The United States Bureau of Labor Statistics will publish the US Consumer Price Index (CPI) m/m on January 12 at 15:30 GMT+2. The index measures a change in the price of goods and services purchased by consumers.
Market outlook for this week
The USD has started the week with gains after suffering huge losses in the previous months. The risk sentiment mostly depends on the pace of the vaccine rollout, the spread of Covid-19 cases, and, of course, Biden’s inauguration and US political changes. Besides, this week is full of significant economic releases. Among them are rate decisions from the ECB and the Bank of Canada, and PMI reports from the Eurozone, the UK, and the USA. Quite a lot! Let’s briefly discuss how the market will react and then move on to the technical analysis.
January 19, 12:00 UTC +2 – German ZEW Economic Sentiment
This report is based on a survey of German investors and analysts, which is set to rate the economic outlook for the country. Since Germany is the leading economy in Eurozone, this indicator has a huge impact on the EUR. If the data comes out better than market expectations, the EUR will surge. Otherwise – drop.
January 20, 17:00 UTC +2 – Bank of Canada’s report
On December 9, the Bank of Canada left the rate at a record low of 0.25% as was expected. However, this time the bank may cut rates as it is unsatisfied with the too high CAD. If the recent strength of the USD can’t be sustained, the bank may really impose rate cuts, which will press the CAD down. If the BOC doesn’t make any changes, the CAD may move up.
January 21, 14:45 UTC +2 – ECB report
The European Central Bank expanded its Pandemic Emergency Purchase Program (PEPP) by an additional €500 billion and extended it to 2022 during its meeting in December and left the rate at a record low of 0.0%. If the ECB confirms more easing is needed, the EUR will fall. Otherwise – the EUR will rise.
January 22 – EU, UK, and US PMI reports
Purchasing Managers’ Index (PMI) is an indicator that measures the economic health of the manufacturing and services sectors. Traders pay close attention to whether the real numbers exceed market expectations or not as it will have a huge impact on the currency. If the actual PMI data is higher than the forecasts, the currency will strengthen. If the actual PMI data is lower than the forecasts, the currency will weaken.
EUR/USD dropped last week significantly. The pair has taken a break on Tuesday after falling for so long. It has bounced off the 50-day moving average at 1.2050. If it rises to the high of January 14 at 1.2170, the way up to the next resistance of 1.2220 will be clear. Support levels are 1.2050 and 1.2000.
USD/JPY has jumped above 104.00, but we wouldn’t expect that it will rally further as the long-term trend is bearish. Elsewhere, the pair has failed to cross the 100-period moving average so many times during the last year. Therefore, if it rises to the resistance of 104.50, it’s going to pull back to the downside. Support levels are at the recent lows of 103.50 and 103.00.
S&P 500 is heading upwards. If it manages to jump above the all-time high at 3 824, the way up to the next round number of 3 850 will be clear. Support levels are at the low of January 15 at 3 745 and the key psychological mark of 3 700.
Finally, let’s talk about gold. XAU/USD tries to rebound from its recent losses. If it closes above the 50-day moving average of $1 865, it will have all chances to rise to the key psychological mark of $1 900. On the flip side, the move below the support of $1 825 will press gold to $1 800.
The US dollar index keeps rounding above the 103.60 historical support level. The buyers have already defended this level for three weeks, highlighting their interest in the greenback. Thus, buying USD looks less risky right now.
On the H4 timeframe, the US dollar index has formed a bullish falling wedge. At the beginning of the trading session, the price is testing the upper border of this wedge. Thus, in case of a higher-than-expected Core PCE Price Index m/m, the US dollar will skyrocket against other currencies.
The Reserve Bank of Australia (RBA) will make a statement and release a Cash Rate on February 7, 05:30 GMT+2. It's among the primary tools the RBA uses to communicate with investors about monetary policy.
This week may be the most important since the year started as the Fed assess the economic outlook and the US presents fresh NFP readings.
S&P Global, a private banking company, will release a monthly change in British Flash Manufacturing Purchasing Managers Index (PMI) on January 24, 11:30 GMT+2. The index is a leading indicator of economic health as businesses react quickly to market conditions, and purchasing managers hold the most current and relevant insight into the company's view of the economy.