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.
Market rally takes break on Friday
- US unemployment claims rose more than was expected. Philly Fed Manufacturing Index turned out worse than the forecasts as well. Analysts believe the dire economic data will press US officials to unveil the stimulus package faster. “We are in an environment now where bad news is good news because it means more stimulus,” said ANZ Research. Once the stimulus package is delivered, the riskier assets will surge. Today the US dollar regains yesterday’s losses.
- The Bank of Japan held a meeting early in the morning. The central bank kept its monetary policy unchanged and extended the Covid-19 aid program by six months. The Japanese yen dropped, pushing USD/JPY higher.
- The Bank of England made a report yesterday, where it maintained the status quo. The reaction of the pound was modest. As for the Brexit front, EU-UK sides keep negotiating. Market participants await the soon breakthrough in talks as one of the sticking points has been resolved. GBP/USD dropped at the start of the day due to the strong USD.
The most traded pair takes a break after rallying up for so long. If the price drops below yesterday’s low of 1.2240, it may fall to the 50-hour moving average of 1.2225. However, it’s likely to keep moving up to the resistance of 1.2275. If it manages to break this level, the way up to the next round number of 1.2300 will be clear.
XAU/USD has broken through the 200-day moving average and almost reached $1 900 but pulled back. If it manages to break above it, the way up to the 100-day moving average near $1 915 will be clear. The hopes for a US stimulus package may help gold to edge higher. In the opposite scenario, the move below the support of $1 860 will drive gold lower to the low of December 14 at $1 825.
The British pound is on the back foot amid the strong USD. If it drops below Wednesday’s low of 1.3450, the way down to the key psychological mark of 1.3400 will be open. On the flips side, the move above the resistance of 1.3625 will push the pair higher to 1.3680.
Finally, let’s discuss the S&P 500. It pulled back after setting the fresh high at 3 725. The move above this level will drive the stock index to the next round number of 3 750. Most analysts forecast the S&P 500 will drive further up. Support levels are at the low of December 14 at 3 645 and at the 50-day moving average of 3 545.
Follow German ifo Business Climate at 11:00 MT time and Canadian retail sales at 15:30 MT time.
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.
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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.
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.