The December Consumer Price Index data for the US was the most significant event in the previous week, where the yearly inflation rate was down by 6.5% from 7.1%.
It is a sign that the US economy has shown some reaction to the increased interest rates and the economy is to close in 2023 without reaching recession. Moreover, the latest CPI data increased the possibility of a 25 bps rate hike.
Forex Technical Outlook for 16 January 2023 to 20 January 2023
The coming trading days are going to be important as there are several important releases regarding the Consumer price index in some major economies.
Moreover, the US PPI and Retail sales could confirm that the current lower CPI has a solid background.
Before proceeding further, let’s see important releases for this week:
- China GDP q/y on Tuesday
- GBP Claimant Count Change on Tuesday
- CAD CPI m/m on Tuesday
- Empire State Manufacturing Index On Tuesday
- BOJ Monetary Policy Statement on Wednesday
- The UK CPI y/y on Wednesday
- The US PPI & Retail Sales m/m on Wednesday
- CAD Retail Sales m/m on Friday
Let’s proceed with the weekly outlook with the DXY outlook:
The US Dollar index (DXY) extended the loss throughout the week, where a strong bearish daily candle was seen after the CPI release.
The dynamic 20 EMA is above the price and working as a strong resistance. Moreover, the RSI is aiming lower but is yet to find the bottom at the 30% area.
Based on this structure, the selling pressure in the DXY could extend toward the 101.23 support level this week. However, a minor bullish correction is pending, which can higher the price toward the 103.40 resistance level after the weekly open.
The monthly candle came with a shadow on the downside where there are 12 more trading days to go in January. The weekly candle is also supportive of bulls but this week is closed with a new swing high at 1.0867 level from where a bearish correction may appear.
This technical analysis shows the daily price of EUR/USD where the current price is trading within a strong bullish trend.
The sell-side liquidity grab and a swing low formation at the 1.0482 level boosted the buying pressure following the CPI-driven sentiment.
If we draw a Fibonacci line level from 1.0610 high to 1.0482 level, the 161.8% Extension level is marked at the 1.0896 level, which would be the current price target from the correction.
The gap between the price and dynamic 20 DMA is extended, which is a sign of a possible bearish correction in the coming days. Moreover, the potential divergence in RSI is also signaling a bearish correction.
Based on the current price behavior, investors should seek a bearish opportunity from the 1.0867 to 1.0800 area, targeting the 1.0590 to 1.0482 area.
However, the broader outlook is bullish and the conservative approach would be to wait until the bearish correction is over. In that case, any bullish rejection from 20 EMA could offer a trend trading opportunity.
In the weekly candle, a small bullish body appeared after a long wicked bullish rejection, which is a primary sign that bulls are not done with the price.
As per the previous weekly outlook, GBP/USD is trading with more than 100 pips of gains and it has more room to increase in the coming days.
This technical analysis of the GBP/USD shows a bullish opportunity as the current dynamic 20-day Exponential Moving Average is the immediate resistance.
The recent daily candles above the 20 DMA are very corrective, which is a sign that bears are not interested in showing sufficient interest.
In the indicator window, the Relative Strength Index (RSI) is aiming higher to the overbought 70% level with no sign of divergence.
Based on the price outlook for 16 January 2023 to 20 January 2023, GBPUSD is expected to move higher toward the 1.2670 resistance level. A strong bullish daily candle above the 1.2250 level would validate the conservative buying possibility.
On the other hand, a break below the dynamic 20 EMA could extend the correction toward the 1.1844 level before showing another buying possibility.
In the monthly chart, a bullish body is still forming after an inside bar while the last three weekly candles are showing a strong bullish trend.
As per the previous weekly outlook, AUD/USD is trading more than 70 pips higher from the weekly opening price and the upside possibility is still potent for this week.
This technical analysis indicates how the daily AUD/USD price is trading above the 0.6860 event level from where the latest bullish trend initiated.
The highest trading volume level from the October low to January high is supportive of bulls as the 0.6696 high volume is below the price.
The dynamic 20-day Exponential Moving Average is below the price although there is a bearish mean reversion pending.
The bullish trend continuation opportunity is visible from the current RSI formation, which is aiming higher from the 50% neutral level.
Based on this behavior the buying momentum can extend after a minor intraday correction. In that case, the primary target of the bull is toward the 0.7138 resistance level.
The alternative trading approach is to wait for the price to come below the 0.6860 level, which can lower the price toward the 0.6692 level.
The weekly USD/JPY candle closed sharp bearish, boosted by the lower CPI in the US.
As per the previous USD/JPY weekly outlook, the price is currently running with more than 450 pips gains and this week might be a time to book some profits.
This technical analysis shows a strong bearish trend in the USD/JPY daily price, where the current price is aimed toward the trend line support.
The highest trading volume level is spotted at 132.32 level, which came after the US CPI news release. It seems institutional traders are interested in buying the JPY, which could lower the price in the coming days.
The strong selling pressure extended the gap between the price and 20-day EMA by 487 pips, which is signaling that profit-taking is knocking by bears.
The RSI reached the 30% oversold area, while the price has more room downside to reach the 126.38 support level.
Based on the current USD/JPY outlook, any bullish rejection and intraday higher high formation from 127.60 to the 126.30 area could increase the possibility of a bullish correction towards the 130.20 area.
The US CPI came significantly down after 2.5 years and there is no surprise to see the XAU/USD react with extreme bullish pressure.
XAU/USD buying possibility is potent as the price is trading above the 1879.31 key support level.
The highest trading volume from November to January peak is spotted at the 1775.00 level, which is a sign that there was no institutional selling interest in the last two months.
The dynamic 20 DMA is below the price, while the current RSI is above the 70% overbought area.
Based on the current XAU/USD weekly outlook, a minor bearish correction is possible but the broader outlook will be bullish toward the 1990.00 level
A strong bearish pressure with a daily candle close below the 1878.00 level could initiate a deeper correction toward the 1807.42 support level.
Bitcoin price has reacted massively to the recent US consumer price index (CPI) release for December. Although a minor bearish correction was seen after the new release, bulls were the ultimate winner.
BTC/USD price moved 2% immediately after the CPI news release but an immediate recovery is seen with a more than 7% increase in the next 6 hours.
This technical analysis indicates how bulls regained momentum with a bullish trend line breakout. Moreover, a new swing high above the 18,416.00 level opened the possibility of a further upside pressure in this pair.
The dynamic 20 EMA is below the price, while the RSI reached the overbought 70 Area. The high volume level is also below the price, signaling institutional traders' interest in this pair.
Based on this price behavior, the upside possibility is solid where the ultimate target is to test the 21,519.00 resistance level. However, breaking below the 18,000.00 level could extend the bearish pressure toward the 16400.00 area.
The weaker US CPI increased the possibility that the Fed would stay back from the rate hike path, which could allow major pairs to regain momentum against the US Dollar. However, any impulsive movement could come with a sufficient correction, which could allow investors to join the existing momentum.