USD Index Price Analysis: No changes to the consolidative theme

 

• DXY attempts a mild rebound after bottoming out near 111.80.
• Further range bound remains on the cards for the time being.

DXY bounces off multi-session lows in the 111.80/75 band on Tuesday.

So far, the index looks poised to keep navigating within a 112.00-114.00 range at least until the next FOMC event.

The prospects for extra gains in the dollar should remain unchanged as long as the index trades above the 8-month support line near 108.00.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 103.43.

EUR/JPY Price Analysis: Still scope for a move to 144.00

 

• EUR/JPY comes under some pressure and fades two daily gains in a row.
• There is still room for a potential rebound to the 144.00 region.

EUR/JPY seems to have met decent resistance around daily highs near 142.30 at the end of the week.

The continuation of the bounce off last week’s lows remains on the table in the very near term. That said, the cross could therefore extend the bullish attempt to the weekly top at 144.04 (September 20), which is deemed as the last defense for a move to the 2022 peak at 145.63 (September 12).

In the meantime, while above the key 200-day SMA at 135.84, the constructive outlook for the cross should remain unchanged.

USD strength to persist into early next year – Rabobank

 In the view of economists at Rabobank, the US dollar is set to remain well supported for several months with the hawkish position of the Fed underpinning the attraction of the greenback as a safe haven.

Scope for further dips in EUR/USD below parity

“As the Fed still has a lot of work to do in taming price pressures and ensuring that inflation expectations are well anchored into the medium-term, it can be assumed that the FOMC will not be ready to relinquish its hawkish position just yet. Since this will impact risky assets, we see risk that USD strength persists into early next year.”

“We expect the USD to remain the favoured safe haven relative to either the JPY or the CHF in view of higher US short-term interest rates.”

“Given also that the eurozone is facing a difficult winter which includes the possibility of energy rationing for some businesses, we see scope for further dips in EUR/USD below parity.”

UK: Liz Truss wins contest to become the next UK Prime Minister

 Liz Truss won the Conservative Party leadership race to become the next British Prime Minister.

"I will deal with long-term issues on energy supply," Liz Truss said in her acceptance speech and noted that she will deal with the crisis in households' energy bills.

Additional takeaways

"I will govern as a conservative."

"I intend to deliver what we promised voters in 2019."

"I will deliver a bold plan to cut taxes and grow our economy."

"We will deliver a great victory for the conservative party in 2024."

Market reaction

The UK's FTSE 100 Index showed no immediate reaction to these comments and was last seen losing 0.6% on a daily basis. Meanwhile, the GBP/USD pair continues to fluctuate at around 1.1500 during the European trading hours.

Iran Foreign Minister: Carefully reviewing EU-drafted text for revival of 2015 nuclear pact

 Iran's Foreign Minister Hossein Amirabdollahian said on Wednesday that Tehran is carefully reviewing the EU-drafted text for the revival of the 2015 nuclear pact, as reported by Reuters. 

"We need stronger guarantees from the other party to have a sustainable deal,"  Amirabdollahian added. "The (U.N.) agency should close its politically-motivated probes."

Market reaction

Crude oil prices showed no immediate reaction to these comments. As of writing, the barrel of West Texas Intermediate was trading at $89.10, where it was down 3.5% on a daily basis. 

USD/TRY leaps to fresh 2022 peaks past 18.00 after CBRT cut rates

 

• USD/TRY clinches new YTD tops beyond the 18.00 mark.
• The pair now targets the all-time top at 18.25 (December 20 2021).
• The Turkish central bank reduced the policy rate by 100 bps.
• 
  
  
  

The Turkish lira debilitates to fresh lows vs. the greenback and pushes USD/TRY past the 18.00 yardstick for the first time since December 2021.

USD/TRY now targets the all-time high at 18.25

USD/TRY leaves behind the key barrier at 18.00 after the Turkish central bank (CBRT) caught the markets off guard and reduced the One-Week Repo Rate by a full point to 13.00% at its meeting earlier on Thursday. the central bank also cut the Overnight Borrowing Rate and the Overnight Lending Rate by 100 bps to 11.50% and 14.50%, respectively.

In its statement, the CBRT continues to see domestic inflation largely driven by higher energy costs exclusively on the back of geopolitical events and “effects of pricing formations that are not supported by economic fundamentals”.

EUR/USD eyes 2020 lows at 1.0637 as USD regains poise

 

 The latest candle on the four-hour chart closed below 1.0700. The Relative Strength Index (RSI) indicator on the same chart stays near 40 and the descending line coming from April 21 stays intact, highlighting EUR/USD's bearish bias in the near term. 

It's worth noting that EUR/USD will touch its weakest level since April 2017 with a drop below 1.0635. Sellers might see such a move as a profit-taking opportunity and trigger a correction in the pair. In that case, 1.0700 (psychological level) aligns as the next recovery target before 1.0730 (static level) and 1.0760 (static level).

On the downside, a daily close below 1.0640 is likely to open the door for additional losses toward 1.0600 (psychological level) and 1.0570 (static level from March 2017).

📕 Comment on Gold on April 25, 2022:

 📕 Comment on Gold on April 25, 2022:

 - Ending the last trading week, precious metal Gold closed with a bearish candle with quite strong force around 1931 and in the early morning of today Gold continued to decline to around 1921, the price turned around.  exactly the same as the starting point of the rally 2 weeks ago.

 - Gold is currently in the support zone 1917-1920.  It is likely that Gold will recover slightly here after a fairly strong drop last week and in my opinion it is likely that Gold will recover to around the 1940 level here we need to wait and see a sell signal.  .  If Gold cannot recover and break through the 1917-1920 threshold, the possibility of this precious metal will slide down to 1900-1890.

GBP/USD Price Analysis: Seems vulnerable near 1.3100 mark, bearish flag breakdown in play

The GBP/USD pair extended last week's retracement slide from the 1.3300 mark, or the 200-period EMA on the 4-hour chart and witnessed some follow-through selling on Monday. This marked the fourth successive day of a negative move and dragged spot prices to over a one-week low, around the 1.3110 region during the mid-European session.

The US dollar continued drawing support from rising bets for a 50 bps Fed rate hike move at the May meeting. Conversely, the sterling was weighed down by dovish remarks from the Bank of England Governor Andrew Bailey, saying that we are starting to see evidence of a growth slowdown. This, in turn, exerted downward pressure on the GBP/USD pair.

 Looking at the broader picture, the pair on Friday confirmed a break through an ascending trend channel, which constituted the formation of a bearish flag pattern. Sustained weakness below the 1.3100 round-figure mark will further validate the bearish bias and set the stage for a further near-term depreciating move for the GBP/USD pair.

The next relevant support is pegged near the 1.3070 region, below which the downward trajectory could further get extended towards the 1.3035 intermediate support. The GBP/USD pair could eventually drop back to challenge the key 1.3000 psychological mark, or the lowest level since November 2020 touched earlier this month.

On the flip side, attempted recovery moves might now confront stiff resistance near the 1.3150-1.3160 region. Any subsequent move up is more likely to attract fresh selling and remain capped near the 1.3180-1.3185 zone. This is closely followed by the 1.3200 mark, which if cleared decisively might prompt some short-covering around the GBP/USD pair.

GBP/USD 4-hour chart

 GBP/USD struggles near two-day low, just above mid-1.3100s post

• A broad-based USD strength dragged GBP/USD lower for the second straight day on Thursday.
• The mixed UK PMI prints failed to impress bullish traders or provide any impetus to the major.
• The market focus remains glued to fresh developments surrounding the Russia-Ukraine saga.

The GBP/USD pair maintained its offered tone through the first half of the European session and had a rather muted reaction to mixed UK PMI prints. The pair was last seen trading just above mid-1.3100s, down nearly 0.35% for the day.

The pair extended the previous day's sharp retracement slide from the vicinity of the 1.3300 mark, or over two-week high and witnessed some follow-through selling for the second straight day on Thursday. The downtick was exclusively sponsored by a stronger US dollar, which continued drawing support from the Fed's hawkish outlook.

In fact, comments by influential FOMC members, including Fed Chair Jerome Powell, have been fueling speculation that the Fed would adopt a more aggressive policy response to combat high inflation. The markets were quick to react and started pricing in the possibility of a 50 bps rate hike at the upcoming meeting in May.

This was reinforced by elevated US Treasury bond yields, which were further underpinned by concerns that surging crude oil prices could put further upward pressure on already high consumer prices. Apart from this, the lack of progress in Russia-Ukraine peace negotiations further benefitted the safe-haven greenback.

On the other hand, the British pound was pressured by a dovish assessment of the Bank of England policy decision last week and its view around the need for future rate hikes. Bulls failed to gain any respite from an unexpected rise in the UK Services PMI, which was offset by a larger drop in the gauge for the manufacturing sector.

Market participants now look forward to the US economic docket, featuring the release of the fllash PMI prints, Durable Goods Orders and the usual Weekly Initial Jobless Claims. The focus, however, will remain on geopolitics amid expectations that US President Joe Biden will announce new sanctions targeting Russian politicians.

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Dollar is Lower; Tight Range Ahead of Inflaton

 The U.S. dollar edged lower Wednesday, but remained in a tight range the day before the release of key inflation data which could confirm the start of the Federal Reserve’s policy tightening process. 

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 95.580, after bouncing off a 2-1/2-week low of 95.136 reached Friday. 

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The speed and timing of when central banks across the world start to lift interest rates is the main factor driving the foreign exchange markets these days, and in particular the Federal Reserve given the importance of the U.S. economy to global growth.

The dollar received a boost at the end of last week with the release of a much stronger than expected jobs report, and Thursday’s consumer price index should cement expectations that the U.S. central bank will raise interest rates next month.

The headline CPI is seen rising 0.5% on the month and 7.3% on the year in January, climbing to a four-decade high. Most in the market expected the Fed to lift interest rates by 25 basis points in March, a stronger print could offer support to those tipping a larger 50 basis point rise.

“We think that Friday’s payrolls numbers have helped build a floor under the dollar as markets should continue to cement their hawkish views on Fed tightening into the March meeting,” said analysts at ING, in a note.

Elsewhere, EUR/USD edged lower to 1.1412, retreating from the highs seen last week after the European Central Bank policy meeting, as President Christine Lagarde tried Monday to rein in these expectations for aggressive action with growth in the Eurozone still fragile.

“We still think that the market pricing of more than 50bp of higher overnight rates, i.e. around two 25bp rate hikes, until the end of the year looks excessive,” said analysts at Nordea, in a note.

Additionally, GBP/USD edged lower to 1.3538, USD/JPY fell 0.1% to 115.45, after the pair briefly touched a one-month high, while the risk-sensitive AUD/USD climbed 0.1% to 0.7148.

USD/PLN rose 0.1% to 3.9652 and EUR/PLN was flat at 4.5240, the day after Poland’s central bank lifted its benchmark rate by 50 basis points to 2.75%, increasing interest rates for a fifth consecutive month to an almost nine-year high in an attempt to curb record inflation levels.

Later Wednesday, the Riksbank holds its latest policy-setting meeting, with the markets increasingly looking at still-dovish central banks given the recent shift in many of their peers.

“The Swedish economy has overall developed better than projected by the Riksbank,” said Nordea, and “the development is strong enough for the Riksbank to trim its balance sheet.”

“However, we do not expect inflation to remain high long enough for the Riksbank to consider a rate hike.”

EUR/SEK traded 0.1% lower at 10.4226 and USD/SEK also down 0.1% at 9.1358.

Australian currency rises strong again

 Australian retail sales surge

The Aussie has bounced back on Monday, boosted by an excellent retail sales report for Q4. Retail sales surged 8.2%, above the consensus of 7.8% and ahead of the Q3 read of -4.4%. The end of the Covid-related lockdowns and the holiday season brought out consumers who were in a spending mood. The upswing in consumer spending has raised expectations that the RBA will hit the rate trigger in the second half of the year, perhaps as early as August.

At last week’s RBA meeting, Governor Lowe said that a hike could be a year away or even longer, but the markets aren’t buying it. Lowe is clearly in no rush to raise rates and may not have abandoned the view that inflation is transient and will ease in the near term. The markets, in contrast, are more hawkish and feel that high inflation will prompt the RBA to raise rates in the second half of 2022.

The US nonfarm payrolls was an absolute shocker, with a gain of 467 thousand jobs in January. Many analysts had projected a negative print, and the consensus of 125 thousand showed that expectations were quite low. With inflation at 40-year highs, wage pressures are rising. Average hourly earnings climbed 5.7% in January y/y, as workers seek higher wages due to the rise in the cost of living. The NFP report will raise expectations that the Fed will have to do more in order to stamp out high inflation.

.

AUD/USD Technical

• AUD/USD faces resistance at 0.7168 and 0.7258
• There is support at 0.6987 and 0.6896

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AUDJPY retests its 200 hour MA on the downside

 

AUDJPY retests the 200 hour MA and bounces.

The AUDJPY saw the price move higher yesterday after an initial move lower after the RBA decision, but then rebounded higher

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The move back to the upside was able to get above its 200 hour moving average (green line currently at 81.379) and also above a downward sloping trendline near 81.72. The price also moved above its 38.2% retracement at 81.859 (move down from the January high).

XAU/USD Price Forecast: Technical outlook

 

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XAU/USD Price Forecast: Technical outlook

Gold is trading near the bottom of a Pitchfork’s channel, drawn from the beginning of December, as depicted by the daily chart. That trendline intersects with a downslope trendline, drawn from August 2020 swing highs, acting as resistance for the non-yielding metal around $1,790-$1,800. Furthermore, the daily moving averages (DMAs) reside above the spot price. Therefore, XAU/USD is downward biased.

The first support level would be December 15, 2021,  swing low at $1,753. A breach of the latter would expose October 6, 2021, a daily low at $1746, followed by September 29, 2021, a low at $1,721

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 The AUDUSD is trading to a new session low. Risk off sentiment is kicking in as the Nasdaq is now down -93 points and the S&P has also now turned negative on the day. The Dow is holding onto a 60 point gain.

Looking at the daily chart, the pair has entered into a swing area between 0.6992 and 0.70627. That area goes back to the end of 2019. In early November 2020, the pair bottomed one last time in that area before moving higher (peaking in February of 2021) at 0.75544.

Since that cycle high, the pair has steadily moved back down, ultimately retesting the 2019/2020 swing area in December 2021. The subsequent bounce higher saw the 100 hour MA stall the rise in early January 2022. On January 13, a try above the 100 day MA failed. The price retested the level last week, but again found sellers. Buyers turned to sellers again. The 100 day MA currently come in at 07264.

Drilling to the 4-hour chart below, the pair has most recently moved away from a lower swing area between 0.7080 to 0.7090 (see green numbered circles on the chart below). That area is now close risk. Stay below keeps the sellers more in control with the low target from the daily at 0.6992 (the low in December reached 0.69935 before bouncing), the next key target. Move below it, and the door opens more to the downside.

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Dollar Rises Like A Ferrari

 LONDON (Reuters) - The dollar climbed to multi-week highs against other major currencies on Thursday, bolstered by the prospects for faster and larger interest rate hikes in the months ahead.

As London trade got under way, the dollar index held at its highest levels since mid-December, while the euro languished at two-month lows of $1.11930. The greenback also hit its highest levels in more than a year against the New Zealand dollar and a seven-week peak against Australia's currency.

It rose broadly against emerging market currencies as money markets moved swiftly to all but price in as many as five Federal Reserve rate rises this year.

The Fed concluded a two-day meeting on Wednesday and Fed chief Jerome Powell said the central bank was in a mind to begin hiking in March to tame inflation.

He stressed that no decisions had been taken, but answering a question about whether the central bank would consider a 50-basis point hike, he replied without ruling it out.

He said instead that the economy seemed stronger than in the most recent hiking cycle and inflation, much hotter with room to raise rates without "threatening" the labour market.

U.S. gross domestic product figures later on Thursday are expected to show annual growth at its strongest since 1984.

"While the market had already been priced for hikes, a lot of people were assuming that the Fed might be more sensitive to the equity market, which it wasn't," said Jane Foley, head currency strategist at Rabobank. "Also the Fed's mention the balance sheet has focused markets' mind on the withdrawal of stimulus."

Foley added that a shake-out of overly long dollar positions earlier in the month had left the greenback in a position to react to the latest Fed signalling.

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YUAN HIT

The dollar's overnight leap of 0.7% against the yen was its sharpest in more than two months, while Treasury yields shot higher and stock markets took a fresh beating as rate-hike prospects resonated.

The dollar index was last at 96.825, holding near its highest levels since mid-December.

The risk-sensitive Australian dollar was last down about 0.5% at $0.7077, having fallen to as low as $0.7064, while the New Zealand dollar fell 0.7% to $0.6597, a nearly 15-month trough.

Sterling fell to a one-month low at $1.3407 and was last down 0.4% on the day. Britain's pound is delicately balanced as traders keep a wary eye on Prime Minister Boris Johnson, who is under pressure after attending parties during lockdowns, and on next week's Bank of England meeting. [GBP/]

Elsewhere, China's yuan took a hit as data showed Chinese industrial profits grew at their slowest pace in more than 18 months, bolstering the case for policy support.

The yuan was on course for its steepest daily drop in more than a month in onshore trade and last traded at 6.3632 to the dollar. Emerging markets currencies across Asia also logged losses.[CNY/][EMRG/FRX]

After a battering last week, cryptocurrencies have mostly held their ground in the wake of the Fed's meeting, though bitcoin was last down 2% at $36,049.

USD & JPY Goes up & Down

The USDJPY has seen more up and down price action today continuing the price action seen on Friday. The pair did move below the low from Friday's trade, but found support near the low from January 14 at 113.474. It dipped briefly below the level to a low of 113.464, but quickly rebounded.

The subsequent move back higher saw the pair move into a topside swing area between 113.954 and 114.028 

 Sellers leaned against that area and pushed the price back down toward another swing area between 113.596 and 113.629. The price has been able to stay above that area. A break below is needed to solicit more selling with the lows near 113.47 as the next major target (obviously). Conversely, stay above the lower swing area (green numbered circles) and a rotation back toward the red numbered circles, would be the next target.

The USD and the JPY can both be safe haven currencies. That dynamic can neutralize the price action for this pair during volatile bearish price action in the US stock market. That is what we are seeing in the up and down price action over the last two days. Until it gets out of this bearish bias, we can expect more of the same going forward.

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Dollar got high today

LONDON/HONG KONG (Reuters) -The dollar inched higher on Monday, moving further off its recent two-month lows, lifted by the tension between Russia and the West over Ukraine and the possibility of a more hawkish stance from the Federal Reserve this week.

Markets were until recently not fretting about the massing of Russian troops on Ukraine's borders, but tensions have tightened several notches of late, with U.S. President Joe Biden considering boosting military assets in Eastern Europe and ordering diplomats' families to leave Kyiv.

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ING Bank strategist Francesco Pesole said markets were pricing more of a risk premium into the euro, with fears worsening that Russia's standoff with the West could prompt it to curb energy supplies to Europe.

Meanwhile, the IHS Markit Flash Composite Purchasing Managers' Index for the euro zone, a gauge of economic health, dropped in January to its lowest since last February.

The euro slipped 0.15% by 0845 GMT to $1.1325, trading just off two-week lows touched on Friday, while the dollar index was 0.10% higher at 95.72.

The greenback also gained 0.1% on the safe-haven yen with a dollar worth 113.8 yen, though the Japanese currency was still near its recent top of 113.47.

The dollar index has gained some 1.3% off since Jan. 14. During this period, several banks have upped forecasts for the speed and size of policy tightening by the U.S. Federal Reserve.

The Fed starts a two-day meeting on Tuesday and may signal the start of interest rate rises from March while indicating how fast it will move with reducing the size of its balance sheet.

Most expect the first hike to 0.25% in March and three more to 1.0% by year end..

However, positioning data showed on Friday speculators cut net long positioning on the dollar to the lowest since September and instead added $2.6 billion worth of net positions.

ING's Pesole said leaving aside the Ukraine situation, the dollar recovery could stall if the Fed signalled an implicit preference for balance sheet reduction as a means to tighten policy.

"If markets see the Fed willing to let balance sheet reduction do the heavy lifting, that may force a scaleback in forecasts for the number of rate hikes," he said.

"The dollar will find more support from actual rate hike expectations than expectations of draining liquidity out of the market."

The Australian dollar meanwhile slipped 0.25% to two-week lows of A$0.71.52 against the greenback, ahead of Tuesday data that may show core inflation at 2.4%, the fastest rate of price growth since 2014..

The one currency to hold firm against the dollar was the Chinese yuan, which rose 0.2% to the highest since May 2018 at 6.328

Finally, Bitcoin which has almost halved in value since touching a $69,000 record in November, looked at risk of falling under $34,000 for the first time since last July.

It lost 3.6% to trade around $34,962, while ether, the world's second-largest cryptocurrency, was at $2,379, having hit its lowest since July on Saturday

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Weekly Overview on Currencies

 Currencies

MARKET VIEW

Weekly changes: EURUSD +0.61%, GBPUSD +0.28%, USDCAD +0.13%

EURUSD closed the week at 1.16425. The pair reached the 1.1670 mark twice but declined both times from the strength of the current resistance level.

GBPUSD ended Friday at 1.37551. The pair traded modestly within a week, having risen 2.4% in the previous fortnight.

USDCAD closed the week at 1.23583, the same spot as the Friday ago. The oil stepped from its three-year high, giving the Canadian dollar space to consolidate.

BULLISH TRIGGERS

The U.S. dollar eased after Powell's comment, enabling EURUSD to advance near the 1.1650 level. However, the eurozone inflation expectations are at their highest levels in years. This puts additional pressure on the ECB and its monetary policy agenda meeting this week.

GBPUSD changed insignificantly. The British pound fluctuated due to the country's various economic releases but remained bullish by late Friday. Early in November, the BoE is expected to be the first major central bank to lift its interest rate.

BEARISH TRIGGERS

The USDCAD finished the week flat, slowing its monthly-long decline. The BoC interest rate decision meeting this week might propose another round of tapering. Two days later, Canada will release its GDP data. The central bank's choice of tight or dovish tone of voice, followed by the solid or weak data, will determine USDCAD behaviour this week.

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📕 Comment on Gold on October 18, 2021

 - After the precious metal Gold touched MA20 on the weekly chart as well as the descending trendline channel extending from June 1, 2021 until now, as analyzed at the end of last week Gold has dropped sharply from 1796 to 1764 ($32).  Closing the week with a long bullish candle so in my opinion at the beginning of the week there will still be selling pressure before the next rally.

 - Switching to the daily time frame, we can see that the selling force of Gold on Friday dominated quite a lot and is showing signs of a slight recovery and we can wait to buy around 1767.  with the target 1778-1782.  Here we liquidate the order and wait for a sell signal.  At that time, the team will update the signal to watch.

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