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      10/06/21 10:53

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    • The Federal Reserve (Fed), Bank of England (BoE), and European Central Bank (ECB) all meet this week.  Jeremy Naylor | Writer, London | Publication date: Monday 30 January 2023  The US dollar has the upper hand, however if there’s a dovishness to the Fed’s statement, which may happen if there’s the determination to wait to see what effect the big rate rises are having, and the ECB is hawkish, insisting on more rate rises to combat inflation, then this could stir the direction away from USD. The BoE, like the ECB, is expected to raise rates more than the Fed.   Fed It's a big week this week for central banks and things kick off tomorrow, Tuesday 31st of January, with the Federal Reserve (Fed) at the beginning of its two days of meetings. It's expected to deliver another interest rate rise after seven in 2022, although at a much slower rate. The market expects a 25-basis point (bp) rise in the federal funds rate to between 4.5 and four and three quarter percent. Remember in December US inflation decelerated for a sixth straight month at 6.5% - its lowest level since October 2021. US central bankers want to continue to raise rates but much more slowly to see how the economy is responding to the previous hikes and make sure it doesn't go too far. Dollar basket This is the dollar basket just coming out at this line of support at 10110, which is the low we had back on the 27th of May 2022. The MACD has turned around this oscillator here at the bottom indicating that we've got the blue line over the red dotted line, which indicates to me that potentially we do have some more upside to go technically, but it's all about that statement from the Fed that we've get at 19:00 Wednesday evening UK time. I f you are long on this chart going into the news, your stock would be down here at something like the 10075 level, 10167 is over trading at the moment. Any upward move would be capped out potentially by this rise up to here at 10308, which is the lows we had back on the 14th of December. BoE Then on Wednesday, the Bank of England (BoE) starts its two-day meeting with inflation at 10.5% in December, higher than in the US and the eurozone with wages excluding bonuses rising at their fastest rate since records began back in 2001. The Bank of England is likely to raise its main interest rate, the base lending rate, for a 10th consecutive time by half a percentage point to 4%. Now, at its last meeting in December, the monetary policy committee voted for a 50bp rise to 3.5%. But the vote was split three ways to members voting to end the rate rises while one backed a larger three quarter point move. The balance went for that move up that we saw, according to Reuters. Economists see a similar split next week because of the uncertainty around inflation. The big question is, how fast will inflation fall? Is there a risk of bottoming out above the Bank of England's target? GBP/USD Well, we take a look at what's happening sterling against the US dollar for this. Now this is sterling rising or has been rising against the US dollar the last couple of days, sterling has been falling against that slightly stronger greenback. And if you're short on this, your stock goes above this line of resistance at around about 12480 level - 12370 trading there at the moment. But we'll certainly be looking to see just what's going on with sterling as to the hike cycle. They see just one rate rise more to four and a quarter percent in March, while financial markets see the end of tightening mid-2023 at 4.5%. ECB Then on Thursday, just after the Bank of England decides on its interest rate picture, the European Central Bank (ECB) is seen hiking by another 50-basis points to 3%. There's little doubt about that, according to the CBN members. They've been very transparent in the last few weeks, agreeing with the Christine Lagarde scenario of another significant rate rise. The ECB is also further away from reaching the limit of its rate. It started its tightening cycle later than many central banks, only raising its main base rate by a total of 250 basis points in 2022 compared with 325 basis points at the Bank of England, and 425 basis points from the Federal Reserve. EUR/USD Let's take a look at what's happening with the euro/dollar trade around that interest rate decision in the opposite direction. As with the DXY, we've seen the MACD turn around in the last 24 hours indicating the momentum is now beginning to pick up on the downside. If you're short on this trade, your stock goes above this line of resistance, your stop just underneath the 110 level, 20855 is where we are. Support kicks in at 10766. That's it. You are short on this, short euros against that stronger US dollar. But it does depend on there being an emphasis on the US dollar. If we get anything like a dovish Fed and a hawkish euro area, we could well see this recent trend reversed with a move up for the euro/dollar trade.
    • Gold and Brent crude consolidate, as natural gas drops into 21-month low Gold and Brent crude struggle to maintain recent gains, while natural gas collapses into a fresh 21-month low. Source: Bloomberg      Joshua Mahony | Senior Market Analyst, London | Publication date: Monday 30 January 2023  Gold consolidates as stocks head lower Gold has struggled to maintain its upward trajectory of late, with the precious metal losing some of its shine thanks to a similar sideways trajectory for the US dollar. A resurgence in the dollar could bring about a turn lower for the price of gold, meaning that there is also a likely positive correlation between equities and precious metals for the time being. Nonetheless, from a purely technical standpoint, the recent consolidation phase continues to point towards another move higher as long as price does not break back down through the most recent swing-low of $1911. Should that occur, it would make sense to expect a potential move lower for gold. Source: ProRealTime Brent crude turning lower from resistance zone Brent crude has been struggling to maintain its upward trajectory over the past week, with price starting to weaken from a key resistance zone. The descending trendline and 100-simple moving average (SMA) have converged to bring a key area that could see the wider downtrend kick in once again. The stochastic oscillator provides another potential signal that the bears could come back into play once again here, with the break through the 80 threshold highlighting a reversal in momentum. Looking back at previous occasions that we have seen this signal, we have seen periods of weakness following each of the past five signals (as shown by vertical dotted lines). For a bearish confirmation signal, watch for a break below the $83.97 swing-low. Source: ProRealTime Natural gas continues its declines, as price hits 21-month low Natural gas has been hit hard over the course of the past five months, with price falling back from almost $10 to the sub-$3 mark we see today. As we look to emerge from a largely mild European winter, the healthy stockpiles largely bring the conversation of a potential squeeze in prices to an end. Whether that issue resurfaces with regards to next winter remains to be seen, but sentiment has clearly taken a hit of late. Nonetheless, there will likely be a point where the price of natural gas is deemed to have gone too far, with current prices trading back within a crucial historical zone that has previously held price for an extended period. While there is a chance that that the bulls come back in at some point, the downtrend still remains in play as highlighted on the four-hour chart. A rise up through $3.322 would signal a potential bullish reversal coming into play. Until then, the bearish trend remains the dominant force that should continue to send prices lower. Source: ProRealTime
    • Major US indices ended last week with further upside, but a sharp paring of gains at the last hour may suggest some caution kicking in ahead of several key risk events. Source: Bloomberg   Indices /business/market_index United States Risk Market sentiment Federal Reserve  Yeap Jun Rong | Market Strategist, Singapore | Publication date: Monday 30 January 2023  Market Recap Major US indices ended last week with further upside, (DJIA +0.08%; S&P 500 +0.25%; Nasdaq +0.95%), but a sharp paring of gains at the last hour may suggest some caution kicking in ahead of several key risk events (central bank meetings, PMI data, US job report) this week. After ticking 3% lower since the start of the year, the US dollar index has also stabilised above a near-term support at its 101.00 level, with its measured moves within a tight range pointing to some wait-and-see ahead of the upcoming FOMC meeting. Economic data last week showed US core PCE price index coming in line with expectations at 4.4% year-on-year, further moderating from previous 4.7%. The data continues to anchor market expectations of terminal rate outlook at the 4.75%-5% range, which is less hawkish than what Fed policymakers have been guiding for. Still above-target inflation and easing financial conditions over the past months may refrain the Fed from feeding markets with any pivot hopes prematurely but equity bulls may attempt to ride on any signs of a more data-dependent stance to continue recent bullish momentum. The past week has also seen mega cap tech counters taking leadership for markets’ bullish moves, and the onus will fall on several big tech names this week (Advanced Micro Devices, Meta Platforms, Alphabet, Apple and Amazon) to support further upside. Thus far, the Nasdaq 100 index has broken above a key downward trendline resistance, suggesting bulls in control. A near-term resistance at the 12,200 level lies ahead and any break above this level could pave the way towards the 13,000 level, where a Fibonacci confluence zone resides. Source: IG Charts Asia Open Asian stocks look set for a lower open, with Nikkei -0.04%, ASX -0.16% and KOSPI -0.83% at the time of writing, as the last-hour de-risking in US indices on Friday and muted moves in US equity futures this morning suggests some caution ahead of several key risk events this week. The mainland China markets will reopen today after its Lunar New Year holidays, with positive catch-up performance likely on the table and an anticipated return to bull market for the CSI 300 index. Last week, the Hang Seng Index has pushed to its 10-month high, posting its six consecutive weeks of gains. The economic calendar in the region is largely quiet today, but focus will be on China’s NBS PMI readings tomorrow. Expectations for its manufacturing PMI are for a smaller contraction to 49.7 from previous 47.0, but with market technicals in overbought territory for now, any lower-than-expected read may be tapped on for some profit-taking. For the Nikkei 225 index, recent upside has brought it to retest a key resistance at the 27,400 level currently, which also marks the completion of a previous double-bottom pattern. Any move higher could pave the way towards the 28,400 level next, where a key 61.8% Fibonacci retracement level stands. The index is currently trading above both its 100-day and 200-day moving average (MA). Source: IG Charts On the watchlist: Brent crude prices hovering at 100-day MA ahead of OPEC+ meeting Brent crude prices have been able to form a higher low and higher high since December last year, taking its cue from the weaker US dollar, China’s reopening narrative and an improved risk environment to gain some traction. That said, recent upside has stalled just below its 100-day MA, with its near-term ranging pattern pointing to ongoing wait-and-see ahead of several key risk events this week. Expectations for the upcoming OPEC+ meeting are for a no-change to current policy, in light of higher oil prices in recent months and an improving outlook on China’s demand. That may leave sentiments to be more sensitive to a series of central bank meetings and economic data to drive moves. Any break above its 100-day MA could further provide conviction of bulls in control and places the next key test of resistance at the US$92.87 level on watch. This level is where a key 61.8% Fibonacci retracement level resides. Source: IG Charts Friday: DJIA +0.08%; S&P 500 +0.25%; Nasdaq +0.95%, DAX +0.11%, FTSE +0.05%
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