Last week, the Forex market saw the biggest increase in the New Zealand dollar and the greatest decrease in the value of the US dollar.
Joe Biden’s inauguration was quite the event for global markets as stocks peaked to new record highs, with tech blue-chip stocks heading the growth, while a defensive dollar withdrew during the positive market mood. The longer-term effect of Joe Biden’s economic policy of providing a huge additional $2 trillion stimulus is expected to see further weakness in the US dollar.
The two countries with the most developed progress of vaccinating their populations, Israel, and the UAE, are seeing their stock markets outperform the global markets, ever since the start of the new year.
This week, the economic calendar will give traders some key insights into the US economy, which appears to have sustained its deceleration at the end of Q4’20 (see more below). On the data side of the calendar, there are five ‘high’ rated releases, as well as the medium-ranked weekly initial jobless claims, which have been the ‘canary in the coalmine’ of sorts as a bellwether for the recent slowdown.
On Monday, the Australian banks will be closed in observance of Australia Day.
Tuesday’s and Friday’s consumer confidence readings, the former of which is the January US Conference Board’s consumer confidence index and the latter of which is the final January US University of Michigan consumer sentiment report, may convey greater effect than normal, as we are still in the initial stages of an economic rebound.
The December US durable goods release this Wednesday and the preliminary Q4 (2020) US GDP report on Thursday will give traders some significant data that will reveal the extent of the economy’s slowdown. The main event will be the Fed’s meeting on Wednesday although there are no expectations for policy changes. Any market reaction will come from the Chairman Powell’s comments.
In Europe, the highlight of the week will be the French and German yearly GDP for Q4 2021, on Friday. Amid an ongoing lockdown, the economy probably shrank again in the final quarter, something backed by the Markit PMI survey for December. And the prospects for Q1 do not look bright either, considering that the nation’s lockdown will continue until mid-February.
EUR/USD
The Euro had a great week, as it has recovered nicely after the dramatic sell off over the last two weeks.
This week, we expect that the EURUSD price will range-bound, depending on what will be said about the Covid-19 stimulus bill in the US and the likelihood of stricter lockdowns in the EU.
FORECAST: NEUTRAL
Resistance: 1.2200, 1.2250, 1.2300
Support: 1.2150, 1.2100, 1.2050
AUD/USD
The Aussie fluctuated during the week, as we have formed a rather range candlestick yet again. There are many signs of a pullback after a “exhausted” bullish move in the last weeks.
FORECAST: SHORT
Resistance: 0.7750, 0.7800, 0.7850
Support: 0.7700, 0.7650, 0.7600
USD/CAD
The USDCAD pair bounced back close to the mean level after a two-year low on Thursday.The WTI Oil is in a holding pattern for the last two weeks. Bank of Canada keeps rates and quantitative easing unchanged as expected.
We expected further gains for the US dollar this week.
FORECAST: LONG
Resistance: 1.2800, 1.2850, 1.2900
Support: 1.2700, 1.2650, 1.2600
GBP/USD
Although the US dollar is still weak, there are few currencies which are increasing strongly against it. The most well-established bullish trend against the greenback is expressed now in the British pound.
This week, we expect that the Cable price to range-bound as there are still uncertainties in the logistics of Brexit and the Covid-19 battle.
FORECAST: NEUTRAL
Resistance: 1.3700, 1.3750, 1.3800
Support: 1.3600, 1.3550, 1.3500
USD/JPY
The US dollar fluctuated during the week against the Japanese yen as we are sitting just below the ¥104 level. The ¥104 level is important, as it has offered resistance for the last month or so.
This week we expect the USDJPY pair to range until there is a pivotal decision on stimulus.
FORECAST: NEUTRAL
Resistance: 104.0, 104.5, 105.0
Support: 103.5, 103.0, 102.5
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