add further downward pressure on the pair.
During the New York session, the EUR/JPY slides 0.40%. At the time of writing, the EUR/JPY is trading at 128.43. A mixed market mood surrounds the financial markets, as depicted by US equity indices trading in the red, except for the Dow Jones, gaining 0.23%.
EUR/JPY Price Forecast: Technical outlook
In the overnight session, the EUR/JPY was subdued around the 50 and the 100-hour simple moving average (SMA), lying at 128.75 and 128.77, respectively. In the overlap of the European and North American session, faced resistance at the abovementioned, followed by a fall towards the daily low at 128.35.
The EUR/JPY daily chart depicts a neutral-downward bias. Although almost flat, the daily moving averages (DMAs) reside above the spot price.
On the downside, the EUR/JPY first support would be January 25 daily low at 128.24. A breach of the latter would expose December 2021, daily lows at 127.51. It is worth noting that a downslope trendline below the latter, part of a falling wedge, might be tested, but it is in the early stages of the pattern.
To the upside, the EUR/JPY first resistance level would be the 50-DMA at 129.27. A test of that level would expose the 100-DMA at 129.89, followed by the 200-DMA at 130.49.
What you need to know on Friday, January 28:
The market was all about the dollar and the Fed after the US central bank pretty much confirmed a rate hike coming in March, fueling speculation of at least four hikes this year. The greenback got additional support from upbeat growth figures, as Q4 GDP came in at 6.9%, much better than the 5.5% expected. Meanwhile, unemployment claims in the week ended January 14 met expectations by printing at 260K.
The American currency extended its post-Fed rally to reach a multi-month high vs the shared currency, as EUR/USD plunged to 1.1130. GBP/USD fell to 1.3354, a one-month low, with both pairs settling nearby.
Commodity-linked currencies also fell, with AUD/USD currently trading at around 0.7030 and USD/CAD at 1.2730. Gold prices collapsed, with the bright metal falling below $1,800 a troy ounce. Crude oil prices advanced to fresh multi-year highs but lost momentum ahead of the daily close and finished the day little changed, with WTI settling at $86.80 a barrel.
Wall Street started the day with a firm footing, posting substantial intraday gains. However, it changed course in the final hours of trading, with indexes falling into the red. US Treasury yields retreated from Wednesday’s peak, with the yield on the 10-year note down to 1.78%. The greenback held on to gains despite the changing direction in equities and yields.
Dogecoin price to break weekly high and tag $0.16
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- USD/CAD is at three-week highs around 1.2740, having cleared some key resistance levels on the way.
- The buck has been given a broad boost in wake of Wednesday’s more hawkish than expected remarks from Powell.
- Short-term bulls will be betting that technical buying carries the pair to resistance in the 1.2800 area.
USD/CAD rallied above the 1.2700 level in recent hours to hit a new three-week high around 1.2740, the pair having broken to the north of its 50-day moving average close to 1.2710. USD/CAD now trades about 0.6% higher on the session near 1.2740, having rallied around 90 pips from earlier session lows at 1.2650. At these earlier session lows, it seems that the short-term bulls took the opportunity to add to long positions with the pair retesting a downtrend it broke above in wake of Wednesday’s hawkish Fed meeting.
Indeed, the more hawkish than expected tone of Fed Chair Jerome Powell’s remarks in the post-meeting press conference are the main reason why the US dollar has strengthened across the board, including versus the loonie, on Thursday. Arguably, stronger than expected US GDP growth figures for Q4 2021 are helping sustain the broad USD rally on Thursday. Wednesday’s BoC meeting, where, like the Fed, the central bank also gave the nod to a rate hike in March, has been largely forgotten at this point. Although looking at the daily G10 performance table, with CAD holding up better than most of its G10 peers, it may be offering some relative support (versus the likes of AUD, NZD and NOK for example).
US equity markets have been choppy, as have global crude oil markets, with both asset classes swinging from the green back into the red over the course of the session and not offering the risk/commodity-sensitive loonie much support. With USD/CAD above the downtrend that had prevailed since mid-December and above key resistance in the 1.2700 area, it seems likely that technical buying can carry the pair higher towards resistance around 1.2800 in the short term. If Friday’s US Core PCE inflation data for December comes in higher than expected, this will likely help this move via a boost to the buck amid renewed Fed tightening bets.
- Gold slid to trendline support as US equities lost ground late in the session.
- US Q4 GDP rose 6.9% saar in December, versus 5.5% expected.
- US dollar remains in bullish territory despite the slump in US yields.
Update: Gold (XAU/USD) bears take a breather around $1,797 as Friday’s Asian session begins, following a $50 slump in the last two consecutive days to a three-week low.
In doing so, the yellow metal awaits fresh clues after piercing the $1,800 threshold the previous day.
That said, the global rush towards the US dollar after the Federal Reserve (Fed) indirectly confirmed the March rate hike, also cited room for more lift-offs, seemed to have underpinned the latest declines even as the US Treasury yields eased afterward. Additionally, escalating geopolitical fears concerning the Russia-Ukraine issue also drown the gold prices.
Moving on, major attention will be given to the US Core PCE Price Index figures for December as they’re considered the Fed’s preferred version of inflation. Markets expect a 4.8% YoY figure versus 4.7% prior.
End of update.
Gold, (XAU/USD), was lower in midday markets on Wall Street, losing some 1.4% at $1,795. The price of gold fell from a high of $1,822.18 and had reached a low of $1,791.86. Equity markets initially bounced in the aftermath of the FOMC driven sell-off yesterday. However, they started to slide again and the US dollar edged higher, hitting a one-and-a-half-year high, weighing on the yellow metal.
''The market ran short of optimists as it weighed up the pros and cons of a Fed belatedly determined to tame rampant inflation,'' analysts at ANZ Bank explained.
At the time of writing, the Dow Jones Industrial Average is down 0.25% and has marked a low of 34,034.08 so far, giving up earlier gains of as much as 1.4%. The Nasdaq Composite fell 0.5% to 14,002.58 after trading in the green at market open. The S&P 500 is down 0.37% and hit a low of 4,315.20 after trading up 1.2% earlier in the session. The yield on the US 10-yr note fell to 1.783% and is down 4%.
Powered by bets the US Federal Reserve could deliver faster and larger interest rate hikes in the months ahead, the greenback holds near the highest levels since July 2020 against other major currencies on Thursday, as measured by the DXY index. At the time of writing, it is trading 0.7% up near 97.20 as money markets move in to price in as many as five quarter-point increases by year-end.
The greenback was also supported on the fourth-quarter Gross Domestic Product that rose 6.9% saar vs expectations of a 5.5% rise. The GDP price index also beat expectations, rising 6.9% saar, while Q4 core inflation rose to 4.9% vs 4.6%. Personal consumption expenditures rose 3.3% vs 2.0% in Q3.
Is the Fed jawboning?
Analysts at TD Securities tackle the questions as to whether the Fed is jawboning, or whether they are on a quest to pummel inflation?
''The answer to this question is key to recognizing the regime that lies ahead. By not pushing back against the notion of hikes at consecutive meetings or even against a potential 50bp rate hike, Chair Powell's tone was undeniably hawkish at yesterday's FOMC,'' the analysts argued.
''The market has already priced-in a 25bp hike in March but the possibility of a 50bp hike is also seeping into market pricing. Given global macro's elevated sensitivity to liquidity, evidence that quantitative tightening might be more impactful for asset prices suggests that this axis could be particularly relevant.''
''We expect that the precious metals complex will struggle to attract capital in the face of a hawkish Fed.''
''We should not discount the possibility that the Fed's tone is also being used as a policy tool — jawboning might also help crush the momentum in inflation expectations that ultimately threatens the Fed's control on inflation itself.''
''In this scenario, the Fed could potentially use the pace of quantitative tightening as a tool to manage the strike on its put, without necessarily causing undue harm to its primary objective of keeping inflation expectations bounded.''
''We have initiated a short gold position and expect a low threshold for CTA trend follower liquidations to support our position.''
Gold technical analysis
The price, however, is meeting dynamic trendline support. While the momentum is with the bears, profit-taking into month-end could see the bulls move in for the kill. This could be expected to see the price revert back towards liquidity where the 38.2% ratio is currently aligned, towards $1,820. With that being said, a break below the trendline and then $1,780 horizontal support would open the doors to lower levels for the foreseeable future.
- All three major US bourses have reversed earlier gains and are now trading in negative territory.
- The S&P 500 was at one point above 4400 but is now in the low 4300s.
- Sentiment remains mixed and conditions choppy as investors digest this week’s Fed meeting and the latest strong US GDP numbers.
Having been as much as 1.8% higher in earlier trade and above the 4400 level, the S&P 500 has reversed lower in choppy trade and is back to trading in the red in the low 4300s. At current levels around 4320, the index trades lower by about 0.6% on the day. The Nasdaq 100 and Dow indices have seen similarly choppy trading conditions, with both also reversing sizeable gains earlier in the session to slip into the red. The Nasdaq 100 index is now down about 1.0% on the day and probing the 14K level again for a third successive session, while the Dow has reversed from earlier highs in the 34.75K area to just above 34K where it trades lower by about 0.3% on the session. Sentiment remains mixed and conditions choppy as investors digest this week’s Fed meeting and the latest strong US GDP numbers.
Looking at the S&P 500 GICS sector performance, there is a clear defensive bias, with Utilities (+0.4%) and Consumer Staples (+0.3%) leading. Most other sectors are either flat or in the red, aside from the big tech-dominated Communication Services sector, which is about 0.25% higher. The comparatively decent performance of this sector versus the likes of the Information Technology (-1.0%) and Consumer Discretionary (-1.8%) sectors highlights some interesting rotation going on under the surface. The first thing to note is that Tesla has seen a massive 9.0% decline post earnings (the carmaker warned of lasting supply chain issues) and this is weighing on the Consumer Discretionary sector. Meanwhile, Netflix has rocketed nearly 7.0% higher after billionaire investors Bill Ackman hailed the share’s recent post-earnings drop as a great buy-the-dip opportunity.
Elsewhere, the semiconductor subindex within the Information Technology sector is getting battered in wake of poor Intel (-7.5%) earnings, with the co. also warning about supply chain issues. The PHLX Semiconductor Index is down nearly 5.0% on the day. Elsewhere, despite the downbeat tone in most non-defensive equity sectors, large-cap tech stocks have been doing well (Microsoft +1.0%, Amazon +1.0%, Apple -0.4%, Google flat, Meta (Facebook) +0.4%). One equity analyst said, “we believe the biggest opportunity in markets right now is in dividend growth stocks (like the aforementioned large-cap tech names) that have strong balance sheets and cash flows, and can thrive in an environment no matter what the Fed does”.
- The USD dollar marches firmly in the North American session, with the DXY surging 1.34%, above 97.00.
- The greenback gains lie on the back that the US central bank might hike rates in the March meeting.
- USD/JPY is upward biased, though a break above the 115.30-45 region would open the door for a test of YTD highs.
The US dollar extends its rally against the Japanese yen, trading at 115.23, a gain of 0.55% at the time of writing. The investor’s mood has been swinging throughout the day. In the last hour, US equity indices fluctuated between wins and losses, but the USD has been able to hold its ground vs. the safe-haven Japanese yen.
The dollar surge is attributed to Fed hawkishness. On Wednesday, the US central bank kept the Federal Funds Rate (FFR) unchanged around the 0-0.25% range while mentioned that they would hike rates “soon.” Following the release of the monetary policy statement, Fed’s Chairman Jerome Powell said that “the committee is of a mind to raise the federal funds rate at the March meeting assuming that the conditions are appropriate for doing so.”
In the meantime, the US dollar index, which measures the dollar value against a basket of its rivals, advances 1.34%, up to 97.231. Contrarily to the positive performance of the greenback, the US 10-year Treasury yield slides six basis points, from 1.851% to 1,792%
Before Wall Street opened, the US economic docket featured Initial Jobless Claims for the week ending on January 22, fell to 260K from 286K, better than expected after two consecutive weeks of increases. Meanwhile, the Gross Domestic Product (GDP) for Q4 rose by 6.9%, crushing 5.5% expectations, helped by the fiscal policy and Fed accommodative monetary policy.
Later in the day, USD/JPY traders focus would turn to the release of the Consumer Price Index (CPI) in Japan,
USD/JPY Price Forecast: Technical analysis
The USD/JPY is upward biased, as depicted by the daily moving averages (DMAs) residing well below the spot price. At press time, the pair is approaching an upslope trendline drawn from October 2021 swing lows to December ones, broken to the downside on January 13, that will be resistance around 115.30-45 area.
A breach of the latte would expose the YTD high at 116.35, which, once broken, will be followed by January 2017 cycle highs at 118.61, a space of approximately 235-pips.
Contrarily, the USD/JPY first support would be the January 18 daily high, previous resistance-turned-support at 115.00, followed by 114.47, and the 50-DMA at 114.31.
- GBP/USD offers something for both the bulls and bears until the 4-hour support structure breaks.
- The bulls will want to see the 61.8% Fibo give on the 4-hour time frame.
As per the prior day's analysis, GBP/JPY Price Analysis: Bears sinking their teeth into what could be a fresh daily impulse, the price has moved accordingly within the corrective stage of the bearish trend.
The Fibonacci levels are in focus and for now, the space between the 38.2% ratio and the 50% mean reversion mark is offering resistance:
GBP/JPY daily chart
The wicks of the 28 December and 3 January daily candlesticks align and offer values of liquidity below the 21-day EMA, reinforcing the resistance potential.
GBP/JPY H4 chart
The 4-hour chart shows that the price needs to get below 153.83 where the dynamic support of the counter-trendline and horizontal support meet. On the flip side, if the bulls commit and should the 50% mean reversion give way, then the 61.8% will be the last defence to a potential bullish daily and weekly continuaiton:
GBP/JPY weekly chart
The weekly chart is bullish and the price s testing the critical Fibonaccis. If the price holds the 21-week EMA, and the 4-hour chart's 61.8% gives, then this will be bullish for the outlook in weeks ahead.
- On Thursday, the Swiss franc collapsed almost 1%, as Fed policymakers eye the first rate hike in the March meeting.
- The US Dollar Index marches firmly above 97.00 for the first time since 2020.
- USD/CHF is upward biased, though a retracement before resuming the uptrend is on the cards.
During the North American session, the USD/CHF advances close to 1%, trading above 0.9300 for the first time since November 2021 highs. At the time of writing, the USD/CHF exchanges hands at 0.9312.
A risk-on market mood dented the prospects of the Swiss franc, which usually rallies on risk aversion. In the meantime, the US Dollar marches firmly throughout the session, with the US Dollar Index (DXY) advancing 1.23%, sitting at 97.131.
USD/CHF Price Forecast: Technical outlook
The USD/CHF is upward biased. On Wednesday, the pair broke resistance levels on its way towards 0.9300, like the 50 and 100-day moving averages (DMAs), lying at 0.9204 and 0.9212. Furthermore, it broke a downslope resistance trendline drawn from April – September 2021 cycle highs that pass around the 0.9300-05 area. However, due to the nature of the movement, a pullback towards the figure, or December 15, 2021, a daily high at 0.9294, is on the cards.
That said, the USD/CHF first support is 0.9300. A break of that level immediately suggests a test of December 15, 2021, high at 0.9294, followed by a January 26 daily high at 0.9246.
Contrarily, to the upside, the first resistance is November 2021 cycle high at 0.9373. A breach of the latter would expose the 0.9400 figure, followed by April 2021, swing highs at 0.9472.
- NZD/USD recently dipped below 0.6600 for the first time since early November 2020 as the pair maintains bearish momentum.
- It is now down more than 4.0% from its earlier monthly highs near 0.6900.
- Hawkish Fed vibes and strong US data have been driving the latest downside, with hot NZ CPI figures ignored.
NZD/USD has dipped below the 0.6600 level in recent trade for the first time since early November 2020, as the pair maintains bearish momentum courtesy of renewed USD strength following stronger than expected Q4 US GDP numbers released on Thursday. The latest drop comes after the pair reversed sharply lower from Wednesday highs above 0.6700 when Fed Chair Jerome Powell caught investors off guard with his more hawkish than expected tone in the post-Fed meeting press conference. Since then, the US dollar has strengthened across the board, with the bullish momentum carrying through to a second session. NZD/USD currently trades 0.8% lower on the day after Wednesday’s 0.5% loss, with on-the-week losses now about 1.7%.
Recent losses come following a torrid last few weeks for the kiwi. A reversal lower in global equities (the S&P 500 is roughly 9.0% lower versus monthly highs), a ramping up of Fed tightening bets and technical selling have seen the pair reverse more than 4.0% lower from monthly highs near 0.6900. Indeed, since posting annual highs on January 13, the pair has fallen in nine out of the last ten sessions. The losses really accelerated when NZD/USD broke to the south of its mid-December to mid-January upwards trend channel in the 0.6750 area on January 21. Most short-term bears will be targetting a test of the August/September 2020 lows in the 0.6500 area.
RBNZ hawkishness (the central bank has already hiked rates twice since October 2021, bringing rates to 0.75%) has been unable to shelter the kiwi from losses. That might explain why hotter than expected New Zealand Consumer Price Inflation figures for Q4 2021 (released early during Thursday’s Asia Pacific session) has been unable to offer NZD/USD a lift. For reference, CPI came in at 1.4% QoQ and 5.9% YoY, above the 1.3% and 5.7% expected.
Looking ahead to the rest of the week, though equity market sentiment has taken a turn for the better amid dip-buying, this has not yet come to the aid of risk-sensitive G10 currencies like the kiwi. Equities are likely to remain choppy for the rest of the week as investors digest Wednesday’s Fed meeting, which could keep NZD vulnerable. Otherwise, further bearish NZD/USD could come from Friday’s US Core PCE Inflation data for December, especially if it comes in hot and further pumps Fed tightening bets.
Analysts from Rabobank expect no surprises from the European Central Bank at its February meeting. They expect 2022 to bring a reversal of pandemic policies, but not a broader tightening of policy.
“The ECB has recovered some policy flexibility in December, but this comes at the cost of some uncertainty and continued market speculation that the ECB will hike rates sooner rather than later. We expect the ECB to stick to its script of transitory inflation, which means that 2022 should only see a reversal of pandemic-related tools, and not a broader withdrawal of monetary accommodation aimed at achieving the inflation goal.”
“While the outlook remains very fluid, we therefore believe that it takes a lot of stars to align before the ECB’s baseline is realised, let alone exceeded, in terms of wage-driven inflationary pressures. And downside risks remain abundant. Most notably, we believe that cost-push inflation could still have a detrimental impact on future consumption and hence medium-term inflation. And the geopolitical environment may further exacerbate the energy price shock, if tensions with Russia escalate.”
“Inflation is still more likely to nip demand in the bud before wage growth gets enough room to accelerate sharply. We therefore maintain our call that 2022 will only see the reversal of pandemic-specific stimulus measures and we do not expect the ECB to turn into a more general inflation hawk.”
Data released on Thursday, showed the US economy grew at a 6.9% annualized rate in the fourth quarter, surpassing gexpectetions. According to analysts at Wells Fargo, the details behind the better-than-expected headline point to a slowing in spending and a back-up in inventories. Without the boost from inventories, GDP would have been just 2.0% in Q4, they explained.
“It is tempting to celebrate a better-than-expected outturn with 6.9% GDP growth in the fourth quarter, but due to a confluence of factors we will not likely see that sort of growth again for some time. While to some extent the year-end surge was a function of steady consumer and business spending, both petered out at the end of the year as Omicron cases climbed and hospitalizations followed.”
“In the absence of that stimulus, consumer spending is poised to slow. We do not have a quarterly growth rate north of 3.0% for consumer spending throughout the rest of this year or next year. To the extent that there is good news in that, this will allow supply chains a chance to catch up”.
“The inventory build we saw in Q4 was an unhealthy one, and an argument could be made that it was unintentional. But a slower, sustained build in inventories over the next couple of years will not only underpin growth it will allow for a smoother, if somewhat slower expansion in the business sector.”
“The defining challenge for the economy in the next year or two will be how well we can sustain growth not just in the absence of fiscal policy, but in the face of tightening monetary policy.”
- US dollar holds onto daily gains across the board.
- EUR/USD heads for the lowest daily close since June 2020.
- US Q4 GDP comes above expectations, Jobless Claims slide and Durable Goods Orders decline more than expected.
After a brief recovery, the EUR/USD dropped to 1.1130, hitting a fresh multi-month low. It then rebounded again, finding resistance around 1.1160. The pair remains under pressure amid a broad-based strong US Dollar.
The greenback strengthened sharply after the FOMC meeting. “Fed Chair Jerome Powell was quite hawkish during the press conference, which drove US yields higher, EUR/USD lower and US equities lower. We continue to see EUR/USD at 1.08 and expect dollar strength to broaden against other currencies during H1”, considered analysts at Danske Bank.
Economic data in the US came in mixed on Thursday. The first reading of Q4 US GDP showed activity expanded at a 6.9% annualized rate, above the 5.5% of market consensus. Initial Jobless Claims dropped to 260K in line with expectations. Durable Goods Orders dropped 0.9% in December (vs the 0.6% slide expected). Pending Home Sales fell 3.8% in December.
The economic figures have no impact on price actions as market participants continue to digest the FOMC meeting. The dollar remains firm even as US yields decline and stocks rebound on Thursday.
The EUR/USD is about to post the lowest daily close since June 2020. Despite falling 150 pips during the last 24 hours and showing oversold readings, no signs of a correction or stabilization are seen at the moment. Under 1.1130, the next support might be seen at 1.1105.
- Silver plummets on the back of Fed’s Chairman Powell, saying that the “committee” could raise rates in the March meeting.
- On Wednesday, the US central bank kept rates unchanged and mentioned that QT would begin after the bank started its hiking cycle.
- XAG/USD is heavily downward pressured, approaching an upslope trendline that might give way towards $21.94.
Silver (XAG/USD) slides sharply on Thursday, after the Federal Reserve’s first monetary policy meeting, left open the door for a rate hike in March, as Fed’s Chairman Jerome Powell mentioned. At the time of writing, XAG/USD is trading at $22.58, down more than 3.97%.
The market sentiment remains positive, as portrayed by European and US equities climbing. In the meantime, the US Dollar Index, a measurement of the greenback value against six peers, advances 1.33%, sitting at 97.224, its highest level since July 2020.
On Wednesday, the US central bank held its first monetary policy meeting of 2022. Fed policymakers agreed to keep rates unchanged at the 0 to 0.25% range. Policymakers commented that inflation reflects “supply and demand imbalances related to the pandemic and the reopening of the US economy.” Furthermore, the balance sheet reduction will begin as soon as the central bank hikes rates.
Chairman Powell hit the stage following the Fed’s monetary policy statement release. He said that “…the committee is of a mind to raise the federal funds rate at the March meeting assuming that the conditions are appropriate for doing so.”
The US economic docket featured Initial Jobless Claims for the week ending on January 22, fell to 260K from 286K in the previous week, showing the labor market’s resilience after two consecutive weeks of increases. Meanwhile, the Gross Domestic Product (GDP) for Q4 rose by 6.9%, crushing 5.5% expectations.
XAG/USD Price Forecast: Technical outlook
Silver (XAG/USD) is under “heavy” downward pressure, breaking previous support levels, like the 100 and the 50-day moving averages (DMAs), lying at $23.25 and $23.00, respectively. That exposed an upslope trendline, drawn from December 2021 lows up to January ones, which lies around $22.35-50 area. In the event of a test of the latter, that would send XAG/USD tumbling towards January 7 cycle low at $21.94, followed by December 2021 lows at $21.42.
Economists at Rabobank have significant doubts over market expectations that the Bank of England (BoE) is likely to hike rates at an aggressive pace this year. Therefore, they expect the GBP/USD to dive below the 1.30 level by mid-year.
The BoE will struggle to tighten policy further this year
“On the assumption that the government does proceed with the announced hike in National Insurance tax in April, we see a risk that the market will unwind some of its assumption on BoE rates and this could leave the pound vulnerable in the spring and early summer.”
“Given our view that the USD will be buoyed as Fed tightened commences, we see risk that cable could dip below the 1.30 level in the middle of the year.”
- US dollar remains strong across the board following Fed’s meeting.
- Mexican peso under pressure amid risk aversion.
- USD/MXN bullish, next resistance at 20.85.
The USD/MXN soared to 20.80, reaching the highest level in five weeks earlier on Thursday, boosted by a stronger US dollar across the board. The greenback is rising sharply on the back monetary policy expectations from the US.
On Wednesday, the Fed opened the doors to rate hike in March and more during the next year. The more “hawkish” than expected tone from Chair Powell triggered sharp moves and hit emerging market currencies. So far, the Mexican peso is not the most affected. The positive tone in Wall Street with the Dow Jones up by 0.98% is helping the MXN.
The fundamental perspective supports the dollar with US yields moving to the upside, and a caution tone prevailing in global equity markets. The Bank of Mexico is expected to hike rates again offsetting somewhat Fed’s boost to the USD/MXN.
From a technical perspective, the bias in USD/MXN points to the upside. A break under 20.60 (uptrend line) should alleviate the bullish tone. The next support stands at 20.52, followed by 20.40. The 20.85/90 barrier is a strong area that if broken, would clear the way for a return above 21.00.
- WTI hit fresh multi-year highs above $88.00 per barrel recently, breaking above last week’s highs.
- Profit-taking has since seen WTI drop back into the mid-$86.00s, but oil holds onto decent on the week gains.
- Positive risk appetite and ongoing geopolitical and OPEC+ supply concerns are an ongoing source of support that might limit downside.
Crude oil prices have been on the back foot in recent trade amid profit-taking after they plowed to fresh multi-year highs. Front-month WTI futures surpassed the $88.00 level for the first time since October 2014 in the last few hours, finally managing to surpass last week’s highs just under $88.00 after failing on Wednesday in wake of the hawkish Fed meeting. However, profit-taking in the last few minutes has seen WTI give up its earlier session gains and slip back into the mid-$86.00s, where it trades down by slightly more than 50 cents on the day. At current levels near-$86.50, oil is trading well within recent intra-day ranges and still holds onto gains of about $1.75 on the week and is more than $4.50 up from earlier weekly lows.
Risk appetite has broadly taken a turn for the better on Thursday, with the S&P 500 up about 1.5% on the session, which (prior to the profit-taking) had been offering some support to crude oil prices. Meanwhile, according to market commentators and analysts, ongoing OPEC+ supply concerns and the tense geopolitical backdrop continue to offer support to the oil complex. After the US and NATO issued a formal response to Russian security requests (essentially rejecting demands to rule out Ukraine ever joining NATO and reduce their Eastern European military presence), global markets await Russia’s next move.
According to Reuters, tensions between NATO/Russia/Ukraine have been “fanning fears of disruption of energy supplies to Europe”. “A more pronounced price slide is being prevented by the Ukraine crisis, as there are still concerns that Russian oil and gas deliveries could be hampered in the event of a military escalation,” analysts at Commerzbank said. Meanwhile, oil market analysts remain concerned about the struggles faced by smaller OPEC+ producers in lifting oil output. Sources have indicated the cartel plans to hike output again in March by 400K barrels per day. OPEC+ supply and geopolitical concerns shielded oil prices this week from bearish US inventory data, which showed a surprise 2.4M barrel inventory build last week.
- Pending Home Sales saw a larger than expected 3.8% MoM drop in December.
- There was no discernable immediate market reaction to the data.
Pending Home Sales in the US fell by 3.8% on a monthly basis in December following November's 2.3% decline (revised lower from a 2.2% decline), data published by the US National Association of Realtors showed on Thursday. That was well below expectations for a decline of 0.2% MoM. The Pending Home Sales Index fell to 117.7 in December from 122.3 (downwardly revised from 122.4) in November.
There was no discernable immediate market reaction to the data.
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