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US stocks declined sharply on Wednesday, suffering heavy daily losses, and were dragged lower by a selloff in tech stocks as Federal Reserve speakers reinforced the idea that interest rates will need to keep climbing to quash inflation.
Fed Governor Christopher Waller teased a long fight with a 2.0% inflation target by citing expectations of tighter monetary policy for longer than expected. Meanwhile, Governor Lisa Cook also said that the central bank remains focused on restoring price stability, as inflation is still running too high. Therefore, hawkish comments from the US policymakers provided support to the US Dollar and exerted bearish pressure on the equity markets.
On top of that, the mixed concerns surrounding the latest geopolitical tension between the US also acted as a tailwind for the greenback. On the Eurozone front, European Central Bank policymaker Klaas Knot said that headline inflation appears to have peaked but added that keeping the current pace of hikes into May could well be needed if underlying inflation does not materially abate.
The benchmarks, S&P 500 and Dow Jones Industrial Average both declined lower on Wednesday as the S&P 500 almost wiped out its previous session’s rally amid hawkish comments from the US policymakers. The S&P 500 was down 1.1% daily and the Dow Jones Industrial Average also dropped slightly with a 0.6% loss for the day.
All eleven sectors in S&P 500 stayed in negative territory as the Communication Services sector and the utility sector are the worst performing among all groups, losing 4.13% and 1.71%, respectively. The Nasdaq 100 meanwhile retreated the most with a 1.8% loss on Monday and the MSCI World index was down 0.5% for the day.
Main Pairs Movement
The US dollar advanced higher on Wednesday, rebounding from a daily low, and held onto its recovery moves towards the 103.50 level amid hawkish Federal Reserve comments. The Fed officials including Chairman Jerome Powell renewed inflation fears and allowed the US Dollar Index (DXY) to regain upside momentum. However, receding woes of the US-China ties and a light calendar might limit the upside for the US Dollar.
GBP/USD advanced higher on Wednesday with a 0.20% gain after the cable struggled to maintain its feet and gradually dropped to the 1.2060 area amid the souring market mood. On the UK front, the UK GDP is expected to display a flat performance every quarter on Friday. Meanwhile, EUR/USD also remained under pressure around the 1.0710 area amid a modest US Dollar comeback. The pair was down almost 0.13% for the day.
Gold advanced slightly with a 0.13% gain for the day after touching a daily high at $1886 during the European trading session, as the statements highlighting inflation fears from the US diplomats weighed on the yellow metal. Meanwhile, WTI Oil rebounded higher with a 1.74% gain for the day. The solid China recovery is expected to keep the oil price in bullish territory.
Technical Analysis
EURUSD (4-Hour Chart)
The EURUSD erased daily gains and was trading below 1.0730 as of writing. The EUR/USD pair hover around 1.0740 on Wednesday, consolidating after Tuesday’s Federal Reserve (Fed) chief Jerome Powell turmoil in markets. The head of the American central bank participated in a moderated discussion at the Economic Club of Washington, DC, providing some interesting headlines. The macroeconomic calendar has no relevant data scheduled for today. A couple of Federal Reserve officials are scheduled to speak during the American afternoon.
From the technical perspective, the four-hour scale RSI indicator climbed to 42 as of writing, suggesting that the pair’s negative traction has weakened. As for the Bollinger Bands, the pair continued to wander below the 20-period moving average, showing that the EURUSD remained defensive at the moment of writing.
Resistance: 1.0930, 1.1025
Support: 1.0664, 1.0508
GBPUSD (4-Hour Chart)
The GBPUSD has failed to stabilize above 1.2100 and erased a portion of its daily gains. The US Dollar preserves its strength amid the souring market sentiment and makes it difficult for the pair to gather recovery momentum. Late Tuesday, FOMC Chairman Jerome Powell also acknowledged the strong labor market data and reiterated that they will probably need to do further rate hikes. In an optimistic tone, Powell said that he was expecting 2023 to be “a year of the significant decline in inflation.” This comment made it difficult for the US Dollar Index to preserve its bullish momentum and helped GBP/USD erase some of this week’s losses. Currently, the CME Group FedWatch Tool shows that markets are pricing in a 68% probability of the Fed opting for two more 25 basis points rate increases in March and May. The market positioning is unlikely to change significantly ahead of next week’s inflation report.
From the technical perspective, the four-hour scale RSI indicator recovered to 46 at the moment of writing, suggesting that the pair now have no decisive direction. As for the Bollinger Bands, the pair was breaking through the 20-period moving average to the upper area and the size between the upper and lower bands got smaller, signaling that the pair was within the consolidation phase.
Resistance: 1.2264, 1.2391, 1.2492
Support: 1.1924, 1.1859
XAUUSD (4-Hour Chart)
Gold price stays around $1,870, unable to gain traction on Wednesday amid the absence of a fresh catalyst. Market participants lack of consensus so far from US Federal Reserve (Fed) Chair Jerome Powell’s speech on Tuesday. Powell repeated that they were determined to control inflation and would continue tightening the monetary policy by hiking rates. On the other hand, he also stated that the disinflationary process has begun. At the time of writing, the Gold price is trading at $1,877.26, posting a 0.3% gain daily. The US dollar index rose 0.03% to 103.370 and the benchmark US 10 Year Treasury Yield declined 0.65% to 3.653, having no clear traction on Gold price.
For the technical aspect, RSI indicator 43 figures as of writing, signaling no clear traction as the RSI indicator has no significant movement in the near term. As for the Bollinger Bands, the price is holding around the downward moving average. The bearish trend could persist. In conclusion, we think the market is in modest bearish mode though both indicators show no strong bearish potential. The downtrend from last week should persist until further breakthrough. For the downtrend scenario, the price is currently holding above support at $1,860. If the price drops below the current support, it may trigger some technical selling and drag the price deeper. For the uptrend scenario, the price must hold above $1,860 and break through the resistance at the round-figure mark of $1,900 to confirm the uptrend.
Federal Reserve Chairman Bill Powell said Tuesday that inflation is in the very early stages of easing, which may be a long process, the process may be bumpy, and must keep interest rates at restrictive levels for some time. In the job market, Bauer said that if the strong employment data continues, further interest rate increases will be needed to cool inflation, and borrowing costs may have to reach a peak higher than previously estimated by the Fed.
The Fed’s inflation target is 2%, but several indicators show that the inflation rate is much higher than this target. The U.S. non-farm payrolls report for January released last week showed that 517,000 people were added to the workforce, far exceeding the market’s expectations of 185,000, and the unemployment rate also set a new 53-year low of 3.4%.
Dow ends higher as Powell offers limited new clues on policy. The Dow Jones Industrial Average gained 0.78% or 265 points, the S&P 500 rose 1.3%, and the Nasdaq jumped 1.9%.
On the other hand, the U.S. 10-year bond yield surged to 3.66% and the U.S. Dollar Index rose to 103.53. The U.S. Dollar Index was nearing 104 before Bauer’s remarks, setting a new high for the second day in a row since Jan. 6 and rising more than 0.3% during the day.
Main Pairs Movement
The US dollar retreated lower on Tuesday, extending its February rally throughout the first half of the day but failed to preserve upside traction amid mixed comments from the Federal Reserve (Fed) officials. Fed Chairman Jerome Powell said that he expects 2023 to be a year of significant declines in inflation and added that the central bank would certainly raise rates more if data were to continue to come in stronger than expected. Therefore, the US Dollar fell as Wall Street soared as an immediate reaction.
GBP/USD advanced higher on Tuesday with a 0.24% gain after the cable regained upside strength and rebounded towards the 1.2080 mark amid the fresh optimism surrounding the UK Prime Minister Rishi Sunak’s Cabinet reshuffle. On the UK front, Sunak broke the British Cabinet into two departments to justify his pledge to bolster the economy. Meanwhile, EUR/USD was nothing changed and stabilized above 1.0720 despite hawkish Fed commentary.
Gold advanced slightly with a 0.30% gain for the day after climbing to a daily high above $1880 during the US trading session, as market sentiment stays sluggish amid mixed signals from the Federal Reserve and the geopolitical front. Meanwhile, WTI Oil advanced sharply with a 4.09% gain for the day as the US Dollar weakens on soft US Fed Powell remarks.
Technical Analysis
EURUSD (4-Hour Chart)
The EURUSD has lost its traction and dropped to its lowest level in nearly a month below 1.0700 following a quiet European morning. Ahead of FOMC Chairman Jerome Powell’s speech, the US Dollar preserves its strength on hawkish Fedspeak and weighs on the pair. The EURUSD pair extended its slide to a fresh three-week low at 1.0969, as demand for the US Dollar prevails ahead of the United State Federal Reserve (Fed) President Jerome Powell’s speech. Market participants are still pricing in the latest central bank decisions and the solid employment report published last Friday, both suggesting the Federal Reserve would maintain the tightening course. Chair Powell is due to participate in a moderated discussion at the Economic Club of Washington DC after Wall Street’s opening and may provide a clue about monetary policy.
From a technical perspective, the four-hour scale RSI indicator remained around the 30 levels, suggesting that the pair were surrounded by heavy bearish pressure and investors should be aware of any sign of a dramatic rebound. As for the Bollinger Bands, the pair kept pricing at the lower area, but the size between the upper and lower bands got lower, which indicates that the pair’s downside momentum has been slowdown. We think the pair is more favored for the downside path in the short term, but a critical rebound is not far away.
Resistance: 1.0747, 1.0930, 1.1022
Support: 1.0661, 1.0508
GBPUSD (4-Hour Chart)
The GBPUSD managed to rebound above the 1.2000 level at the moment of writing, erasing its most daily losses. As investors await FOMC Chairman Jerome Powell’s speech, the US Dollar was moving in a volatile path and struggling to preserve its strength as of writing. However, it is too early to say whether Pound Sterling is out of the woods as investors are unlikely to bet on an extended recovery ahead of FOMC Chairman Jerome Powell’s highly-anticipated speech. In the Eurozone, news of EU and UK negotiators have made a breakthrough in the Nothern Ireland Protocol helped Pound Sterling stay resilient against its rivals. Additionally, Bank of England (BoE) Chief Economist Huw Pill noted that they were ready to do more to get inflation back to target, providing a boost for the GBPUSD pair.
From a technical perspective, the four-hour scale RSI indicator rebounded to 33 as of writing, suggesting that the pair was amid strong recovery strength. As for the Bollinger Bands, the pair was pricing below the 20-period moving average and the gap size became smaller, which is a sign that the pair’s negative traction has been softer. The pair now is waiting for a critical move to decide the near-future direction.
Resistance: 1.2265, 1.2397, 1.2492
Support: 1.1927, 1.1854
XAUUSD (4-Hour Chart)
Gold prices were volatile on US Federal Reserve (Fed) Chairman Jerome Powell’s speech. Earlier, the Gold price surged to its highest $1,884.37, and pullback from then as the US dollar regather strength. Federal Reserve Chair Jerome Powell on Tuesday reiterated that continued interest-rate increases will be appropriate and that the “disinflationary process” has begun. The gold prices rose following Powell’s comments that inflation was on the decline. Aftermarket participants reassess the comments and the US dollar regathers strength and Gold price pullback. At the time of writing, the Gold price is trading at $1,872.82, posting a 0.25% gain daily.
For the technical aspect, RSI indicator 39 figures as of writing, slightly holding above the 30 lines as the price established itself above $1,860 from the sharp decline last week. As for the Bollinger Bands, the price is moving between the downward moving average and the lower band. The bearish trend could persist. In conclusion, we think the market is in bearish mode as both indicators show bearish potential. For the downtrend scenario, the price is currently holding above support at $1,860, which seems unstable for now. If the price drops below the current support, it may trigger some technical selling and drag the price deeper. For the uptrend scenario, the price must hold above $1,860 and break through the resistance at the round-figure mark of $1,900 to confirm the uptrend.
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US stocks declined lower on Monday, extending their previous slide, and continued to give back some of this year’s gains amid a dismal market mood. Hawkish Fed bets underpin the US Treasury bond yields and US Dollar, which exerted bearish pressure on equity markets. Meanwhile, traders are waiting to see if Jerome Powell will dampen the bullish reaction to his recent remarks as the Federal Reserve keeps its firm grip on policy. Policymakers from the US appear optimistic about the economic transition after witnessing strong United States employment and activity data on Friday.
On top of that, the political tensions between US and China weighed on the market mood, further fueling demand for the safe-haven US Dollar. On the Eurozone front, European Central Bank (ECB) ’s Robert Holtzmann said that monetary policy must continue to show its teeth until we see a credible convergence to our inflation target.
The benchmarks, S&P 500 and Dow Jones Industrial Average both declined lower on Monday as the S&P 500 remained under pressure as China-linked fears join fresh hawkish concerns over Fed. The S&P 500 was down 0.6% daily and the Dow Jones Industrial Average also dropped slightly with a 0.1% loss for the day.
Nine out of eleven sectors in the S&P 500 stayed in negative territory as the Communication Services sector and the Information Technology sector are the worst performing among all groups, losing 1.31% and 1.22%, respectively. The Nasdaq 100 meanwhile retreated the most with a 0.9% loss on Monday and the MSCI World index was down 1.1% for the day.
Main Pairs Movement
The US dollar advanced higher on Monday, extending its last Friday rally, and climbed to fresh February highs against most major rivals near the 103.70 level amid a risk-averse environment. The upbeat economic report from the US fueled speculation that the US Federal Reserve (Fed) will keep tightening its monetary policy while chances of a rate cut by year-end decreased sharply. Further fueling the dismal mood were mounting tensions between the United States and China.
GBP/USD declined lower on Monday with a 0.31% loss after the cable preserved downside traction and refreshed its daily low below the 1.2020 mark amid a dismal market mood. On the UK front, the Bank of England Chief Economist Huw Pill said that UK policymakers are prepared to do more to get inflation back to target. Meanwhile, EUR/USD also stumbled to multi-week lows at around the 1.0720 area amid US Dollar strength. The pair was down almost 0.65% for the day.
Gold advanced slightly with a 0.13% gain for the day after rebounding from a one-month low at $1864 during the US trading session, but the recent hawkish bias over the Fed’s next move should keep the Gold sellers hopeful. Meanwhile, WTI Oil rebounded higher with a 1.42% gain for the day. WTI posted a modest intraday advance and settled at $74.30.
Technical Analysis
EURUSD (4-Hour Chart)
The EURUSD came under renewed bearish pressure and declined to its lowest level in nearly a month below 1.0737 as of writing. The risk-averse market environment, as reflected by the sharp decline seen in Wall Street’s main indexes, provides a boost to the US Dollar and weighs on the pair. Risk aversion dominates financial markets at the beginning of the new week, pushing the US Dollar further up across the FX board. The upbeat January Nonfarm Payrolls report showed that the US added 517K new job positions in the month, more than doubling expectations, while the Unemployment Rate contracted to 3.4%, despite an increase in the Labor Force Participation Rate to 62.4%. The mounting speculation that the US Federal Reserve will continue to hike rates in the upcoming months not only diminished the chances of a rate cut by year-end, but pressured the EURUSD pair.
From the technical perspective, the four-hour scale RSI indicator figured 28 as of writing, suggesting that the pair was under heavy selling pressure. As for the Bollinger Bands, the pair is pricing below the 20-period moving average and the gap between upper and lower bands became larger, indicating that the pair would move in a volatile path.
Resistance: 1.0930, 1.1022
Support: 1.0714, 1.0662, 1.0508
GBPUSD (4-Hour Chart)
GBPUSD lost upside traction and turned south on the day and was pricing around 1.2009 as of writing. With major indexes opening deep in the red on Monday, the US Dollar continues to gather strength against its rivals and forces the pair to stay on the back foot. Last Friday, the US Nonfarm Payrolls rose by 517K in January, compared to the market expectation of 185K, and the Unemployment Rate declined to 3.4% from 3.5% in December. The impressive job report forced investors to reassess the probability of one more 25 basis points Federal Reserve rate hike in May and helped the US Dollar outperform its rivals. At the same time, the benchmark 10-year US Treasury bond yield climbed toward 3.6, further boosting the greenback.
From the technical perspective, the four-hour scale indicator RSI indicator figured 25 at the time of writing, suggesting that investors should be aware of a corrective rebound while the market was amid a strong oversold mood. As for the Bollinger Bands, the pair was pricing along with the lower band and the gap size got wider, indicating that the strong selling pressure would persist for a while.
Resistance: 1.2265, 1.2401, 1.2493
Support: 1.1924, 1.1859
XAUUSD (4-Hour Chart)
Gold price remains under selling pressure on Monday. Earlier in the European trading session, the Gold price peaked at $1,881.30, and the price resumed to decline amid the broad US Dollar demand from then. The US dollar extends its post-NFP advance on the speculation that the Fed will keep hiking rates for some time, while the chances for a year-end rate cut are reduced. The US dollar index is currently placed at 103.68, while the benchmark 10-year US Treasury bond yield rose 3.06% to 3.634%, weighing on Gold price. At the time of writing, the pair is trading at $1,867.43, posting a 0.09% gain daily.
For the technical aspect, the RSI indicator is 32 figures as of writing, hovering around 30 as the price remains under selling pressure in the near term. As for the Bollinger Bands, the price is moving between the downward moving average and the lower band. The bearish trend could persist. On the other hand, the wide-separated bandwidth shows the huge volatility of Gold price may be. Traders should be aware of the upside correction risk. In conclusion, we think the market is in bearish mode as both indicators show bearish potential. A failure to defend the critical support at $1,900 suggests that the bulls have surrendered. The price is currently holding above support at $1,860, which seems unstable for now. If the price drops below the current support, it may trigger some technical selling and drag the price deeper.
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The upcoming week will bring much anticipation for the financial community as the Reserve Bank of Australia (RBA) is set to announce its latest monetary policy decision. The central bank has been on a streak of consecutive rate hikes, but speculation has been brewing about whether or not it will continue this trend.
With the economy showing signs of growth and inflation pressures on the rise, many are asking: will the RBA raise rates this month?
Here are the key market events for the week ahead:
RBA Rate Statement (7 February)
The RBA raised the cash rate by 25bps to 3.1% in its last meeting of 2022, its eighth consecutive hike.
Analysts anticipate RBA to increase rates by 20bps to 3.3% this month.
UK Monthly Gross Domestic Product (GDP) (10 February)
The British economy saw a growth of 0.1% in November, a decrease from October’s 0.5%.
Analysts predict a 0.1% decrease in the UK (GDP) for December 2022.
Canada Employment Change (10 February)
The Canadian economy saw the creation of 104,000 jobs in December 2022, with an unemployment rate of 5%, the lowest since hitting a record-low of 4.9% in June and July. The unemployment rate dropped from 5.1% in November.
Analysts forecast a smaller increase of 15,000 jobs in January and a slightly higher unemployment rate of 5.2%.
US Prelim University of Michigan Consumer Sentiment (10 February)
The University of Michigan consumer sentiment for the US was revised upward to 64.9 in January 2023, the highest it has been since April 2022, from a preliminary reading of 64.6.
Analysts anticipate the data to be around 65 for this month.
US stocks declined lower last Friday, posting weekly gains but ended its three-day advance after a volatile Friday session as investors contended with data pointing to a robust labor market.
On Friday, the US Bureau of Labor Statistics (BLS) surprised markets by revealing that the Nonfarm Payrolls (NFP) rose by 517K in January, which came much higher than the markets’ expectation of 185K. Moreover, the Unemployment Rate also dropped to 3.4% from 3.5% prior.
The figure strong US economic figure renewed inflation fears and favored the odds of further rate increases from the Fed. Meanwhile, yields on Treasuries also spiked higher after a surprisingly strong jobs report that should give the Fed room to remain aggressive if inflation stays elevated, sending the US Dollar to rose the most on Friday since late September.
On the Eurozone front, European Central Bank (ECB) President Christine Lagarde signaled that the risks to inflation and growth are more balanced after the bank announced a 0.50% interest rate hike last week by matching the market expectations.
The benchmarks, S&P 500 and Dow Jones Industrial Average both declined lower last Friday but the S&P 500 still notched a weekly gain that took the index to its highest level since August as equities swerve between modest gains and losses. The S&P 500 was down 1.0% daily and the Dow Jones Industrial Average also dropped slightly with a 0.4% loss for the day. All eleven sectors in S&P 500 stayed in negative territory as the Consumer Discretionary sector and the Communication Services sector are the worst performing among all groups, losing 3.11% and 2.22%, respectively. The Nasdaq 100 meanwhile retreated the most with a 1.8% loss last Friday and the MSCI World index was up 1.2% for the day.
Main Pairs Movement
The US dollar advanced sharply last Friday, gathering upside strength during the US trading session, and rose to a new three-week high around the 103.00 mark after a surprisingly strong jobs report from the United States. Investors’ sentiment turned sour as January’s Nonfarm Payrolls report increased speculations that the Fed could raise rates back above Wednesday’s 25 basis points mark.
GBP/USD plunged lower last Friday with a 1.42% loss after the cable witnessed heavy selling and dropped sharply towards the 1.2100 mark after robust US economic data. On the UK front, the Bank of England (BoE) announced a 0.50% interest rate hike by matching the market expectations. Meanwhile, EUR/USD also suffered from heavy losses and collapsed to new 2-week lows near the 1.0800 level amid downbeat market sentiment. The pair was down almost 1.07% for the day.
Gold tumbled sharply with a 2.45% loss for the day after dropping from daily highs at $1918 and collapsing toward the $1870 area during the US trading session, as the US Nonfarm Payrolls report showed that more jobs were added to the economy than expected. Meanwhile, WTI Oil dropped sharply with a 3.53% loss for the day. The US crude oil failed to preserve its upside strength that due to a surprising report from the US Department of Labor.
Technical Analysis
EURUSD (4-Hour Chart)
The EUR/USD pair declined lower on Friday, reversing its initial gains, and retreated sharply towards the 1.0850 level after the release of a solid January US job report. The pair is now trading at 1.0859, posting a 0.46% loss daily. EUR/USD stays in the negative territory amid renewed US Dollar strength, as the greenback was lifted by a surprisingly upbeat US Nonfarm Payrolls report and reached a new two-week high at 102.63 level. The report showed that US Nonfarm Payrolls rise by 517,000 in January, which came in much higher than the market expectation of 185,000. The US labor market shows no signs of weakness so far, therefore further Fed action is expected. In the Eurozone, ECB President Christine Lagarde refrained from committing to any move about the possibility of additional rate actions after March, which is acting as a headwind for the shared currency.
For the technical aspect, RSI indicator 41 figures as of writing, suggesting that the risk skews to the upside as the RSI is recovering towards the mid-line. As for the Bollinger Bands, the price failed to preserve its downside momentum and rebounded slightly higher, therefore some upside movements can be expected. In conclusion, we think the market will be bullish as long as the 1.0830 support line holds. On the downside, a break below that support could bring in additional sellers and open the door for an extended slide toward 1.0780.
Resistance: 1.0930, 1.1020
Support: 1.0830, 1.0780, 1.0722
GBPUSD (4-Hour Chart)
GBP/USD dropped sharply to the 1.2100 area after US Nonfarm Payrolls and January Unemployment Rate was released on Friday. The US Bureau of Labor Statistics revealed that Nonfarm Payrolls rose by 517K in January, much higher than the 185K expected. The unemployment rate dropped to 3.4% with the expectation of 3.6%. The US Dollar rose sharply across the board after the report, currently at 102.90, while the benchmark 10-year US Treasury bond yield rose 3.65% to 3.519, exerting heavy pressure on GBP/USD. At the time of writing, the pair is trading at 1.2061, posting a 1.33% loss daily.
For the technical aspect, RSI indicator 23 figures as of writing, placed in the oversold zone as the price is staging strong downward movement in the near term. Though the indicator shows strong bearish momentum, traders should be aware of upside correction risk as the RSI indicator is placed in an oversold zone. As for the Bollinger Bands, the expansion of the bandwidth implies enormous volatility in prices, which also suggests correction risk. In conclusion, we think the market is in bearish mode as both indicators show bearish potential. The recent below 1.2200 area constitutes the formation of a bearish top pattern on the daily chart, which favors a bearish trend. That said, there is a correction risk as GBP/USD dropped sharply in the short term. For the downtrend scenario, if the price drop below 1.2000, it may trigger some follow-through selling and drag the pair further toward the next support at 1.1860.
Resistance: 1.2270, 1.2426, 1.2493
Support: 1.2000, 1.186
XAUUSD (4-Hour Chart)
Gold price extended its slide from the previous day and touched its lowest level since January 10 below $1,870 on Friday as US Nonfarm Payrolls and January Unemployment Rate surpass the expectation. The US Bureau of Labor Statistics revealed that Nonfarm Payrolls rose by 517K in January, much higher than the 185K expected. The unemployment rate dropped to 3.4% with the expectation of 3.6%. The US labor market shows no signs of weakness, therefore further action from Fed is expected. The US Dollar rose sharply across the board after the report, currently at 102.94, while the benchmark 10-year US Treasury bond yield rose 4.04% to 3.532, exerting heavy pressure on Gold prices. At the time of writing, the pair is trading at $1,865, posting a 2.47% loss daily.
For the technical aspect, RSI indicator 26 figures as of writing, placed in the oversold zone as the price is staging strong downward movement in the near term. Though the indicator shows strong bearish momentum, traders should be aware of upside correction risk as the RSI indicator is placed in an oversold zone. As for the Bollinger Bands, the expansion of the bandwidth implies enormous volatility in prices. An upside correction could occur as the indicator shows high volatility and the price drop sharply. In conclusion, we think the market is in bearish mode as both hands show bearish potential. A failure to defend the critical support at $1,900 suggests that the bulls have surrendered. The selling pressure that comes from buyers could drag Gold’s price further.
The Nasdaq and S&P 500 indexes closed higher and hit roughly five-month highs on Thursday (Feb. 2), as a more dovish-than-expected message from Fed Chairman Jerome Powell boosted stocks and Meta Platforms shares surged on tight cost controls.
The S&P 500 rose 1.47% to 4,179.76, its highest level since August. Meanwhile, the technology-focused Nasdaq Composite Index rose 3.25% to 12,200.82, its highest level since September. The Dow Jones Industrial Average underperformed, falling 39.02 points, or 0.11%, to 34,053.94.
On Wednesday, investors are still digesting the Fed’s policy decision and comments from Powell, who acknowledged progress in fighting inflation and seemed reluctant to stop the rally in stocks and bonds.
Data showed that initial jobless claims fell to a nine-month low last week, underscoring the resilience of the labor market, with monthly employment data due out Friday.
The 50-day moving average of the S&P 500 broke above its 200-day moving average, a pattern known as a “golden cross” that many see as a bullish technical signal for near-term momentum. The energy sector was one of the top performers last year, down 2.5%, while the healthcare sector was down 0.7%.
Main Pairs Movement
The greenback, in terms of the USD Index, adds to the weekly leg lower and breaks below the 101.00 support to print new 10-month lows on Thursday. However, the price started to return to the north during the Asia trading session. At the time of writing, trading at 101.73.
EUR/USD pair is displaying a back-and-forth action around 1.0900 after a pullback move from 1.0885 in the early Asian session. The major currency pair has turned sideways ahead of the United States Nonfarm Payrolls data, which will release on Friday. At the time of writing, trading at 1.8993.
GBP/USD sees a further downside near 1.2200 as anxiety soars ahead of US NFP. At the time of writing, trading at 1.22160.
Gold price nosedived to near 1,912.00 after a blockbuster recovery move from the DXY on Thursday. The precious metal is staring at the round-level resistance of 1,900.00 as further downside looks possible ahead of the NFP data. At the time of writing, trading at 1916.40
Technical Analysis
EURUSD (4-Hour Chart)
The EUR/USD pair declined lower on Thursday, coming under renewed bearish pressure, and declined below the 1.0900 mark after the European Central Bank’s interest rate decision. The pair is now trading at 1.0914, posting a 0.67% loss daily. EUR/USD stays in the negative territory amid recovering the US Dollar across the board, as the greenback was bolstered by the market’s reaction to the BoE’s and ECB’s decisions and trimming some of its losses towards the 101.8 area. The US Federal Reserve lifted rates yesterday but sounded dovish, as Fed chair Powell said the disinflation process has started. In the Eurozone, the European Central Bank has decided to raise interest rates by 50 basis points as broadly expected. Still, ECB President Christine Lagarde refrained from committing to additional rate hikes after March, which caused the Euro to lose strength. The decision on future rate raises will remain data-dependent and in a meeting-by-meeting approach.
For the technical aspect, RSI indicator 51 figures as of writing, suggesting that the risk skews to the downside as the RSI is falling sharply towards 50. As for the Bollinger Bands, the price witness heavy selling and retreated from the upper band, therefore a downside trend continuation can be expected. In conclusion, we think the market will be bearish as the pair is now testing the 1.0918 support level. Technical indicators also retreated from overbought conditions and headed to negative territory, which reflects bear signals.
Resistance: 1.1020, 1.1092, 1.1131
Support: 1.0918, 1.0830, 1.0780
GBPUSD (4-Hour Chart)
GBP/USD tumbled to multi-week lows near 1.2250 on Thursday. GBP/USD failed to benefit from the Bank of England’s decision to raise the Bank Rate by 50 bps to the 4% threshold. The pair dropped after the Bank of England lifted rates and gave no signals for further increases. Governor Bailey’s optimistic comments on the inflation outlook seem to be weighing on the pair. At the time of writing, GBP/USD is trading at 1.2244, posting a 1.04% loss daily, while the US dollar index recover part of its loss from yesterday, posting a 0.46% daily gain.
For the technical aspect, RSI indicator 34 figures as of writing, sharply falling through mid-line and currently placed in the bearish region. A downtrend movement could persist. As for the Bollinger Bands, the price dropped through the downward moving average and holds around the lower band now, signaling the downtrend and strong bearish momentum in the near term. In conclusion, we think the market is in bearish mode as both indicators show bearish potential—the price dropped below the previous support at 1.2292. A break out of the previous consolidation range suggests that the bulls have surrendered and the pair could see fresh follow-through selling, dragging GBP/USD down further. For the downtrend scenario, if the price drop below 1.2188, it may head to test the next support at the round-figure mark at 1.2000.
Resistance: 1.2426, 1.2493, 1.2593
Support: 1.2188, 1.2000, 1.186
XAUUSD (4-Hour Chart)
The gold price hit $1,959, the highest level since mid-April, on Thursday and then dropped sharply in the second half of the day, losing all post-FOMC gains. The dollar index recovers part of its loss after having suffered heavy losses late Wednesday, weighting on Gold price. At the time of writing, Gold price is trading at $1,913.33, posting a 1.89% loss daily, while the US dollar index rises to 101.71, posting a 0.53% daily gain. For more price action, keep an eye on the Nonfarm Payrolls report and the ISM Non-Manufacturing PMI report on Friday, which will update the status of the US economy.
For the technical aspect, RSI indicator 40 figures as of writing, slightly below from mid-line. The big move up and down across the mid-line shows high volatility of the price but no clear direction in the near term. As for the Bollinger Bands, the price is moving up and down across the horizontal moving average, showing high volatility as well. In conclusion, we think the market is in consolidation mode. The sharp decline in the Gold price of more than $30 looks like a reversal but is still too soon to tell. For the uptrend scenario, the current resistance is $1,947. A firm break above the level could trigger some follow-through buying and push gold higher toward the next resistance at $1,957. For the downtrend scenario, as long as the Gold price remains under the $1,920 area, a slide toward critical support at $1,900 is possible. On the other hand, a drop below $1,900 could trigger a deeper correction.
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