Last week in the currency markets, the US economy is displayed solid performance metrics particularly in the labor market. Coupled with a hawkish central bank during extreme inflationary pressures, the US Dollar is yet to grow as many expected. The Euro turned a corner this past week, with it breaking out of persistent consolidation against the US Dollar.
While the US battles with lethal inflation levels, the US Federal Reserve appears unable to respond sufficiently and promptly, so the Currency Board has concentrated completely on the US dollar. The US dollar fell after the country announced the consumer price index hit a four-year high of 7% y/y in December. Compared with the previous 4.9%, the underlying value was higher at 5.5%.
Several blue-chip companies will report earnings in the week ahead, including Goldman Sachs and Bank of America, Procter & Gamble, Netflix, and several transportation companies. Traders will cautiously monitor the latest news on the rapidly spreading Omicron coronavirus variant to see how it affects earnings in 2022.
It will be a busy week ahead on the economic calendar this week which implies more volatility in the markets.
On Monday, US banks will be closed in observance of Martin Luther King Day.
On Tuesday, the Bank of Japan will deliver its first monetary policy decision of the year with no surprises expected and the ZEW Economic Sentiment figures for Germany and the Eurozone will be the key stats early in the week.
On Wednesday, Canadian and UK Inflation CPI figures will be in focus and on Thursday the Australian Employment Change and the US Unemployment Claims and Existing Home Sales will be released. Finally, on Friday the UK and Canadian monthly retails sales will be released.
Major Currencies Performance and Signals
EUR/USD
The EURUSD gained last week, but this seemed like a result of US Dollar losses. Traders have overcooked hawkish Fed hawkish policy estimates and monetary policy divergence likely to make road ahead tough for EUR.
FORECAST: NEUTRAL
Resistance: 1.1450, 1.1500, 1.1550
Support: 1.1400, 1.1350, 1.1300
GBP/USD
The British Pound bears didn’t manage to keep the currency down as per US dollar weakness at the end of the week. This week will be a busy week and we expect that that the pair will be on range.
FORECAST: NEUTRAL
Resistance: 1.3700, 1.3750, 1.3800
Support: 1.3650, 1.3600, 1.3550
AUD/USD
Australia reports positive macroeconomic data amid economic recovery. The AUDUSD remains at an inflection point without a clear direction. We expect range trading from the Aussie pair.
FORECAST: NEUTRAL
Resistance: 0.7250, 0.7300, 0.7350
Support: 0.7200, 0.7150, 0.7100
USD/JPY
Last week, the Japanese Yen outperformed versus G10 peers, reversing recent trend. Bank of Japan rate decision expected to bring about changes to inflation outlook. Yen weakness likely to resume against increasingly hawkish global central banks
FORECAST: SELL
Resistance: 114.50, 115.00, 115.50
Support: 114.00, 113.50, 113.00
USD/CAD
The Loonie ended the week up dropping. We expect the trend to continue through the next week with a weak US Dollar but always keeping an eye on the news releases.
FORECAST: SHORT
Resistance: 1.2600, 1.2650, 1.2700
Support: 1.2500, 1.2450, 1.2400
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