Last week the Nasdaq has been hit hard by a mixture of higher yields and risk aversion which will make the big tech earnings next week ever more important. Netflix got things off to a disappointing start and paid the price.
It seems to be a huge week next week on Wall Street after investors have been shaken by a tough start to earnings season and now face a critical FOMC meeting that should pave the way for a March liftoff. The main event is the Fed policy meeting and press conference, and a close second will be the next round of earnings.
The Fed is worried about inflation and will be delivering a series of interest rate hikes in the first half of the year. This week’s meeting is all about preparing markets for how they will normalize policy this year with rate hikes and balance sheet reduction.
In the EU there are a lot of economic data to come from the euro area next week which will no doubt draw a lot of attention, starting with the flash PMIs on Monday.
A quiet week as far as the UK is concerned. From an economic data standpoint, the week starts and finishes on Monday with the flash PMIs. With four rate hikes priced in this year, the focus remains on the inflation outlook and whether more may be needed.
With the FOMC and Bank of Canada meetings this week, economic data takes a back seat. However, there are still some major data points that could move markets, including preliminary global manufacturing and services PMIs, CPI from both Australia and New Zealand, and the first look at US Q4 GDP and Core PCE.
Major Currencies Performance and Signals
EUR/USD
The EURUSD dropped last week with 1.1300 being a strong support. The focus now is on the US FOMC. We remain bearish on the Eurodollar.
FORECAST: SELL
Resistance: 1.1350, 1.1400, 1.1450
Support: 1.1300, 1.1250, 1.1200
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 remain Neutral this week on the British pound.
FORECAST: NEUTRAL
Resistance: 1.3600, 1.3650, 1.3700
Support: 1.3550, 1.3500, 1.3450
AUD/USD
The AUDUSD is trading near session lows for the week in what was an up and down week. Australia releases CPI for Q4 on Tuesday. PMIs will be released early in the week which could dictate early trading. Australia Day bank holiday on Wednesday. We remain bearish.
FORECAST: SELL
Resistance: 0.7200, 0.7250, 0.7300
Support: 0.7150, 0.7100, 0.7050
USD/JPY
Last week, the USDJPY held a swing low area between 113.58 and 113.63. We remain bearish on the USDJPY pair with a careful eye on the FOMC.
FORECAST: SELL
Resistance: 114.00, 114.50, 115.00
Support: 113.50, 113.00, 112.50
USD/CAD
The Loonie stretched to the highest level since January 11and also to the 38.2% retracement of the move down from the January high to the January low at 1.25871. The price currently trading at 1.2580, a few pips below that retracement level. We are Bullish on the Loonies this week.
FORECAST: BUY
Resistance: 1.2600, 1.2650, 1.2700
Support: 1.2500, 1.2450, 1.2400
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