Weekly Outlook Report - February Week 1

This week holds the first-rate decisions for major central banks in the year 2023. Will the decisions further pressure the greenback and give more power to other major currencies?

The answer will be released by the Federal Reserve this Wednesday, as for the BOE and ECB they will answer us on Thursday of this week.

Last week the dollar index witnessed some volatility in its movement, leading it to close exactly where it opened at the beginning of that week.

This behavior might signal a possible retracement of the dollar to the upside, which is reasonable after witnessing strong drops since the beginning of the year.

On the other hand, the EUR/USD imitated the same movement as that of the dollar last week, which technically happened to be on the 50% Fibonacci retracement level on the weekly TF.

The indecisiveness in the direction of the Euro is mainly triggered by this week’s ECB rate decision, and due to the mixed PMI figures released in the Eurozone last week.

USD/JPY remained at the same levels last week from opening to closing, increasing by roughly 0.31% all week. However, it is clearly roaming under the 50SMA on the weekly time frame amid the fed rate decision.

On the other hand, USD/CAD, dropped by over 0.5% last week as the demand for CAD increased in correlation with the increase in demand for Oil, after witnessing an increase in optimism regarding the Chinese economy.

 Gold continued its rise for the sixth week in a row, with anticipation of the US Federal Reserve monetary policy meeting on Wednesday 1-2-2023 to determine the levels of interest rates.

Expectations indicate that the Federal Reserve will raise interest rates by 25 basis points. And if this happens, this will be the slowest pace of raising interest rates since the Fed began its monetary policy tightening cycle.

Gold (Figure 1) is currently trading between important support levels near $1916 an ounce and resistance levels near $1950 an ounce, waiting for any of these levels to be broken or breached.

As for silver (Figure 2), it is still moving in a horizontal trend in the short term and is currently trading between support near $23.1 an ounce and resistance near $24.5 an ounce, we will wait if it will be able to surpass or break these levels.

(Figure 1): XAUUSD, MetaTrader 5, CFI Brokerage

(Figure 2): XAGUSD, MetaTrader 5, CFI Brokerage

Last week was very positive for the stock market, Dow jones gained 1.85%, SP500 gained 2.5% and Nasdaq 100 gained 4.65%.

A report Friday showed the Fed’s preferred inflation measures eased in December to the slowest annual pace in over a year and spending fell. Separate data from the University of Michigan showed US inflation expectations continued to retreat in late January, helping boost consumer sentiment. 

Federal Reserve officials are expected to raise rates by a quarter percentage point on Wednesday, dialing back the size of the increase for a second straight meeting, after recent data suggested the central bank’s aggressive campaign to slow inflation is working, though signs of earnings pressure are raising concerns about the health of the economy. 

Brent and WTI traded within the same price range giving away 1.75%) % & 2.8% respectively compared to the week before as Brent failed to close above their weekly resistance at $87.8 and $82.35.

Both commodities have been in a trading range since December 2022 to date, trading between support zone at $75 for brent and $70 for WTI and resistance zone $90 for brent and $83 for WTI with the 100-week exponential moving average imposing an important resistance level of which both are pivoting around.

Trading at the weekly upper price range boundary would require monitoring a breakthrough above the mentioned resistance levels.  

The five biggest oil companies are forecasted to report record profits for 2022 shortly, with approximately $200 billion in consolidated yearly earnings in response e spiking oil and gas prices.  

Almost one-third of the S&P500 firms have reported their Q4’2022 earnings, around 70% of which reported EPS above estimates, and 60% beat the market’s expectations in terms of revenues led the by Energy and Industrials sectors. While the Utility sector reported the most YoY decline.

The energy sector reported the highest growth rate. 

Next week, 107 S&P 500 companies (including 6 Dow30 firms) are scheduled to report their Q4 and full-year earnings.  

The energy sector is expected to report the highest annual earnings growth of all eleven sectors at 151.7%, John Butters, Vice President and Senior Earnings Analyst at FactSet, said in a report last month.  

The following are some of the companies that will report its earnings.  

The content published above has been prepared by CFI for informational purposes only and should not be considered as investment advice.  Any view expressed does not constitute a personal recommendation or solicitation to buy or sell.  The information provided does not have regard to the specific investment objectives, financial situation, and needs of any specific person who may receive it, and is not held out as independent investment research and may have been acted upon by persons connected with CFI.  Market data is derived from independent sources believed to be reliable, however, CFI makes no guarantee of its accuracy or completeness, and accepts no responsibility for any consequence of its use by recipients.