The markets were relatively quiet last week, and the US dollar-declining trend has persisted as expectations for a more dovish stance from the Fed and other major central banks have grown. In the United States, there will be a lot of economic data this week, while in Australia, Governor Lowe issues an apology to Australians for his confusing interest rates recommendations.
U.S. Dollar Index
The U.S. Dollar Index printed a bearish engulfing candlestick on the weekly price chart below, signaling another weekly decline. However, the 104.92 support level indicated in the price chart below has held on to date and wasn’t even touched, making this uncertain.
Given that we have finally witnessed inflation rates that are really decreasing, the long-term positive trend in the US Dollar is seriously threatened and may very well be coming to an end. Thus, it is implied that the Fed won’t face as much pressure to implement further significant rate hikes.
The Fed meeting minutes from last week, which predict a further 1% to 1.25% in rate increase this cycle, reinforce this. Logically, this will result in a decline in the value of the US Dollar while increasing the value of stocks, commodities, and other risky assets.
The short-term direction of the US Dollar still looks uncertain due to this support level at 104.92. Hence, it may be wise to stand aside from the Forex market this week or to carefully look for short-term trades which do not involve the US Dollar or which are short of the US Dollar.
US Dollar Index Weekly Chart
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GBP/USD
A relatively bullish sign was seen last week when the GBP/USD currency pair printed a very bullish candlestick that ended above the high of the prior week.
The US Dollar’s long-term, extremely bullish trend is now most likely finished, while the Pound, one of the strongest major currencies, once again displayed some short-term strength last week.
As long as the US Dollar is weak, this pair will advance, with the Pound gaining some ground on above-average volatility. If the Bank of England Governor paints a very bleak short-term image in his scheduled public remarks this week, this may be in jeopardy.
GBP/USD Weekly Chart
EUR/USD
The EUR/USD currency pair produced a bullish engulfing candlestick last week, but because the candlestick failed to break the range’s high, the bullishness seemed muted. Bulls won’t be fully persuaded until the price is established above the price’s most important resistance level at $1.0486, or possibly the large round figure just above it at $1.0500.
As critical US economic data is awaited, the facts and present technical values may cause the EUR/USD to become volatile, especially if it can maintain its higher price range.
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EUR/USD Weekly Chart
The Week’s Economic Data
There will be a slew of economic data this week that will show how the labor market and consumer confidence are faring as well as provide hints about the trajectory of inflation.
On Monday 28th
ECB Governor, Christine Lagarde is scheduled to speak, and monthly Australian retail sales are due.
On Tuesday 29th
Germany and Spain release their CPI data, GDP for Canada is due, and the US CB Consumer Confidence report is published.
On Wednesday 30th
The Chinese Manufacturing PMI is released, Employment figures for Germany are due, EU CPI and a number of releases are due from the US, along with a speech from Fed Chair Powell.
On Thursday 1st
The Caixin Manufacturing Purchasing Managers’ Index (PMI) is published, Manufacturing PMIs for Europe and the US are due, and US PCE is released.
On Friday 2nd
Data on Australian retail sales, US non-farm payrolls, and Canadian employment are all upcoming.
Another busy week for economic data releases, many of which are crucial pieces of knowledge that will be utilized to help many Central Banks decide on future monetary policy.
If predictions are accurate, there will need to be some thought given to a slowing of key interest rate increases for most countries soon, given that many global manufacturing PMI figures are leaning towards contraction, unemployment rates are starting to climb, retail sales figures are slowing, and CPIs are hopefully starting to peak or drop.
RBA Governor Philip’s Apology On Rates
Governor of the Reserve Bank Philip Lowe issued an apology to Australians for his confusing recommendations, which encouraged hundreds of thousands of people to take out large mortgages in the hope that interest rates would remain low until 2024.
Based on that advice, around 300,000 Australians at the time took out loans that were six or more times their salary, some with deposits as low as 10%.
However, the Reserve Bank of Australia raised interest rates for the seventh consecutive month in November, announcing that it now anticipates inflation to peak at an above-expected 8% rate by the year’s end.
The cash rate has already reached 2.85%, leaving many people with variable interest rates spending as much as 6–7% on their mortgages and finding it difficult to make payments due to rising living expenses.
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