After the successful breach of the important resistance zone at 1.1920, the EUR continued to gain positions against the USD. A continuation of the rally and an attack of the high at around 1.2010 is the most probable scenario at the time of writing the analysis. If a retracement develops, it should be limited to the support at 1.1924. This week, the most important economic news that could have a significant impact on the currency pair, is the data on the consumer price index in the Eurozone (10:00 GMT), the ISM Manufacturing data for the U.S. (15:00 GMT) on Tuesday, as well as the Non-farm Payrolls change and the Unemployment rate in the U.S. (Friday; 13:30 GMT).
GBPUSD a trading instrument is preparing for a reversal
GBPUSD a trading instrument is preparing for a reversal. GBP/USD pair is correcting upward, adding more than 100 points on the back of the rising value of the British pound, and is currently trading around 1.3348.
The main driver of the positive dynamics was the data on GDP for Q3 2021 published the day before. The country’s economy slowed down slightly on a quarterly basis (from 1.3% to 1.1%), but in annual terms, the growth rate, on the contrary, accelerated from 6.6% to 6.8%. Also, a positive signal for the market was the reluctance of the British authorities to introduce a lockdown for the Christmas weekend.
Despite the fact that the increase in new cases of the disease caused by the new Omicron mutation of coronavirus has exceeded 52% in just a week, and a state of emergency has been declared in London, Prime Minister Boris Johnson said that the government is not yet ready to tighten anti-epidemic measures.
The American currency also contributed to the strengthening of GBP/USD, dropping immediately by 0.5 points in the USD Index on weak macroeconomic data. The level of US GDP in Q3 2021, as expected, slowed down and amounted to 3.4% instead of 10.5% in the previous reporting period, and Existing Home Sales in November were fixed at around 6.46M, which is also below the forecast of experts at 6.52M. Despite the decline in key indicators, the Conference Board’s Consumer Confidence Index rose to 115.8 points in December from 111.9 points a month earlier.
Support and resistance
The trading instrument is within the global descending channel and is currently forming a reversal, rebounding from the support line. Technical indicators maintain an actively weakening sell signal: the fluctuation range of the Alligator indicator EMAs is narrowing and the histogram of the AO oscillator is forming ascending bars and approaching the transition level.
GBPUSD inflation data may influence the decision of the Bank of England
GBPUSD inflation data may influence the decision of the Bank of England. The British pound is trading in the area of record lows, updated last week. Investors are in no hurry to open new positions ahead of meetings of the world’s leading regulators. Today the US Fed will hold a meeting, and a block of statistics from the UK on the dynamics of consumer and production prices for November will be released. From the American regulator, market participants expect acceleration in the pace of reduction of the quantitative easing program, which should provide moderate support to the dollar.
In turn, the European Central Bank and the Bank of England will hold their meetings tomorrow. The British regulator probably will not change the parameters of monetary policy, although not long ago analysts were confident in the growth of the interest rate. However, much will depend on inflation statistics that will appear today.
The UK data released yesterday was moderately optimistic. Claimant Count Change in November showed a decrease of 49.8K after a reduction of 14.9K in October. ILO Unemployment Rate in October expectedly decreased from 4.3% to 4.2%.
Support and resistance
In the D1 chart, Bollinger Bands are reversing horizontally. The price range is reducing from above, pointing to the development of multidirectional dynamics of trading in the short term. MACD indicator is growing while preserving a rather stable buy signal (located above the signal line). Stochastic, having interrupted a steady growth at the beginning of the week, is reversing into a downward plane approximately in the center of its area.
USDCHF forming a local correctional formation. The trading instrument demonstrates a local upward correction and is currently trading at 0.9216.
The Swiss currency remains under serious pressure. After the quarantine measures were seriously tightened in a number of European countries due to the gathering new wave of the pandemic, the country’s authorities also decided to tighten sanitary rules from December 20 to January 24. Now only vaccinated citizens or those who previously had COVID-19 will have access to restaurants, cultural institutions, sports, and entertainment centers.
The Swiss National Bank also pointed out a possible decline in economic indicators due to restrictions caused by the spread of the Omicron strain in its report on monetary policy. According to the regulator, the global economic recovery slowed down in Q3 2021, which led to an increase in consumer prices and a decrease in the activity of the industrial and service sectors. The new inflation forecast for the current year is 0.6%, with a gradual increase in 2022 to 1.0%.
The smooth growth of USD/CHF in the near future may be interrupted by the depreciation of the US dollar, which is under pressure due to the continued growth in the number of coronavirus cases in the United States. According to the New York state authorities, over the past day, another record of 23.4K cases was set; however, the holiday weekend is approaching, and during this period investors are trying to avoid active work on the stock exchange, which can lead to the preservation of the pair’s rate at current levels until the end of the week.
Support and resistance
On the daily chart of the asset, the price is trading within the global ascending channel, forming a local corrective formation. Technical indicators are in a state of uncertainty: the fluctuation range of the Alligator indicator EMAs have completely narrowed and the histogram of the AO oscillator approached the transition level as close as possible.
GBPUSD the US dollar went down. The GBP/USD pair moves within an uptrend around 1.3588 amid a statement by British Prime Minister Boris Johnson about a possible reduction in the quarantine period from seven to five days.
According to the official, the UK showed success in the fight against the Omicron strain, but the hospitalization rate is still unacceptably growing. The government announced that people could come out of quarantine three days earlier if they test negative for coronavirus twice. The reluctance of the authorities to introduce a new lockdown and tighten the existing quarantine measures instills optimism in investors. Macroeconomic statistics for December were also positive. Following the manufacturing sector, Construction PMI was also better than expected, reaching 54.3 points against the expected 54.0 points. British Retail Consortium (BRC) retail sales rose by 0.6% YoY with an expected 0.3% growth.
USD Index began to decline slightly after staying above 96.000 for the holiday weekend and is now at 95.800. Investors react to the recent poor labor market data, assessing the prospects for a change in the course of the US Federal Reserve’s monetary policy in early spring. This week, consumer prices data will be released, and inflation will intensify. According to analysts’ forecasts, it may exceed 7% YoY, which has not happened for more than forty years.
Support and resistance
The asset moves within the global downtrend channel, preparing to overcome the resistance line. Technical indicators keep a global buy signal: fast EMAs on the Alligator indicator are above the signal line, and the AO oscillator histogram forms upward bars in the buy zone.
XAUUSD investor interest in gold rises again. The precious metal is correcting upward but is still below the psychological level of 1800.00, trading around $1793 an ounce. The news of detecting a new strain of coronavirus in South Africa has made serious adjustments to the dynamics of prices in world markets. Air carrier stocks plummeted on the back of statements from the EU, UK, and India about tightening border controls and restricting flights to South Africa.
The number of new speculative positions in gold increased for seven weeks in a row, and from 168.4K reached the January levels of 259.8K. The weekly report on changes in investor positions by the Commodity Futures Trading Commission (CFTC) will publish tonight, but the week will be the eighth consecutive week of growth.
When oil is sharply declining, and the USD Index is unstable, gold remains the only protective asset with sufficient capacity, and this week will show how much investors are ready to trust it. Of course, there are still expectations regarding the tightening of monetary policy from the US Federal Reserve, but in the current conditions of uncertainty, the regulator may take a break, which will also benefit the instrument’s quotes.
Support and resistance
The price has returned to a sideways channel on the global chart, below $1800 per ounce. After last week’s decline, technical indicators are uncertain: the fast alligator EMAs move close to the signal line, and the AO oscillator histogram forms downward bars near the transition level.
USDCAD Canadian inflation hits 1991 levels. Against the backdrop of Canadian macroeconomic statistics, the USD/CAD pair shows local sideways dynamics, trading at 1.2691.
According to the January report, Canada’s consumer price index rose by 0.9% MoM instead of 0.6% expected, which contributed to the growth of the annual rate to 5.1%, which is higher than 4.8% in December. The same index, excluding prices for raw materials and food products, was 4.3%, rising from 4.0% a month earlier. According to a report released Wednesday by the National Bureau of Statistics, Canada’s inflation rate rose to 5.1% last year, the highest since September 1991. With labor market indicators, this growth is not as critical as in the US, and the Bank of Canada has the time and opportunity to control the situation.
The American currency continues to trade without pronounced dynamics, as declines due to ambiguous macroeconomic statistics replace the rises almost the next day. The current local weakening is associated with another increase in the number of people receiving unemployment benefits, which this week amounted to 248K against 225K a week earlier. Analysts had expected a decline to 219K, and the final result disappointed the market. We should also note a significant reduction in the index of manufacturing activity from the Philadelphia Fed, which fell to 16.0 points in February from 23.2 points a month earlier.
Support and resistance
On the global chart, the price moves within the local triangle pattern. Technical indicators are in the state of a local buy signal: the range of EMA fluctuations on the Alligator indicator is directed upwards, and the AO oscillator histogram forms ascending bars in the buying zone.
