The US Federal Reserve plans to cut the monthly asset purchase program by $10 billion to bring it to an end in March. The US inflation accelerated to a 40-year high in December, prompting the Fed to raise rates four times in 2022 and a few more in 2023. The supply-demand imbalance during the economic reopening is also a concern.
Wednesday’s Federal Reserve meeting is likely to provide a staging post regarding the first rate hike, that may be expected to occur in March. Many economists expect a rate hike of 25 basis points while some ask why the Fed is concerned about inflation. However, the Fed is sticking to the plan to raise the interest rate besides the tapering in March.
There was a sharp fall in the service sector activity in the UK while the PMI fell to 53.6 from 58.5 in November. However, the government’s plan B restrictions were introduced regarding the rising cases of the Omicron variant. As a result, limits on social gatherings in restaurants and many venues are seen. However, the manufacturing activity remained steady from the three months of last year although the selling price inflation hit the record high in December.
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Forex Technical Outlook for 24 January 2022 to 28 January 2022
The coming trading days are going to be eventful, where the main focus for investors would be towards the Federal Open Market Committee meeting. Besides, German PMI, Australian CPI, BOC Rate decision, and the US Core PCE index would work as major price drivers.
The US Dollar index showed a strong selling pressure where the daily price moved below the dynamic 20 EMA with an impulsive pressure. However, bulls tried to recover the price but it is still facing resistance from the dynamic level. Therefore, any bearish pressure from the current dynamic level would increase the selling possibility towards the 94.38 area in the coming days. On the other hand, a bullish daily candle above 95.90 would alter the current market structure and higher the price towards the 97.00 area.
EUR/USD showed a strong buying pressure by breaking above the 1.1383 swing high with a bullish daily close. However, the price rebounded lower following the broader market direction and closed the week above the 1.1273 key support level.
The above image shows how the price closed the daily candle below the dynamic 20 EMA where the broader market context is bearish. Moreover, the MACD Histogram changed its direction from bullish to bearish while the MACD line showed a crossover.
Based on the daily price structure, any selling pressure from 1.1383 with a bearish daily close below the dynamic 20 EMA has a higher possibility of extending the broader market trend towards the 1.1187 area. On the other hand, any strong bullish exhaustion from the 1.1273 level with a stable price may alter the current market structure from bearish to bullish, where the primary aim is to test the 1.1526 level.
GBP/USD showed amazing selling pressure in recent days after facing the major supply level. However, the most recent price faces dynamic support from the 20 EMA, which is a primary sign of a possible correction.
The above image shows how the MACD Histogram turned bearish by moving below the neutral zone while the dynamic 20 EMA is below the price. Moreover, the MACD line showed a bearish crossover which is another sign of selling pressure in the price.
Based on the daily price structure, investors should closely monitor how the price trades in the 1.3500 area. A bearish daily close below this level is important to rely on the upcoming selling pressure towards the 1.3267 level. On the other hand, a bullish recovery with a daily close above the dynamic 20 EMA would alter the current market structure.
AUD/USD showed a corrective pressure where the price trades within the bullish channel. However, investors would wait for a strong breakout below the 0.7150 level to consider the upcoming price pressure as bearish.
The above image shows how the MACD Histogram remained corrective while the price moved below the dynamic 20 EMA. However, the current price is still below the 0.7150 level, from where any rebound would extend the bullish channel. On the other hand, a break below the 0.7150 level with a bearish daily close may alter the current market structure and lower the price towards the 0.7000 area.
The MACD divergence in the USD/JPY has shown a strong selling momentum in the price where the primary aim is to test the 113.00 key demand area.
The above image shows that the MACD Histogram is moving down with a strong momentum while the price remained steady below the dynamic 20 EMA. Therefore, an immediate rebound and a bearish rejection from the 114.70 resistance level would be a selling opportunity in this pair. On the other hand, if the current price moves straight to the key demand area of 113.00 to 112.50 level, it may show bullish price action.
The global inflation pressure and the recent possibility of the crypto ban in Russia were major reasons for bullish activity in XAU/USD price. Therefore, the price will likely extend the current bullish pressure towards the 1870.00 area.
The above image shows how the price moved higher from the dynamic 20 EMA, where any bearish correction would be a buying opportunity. On the other hand, the MACD Histogram is still bullish and increasing the bullish momentum.
Based on the daily context, the buying possibility in this pair is valid as long as the price trades above the dynamic 20 EMA. On the other hand, a break below the 1806.00 level would alter the current market structure and initiate a selling pressure in the price.
The news regarding the crypto ban in Russia was the main reason behind the extreme selling pressure in the BTC/USD. The impulsive selling pressure with a daily close below the 40,500.00 level opened the room for testing the 30,000.00 level in the coming days.
The above image shows how the MACD line is extremely selling by making new lower lows while the dynamic 20 EMA is above the price. Although the gap between the price and dynamic 20 EMA opened a mean reversion possibility, the selling pressure is likely to find ground at 30,000.00 area.
In that case, investors should seek buying opportunities at the 30,000.00 area where the price may remain consolidated for an extended time within the 30K to 40K zone.
Overall, investors will find a clear direction about the US Dollar’s strength from the FOMC meeting. A rate hike is widely expected that might not surprise investors by making the US Dollar strong against the basket of currencies.