The GDP in the fourth quarter of 2022 saw an expansion of 2.9% on an annualized basis. Although the growth exceeded predictions, the underlying details were not as positive. Additionally, the decline in monthly indicators towards the end of the year suggests that the slowing trend will continue into the first quarter of 2023.
In other news, one of the major central banks recently decided to temporarily halt interest rate increases. Following a 25 basis point hike to 4.50%, the Governor of the Bank of Canada, Macklem, announced that the central bank's tightening cycle has come to an end.
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Forex Technical Outlook for 30 January 2023 to 03 February 2023
Throughout most of 2022, there were concerns that the European economy could be on the brink of a severe recession. Although a mild winter and decreasing inflation have not completely alleviated these concerns, they do indicate that the economic downturn in Europe may not be as severe as initially projected.
For this week, the main attention will be the FOMC statement and Non-farm payroll. But the monthly closing and BOE Monetary Policy Report will be other events to look at.
Before proceeding further, let’s see important releases for this week:
- CAD GDP m/m on Tuesday
- CB Consumer Confidence on Tuesday
- NZD Employment Change q/q on Wednesday
- ADP Non-Farm Employment Change on Wednesday
- ISM Manufacturing PMI on Wednesday
- FOMC Statement & Federal Funds Rate on Wednesday
- BOE Monetary Policy Report on Thursday
- EUR Main Refinancing Rate & Monetary Policy Statement on Thursday
- US Non-Farm Employment Change on Friday
Let’s proceed with the weekly outlook with the DXY outlook:
The selling pressure in the DXY daily chart has faded as soon as the price moved below the 103.51 level. However, there is no sign of a strong bullish recovery but a stable momentum might come after the FOMC.
The near-term support level is at 101.23 level and the resistance level is at 103.51.
A strong bullish trend is visible in the EUR/USD price, where the latest weekly candle closed with a corrective indecision bar. Although the broader outlook is bullish for this week, the monthly close could create downside pressure due to profit-taking.
This technical analysis shows the daily price of EUR/USD, which is trading under strong buying pressure. The latest high volume levels are below the price which is a sign of institutional investors’ interest in this instrument.
In the daily chart, the dynamic 20 EMA is below the current price and working as a support. On the other hand, the Relative Strength Index reached the overbought zone and formed a rebound. However, there is no significant divergence present in RSI. Therefore we need more information before considering the bearish possibility as potent.
Based on this price structure, we can consider the bullish trend as valid until buyers take the price below the 1.0764 support level. In that case, a bullish daily close above the 1.0930 level could validate the trend extension toward the 1.1185 resistance level.
On the other hand, breaking below the 1.0760 level could lower the price to adorn by the 1.0600 area.
In the GBP/USD price in the broader outlook is bullish as the previous weekly candle closed with an inside bar, opening more room for buyers towards the 1.2800 level.
In the GBP/USD daily chart, the long-term bullish trend is valid as it appeared with a sell-side liquidity grab at the 1.8395 support level.
If we look at the high volume level from November to January peak we can see the highest volume level is at 1.2169 level. It is a sign that institutional traders are still interested in buying this instrument even if the price is trading 19% higher from the post-Covid crash.
The price is trading with the bullish pre-breakout structure, where the dynamic 20 EMA is signaling buyers' interest in the market.
In that case, a buying pressure and daily candle above the 1.2449 level could validate the bullish trend where the ultimate target is to reach down to the 1.3088 level.
The alternative trading approach is to look for short trading opportunities. If the price comes below the 1.2253 level it could come lower towards the 1.1839 area.
The buying pressure in the AUD/USD price is visible as the previous weekly candlestick closed with a massive upside momentum. However, the monthly closing and profit-taking by institutions could limit the upside pressure with corrective price action.
In the AUD/USD daily price, the buying pressure has become questionable as the last two candles showed a corrective momentum below the critical 0.7136 resistance level.
This technical analysis shows how the bullish trend is strong as the high volume level of 0.6905 level is below the current price. However, the price extended higher from the 20 DMA and high volume level, which can open a possibility for a bearish correction.
In the indicator window, the Relative Strength Index (RSI) showed a rebound from the 70% overbought level, followed by a divergence. SInce mid-November, the price made consecutive higher highs but the RSI failed to follow the direction, which creates a divergence with a downside possibility.
Based on this outlook, any downside pressure and bullish rejection from the dynamic 20 EMA could open a long opportunity in this pair. However, the downside pressure is potent as long as the price trades below the 0.7136 resistance level.
In the USD/JPY daily price, the descending channel is still valid, while the price failed to show a solid bullish breakout. In that case, the primary aim for this instrument will be to look for short opportunities for the coming days.
Trading in the USD/JPY price has become tricky as the recent price showed a buyers’ presence, while the broader outlook is still bearish.
In the previous week, consecutive corrective daily candles appeared with no lower low formation. The strong position at the dynamic 20 EMA area is a primary sign of a bullish pre-breakout structure. However, the validation of the buying possibility needs to come with a stable price above the 131.59 resistance level.
Based on this outlook, bulls should wait for the price to form a strong bullish breakout with a D1 candle above the 131.59 level, which will increase the possibility of taking the price toward the 134.70 level.
On the other hand, the bearish trend continuation opportunity should come with a valid new swing low below the 128.62 high volume level. In that case, the selling opportunity will be open towards the target of 126.38 level.
In the higher timeframe price action, the buying momentum is solid in the XAU/USD price. Moreover, the global fundamental outlook and recent US inflation are also supportive of Gold bulls above the $2000.00 level.
In this daily price of XAU/USD, there is no sign of significant downside pressure. Therefore, the long-term bullish trend would remain valid, where any intraday buying possibility could be a decent trading opportunity.
Although the RSI reached the 70% overbought level, the dynamic 20 EMA is still below the price with no significant gap with the price.
In the most recent price chart, the price is hovering above the 1916.46 to 1896.51 demand zone, where a minor bearish correction and a bullish rejection from this area would open a long opportunity.
The buying possibility is potent for this instrument, where the ultimate target is to test the 1998.62 resistance level. On the bearish side, a stable daily candle below 1890.00 is needed before targeting the 1820.00 level.
Bitcoin's price has increased by 45% in the last four weeks, with the most volatility happening in the first three weeks. While the last few days have been more stable, overall, the long-term outlook for BTC is positive.
This rally has pushed the price above the November 5 high of around 21,400.00 but for further confirmation of a new uptrend, a higher high above the August 14 high of 25,205.00 is needed.
In the meantime, there is a chance that the price could drop to key support levels, but if there is strong selling pressure, it could turn into a larger decline. Identifying important support levels is important.
In the daily price chart, institutional investors' interest is clearly visible in this instrument as the latest high volume level is below the price.
The bull run from 16,451.28 came with several base formations at 20,426.20 and 22,298.52 levels. Therefore, the primary trading idea for this pair is to look for the long opportunities from these levels.
The dynamic 20 EMA is still below the price while the RSI is holding a strong position above the 70% level.
The buying possibility could extend the momentum towards the 30,000.00 level from the current zone. Moreover, a stable price above the 26,000.00 level could validate the long-term bullish possibility, targeting the 40,000.00 level.
The coming trading days are going to be volatile as there are several high-impact releases like the FOMC meeting and NFP. Moreover, the monthly close would create a reversal momentum and investors should manage the risk accordingly.