US inflation reached a record high in almost 40 years. The headline inflation is close to its limited consolidation while the underlying inflation rate is rising faster than the Fed’s 2% target level. In this context, investors should closely monitor how inflation is getting eased in the coming quarters.
Unless the oil prices surge higher, easing energy inflation should lower headline inflation. Moreover, the ease in Chinese producer price data might lower headline inflation. In the meantime, the supply chain problem is a matter of consideration where the current PMI data suggests that the supply delivery pressure is easing to some extent.
However, it does not mean the global supply shortage will end soon. The order backlogs have risen higher while goods demand increases to the pre-pandemic level. In addition, the current Omicron sentiment would impact the supply side with uncertainty. The Euro area has experienced ease in the energy price after spiking late last year. Moreover, the high inflation in the Eurozone continues to drive by technical factors than the US and is set to fall faster. The medium-term inflation outlook is set to reach the 2% target level within 2023, which may gradually influence the ECB to move away from the current tightening policy.
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Forex Technical Outlook for 17 January 2022 to 21 January 2022
Investors have experienced the US inflation to reach the record high of 7.7% in December, and now it is time to see what is happening in other countries. The week will start with the Chinese GDP that may come lower than expected. Besides, Canada and the UK will expose the inflation report besides BOJ monetary policy.
The US dollar index moved nicely below the dynamic 20 EMA, where other major currencies benefited from the movement. Now, investors should wait for a pullback towards the 95.70 resistance area from where a bearish pressure may come. On the other hand, a break above the 96.20 level with a bullish daily close might alter the current market structure.
After a lot of volatility, EUR/USD bulls were able to break the 1.1370 resistance level with a bullish gain of more than 100 pips. The bullish pressure came from 1.1313 to 1.1277 demand zone that became valid after breaching the 1.1370 high. Now it is time for a pullback where the ultimate target is 1.1313 level.
The above image shows the MACD Histogram remained bullish for a considerable time where the gap between the price and dynamic 20 EMA is extended. Therefore, the price is more likely to come to the equilibrium point in the coming days.
Based on the daily price structure, a bearish possibility is valid for this week, but any bullish rejection from 1.1370 or dynamic 20 EMA would be a buying opportunity in this pair. The primary target of the bullish pressure will be the 1.1500 level. On the other hand, the break below the 1.1313 level with a bearish daily candle may shift the price direction towards the 1.11 area.
GBP/USD reached the primary bullish target of 1.3690 level and showed bearish candle formation. Therefore, as the current price holds the resistance it may come lower with a corrective speed.
The above image shows that the mean reversion to the dynamic 20 EMA has become potent in this pair, where the MACD Histogram remains bullish. In that case, any crossover in the MACD line with a new daily swing low would be a bearish opportunity in this pair, where the primary target would be the 1.3510 level.
However, the broader market context is still bullish where any rebound and a daily candle above the 1.3690 would be a buying opportunity in this pair where the ultimate target would be the 1.3900 area.
AUD/USD showed an amazing buying pressure after the US CPI release but rebounded lower after taking out the 0.7277 swing high. Therefore, the bullish structure break made the 0.7144 a valid demand level from where another buying attempt may come.
The above image shows that the MACD Histogram became corrective where the most recent daily candle showed bearish pressure with the close-in dynamic 20 EMA. Therefore, if the daily candle shows a bullish formation from the 0.7144 demand level, it may continue moving up towards the channel high. On the other hand, a break below the 0.7128 might resume the bearish pressure towards the 0.7050 area.
USD/JPY formed a divergence with the MACD Histogram and showed an excellent selling pressure towards the 114.00 key support level. However, the pair closed the week with an exhaustion candle on the daily chart, which is the primary sign of the upcoming corrective pressure in the price.
The above image shows how the price moved below the dynamic 20 EMA with a strong bearish pressure while the MACD histogram moved below the neutral zone. In that case, investors should expect a corrective pressure in the price where the break below the 114.00 level with a bearish daily candle may resume the current selling pressure.
On the other hand, a bullish daily candle above the dynamic 20 EMA might alter the current market structure and increase the 115.50 area.
The buying pressure in Gold that started from 1791-1783 demand zone failed to breach the 1830 key resistance level and closed the week with a bearish daily candle formation. Therefore, until the price is taken out at the 1830 level, we can expect the upcoming price pressure to be bearish.
The above image represents a corrective pressure in XAU/USD where the MACD Histograms are moving nowhere while the price is trading above the dynamic 20 EMA. In that case, a bearish pressure towards the 1789 support level is valid until bulls take out the 1830 level. Any bullish rejection from dynamic 20 EMA would be a buying opportunity in this pair, where a daily candle above 1830 would open rooms for testing the 1870.00 level.
The broader crypto market has shown a sign of recovery as soon as the BTC rejected the $40,000.00 key support level with a bullish rejection. Moreover, the recent daily candles are very corrective while the MACD lines have formed a divergence.
The above image represents the daily chart of BTC/USD where the price is approaching the dynamic 20 EMA with a pre-breakout structure. The intraday lower high formation signifies that bulls are building orders in this area to prepare for a big surge.
In that case, a bullish daily candle above the 45,500.00 level would be a buying opportunity in this pair, where the primary target would be the 50,000.00 level. On the other hand, breaking below the 40,000.00 level needs an HODLing approach to find another bullish opportunity at the 37,129.63 area.
Overall, the US Dollar weakness may find relief this week where corrective price action may come at most major pairs. However, investors should apply trade management due to the current increase in Omicron infection and volatility from CPI release in major countries.