The U.S. Dollar is re-living its August 2022 prime days, where further aggressiveness from the federal reserve was expected, inflation was not responding and the employment level was decent.
Is this really the scenario that is facing the FX market for the upcoming quarter? Or will this prime be short-lived, and will we start witnessing drops in the greenback value?
Last week the U.S. dollar was able to gain around 0.7% in value against the basket of other major currencies, whereby significant pressures were visible on the EURUSD, GBPUSD, NZDUSD, and AUDUSD.
With the Flash services PMI in the U.S. beating expectations and breaking above the 50-expansion level for the first time since June 2022, demand for the greenback was witnessed as further rate hikes are being priced in.
This week the focus shifts to consumer confidence in the U.S., along with the ISM PMI reading for the services and manufacturing industries.
Strong support and resistance prices on FX crosses are as follows: EURUSD 1.05331, GBPUSD 1.19140, USDJPY 136.845, USDCHF 0.94236.
Gold prices fell last week to the lowest level in two months after the economic data continued to be issued stronger than expected, which makes the Federal Reserve move towards a more stringent monetary policy, as the data released on Friday indicated the continuation of inflation fears after the personal consumption expenditures price index rose, The preferred indicator of the Federal Reserve for measuring inflation, by 6%, higher than expectations that were indicating a rise of 0.4%, in addition to many economic data that were issued during the month of February, which came out better than expected.
Technically, gold declined last week from levels near $1847 an ounce to close at $1809 an ounce, and it broke the support level near $1816 an ounce, currently levels near $1847 an ounce are the most important resistance gold movements and we will monitor its ability to target it.
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Figure 1: XAUUSD, Metatrader 5, CFI Brokerage
Stocks fell sharply following worrisome signs that US inflation might have reversed course and accelerated again as the year began. The core (less food and energy) personal consumption expenditures (PCE) price index jumped 0.6% in January (vs. +0.4% expected)
The Dow Jones Industrial Average is now in negative territory for the year dropping by 3% last week, SP500 dropped by 2.7% and Nasdaq 100 dropped by 3.3%. Swaps traders are now pricing in quarter-point rate hikes at the March, May, and June meetings, which would push the target range for its key benchmark to 5.25%-5.5%.
Around 94% of the S&P500 listed companies reported their earnings till now, more than 60% of which beat the market's expectations in terms of both EPS and Revenues. However, the performance still during Q4 was subpar.
This week 28 companies are expected to report their quarterly earnings, of which major retailers including Costco, Lowe’s, and Target reflecting consumer spending amid inflationary pressures. As well big companies such as Dell Technologies and Zoom Communications
WTI and Brent traded at the week of Feb 12th closing support prices, whereby WTI closed last week at $76.42 and Brent at $82.81. Both traded modestly at -0.17% and -0.19%, aiming to hold on at the current support levels.
Chinese oil demand is rebounding after the reopening of its economy, and traders are monitoring the demand for projections of the next direction for benchmark Brent futures.
According to Bloomberg, Last Tuesday, Unipec, the largest oil trader in China and the trading unit for the state-owned refiner Sinopec together with PetroChina, hired ten supertankers in March to transport US oil back to Asia.
Each vessel can transport an average of 2 million barrels of crude. Viktor Katona, a lead crude analyst at Kepler stated to Bloomberg that Chinese firms are taking advantage of the remarkable arbitrage for US crude that has been suppressed because of President Biden’s massive release from the Strategic Petroleum reserve.
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