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Fundamental and technical factors on the dollar locally give opposite signals. However, after a long period of strengthening the American currency, a corrective DXY pullback looks like a logical short-term prospect.
On Wednesday, the US dollar came under pressure, the sharpest loss since last May and coming out of a prolonged consolidation.
Often such a decisive move out of the range is followed by a further breakout move, which we may well see in the coming days.
The Dollar Index closed below the 50-day moving average on Tuesday and made a further move lower on Wednesday. The fall out of the range gave an informal start to the correction after the rally from May through most of November and the sideways movement in December.
Fundamental and technical factors on the dollar locally give opposite signals. However, after a long period of strengthening the American currency, a corrective DXY pullback looks like a logical short-term prospect.
On Wednesday, the US dollar came under pressure, the sharpest loss since last May and coming out of a prolonged consolidation.
Often such a decisive move out of the range is followed by a further breakout move, which we may well see in the coming days.
The Dollar Index closed below the 50-day moving average on Tuesday and made a further move lower on Wednesday. The fall out of the range gave an informal start to the correction after the rally from May through most of November and the sideways movement in December.
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A potential target for such a pullback is seen in the 93.50-94.00 area. Near 94 is the 61.8% Fibonacci retracement of the dollar's move amplitude in 2021 and the starting point of the last rally in November. Near 93.50, the peak area of the index last year could be equally strong support.
It hardly makes sense to say now that we are seeing the start of a big wave of dollar decline, as solid fundamentals support its growth. It looks like Fed members started a competition on whose expectations and comments are the most hawkish, and consumer inflation has given little reason to change the rhetoric.
Among the latest comments is Powell's reassurance that the economy can cope with rate hikes. Fighting inflation is a top priority for the US central bank. Mary Daly, president of the Federal Reserve Bank of San Francisco, predicts a first rate hike as early as March. This practically rules out a pause between the end of balance buying and the first policy tightening.
Furthermore, there are increasing signs that rate increases can continue to occur more frequently than once a quarter, as was the case in the previous tightening cycle. Many other central banks in developed countries are not yet prepared to tighten their policies as vigorously, which generally creates a sustained pull towards the USD on the interest rate differential in its favour.
A potential target for such a pullback is seen in the 93.50-94.00 area. Near 94 is the 61.8% Fibonacci retracement of the dollar's move amplitude in 2021 and the starting point of the last rally in November. Near 93.50, the peak area of the index last year could be equally strong support.
It hardly makes sense to say now that we are seeing the start of a big wave of dollar decline, as solid fundamentals support its growth. It looks like Fed members started a competition on whose expectations and comments are the most hawkish, and consumer inflation has given little reason to change the rhetoric.
Among the latest comments is Powell's reassurance that the economy can cope with rate hikes. Fighting inflation is a top priority for the US central bank. Mary Daly, president of the Federal Reserve Bank of San Francisco, predicts a first rate hike as early as March. This practically rules out a pause between the end of balance buying and the first policy tightening.
Furthermore, there are increasing signs that rate increases can continue to occur more frequently than once a quarter, as was the case in the previous tightening cycle. Many other central banks in developed countries are not yet prepared to tighten their policies as vigorously, which generally creates a sustained pull towards the USD on the interest rate differential in its favour.
#WaveAnalysis
#Gold reversed from resistance level 1826.71
• Likely to fall to support level 1800.00
Gold recently reversed down from the pivotal resistance level 1826.71, intersecting with the daily upper daily Bollinger Band and the 61.8% Fibonacci correction of the downward correction (ii) from November.
The downward reversal from the resistance level 1826.71 stopped the previous impulse waves (iii) and 3.
Gold can be expected to fall further toward the next round support level 1800.00 (which has been reversing the pair from November).
#Gold reversed from resistance level 1826.71
• Likely to fall to support level 1800.00
Gold recently reversed down from the pivotal resistance level 1826.71, intersecting with the daily upper daily Bollinger Band and the 61.8% Fibonacci correction of the downward correction (ii) from November.
The downward reversal from the resistance level 1826.71 stopped the previous impulse waves (iii) and 3.
Gold can be expected to fall further toward the next round support level 1800.00 (which has been reversing the pair from November).
#WaveAnalysis
#USDJPY broke daily up channel
• Likely to fall to support level 113.50
USDJPY currency pair recently broke the key support level 114.50, intersecting with the daily up channel from November and the 50% Fibonacci correction of the upward impulse 3.
The breakout of the support level 114.50 accelerated the active short-term correction 4 from the start of this year.
USDJPY currency pair can be expected to fall further toward the next support level 113.50.
#USDJPY broke daily up channel
• Likely to fall to support level 113.50
USDJPY currency pair recently broke the key support level 114.50, intersecting with the daily up channel from November and the 50% Fibonacci correction of the upward impulse 3.
The breakout of the support level 114.50 accelerated the active short-term correction 4 from the start of this year.
USDJPY currency pair can be expected to fall further toward the next support level 113.50.
#WaveAnalysis
#Novartis broke round resistance level 90.00
• Likely to rise to resistance level 91.30
Novartis continues to rise steadily after the earlier breakout of the round resistance level 90.00 (which reversed the price earlier this month).
The breakout of the resistance level 90.00 accelerated the active minor impulse wave 1 of the intermediate upward impulse wave (C) from the end of December.
Novartis can be expected to rise further toward the next resistance level 91.30 (former support from August and the target for the completion of the active wave 3).
#Novartis broke round resistance level 90.00
• Likely to rise to resistance level 91.30
Novartis continues to rise steadily after the earlier breakout of the round resistance level 90.00 (which reversed the price earlier this month).
The breakout of the resistance level 90.00 accelerated the active minor impulse wave 1 of the intermediate upward impulse wave (C) from the end of December.
Novartis can be expected to rise further toward the next resistance level 91.30 (former support from August and the target for the completion of the active wave 3).
Bearish signals in Ether and Bitcoin
The technical picture for ETHUSD is quite gloomy as the selling intensified earlier after failed attempt to went back above 200 SMA. The dip and consolidation below it suggests a break of the bullish trend formed in May 2020.
In a worst-case scenario, it could be a road to $1300-1700, which is about half of the current levels. It is extremely unlikely that in this bear market cycle, the price of ether will lose 95% of its peak, as it did in 2018, which could completely nullify the rise from 2020.
Bitcoin's disposition is no less worrisome. A death cross is forming in it as the 50-day dips below the 200-day. At the same time, the price is below these averages, which reinforces the bearish signal. Attempts earlier in the week to form a rebound are encountering stronger selling, further indicating seller pressure.
The bearish picture in Ether and Bitcoin makes the entire cryptocurrency sector look cautious in the near term.
The technical picture for ETHUSD is quite gloomy as the selling intensified earlier after failed attempt to went back above 200 SMA. The dip and consolidation below it suggests a break of the bullish trend formed in May 2020.
In a worst-case scenario, it could be a road to $1300-1700, which is about half of the current levels. It is extremely unlikely that in this bear market cycle, the price of ether will lose 95% of its peak, as it did in 2018, which could completely nullify the rise from 2020.
Bitcoin's disposition is no less worrisome. A death cross is forming in it as the 50-day dips below the 200-day. At the same time, the price is below these averages, which reinforces the bearish signal. Attempts earlier in the week to form a rebound are encountering stronger selling, further indicating seller pressure.
The bearish picture in Ether and Bitcoin makes the entire cryptocurrency sector look cautious in the near term.
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Ruble's fall on geopolitics is likely to continue
On Thursday, the Russian ruble lost more than 2% against the dollar and euro, as both sides' hawkish comments followed the Russia-NATO meeting. In early trading on Friday, the dollar was above 76.6, and the euro was 87.8 on the Moscow exchange. Friday morning, the Russian market shows cautious buying as investors generally believe that all sides benefit from the talks and reduced tensions. In such an environment, we see the third attempt in two and a half months to buy back the ruble after a failure. At the time of writing, the dollar is back below 76, and the euro is back to test 87.
In our view, it is now too premature to buy back the fall and bet on normalisation. The rhetoric of the statements indicates a willingness to escalate, so the situation is likely to get worse before it gets better.
The investor reflex formed in recent years - that a sharp fall in the ruble and the equity market are an opportunity to buy a good asset at a discount - is now highly questionable.
By and large, the ruble and the Russian economy face risks no less serious than in 2014, when US and EU sanctions and Russia's response to them raised Russian market volatility to global financial crisis levels.
In the coming days or weeks, geopolitics override solid fundamentals for the Russian ruble, such as strong consumer demand and expensive oil.
Ruble's fall on geopolitics is likely to continue
On Thursday, the Russian ruble lost more than 2% against the dollar and euro, as both sides' hawkish comments followed the Russia-NATO meeting. In early trading on Friday, the dollar was above 76.6, and the euro was 87.8 on the Moscow exchange. Friday morning, the Russian market shows cautious buying as investors generally believe that all sides benefit from the talks and reduced tensions. In such an environment, we see the third attempt in two and a half months to buy back the ruble after a failure. At the time of writing, the dollar is back below 76, and the euro is back to test 87.
In our view, it is now too premature to buy back the fall and bet on normalisation. The rhetoric of the statements indicates a willingness to escalate, so the situation is likely to get worse before it gets better.
The investor reflex formed in recent years - that a sharp fall in the ruble and the equity market are an opportunity to buy a good asset at a discount - is now highly questionable.
By and large, the ruble and the Russian economy face risks no less serious than in 2014, when US and EU sanctions and Russia's response to them raised Russian market volatility to global financial crisis levels.
In the coming days or weeks, geopolitics override solid fundamentals for the Russian ruble, such as strong consumer demand and expensive oil.
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Recent weeks have brought the ruble back down, forming the third EUR/RUB rebound in the last five years from the 50-month average, which has acted as a long-term trend benchmark over the previous 20 years.
The long-term technical picture suggests that the strengthening of the ruble for most of last year was a corrective rebound from the growth impulse from the lows of early 2020 to a peak later in the year. From this perspective, the euro could surpass 90 and the dollar 80 by the end of this year.
Recent weeks have brought the ruble back down, forming the third EUR/RUB rebound in the last five years from the 50-month average, which has acted as a long-term trend benchmark over the previous 20 years.
The long-term technical picture suggests that the strengthening of the ruble for most of last year was a corrective rebound from the growth impulse from the lows of early 2020 to a peak later in the year. From this perspective, the euro could surpass 90 and the dollar 80 by the end of this year.
Market Holiday for Martin Luther King, Jr. Day📅
There are upcoming changes in the trading schedule due to Martin Luther King Jr. Day in the US. Therefore, US stocks and agricultural Futures will be closed today, with some instruments also closing early.
You can check the full trading schedule here: https://www.fxpro.com/trading-tools/market-holidays
There are upcoming changes in the trading schedule due to Martin Luther King Jr. Day in the US. Therefore, US stocks and agricultural Futures will be closed today, with some instruments also closing early.
You can check the full trading schedule here: https://www.fxpro.com/trading-tools/market-holidays
#WaveAnalysis
#USDCHF reversed from key support level 0.9100
• Likely to rise to resistance level 0.9150
USDCHF currency pair recently reversed up from the key support level 0.9100 (which has been reversing the price from August), intersecting with the lower daily Bollinger Band.
The upward reversal from the support level 0.9100 stopped the previous short-term ABC correction (ii).
USDCHF currency pair can be expected to rise further toward the next resistance level 0.9150.
#USDCHF reversed from key support level 0.9100
• Likely to rise to resistance level 0.9150
USDCHF currency pair recently reversed up from the key support level 0.9100 (which has been reversing the price from August), intersecting with the lower daily Bollinger Band.
The upward reversal from the support level 0.9100 stopped the previous short-term ABC correction (ii).
USDCHF currency pair can be expected to rise further toward the next resistance level 0.9150.
#WaveAnalysis
#NZDUSD reversed from resistance level 0.6855
• Likely to fall to support level 0.6800
NZDUSD currency pair recently reversed down from the pivotal resistance level 0.6855 (former monthly low from September), strengthened by the upper daily Bollinger Band and the 38.2% Fibonacci correction of the downward impulse from November.
The downward reversal from the resistance level 0.6855 stopped the previous short-term ABC correction 2.
Given the clear daily downtrend- NZDUSD currency pair can be expected to fall further toward the next support level 0.6800.
#NZDUSD reversed from resistance level 0.6855
• Likely to fall to support level 0.6800
NZDUSD currency pair recently reversed down from the pivotal resistance level 0.6855 (former monthly low from September), strengthened by the upper daily Bollinger Band and the 38.2% Fibonacci correction of the downward impulse from November.
The downward reversal from the resistance level 0.6855 stopped the previous short-term ABC correction 2.
Given the clear daily downtrend- NZDUSD currency pair can be expected to fall further toward the next support level 0.6800.
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#WaveAnalysis #JPN225
• Nikkei 225 reversed from support level 27900.00
• Likely to rise to resistance level 28750.00
Nikkei 225 index recently reversed down from the key support level 27900.00 (which has been reversing the price from the middle of December), strengthened by the lower daily Bollinger Band.
The upward reversal from the support level 27900.00 is likely to create the daily Hammer if the index closes today near the current levels.
Nikkei 225 index can be expected to rise further toward the next resistance level 28750.00 (previous minor reversal high from the start of January).
• Nikkei 225 reversed from support level 27900.00
• Likely to rise to resistance level 28750.00
Nikkei 225 index recently reversed down from the key support level 27900.00 (which has been reversing the price from the middle of December), strengthened by the lower daily Bollinger Band.
The upward reversal from the support level 27900.00 is likely to create the daily Hammer if the index closes today near the current levels.
Nikkei 225 index can be expected to rise further toward the next resistance level 28750.00 (previous minor reversal high from the start of January).
Bitcoin failed to build on last week's momentum and is back in the $41-42K consolidation area from above. A decline from these levels in the coming days will be a development of the downtrend since November, reversing the BTCUSD from the upper boundary of the downtrend channel. A bearish scenario suggests a dip towards $31K by the end of this week to close the July gap. But the door for such a decline will only open after the bulls surrender the $40K level they managed to hold in September and earlier in January.
Ether has also encountered a sell-off in its attempts to rise above $3.3K. The 200-day moving average level is now acting as significant resistance.
Bitcoin and Ether, which have a combined capitalisation of almost 60% of all cryptocurrencies, show worryingly negative dynamics. At the same time, their share has been declining since late last year.
We are seeing either a shift in investor attitudes towards the sector leaders or certain inertia of altcoins compared to the flagships.
Ether has also encountered a sell-off in its attempts to rise above $3.3K. The 200-day moving average level is now acting as significant resistance.
Bitcoin and Ether, which have a combined capitalisation of almost 60% of all cryptocurrencies, show worryingly negative dynamics. At the same time, their share has been declining since late last year.
We are seeing either a shift in investor attitudes towards the sector leaders or certain inertia of altcoins compared to the flagships.
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Pound retreats locally but has strong prospects
After nearly a month of strengthening against the dollar, the British pound is encountering strong resistance. Speculative interest in the British currency is shrinking as more hawkish Fed rhetoric is being put into the GBPUSD quotes in recent weeks as the Bank of England is no longer looking so hawkish.
In addition, locally, the pound looks somewhat tired after an impressive rally, having added 4.3% in the last month. The pause in the pound's rise is seen as a desire by market forces to look around and assess further prospects.
The GBPUSD rally stalled at the end of last week as it tried to develop a rise above 1.3700, near where the 200-day moving average runs. Since September, this curve has acted as a resistance level, indicating that bearish sentiment prevails.
Locally, the chances are pretty high that a corrective pullback in the pound will continue as the markets reassess the hawkish sentiment of the Fed.
Pound retreats locally but has strong prospects
After nearly a month of strengthening against the dollar, the British pound is encountering strong resistance. Speculative interest in the British currency is shrinking as more hawkish Fed rhetoric is being put into the GBPUSD quotes in recent weeks as the Bank of England is no longer looking so hawkish.
In addition, locally, the pound looks somewhat tired after an impressive rally, having added 4.3% in the last month. The pause in the pound's rise is seen as a desire by market forces to look around and assess further prospects.
The GBPUSD rally stalled at the end of last week as it tried to develop a rise above 1.3700, near where the 200-day moving average runs. Since September, this curve has acted as a resistance level, indicating that bearish sentiment prevails.
Locally, the chances are pretty high that a corrective pullback in the pound will continue as the markets reassess the hawkish sentiment of the Fed.
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The pound may fare better than other developed country currencies in the outlook for the year compared to the dollar.
The Bank of England has shown a willingness to act quickly. In addition, history suggests that in periods of high inflation and rising house prices, it actively raises its key rate.
Unlike the weak Eurozone, Britain has a chance of not only catching up but overtaking the US in key rate levels over the next three years, providing an influx into GBPUSD.
The EURGBP pair has started the year near the bottom of a wide range over the last 5.5 years.
And in the coming months, we could well see a move down out of this corridor with the lower boundary at 0.8350, aiming for 0.78 by the end of the year.
The pound may fare better than other developed country currencies in the outlook for the year compared to the dollar.
The Bank of England has shown a willingness to act quickly. In addition, history suggests that in periods of high inflation and rising house prices, it actively raises its key rate.
Unlike the weak Eurozone, Britain has a chance of not only catching up but overtaking the US in key rate levels over the next three years, providing an influx into GBPUSD.
The EURGBP pair has started the year near the bottom of a wide range over the last 5.5 years.
And in the coming months, we could well see a move down out of this corridor with the lower boundary at 0.8350, aiming for 0.78 by the end of the year.
The Chinese renminbi has been on the offensive against the US dollar for the past week, bringing USDCNH back to test the lows of the past six months.
The economy grew by 1.6% last quarter after 0.2% previously. However, the GDP growth was 4.0% y/y - the lowest since the second quarter of 2020. Industrial production added 4.3%, markedly better than the expected 3.7%.
December retail sales data disappointed with growth slowing to just 1.7% y/y, the lowest since August 2020.
Weakness in domestic demand data has not stopped the demand for the Chinese renminbi, which is testing the 6.35 mark for the second month. Earlier in May 2021, we also witnessed a prolonged reversal near this level.
The yuan has settled well, consolidating in a narrow range since late October, which has created the potential for a resumption of the trend. A firm consolidation below 6.35 at the end of the week or the month would be an essential signal for starting a new downward wave.
The economy grew by 1.6% last quarter after 0.2% previously. However, the GDP growth was 4.0% y/y - the lowest since the second quarter of 2020. Industrial production added 4.3%, markedly better than the expected 3.7%.
December retail sales data disappointed with growth slowing to just 1.7% y/y, the lowest since August 2020.
Weakness in domestic demand data has not stopped the demand for the Chinese renminbi, which is testing the 6.35 mark for the second month. Earlier in May 2021, we also witnessed a prolonged reversal near this level.
The yuan has settled well, consolidating in a narrow range since late October, which has created the potential for a resumption of the trend. A firm consolidation below 6.35 at the end of the week or the month would be an essential signal for starting a new downward wave.