Last week in the currency markets, the British Pound was the unexpected winner. The US Dollar, finished as the second strongest and indeed failed to ride on hawkish Fed and surging yields. The US Dollar was more mixed than the currency heat map suggested. The Japanese Yen recovered some ground after initially selling off. The Aussie and the Kiwi pairs were the worst performers and would be driven by overall risk sentiment in the future.
The December non-farm payroll report might disappoint the markets with the much weaker than expected job growth. Yet, unemployment is back below 4% at 3.9%. COVID-19 news updates will remain a key area focus. Risk aversion could hit should a new strain of the virus appear in a developed economy.
It will be a quieter week ahead on the economic calendar, with 49 numbers in focus in the week ending 14th January.
In the US dollar next week, the December inflation figures will be in focus on Wednesday along with wholesale inflation numbers on Thursday. Anticipate lots of interest in the numbers, with inflation key to the FED’s policy moves for the year. On Thursday, jobless claims will also draw interest ahead of retail sales and consumer sentiment figures on Friday.
With the markets now zoomed in on the Federal Reserve, Fed Chair Powell is due to give testimony on Tuesday before the Committee on Banking, Housing, and Urban affairs. Expect plenty of market interest, with FOMC member chatter in the week also needing consideration.
This week also signs the beginning of the earnings season. As it is tradition, the big Wall Street banks will kick things off. These banks include JP Morgan, Citigroup and Wells Fargo. Other possible market moving names reporting this week are as follows: TLRY, ACI, INFY, TSM, KBH, DAL, BLK, JPM, C, WFC.
Major Currencies Performance and Signals
EUR/USD
The EURUSD attempts to retrace the decline from the start of the year following the weaker-than-expected US Non-Farm Payrolls (NFP) report. We remain bullish this week for the Euro.
FORECAST: BUY
Resistance: 1.1400, 1.1450, 1.1500
Support: 1.1350, 1.1300, 1.1250
GBP/USD
The British Pound has held onto recent gains as the rapid spread of the Omicron variant continues to hinder the pace at which the global economy can recover from the Coronavirus pandemic. After the BoE (Bank of England) decided to raise rates in December, the Sterling ended the year in positive territory and remains resilient against its major counterparts.
FORECAST: BUY
Resistance: 1.3600, 1.3650, 1.3700
Support: 1.3550, 1.3500, 1.3450
AUD/USD
The Australian Dollar started off the New Year on a sour note against the US Dollar. We are bearish this week in the Australian Dollar.
FORECAST: SELL
Resistance: 0.7200, 0.7250, 0.7300
Support: 0.7150, 0.7100, 0.7050
USD/JPY
Last week, USDJPY slipped its own near-term support as a risk and monetary policy measure. This week we expect the pair to trade in a range. We remain Neutral on USDJPY.
FORECAST: NEUTRAL
Resistance: 116.00, 116.50, 117.00
Support: 115.50, 115.00, 114.50
USD/CAD
The Loonie ended the week up dropping massively after the Fed comments. We expect the trend to continue through the next week.
FORECAST: SHORT
Resistance: 1.2650, 1.2700, 1.2750
Support: 1.2600, 1.2550, 1.2500
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