• Market pricing indicates a probability of less than 50% for a March rate hike, with signs of solid fourth-quarter growth contributing to this sentiment.
• The Bank of England (BOE) is assessing the possibility of a swifter cooling in inflationary pressures ahead of its policy meeting on Thursday, which might influence its rate path decision.
• Pound Sterling is trading in a tight range as focus shifts to the monetary policy decisions of both the US Federal Reserve (FOMC) and the BOE. Both central banks are expected to maintain interest rates, with the BOE potentially revising its long-held warning about hiking rates.
• The FOMC is committed to achieving maximum employment and a 2 percent inflation rate over the longer run, further emphasizing the importance of their upcoming statement.
• Investors are eagerly anticipating clues from the BOE and the FOMC regarding the timing of their first rate cuts, making these events crucial for market sentiment.

Week Ahead: January 30 – February 2, 2024: JOLTS, BOE and FOMC

Tuesday, January 30, 2024

Australia Retail Sales MoM

The month-over-month rise of 2.0% in Australia’s retail sales for November 2023 surpassed market estimates, signifying robust consumer spending. This upward trend can impact the USD/AUD currency pair by potentially strengthening the Australian dollar against the US dollar.

USA CB Consumer Confidence and JOLTS Job Openings

The release of CB Consumer Confidence and JOLTS Job Openings data in the USA may influence the US dollar and major currency pairs such as EUR/USD, USD/JPY, and GBP/USD. Positive consumer confidence and strong job openings can bolster the US dollar, exerting upward pressure on major currency pairs.

Wednesday, January 31, 2024

Australia’s CPI and Trimmed CPI q/q

The release of Australia’s Consumer Price Index (CPI) and Trimmed CPI for the fourth quarter can impact the USD/AUD currency pair due to its implications for monetary policy decisions by the Reserve Bank of Australia.

China Manufacturing PMI

As China is Australia’s biggest exporter, the release of China’s Manufacturing Purchasing Managers’ Index (PMI) may affect the USD/AUD and other major currency pairs, reflecting changes in demand for Australian exports.

German Prelim CPI m/m

The German Preliminary Consumer Price Index (CPI) for the month might influence the EUR/USD currency pair, as it provides insights into inflationary pressures within the Eurozone.

USA’s ADP Non-Farm Employment Change, Employment Cost Index q/q, Federal Funds Rate, FOMC Statement, and FOMC Press Statement

These pivotal US economic events are likely to impact the US dollar and major currency pairs such as EUR/USD and GBP/USD. The ADP employment change, employment cost index, federal funds rate decision, and accompanying FOMC statements can significantly influence the value of the US dollar.

Canada’s GDP m/m

The release of Canada’s Gross Domestic Product (GDP) for the month may impact the USD/CAD currency pair, reflecting changes in the Canadian economy and its potential effects on the exchange rate.

Thursday, February 1, 2024

Britain’s BOE Monetary Policy Report, Monetary Policy Summary, and MPC Official Bank Rate Votes

The Bank of England’s Monetary Policy Report, Monetary Policy Summary, and Official Bank Rate decisions can influence the GBP/USD currency pair by signaling the central bank’s stance on monetary policy and interest rates.

USA Unemployment Claims and ISM Manufacturing PMI

The release of US unemployment claims and the Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) may impact the US dollar and associated currency pairs such as EUR/USD, reflecting changes in labor market conditions and manufacturing sector sentiment.

Friday, February 2, 2024

USA Average Hourly Earnings m/m, Unemployment Rate, and Revised UoM Consumer Sentiment

The release of US average hourly earnings, unemployment rate, and revised University of Michigan Consumer Sentiment data can impact the US dollar and associated currency pairs such as EUR/USD, indicating shifts in wage growth, employment levels, and consumer sentiment.

For more detailed insights and real-time updates, please refer to the respective sources and official economic data releases.

EUR/USD Analysis: Defensive Trend Continues Below 1.0850 Amid Cautious Markets

Market Sentiment

The EUR/USD pair remains on the defensive below the key level of 1.0850, reflecting the cautious sentiment prevailing in the markets. This defensive stance is driven by a negative shift in risk sentiment. As a result, the US Dollar has strengthened against its currency counterparts, exerting downward pressure on the pair.

Trading Recommendation

In light of this, a trading recommendation for the EUR/USD pair is to consider selling. The entry price (pivot) stands at 1.0870, with target and take profit levels (TP) set at 1.0825 and 1.0810, respectively. Traders are advised to manage risk at 2% per trade within the intraday period, operating in the spot market.

It’s important to note that as long as the resistance at 1.0870 is not surpassed, the risk of a bearish breakout below 1.0825 remains high. This recommendation aligns with the defensive posture of the pair and the cautious market conditions currently at play.

EUR/USD Daily Chart

GBP/USD Struggles Below 1.2700 Amid Cautious Market Mood

Cautious Market Sentiment and Its Impact on GBP/USD

The GBP/USD pair lost its traction and retreated to the 1.2700 area after initially edging higher in the early European session on Monday. The pair continues to move within a narrow band near 1.2700, reflecting the cautious market mood ahead of the upcoming monetary policy announcements by the Federal Reserve and the Bank of England later in the week.

Impact of Geopolitical Tensions on Market Sentiment

The cautious market sentiment at the beginning of the week has bolstered the resilience of the US Dollar (USD) against its rivals, hindering the GBP/USD pair from gathering bullish momentum. Investors’ concerns about the potential negative economic impact of escalating geopolitical tensions in the Middle East have contributed to the challenging environment for the pair.

Geopolitical Developments and Market Response

Over the weekend, reports emerged of the UK navy ship HMS Diamond shooting down a Houthi drone over the Red Sea. Additionally, a drone strike near Jordan’s border with Syria resulted in casualties among US troops. Should safe-haven flows dominate the financial markets later in the day, GBP/USD may face continued pressure.

Economic Indicators and Their Influence

A survey conducted by US bank Citi and polling firm YouGov revealed that UK public inflation expectations for the next twelve months fell to 3.9% and 3.5% in November and December, respectively, from 4.2% in October. Despite this noteworthy data, the market reaction remained subdued.

Trading Recommendation for GBP/USD

According to recent analysis and forecasts for the GBP/USD currency pair, it appears to be facing challenges in finding a firm near-term direction. The pair is currently trading above 1.2700 and is under pressure amid a stalled US Dollar recovery in early European trading on Monday. With this context in mind, there’s a recommendation to consider selling the GBP/USD asset, with an entry price (pivot) at 1.2730 and target and take profit levels (TP) set at 1.2675 and 1.2655, respectively.

However, it’s important to note that the resistance at 1.2730 plays a crucial role, as the risk of a break below 1.2675 remains high as long as this level is not surpassed. It’s essential to exercise caution and consider potential market volatility when evaluating these levels and scenarios.

GBPUSD Daily Chart

Oil Prices Surge Amid Escalating Geopolitical Tensions

Oil markets experienced a significant surge on early Monday as traders reevaluate their positions in response to escalating tensions in the Red Sea and the Middle East. This article examines the key factors contributing to the surge in oil prices and outlines the potential impact of upcoming events on the US Dollar Index (DXY) and oil markets.

Geopolitical Developments and Oil Prices

The increase in oil prices can be attributed to rising tensions in the Red Sea and the Middle East, particularly due to recent attacks by Houthi rebels on several vessels. The subsequent retaliation from the United States, coupled with Iran’s readiness for war, has created a sense of urgency among traders, leading to a reduction in bearish bets and a shift towards net long positions in oil.

Impact of US Federal Reserve Rate Decision and Jobs Report

The US Dollar Index (DXY), inversely correlated to oil prices, has been influenced by positive US data towards the end of the previous week, resulting in an upward trend. Market participants are preparing for potential market-moving events, namely the US Federal Reserve rate decision scheduled for Wednesday and the US Jobs Report set to be released on Friday. The outcomes of these events are expected to significantly impact the direction of the DXY and subsequently influence oil market dynamics.

Intraday Analysis: Crude Oil (WTI) Recommendation

Based on the latest intraday analysis, the bias for Crude Oil (WTI) remains bullish, prompting a recommendation to consider buying. The entry price (pivot) is set at 77.50, with target and take profit levels (TP) identified at 79.30 and 80.00, respectively. It’s important to note that the risk associated with this trade is set at 1%, reflecting cautious risk management in the current market conditions.

While the possibility of a continuation of consolidation cannot be ruled out, its potential extent is expected to be limited. Traders are advised to approach these levels with consideration for any scenarios that may have already played out due to market volatility.

Crude Oil WTI Daily Chart

Disclaimer:

All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance.

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