In January, the ISM services index entered expansionary territory, indicating a positive economic expansion. Nevertheless, a significant surge in the prices paid sub index indicates the persistence of inflationary pressures. Furthermore, consumer borrowing is confronted with escalating interest rates, as evidenced by the comparatively modest growth of $1.6 billion in aggregate consumer credit in December.
The CPI will be the key event on Tuesday before retail sales and industrial production on Thursday. The concentration continues to be on central banks on an international scale.
In addition to maintaining its policy rate at 4.35%, the Reserve Bank of Australia hinted at a more aggressive posture than had been anticipated. Positive wage data from December and ongoing wage negotiations in Japan indicate that an April rate hike is imminent.
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Forex Technical Outlook for 12 February 2024 to 16 February 2024
Let’s see the list of events to look at this week:
- BOE Gov Bailey Speaks on Tuesday
- NZD Inflation Expectations q/q on Tuesday
- GBP Claimant Count Change on Tuesday
- USD Core CPI m/m on Tuesday
- AUD Unemployment Rate on Thursday
- USD Core Retail Sales m/m on Thursday
- USD Empire State Manufacturing Index on Thursday
- USD Core PPI on Friday
Let’s see the market outlook from the weekly forecast:
In conjunction with the subdued US Dollar Index’s activity and recent hawkish remarks by several ECB officials, the EUR/USD remains under downward pressure. As a result, traders are apprehensive about initiating significant directional adjustments until the Federal Reserve's (Fed) position on interest rate increases becomes more transparent.
The anticipation is high for the forthcoming disclosure of US consumer inflation data the following week, as it may provide insights into the timing and velocity of Fed rate hikes in 2024. This information will significantly impact short-term USD dynamics, which may also stimulate movement in the EUR/USD price.
Elevated US Treasury bond yields are supported by the hawkish sentiment for the US Dollar, limiting the upside potential of EUR/USD. The safe-haven USD might struggle to gain additional momentum without substantial economic updates from the Eurozone or the United States, given the prevailing risk-on environment. Insufficient purchasing activity indicates that the recent decline from the peak in December may not have reached its conclusion yet.
The EUR/USD daily price trades bearishly within the descending channel, where the near-term supply zone is at 1.0898-1.0833.
The MACD Histogram lost the downside momentum and reached the neutral level, while the RSI looks potent to sellers as it remains sideways below the 50.00 line.
In this context, a downside continuation is possible if the price trades within the channel. A daily candle below the 1.0723 level could extend the downside pressure towards the 1.0500 area.
On the bullish side, a valid channel breakout could be the primary signal of the bull run targeting the 1.1137 resistance level.
The GBP/USD pair fell below 1.2600 on Thursday but regained stability on Friday morning. The absence of substantial data releases may result in market sentiment impacting the DXY’s valuation.
Catherine Mann, a policymaker at the Bank of England, stated on Thursday that her recent policy meeting vote in favor of an increase in interest rates was motivated by her skepticism regarding the near-term sustainability of headline inflation. In the interim, Jonathan Haskel, a policymaker at the Bank of England, acknowledged on Friday that inflationary pressures may be abating. However, he stressed the importance of receiving additional evidence of a deceleration before modifying his position on the rate outlook.
GBP/USD formed a bearish breakout from the triangle formation, while the current MACD Histogram is bearish below the zero level. Moreover, the 14-day RSI is below the 50.00 level with a sideways momentum.
Based on this outlook, a minor upward pressure is possible, but a bullish breakout above the 1.2770 level could be a valid long signal
On the bearish side, a downside continuation with a bearish daily candle below the 1.2499 level could lower the price in the coming days
The Australian Dollar (AUD) remained sideways against the US dollar throughout the week. Due to the S&P/ASX 200 index's underwhelming performance and declining coal and iron ore prices, the AUD/USD pair is confronted with headwinds. Additionally, as US Treasury yields increased on Thursday, the US Dollar (USD) gained ground against the AUD.
Following Reserve Bank of Australia (RBA) Governor Michele Bullock's reaffirmation, the Australian Dollar gained some support. Bullock stated that although the board has not explicitly rejected the notion of additional interest rate increases, it has also refrained from confirming any. Nevertheless, the Commonwealth Bank of Australia (CBA) continues to anticipate 75 basis points in reductions to benchmark interest rates in 2024, with the first reduction scheduled for September.
Citing a robust labor market and persistent disinflation, Federal Reserve Richmond President Thomas Barkin reaffirmed that policymakers have the flexibility to exercise forbearance about the timing of rate adjustments. Ahead of the interest rate decision on January 31, Federal Reserve Chair Jerome Powell dismissed the possibility of a rate reduction in March during a press conference.
A sideways momentum is visible in the AUD/USD price, while the dynamic 20-day EMA is an immediate resistance. The RSI shows a rebound from the 30.00 level, while the MACD Histogram returned to the neutral level
As per the downside continuation, a daily candle below 0.6453 could increase the possibility of reaching the 0.6337 level in the coming days.
Last week, the Japanese Yen (JPY) reached a new year-to-date low against the US Dollar (USD). The safe-haven JPY is under downward pressure as a result of Bank of Japan (BoJ) Deputy Governor Uchida Shinichi's dovish remarks on Thursday, stating that the central bank would not aggressively raise interest rates after ending negative rates.
Moreover, the prevailing optimistic sentiment in equity markets undermines the JPY's status as a safe-haven currency, thereby providing additional support for the USDJPY pair.
Nevertheless, bulls encounter difficulty in finding solace in the USD's (Fed) lackluster performance in 2024, which is exacerbated by the ambiguity surrounding the timing and speed of interest rate reductions. This uncertainty may discourage traders from positioning the USDJPY pair for additional appreciation prior to the release of crucial data the following week.
The forthcoming US consumer inflation data will significantly impact the Federal Reserve's policy decisions, thereby molding sentiment towards the US dollar and infusing renewed vitality into the currency pair.
USD/JPY formed a bottom above the Ichimoku Cloud support, making a new swing high. Moreover, the dynamic Tenkan Sen and Kijun Sen show an upward possibility as they remained below the current price with an upward slope.
In this structure, the bullish possibility is potent, and the price could reach the 151.92 resistance level soon. However, a downside continuation with a stable price below the 144.00 level might alter the current momentum at any time.
The robust US macro data and hawkish comments from several influential Federal Open Market Committee (FOMC) members pushed the Gold price to form a downside pressure. The ongoing risk-on momentum in global equity markets is a significant headwind for the safe-haven precious metal.
While the US Dollar (USD) continues its consolidative movement below its highest level in nearly three months, uncertainty regarding the Federal Reserve's (Fed) approach to rate cuts hinders aggressive directional bets on gold.
Traders are exercising caution and awaiting the release of the upcoming US consumer inflation figures next week. These figures are expected to clarify the timing and pace of Fed rate cuts in 2024, influencing USD demand and potentially offering momentum to the non-yielding gold.
An ascending channel breakout with a bearish continuation below the 2008.89 support level could be a valid short opportunity in the XAU/USD price, targeting the 1973.03 support level.
On the other hand, the near-term support level is protected with the trendline low, from where a bullish rebound could extend the channel toward the 2078.11 level.
Traders are optimistic about the Bitcoin (BTC) price after it broke consolidation within a daily supply zone. Nevertheless, the subsequent course of action depends on its capacity to overcome the current congestion level.
As a decentralized digital currency, Bitcoin is the preeminent cryptocurrency in market capitalization. This characteristic obviates the necessity for intermediaries to be engaged in financial transactions.
As a result of economic constraints in China, which have caused investors to withdraw from the domestic market, the volume of ETF trading has increased. As a result, the Chinese government is implementing strategies to deter capital migration and stabilize the stock market.
Similarly, the lackluster performance of global funds is increasing interest in US-focused ETFs in Europe and Canada. Foreign investors experience fear of missing out (FOMO) due to the allure of opportunities in the United States.
After surpassing 45,000.00, the price of Bitcoin is currently above the supply zone of 44,235.00 to 46,715.00. Therefore, Bitcoin could have a higher possibility of moving as high as 48,000.00 or 50,000.00 with a decisive close above this level.
Bullish momentum is indicated by the Relative Strength Index (RSI), and Moving Average Convergence Divergence (MACD). However, a bearish daily close below the 43,891..40 swing low could be a short-term bearish opportunity targeting the 40,000.00 level.