US stocks suffered from daily losses last Friday, witnessing heavy selling pressure, and extended their weekly rout following data that showed the core PCE rose at the highest rate in six months. The annual Core PCE Price Index, which is also the Federal Reserve’s preferred gauge of inflation, edged higher to 4.7% and came in higher than the market expectation of 4.3%.

Therefore, the hotter-than-estimated inflation data suggested growing bets the Federal Reserve has a long way to go in its aggressive tightening crusade, making the odds of a soft landing look slimmer. Investors dumped US equities after a higher-than-anticipated jump in consumer spending in January fueled the risk of more policy tightening by Fed chair Jerome Powell in March. On top of that, the Federal Reserve (Fed) officials were also hawkish and backed the US Dollar bulls, as well as weighing on the equity markets. As per the latest reading of the FEDWATCH tool, market players price a year-end effective fed funds rate at 5.3%, versus 5.1% signaled by the US central bank in its December meeting.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined lower last Friday as the S&P 500 experienced the worst slide in 2023 after hot PCE inflation data provided a boost to the US Treasury bond yields. The S&P 500 was down 1.1% daily and the Dow Jones Industrial Average meanwhile dropped lower with a 1.0% loss for the day. Nine out of eleven sectors in the S&P 500 stayed in negative territory as the Real Estate sector and the Information Technology sector are the worst performing among all groups, losing 1.82% and 1.77%, respectively. The Nasdaq 100 meanwhile dropped the most with a 1.7% loss last Friday and the MSCI World index was down 1.2% for the day.

Main Pairs Movement

The US dollar advanced higher last Friday, marking a four-week uptrend by the end of the day, and ground near the highest levels in seven weeks amid strong United States data. The hawkish Federal Reserve concerns have provided strong support to the safe-haven greenback, as hawkish Federal Reserve (Fed) talks underpin markets bets of higher Fed rates. Cleveland Fed President Loretta Mester told CNBC on Friday that his funds’ rate was above the median in December and still thinks they need to be somewhat above 5%.

GBP/USD dropped lower last Friday with a 0.57% loss after the cable extended its intraday slide and touched a daily low near the 1.1930 mark in the late US session amid a stronger US Dollar and higher US yields. On the UK front, bets for additional rate hikes by the BoE might limit the downside for the currency. Meanwhile, EUR/USD also witnessed some selling interest and touched a daily low below the 1.0540 mark. The pair was down almost 0.45% for the day.

Gold suffered from daily losses with a 0.62% loss for the day after dropping to the lowest levels in two months below the $1810 level during the US trading session, as the strong US data underpinned hawkish Federal Reserve concerns and weighed on the yellow metal. Meanwhile, WTI Oil rebounded sharply with a 1.23% gain for the day.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD further declined to its lowest level since early January below 1.0550 as of writing following the surprisingly high US core PCE inflation, rising to 4.7% in January, compared to market expectation of 4.3%, which provided a boost to the US Dollar. More detailed data saw Personal Income expand by 0.6% MoM also in January and Personal Spending increased by 1.8% compared to the previous month. However, it’s also worth noting that markets are already fully pricing in two more 25 basis points for Fed rate hikes in March and May. Currently, speculation the Fed will do a 50 basis points rate hike is mounting based on the stronger-than-expected growth in monthly core PCE inflation, and the CME FedWatch Tool showed the probability of a 50 bps rate hike rose to 32.9%.

From the technical perspective, the four-hour scale RSI indicator fell below the critical overselling level, suggesting that the pair were surrounded by strong bearish momentum, but investors should be aware of the corrective pullback. As the Bollinger bands, the pair continued to move along with the lower band, showing the pair was more favored to the downside path.

Resistance: 1.0788, 1.0929

Support: 1.0508, 1.0401

XAUUSD (4-Hour Chart)

Gold price remained under bearish pressure and priced at its lowest level since late December near the $1810 mark. On the back of stronger-than-expected PCE inflation data for January, the benchmark 10-year US Treasury bond yield is up more than 1% on the day near 3.95%, weighing on XAUUSD. The recent series of strong United States economic data and hawkish Federal Reserve (Fed) commentary has heightened expectations for three rate hikes this year – 25 basis points (bps) each in the March, May, and June meetings. Earlier in the US session, the US headline PCE rose 5.4% in the year to January from 5.3% and the core PCE rallied to 4.7% from a year earlier, both prints surpassing initial estimates. Markets now price the Federal Reserve terminal rate at 5.347% in July, remaining above 5% through the year.

From the technical perspective, the four-hour scale RSI indicator dropped below overselling level, suggesting that the pair was under heavy bearish pressure, but market participants should be cautious about a corrective pullback. As for the Bollinger Bands, the gold was priced below the lower band and the size between upper and lower bands gets larger, showing the downside tendency would persist shortly.

Resistance: 1850, 1870, 1900

Support: 1820, 1800

Economic Data

This week, the markets will be watching closely as two of the most influential economic indicators – US ISM Manufacturing and Services PMI figures – are released. With these reports being used to measure the overall health of the US economy, the results could have a dramatic effect on financial markets worldwide. This makes them an essential area for market participants to keep tabs on.

Here are key events to watch out for:

Gross Domestic Product | Canada (28 February)

The Canadian economy continued its upward trend in Q3 2022, growing by 0.7%, marking the fifth consecutive quarter of growth. 

Analysts predict that the economy will continue to grow and expand by 0.4% in Q4 2022.

CB Consumer Confidence (28 February)

The Consumer Confidence Index fell from 109 in December to 107.1 in January 2023, according to the Conference Board. 

However, analysts anticipate a possible recovery in the index, with a projected increase to 109 in February.

Consumer Price Index (CPI) | Australia (1 March)

The Consumer Price Index in Australia increased to a new high of 8.4% in December 2022, up from 7.3% in November. 

Analysts predict that the Australian CPI will continue to rise, with an 8.6% increase projected for January 2023.

ISM Manufacturing Purchasing Managers’ Index | US (1 March)

The US ISM Manufacturing PMI fell to 47.4 in January 2023, the lowest level since May 2020. 

Analysts predict a slight rebound in the PMI for February, with a reading of 47.9.

ISM Services Purchasing Managers’ Index | US (3 March)

The ISM Services PMI for the United States unexpectedly rose to 55.2 in January 2023, up from a 2-1/2-year low of 49.2 in December. 

Analysts predict that the PMI will fall slightly in February 2023 at 54.6.

US stocks advanced higher on Thursday, regaining upside momentum, and rose in a jittery session after US indexes trimmed part of their losses ahead of the close. The impressive rebound witnessed in huge companies like Microsoft Corp. and Apple Inc has underpinned the Nasdaq 100 despite the hawkish FOMC Meeting Minutes and mixed United States figures.

On Thursday, the US Q4 GDP report showed that the annualized pace of growth in the country was downwardly revised to 2.7% from 2.9% in the last quarter of 2022. Meanwhile, the Personal Consumption Expenditure Prices rose by 3.7% QoQ, which indicated that inflationary pressures in the same period were higher than previously estimated.

The economic data further fueled speculation the US Federal Reserve will continue to hike rates in the upcoming meetings. Market players are now waiting for the US January Personal Consumption Expenditures Price Index, which is the Fed’s preferred price gauge, is expected to show acceleration.

The benchmarks, S&P 500 and Dow Jones Industrial Average both advanced higher on Thursday as the S&P 500 came back up after erasing a rally of almost 1% with a series of twists and turns on Wall Street. The S&P 500 was up 0.5% daily and the Dow Jones Industrial Average meanwhile climbed higher with a 0.3% gain for the day. Seven out of eleven sectors in the S&P 500 stayed in positive territory as the Information Technology sector and the Energy sector are the best performing among all groups, rising 1.63% and 1.27%, respectively. The Nasdaq 100 meanwhile rose the most with a 0.9% gain on Thursday and the MSCI World index was up 0.3% for the day.

Main Pairs Movement

The US dollar edged higher on Thursday, preserving its upside strength but then retreated slightly back from a daily high above 104.70 level during the US trading session amid hawkish Fed bets. The Fed is expected to continue its policy tightening to achieve price stability as the upbeat labor market in the United States could underpin the Consumer Price Index (CPI) sooner. The USD Index is likely to remain volatile ahead of the release of the United States Core Personal Consumption Expenditure (PCE) Price Index data.

GBP/USD dropped lower on Thursday with a 0.27% loss after the cable extended its intraday slide and touched a daily low below the 1.2000 mark in the late US session ahead of US PCE Inflation. On the UK front, the BoE policymaker is worried about the extended persistence of inflation and sees the need for more tightening. Meanwhile, EUR/USD also witnessed some selling interest and touched a daily low around the 1.0580 mark. The pair was down almost 0.10% for the day.

Gold suffered from daily losses with a 0.17% loss for the day after witnessing further downside move and printed a fresh seven-week low below the $1820 level during the US trading session, as the US data fueled market concerns and weighed on the yellow metal. Meanwhile, WTI Oil rebounded sharply with a 1.95% gain for the day.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD extended its bearish tendency and was trading below the 1.0600 level as of writing, under pressure since the day started. The US Dollar continued to strengthen on the back of hawkish US Federal Reserve (Fed) prospects. The Federal Open Market Committee (FOMC) Meeting Minutes released on Wednesday is more hawkish than anticipated, which showed that a few members would have preferred a 50 bps hike and that participants believe the continued tight job market would contribute upward pressure to inflation. The news boosted demand for the US Dollar as stock markets turned south. In Eurozone, the final estimate of the January Harmonized Index of Consumer Price (HICP), was confirmed at 8.6% YoY. However, the core reading was upwardly revised to 5.3% from a preliminary estimate of 5.2%.

From the technical perspective, the four-hour scale RSI indicator hovered just above the oversold zone, suggesting the pair was pressured by heavy bearish traction. As for the Bollinger Bands, the pair was moving along with the lower, trying to find support in the lower band, but the size between the upper and lower bands get larger, showing the downside tendency has a high chance to persist shortly.

Resistance: 1.0788, 1.0929

Support: 1.0508, 1.0401

XAUUSD (4-Hour Chart)

Gold price maintains under bearish pressure on Thursday as risk aversion continued underpinning the US Dollar. Gold price keeps edging lower in the course of trading and hit the lowest $1,817.58 in the US session, while the US dollar advanced on the back of hawkish FOMC Meeting Minutes. On the other hand, inflationary pressures in the same period were higher than previously estimated. Personal Consumption Expenditure Prices rose by 3.7% QoQ, higher than the 3.2% expected, while the core reading came in at 4.3% higher than the 3.9% from the third quarter of 2022. The figures fueled speculation that the US Federal Reserve will hike rates further in the upcoming meetings.

For the technical aspect, RSI indicator 36 figures as of writing, maintaining in sell region as Gold price is still under a bearish trend. As for the Bollinger Bands, the price is moving down along with the lower band. This and the downward moving average signal some bearish potential. A continued downtrend could be expected. In conclusion, we think the market is in bearish mode as both indicators show bearish potential. We believe the downtrend would persist. For the downtrend scenario, the price is holding at $1,820. If the price close below the level, it may head to test the crucial support at the round-figure mark of $1,800.

Resistance: 1850, 1870, 1900

Support: 1820, 1800

Economic Data

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US stocks declined lower on Wednesday, witnessing some selling momentum, and failed to sustain their rebound after the Federal Reserve signaled that interest rates will continue moving higher amid ongoing inflation concerns. As per the latest Federal Open Market Committee’s (FOMC) Monetary Policy Meeting Minutes, all participants agreed more rate hikes are needed to achieve the inflation target as some believed there was an elevated risk of a recession in 2023.

On top of that, a few participants also favored a 50 basis point (bps) rate hike, which suggested that the Fed will be in no rush to cut rates and Swap markets now see June interest-rate hike as a near certainty. The hawkish Federal Reserve Minutes have underpinned the safe-haven greenback and weighed on the equity markets, which also suffered from geopolitical tensions throughout the day.

On the Eurozone front, European Central Bank (ECB) President Christine Lagarde said that inflation has begun to slow down but reiterated that they intend to raise the key rates by 50 basis points (bps) at the upcoming policy meeting.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined lower on Wednesday as the S&P 500 witnessed its fourth straight decline and the longest losing streak since December after a series of twists and turns. The S&P 500 was down 0.2% daily and the Dow Jones Industrial Average meanwhile retreated lower with a 0.3% loss for the day. Nine out of eleven sectors in the S&P 500 stayed in negative territory as the Real Estate sector and the Energy sector are the worst performing among all groups, losing 1.02% and 0.77%, respectively. The Nasdaq 100 meanwhile was little changed with a 0.4% gain on Wednesday and the MSCI World index was down 0.5% for the day.

Main Pairs Movement

The US dollar edged higher on Wednesday, extending its upside traction and accelerating its advance by the end of the US trading session following the Federal Open Market Committee (FOMC) Meeting Minutes. Fed chair Jerome Powell and his mates are still reiterating higher interest rates for a longer period to drag inflation down. Moreover, geopolitical fears surrounding China and Russia escalated and favored the rush towards the risk-safety, which in turn propelled the US Dollar.

GBP/USD dropped lower on Wednesday with a 0.54% loss after the cable witnessed an intense sell-off in the late US session and touched a daily low below the 1.204 mark amid Fed’s hawkishness. On the UK front, the preliminary UK manufacturing activities remained upbeat at 49.2 but a figure below 50.0 is considered a contraction. Meanwhile, EUR/USD also witnessed some selling interest and touched a daily high above the 1.0690 mark. The pair was down almost 0.40% for the day.

Gold suffered from daily losses with a 0.53% loss for the day after sliding towards the $1824 area and surrendered most of its early gains during the US trading session, as the geopolitical fears and hawkish Federal Reserve Minutes both exerted bearish pressure on the Gold price. Meanwhile, WTI Oil declined sharply with a 3.16% loss for the day.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD was testing the 1.0620 support at the moment of writing, as investors wait for the Fed to release the minutes of the year’s first policy meeting, and the cautious market mood help the US Dollar hold its ground in the American session. Various signs showed that US inflation will take longer to reach the Federal Reserve’s 2% target, which means monetary tightening will continue longer than previously estimated. Apart from this, following Wall Street’s sharp decline on Tuesday, risk aversion keeps benefiting the safe-haven greenback, which weighed on the EURUSD pair. Moreover, geopolitical tensions continue to undermine the market mood as China escalated the bet, with a top local diplomat claiming they would deepen strategic cooperation with Russia.

From the technical perspective, the four-hour scale RSI indicator slid to 36 figures as of writing, suggesting that the pair was pressured by risk aversion flow. As for the Bollinger Bands, the pair was wandering in a narrow lower area and supported by the lower band, showing the pair was amid a bearish tendency in the near term.

Resistance: 1.0758, 1.0927

Support: 1.0619, 1.0508

XAUUSD (4-Hour Chart)

Gold price dropped towards $1,820 on Wednesday as the US Dollar maintained its hawkish bias. At the time of writing, Gold price is trading at $1824.61, posting a 0.56% loss daily, while the US Dollar Index rose 0.37% to 104.558. The US Dollar advance following the Federal Open Market Committee (FOMC) Meeting Minutes. The document showed that a few participants favored a 50 basis point (bps) rate hike, while some believed there was an elevated risk of a recession in 2023. Most importantly, all participants agreed more rate hikes are needed to achieve the inflation target, which benefits the US Dollar, weighing on dollar-denominated Gold.

For the technical aspect, the RSI indicator is 35 figures as of writing, edging lower as the Gold price stages a downside movement. As for the Bollinger Bands, the price slid through the moving average and lower band. As the price made a decisive breakthrough to the downside, a continued downtrend could be expected. In conclusion, we think the market is in bearish mode as both indicators show bearish potential. For the downtrend scenario, the next support level is at $1,820. If the price close below the level, it may head to test the crucial support at the round-figure mark of $1,800.

Resistance: 1850, 1870, 1900

Support: 1820, 1800

Economic Data

US stocks recorded their worst day in two months on Tuesday, as investors were unnerved by economic data suggesting interest rates have further to rise after months of increases by the Federal Reserve.  The blue-chip S&P 500 index ended down 2 percent, with declines in every sector. The tech-heavy Nasdaq Composite slid 2.5 percent. Both indices had their steepest daily losses since December 15.

Markets have wobbled in recent days as investors gird for further interest rate rises from the Fed to combat inflation in the US economy. Yields on benchmark Treasury bonds reached three-month highs on Tuesday, pushing yields up to 3.95 percent.

Ahead of Wednesday’s trade, market participants will be closely monitoring the latest FOMC meeting minutes as well as a speech from FOMC member Williams. Key reports to watch include the PCE Prices Index this Friday (2/24), the Job Openings and Labor Turnover report on 3/8, the February Employment Report on 3/10, and the Consumer Price Index on 3/14.

Main Pairs Movement

DXY trades within a tight range near Friday’s closing levels in the sub-104.00 zone.

Higher Treasury yields and a projected 5.3% terminal Fed funds rate have seen a resurgence in the US Dollar index, DXY. At the time of writing, the price traded at 104.171.

GBP/USD grinds higher past 1.2100, mildly bid around 1.2115 during the initial hours of Wednesday’s Asian trading, as upbeat UK fundamentals keep Cable buyers hopeful ahead of the key Federal Open Market Committee’s Monetary Policy Meeting Minutes. At the time of writing, the price traded at 1.2118.

Gold price holds lower grounds near $1,835, following a two-day downtrend, at the time of writing, price trading at 1836.18.

Brent crude settled 1.2 percent lower to $83.05 a barrel, while the US equivalent WTI price is declining towards $75.50 as the expectations for more rate hikes by the Fed are escalating.

Technical Analysis

GBPUSD (4-Hour Chart)

The GBPUSD lost upside traction and hover around the 1.21000 level as of writing, as the stronger-than-expected PMI data from the US provided a boost to the US dollar and limit the pair’s upside. The monthly data published by S&P Global showed on Tuesday that Composite PMI in early February jumped to 53 from 48.5 in January. Manufacturing PNI came in at 49.2 to beat the market expectation of 46.8 and Services PMI climbed to 53.3 from 48.7. With the UK private sector holding resilient in the face of strong inflation, the Bank of England is likely to continue to raise its policy rate without worrying about a deep recession.

From the technical perspective, the four-hour scale RSI indicator figured 58 as of writing, suggesting that the pair was surrounded by bullish momentum. As for the Bollinger Bands, the pair was priced above the 20-period moving average and limited by the upper band, showing the pair currently was more favored to the positive path in the near term. Once the bulls break the upper band, the next stop would be the 1.2210 level.

Resistance: 1.2211, 1.2400

Support: 1.2012, 1.1935, 1.1859

XAUUSD (4-Hour Chart)

Gold price remains under pressure on Tuesday as the benchmark US 10-Year Treasury rose 2.97% to 3.956, capping any further gains on Gold price. At the time of writing, the Gold price is trading at $1835.10, posting a 0.46% loss daily. On the other hand, investors keep their eyes on geopolitical tensions. The recent visit of US President Joe Biden to Ukraine led Russia to suspend its nuclear arms treaty with the United States. Russian President Vladimir Putin also vowed to continue the military campaign in Ukraine. Worrying about geopolitical tension could directly influence the risk sentiment, and provide a fresh catalyst to Gold prices.

For the technical aspect, RSI indicator 43 figures as of writing, holding around mid-line as the price is amid a consolidation phase in the near term. As for the Bollinger Bands, the price moves up and down around the moving average. The price needs a decisive breakthrough to trigger some following traction. In conclusion, we think the market is under a modest bearish trend as the price is edging lower and weighed by upbeat US Treasury yield, though both indicators show no strong bearish potential. For the downtrend scenario, the next support level is at $1,820. If the price close below the level, it may trigger some technical selling and drag the price deeper.

Resistance: 1870, 1900, 1920

Support: 1820, 1800

Economic Data:

U.S. stock futures were trading lower during Monday’s evening deals, with significant benchmark averages remaining closed during the regular session for a public holiday.

Contracts on the S&P 500 Index slipped 0.3%, with Treasury futures dropping across the curve. Stocks ended last week on a muted note after Richmond Fed President Thomas Barkin and Fed Governor Michelle Bowman both expressed their support for continued rate hikes.

On the bond markets, United States 10-Year rates were at 3.842%. As Germany’s 10-year yield advanced two basis points to 2.46% and Britain’s 10-year yield declined four basis points to 3.47%.

There are six big stock buybacks follow by this week.

TWLO announced a share repurchase program of up to 1 billion of its outstanding Class A common stock. Shares gained more than 17% last week.

Citizens Financials 1.15 billion buyback expansion. This is incremental to the $850M of capacity remaining as of December 31, 2022, under the prior June 2022 authorization, of which $400M will be utilized during Q1/23. Also, there are 4 more share buybacks for CHKP with 2 billion, WAB with 750 million, TTD with 700 million, and NTR with 5% of its issued common shares.

Main Pairs Movement

DXY trades within a tight range near Friday’s closing levels in the sub-104.00 zone.

The ongoing price action favors the continuation of the uptrend for the time being. Further bouts of strength are now expected to put a potential test of the 2023 top at 105.63 (January 6) back on the investors’ radar in the future. In the longer run, while below the 200-day SMA at 106.44, the outlook for the index remains negative. At the time of writing, the price is trading at 103.895.

WTI crude oil remains depressed near $76.50 as it fades from late Friday’s bounce off a 10-week low during early Monday in Asia. In doing so, the black gold remains below the convergence of the 21-DMA and the 50-DMA, as well as the downward-sloping resistance line from November and the 100-DMA. At the time of writing, the price is trading at 77.36.

Gold price struggles for clear directions around 1,840, following a mildly negative start to the week’s trading, as traders await the preliminary readings of the United States Purchasing Managers Index for February. At the time of writing, the price is trading at 1842.44.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD advanced toward the 1.0690 level in the second half of Monday and managed to erase its losses. As trading action turns subdued with US markets remaining closed in observance of Presidents’ Day, the pair could find it difficult to gather directional momentum. The US Dollar started the week advancing against most major rivals as geopolitical headlines took over the weekend. However, the EURUSD pair is confined to a tight 30 pips range since the market opened. A scarce macroeconomic calendar and a holiday in the US will limit volatility until Tuesday’s Asian opening. The Eurozone published December Construction Output, which contracted 1.3% YoY and 2.5% MoM, worse than anticipated.

From a technical perspective, the four-hour scale RSI indicator remained flat in the neutral region, suggesting that the pair currently lack of catalyst to make a decisive move. As for the Bollinger Bands, the pair continued to move along with the 20-period moving average. We think the EURUSD would move in a small range from 1.0650 to 1.0700 until there is any unanticipated event to fuel the market mood.

Resistance: 1.0794, 1.1022

Support: 1.0634, 1.0505

XAUUSD (4-Hour Chart)

The XAUUSD consolidate Friday’s gains, moving slightly in a narrow range around the $1840 mark as United States markets are closed amid President’s Day holiday. The financial markets are trying to digest the latest US Federal Reserve officials’ hawkish messages. Hopes for a soon-to-come pivot in monetary policy have faded ever since the year started, with the terminal rate now expected above 5%. Apart from this, tensions between the US and China over the balloons shots earlier this month continue as US top diplomat Anthony Blinken said Beijing’s actions were irresponsible, while Chinese officials responded US reaction was “hysterical.” Meanwhile, North Korea fired an intercontinental ballistic missile on Saturday that landed in the Sea of Japan. Finally, US President Joe Biden arrived in Ukraine in a surprise visit to Kyiv to announce additional weapons supplies. The mounting geopolitical crisis may provide a boost for the safe-haven gold.

From a technical perspective, the four-hour scale RSI indicator little changed on Monday, staying in the neutral area, which suggests that the pair currently failed to gather directional momentum. As for the Bollinger Bands, the pair was pricing stably above the 20-period moving average, showing the pair is more favored to the upside path in the near term.

Resistance: 1870, 1900, 1920

Support: 1820, 1800

Economic Data

US stocks declined lower on Friday, witnessing some selling momentum, and ended the week slightly lower amid Federal Reserve officials’ hawkish comments. The geopolitical conditions surrounding China and Russia join the recently hawkish Federal Reserve (Fed) bias and exerted bearish pressure on the equity markets.

On Friday, Federal Reserve Bank of Richmond President Thomas Barkin said that he favored a quarter-point interest rate hike in February to give the central bank “flexibility” in its quest to tamp down inflation. Meanwhile, Fed Governor Michelle Bowman said rates need to keep going higher since inflation remains much too high and they are seeing a lot of inconsistent data in economic conditions.

The higher-than-expected Producer Price Index (PPI) for January has spurred hawkish commentary by two Federal Reserve (Fed) officials, who said that rates need to be higher for longer, foreseeing them above the 5.0% threshold. On the Eurozone front, European Central Bank’s policymakers said that they will keep rates high as long as necessary and another 50 basis points (bps) rate hike in March will be needed under virtually all scenarios.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined lower on Friday as the S&P 500 was trading with losses on risk aversion after economic data revealed an uptick in inflationary pressures in the United States. The S&P 500 was down 0.3% daily and the Dow Jones Industrial Average meanwhile advanced higher with a 0.4% gain for the day. Five out of eleven sectors in the S&P 500 stayed in negative territory as the Energy sector and the Information Technology sector is the worst performing among all groups, losing 3.65% and 1.19%, respectively. The Nasdaq 100 meanwhile dropped the most with a 0.7% loss on Friday and the MSCI World index was down 0.7% for the day.

Main Pairs Movement

The US dollar edged higher on Friday, failing to preserve its upside traction, and retreated to the 103.90 area ahead of the Wall Street close amid the souring market mood. The US CPI and PPI figures reignite investors’ worries about a hawkish Federal Reserve and spurred speculations that further Federal Reserve tightening is on its way. The Money market futures show the Federal Fund Rates (FFR) climbing above 5.3% in July vs. 4.9% a couple of weeks ago.

GBP/USD advanced higher on Friday with a 0.37% gain after the cable rebounded from a daily low and climbed to a 1.2040 level amid the retreating US dollar. On the UK front, the softer UK inflation report on Tuesday contributed to speculations that the Bank of England (BoE) would not hike rates as aggressively as expected. Meanwhile, EUR/USD also witnessed some buying interest and touched a daily high above the 1.0690 mark. The pair was up almost 0.20% for the day.

Gold was trading higher with a 0.33% gain for the day after rebounding towards the $1843 area and recovered most of its daily losses during the US trading session, as the softer Consumer Price Index (CPI) for January in the US incremented the likelihood of further tightening by the Fed and exerted bearish pressure to the Gold price. Meanwhile, WTI Oil declined sharply with a 2.74% loss for the day.

Technical Analysis

GBPUSD (4-Hour Chart)

The GBPUSD has reversed its direction and advanced toward 1.2000 in the American session on Friday. The modest retreat witnessed in the US Dollar Index seems to act as a tailwind for the pair. The broad-based US Dollar (USD) strength weighed heavily on the pair in the second half of the week. Hawkish comments from Fed policymakers and the latest macroeconomic data releases revived expectations that the Fed could opt to do additional rate hikes even after May. In the domestic, the UK’s Office for National Statistics reported on Friday that Retail Sales increased by 0.5% every month in January. Although this reading came in better than the market expectation for a decrease of 0.3%, December’s print of -1% got revised lower to -1.2%, not allowing the Pound Sterling to benefit from that data.

From the technical perspective, the four-hour scale RSI indicator surged to 48 figures as of writing, suggesting that the pair were amid recovery momentum. As for the Bollinger Bands, the pair was supported by the lower band and tried to challenge the 20-period moving average, showing the pair was hovering in a range from 1.1920 to 1.2210 and waiting for a more clear signal.

Resistance: 1.2209, 1.2390

Support: 1.1924, 1.1859

XAUUSD (4-Hour Chart)

The XAUUSD regathered recovery momentum and climbed above the $1830 mark in the second half of the day on Friday, as the 10-year US Treasury bond yield turned negative on the day below 3.9%, helping XAU/USD retrace its daily decline. The US Dollar continues to build on its recovery mode from ten-month troughs, as the American economy shows signs of resilience, in the wake of the latest strong economic data. The strong United States Nonfarm Payrolls data was succeeded by the hot Consumer Price Index (CPI). Furthermore, the US Retail Sales as well as Producer Price Index (PPI) all support Federal Reserve doing an additional rate hike, with the rate likely to go beyond 5.1%.

From the technical perspective, the four-hour scale RSI indicator rallied dramatically to 48 as of writing, suggesting that the pair was recovering from the consecutive day’s losses. As for the Bollinger Bands, the pair was just breaking through the 20-period moving average and gained support during the $1820 mark of the lower band. In our view, gold will remain the downside tendency and fall to find the $1800 mark, a strong psychological level, shortly.

Resistance: 1870, 1900, 1920

Support: 1820, 1800

Economic Data

In the upcoming week, several significant events and economic data releases are scheduled to take place. Among them are the Federal Open Market Committee (FOMC) meeting minutes, the Reserve Bank of New Zealand (RBNZ) rate statement, and the Canada Consumer Price Index (CPI) report. 

These events are expected to garner considerable attention from investors, economists, and financial analysts as they provide insights into the current state of the global economy and the outlook for the future. Market participants will closely monitor these reports and releases to understand the current economic climate better and make informed investment decisions.

Let’s take a closer look at these events:

UK and US Flash Services PMI (21 February)

The UK’s January 2023 Flash Services PMI decreased from 49.9 in December 2022 to 48.7. The US Flash Services PMI increased from 44.7 in December to 46.8 in January.

For February 2023, analysts anticipate that the UK Flash Services PMI will increase to 49.3, while the US Flash Services PMI will rise to 47.4.

UK Flash Manufacturing PMI (21 February)

The UK Flash Manufacturing PMI increased to 47.0 in January 2023 from the 31-month low of 45.3 recorded in December 2022. 

Analysts predict a further increase in the UK Flash Manufacturing PMI to 47.5. This data is closely watched as it provides an early indication of the health of the UK manufacturing sector, which plays a crucial role in the country’s economy.

Canada Consumer Price Index (21 February)

Canada Consumer Price Index declined by 0.6% in December 2022 compared to the previous month. 

Analysts forecast a 0.2% increase in Canada’s CPI for January 2023. This forecasted increase is significant as it could indicate the beginning of a broader economic recovery.

Australia Wage Price Index (22 February)

The Australian Wage Price Index (WPI) experienced a year-on-year increase of 3.1% in Q3 2022, as per the seasonally adjusted data, marking an acceleration from the 2.6% growth seen in Q2. This result is the most substantial reading since Q1 2013.

For Q4 2022, analysts forecast that Australian WPI will increase by 3.6% year-on-year. This anticipated growth is a positive sign for the Australian economy, and investors will be keeping a close eye on the release of the WPI data for insights into the country’s economic health.

RBNZ Monetary Policy and Rate Statement (22 February)

The Reserve Bank of New Zealand increased its interest rate in November 2022 by 75bps to 4.25% from the previous rate of 3.5%.

Analysts expect the RBNZ to announce another increase in its interest rate of 50bps to 4.75% this month. The expected gain would signify the central bank’s continued efforts to keep inflation under control and maintain a stable economy.

FOMC Meeting Minutes (23 February)

In its February 2023 meeting, the US Federal Reserve increased the fed funds rate target range by 25bps to 4.5%-4.75%. In a statement, Fed Chair Jerome Powell indicated that the Fed had the necessary tools to control inflation, and disinflation had begun.

Powell’s comments suggested that there would be no significant changes to the Fed’s future rate increase strategy, despite a strong January jobs report. 

Core PCE Price Index (23 February)

In December 2022, the US Core PCE price index, excluding food and energy, increased by 0.3% on a month-on-month basis, compared to the 0.2% growth seen in the previous month.

Analysts predict that the US Core PCE Price Index will increase by 0.2% this month.

US stocks dropped sharply on Thursday, coming under intense selling pressure, and closed firmly in the red after two Federal Reserve officials said they were considering 50 basis-point interest rate hikes to battle persistently high inflation. The firmer US data that allows the Fed policymakers to remain hawkish lend support to the US dollar and weighed heavily on the equity markets. On Thursday, St. Louis Federal Reserve’s James Bullard and Cleveland Fed President Loretta Mester both embraced more significant hikes as they said that continued policy rate increases can help lock in a disinflationary trend during 2023 and would not rule out supporting a half-percentage-point increase at the Fed’s March meeting. On top of that, the US Producer Price Index (PPI) for January gained major attention as it jumped the most since June with a 0.7% MoM figure, reviving speculation the US Federal Reserve will maintain the pace of tightening for more than anticipated. On the Eurozone front, ECB’s monthly bulletin said that future policy rate decisions will continue to be data-dependent and follow a meeting-by-meeting approach.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined lower on Thursday as the S&P 500 suffered from daily losses after the US Dollar reached fresh weekly peaks. The S&P 500 was down 1.4% daily and the Dow Jones Industrial Average also retreated lower with a 1.3% loss for the day. All eleven sectors in S&P 500 stayed in negative territory as the Consumer Discretionary sector and the Information Technology sector is the worst performing among all groups, losing 2.16% and 1.75%, respectively. The Nasdaq 100 meanwhile dropped the most with a 1.9% loss on Thursday and the MSCI World index was little changed for the day.

Main Pairs Movement

The US dollar edged higher on Thursday, refreshing its weekly peaks against most major rivals near the 104.20 level but gave back some ground ahead of the Wall Street close amid the downbeat market mood. The US Producer Price Index (PPI) bolsters hawkish Federal Reserve bets and fuels US Treasury bond yields. The latest FEDWATCH read from Reuters also signals that the interest rate futures market shows US rates could peak close to 5.25% by July.

GBP/USD declined lower on Thursday with a 0.31% loss after the cable extended its downside momentum and touched a daily low below the 1.1970 mark amid the higher-than-expected US PPI data. On the UK front, the softer UK CPI reflected that the Bank of England would not need to tighten monetary conditions aggressively. Meanwhile, EUR/USD also witnessed selling interest and dropped to a daily low below the 1.0660 area. The pair was down almost 0.14% for the day.

Gold was little changed with a 0.02% gain for the day after regaining some upside traction and rebounded from the $1828 area during the US trading session, as the higher US PPI and renew hawkish bias for the Federal Reserve continued to exert bearish pressure to the Gold price. Meanwhile, WTI Oil retreated lower with a 0.13% loss for the day.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD came under modest bearish pressure and stayed below 1.0700 during the US trading session on Thursday. The pair confronted another selling pressure after US Producer Prices rose more than expected a monthly 0.7% in January and 6.0% from a year earlier. Still, on the strong side, weekly Initial Claims increased by 194K in the week of February 11, showing once again the persistent good health of the labor market. Moreover, Cleveland Fed and well-known hawk L.Mester reiterated that inflation remains too high at the time when she noted that the current Fed’s tightening cycle should slow growth and increase unemployment.

From a technical perspective, the four-hour scale RSI indicator remained neutral at 43 figured as of writing, suggesting that the pair was surrounded by modest negative traction. As for the Bollinger Bands, the pair was supported by the lower band and the pair touched the lower bands three times, showing this is a critical support level for the near term. As a result, we think the bears could put their eyes on the 1.0510 level once the EURUSD fell below the 1.0656 support level.

Resistance: 1.0930, 1.1020

Support: 1.0656, 1.0508

XAUUSD (4-Hour Chart)

The XAUUSD extended its bearish route and dropped to a fresh February low of $1827 marks after the release of US macroeconomic data. Currently, the US Dollar remained its upside tendency and earned modest growth daily. The US labor market remains tight, while there were more signs of inflation easing at a slower-than-anticipated pace. The January Producer Price Index (PPI) rose at an annualized pace of 6%, easing from 6.5% in December but missing the 5.4% anticipated by financial markets. Following the report, Federal Reserve Loretta Mester said that inflation remains too high and with the risks skewed to the upside, hinting the terminal rate could be well above 5%.

From a technical perspective, the four-hour scale RSI indicator figured 44 as of writing, showing the gold pair was surrounded by a modest headwind. As for the Bollinger Bands, the pair continued to trade in the lower area and failed to challenge the 20-period moving average several times. In our view, the downside tendency would persist in the near future unless the pair could stand firmly in the upper area.

Resistance: 1870, 1900, 1920

Support: 1830, 1800

Economic Data