Last week, the S&P 500 closed much better than it started, especially considering the strong rally that developed in the final hour of trade on Friday. As I had looked at two weeks ago the backdrop was getting more imposing for equities.
And with the Federal Reserve rate decision coming up the Fed went into a blackout period which meant no Fed-speak to save the day. That week was also OPEX which had been a bearish factor for equities since last year and that very much remained the case as price action played out.
Next week remains extremely busy with important macro items set to be released every day on the economic calendar especially for the British pound on Thurdsday. That’s on top of a very busy earnings calendar with Google and GM set to report on Monday, Facebook on Tuesday, Amazon on Wednesday, and Ford on Thursday amongst a host of others. So, this is not a market without motive and there will be ample drive coming in next week.
In China, all week Chinese banks will be closed in observance of the Spring Festival.
It’s a NFP time this week and Friday’s nonfarm payrolls are expected to decline by about 100,000 with a mild upward tick in the unemployment rate to 4%. Wage gains are expected to push the year-over-year pace over 5% driven by another monthly gain of about ½% m/m or more.
Major Currencies Performance and Signals
EUR/USD
Fed officials expect aggressive monetary tightening in 2022. A wait-and-see strategy is likely to be adopted by the European Central Bank. The EURUSD exchange rate is technically bearish and may hit 1.1000 shortly.
FORECAST: SELL
Resistance: 1.1150, 1.1200, 1.1250
Support: 1.1100, 1.1050, 1.1000
GBP/USD
The Cable has dropped big as well last week. With four rate hikes priced in this year, the focus remains on the inflation outlook and whether more may be needed. We are bearish this week on the British pound with a careful eye on Thursday’s releases and NFP on Friday.
FORECAST: SELL
Resistance: 1.3400, 1.3450, 1.3500
Support: 1.3350, 1.3300, 1.3250
AUD/USD
The AUDUSD pair should continue to decline in the coming weeks due to central bank imbalances. Stocks fell due to the Fed’s hawkish activity and strong US growth. There is a chance that the AUDUSD pair will continue to fall towards 0.6770.
FORECAST: SELL
Resistance: 0.7000, 0.7050, 0.7100
Support: 0.6950, 0.6900, 0.6850
USD/JPY
Last week, the USDJPY price has been up on each successive day with the biggest gain coming on Wednesday and Thursday. We are Long this week on the US Dollar
FORECAST: BUY
Resistance: 115.50, 116.00, 116.50
Support: 115.00, 114.50, 114.00
USD/CAD
The USD/CAD approaches triangle resistance after gloomy week for the Loonie. We remain bullish on the US Dollar this week with a an eye on the NFP results on Friday.
FORECAST: BUY
Resistance: 1.2800, 1.2850, 1.2900
Support: 1.2750, 1.2700, 1.2650
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