Market Focus

U.S. equity markets rallied on the last trading day of January to close out one of the worst months of trading since March of 2020. The Dow Jones industrial average rose 1.17% to close at 35131.86, the S&P 500 gained 1.89% to close at 4515.55, and the Nasdaq composite leapt 3.41% to close at 14239.88. Gains were led by technology sector giants such as Tesla, Spotify, and Netflix, who saw share prices retreat significantly as the Fed continues inching towards rate hiking. The benchmark U.S. 10-year Treasury yield slid to 1.784%, while the 30-year yield also fell slightly to 2.116%.

Tensions between Ukraine and Russia continue to pose a threat to energy prices for the European zone, as major countries such as Germany rely on Russia’s supply of oil and natural gas. Moscow has denied plans to invade Ukraine, however around 100,000 Russian troops have already gathered around the Ukrainian border.

Main Pairs Movement

The DXY remained fairly unchanged over the course of yesterday’s trading and is at 96.648, as of writing. The Greenback lost some ground as treasury yields cooled off since reaching their peak last week.

The Euro traded lower against the dollar over the course of yesterday’s trading. Eurozone GDP topped estimates, helping the currency rally against the Dollar. Furthermore, a continued accommodative ECB adds to the recent bullish outlook for the Euro.

The Sterling gained over the Greenback as the Dollar weakened across the board. Risk-on sentiment could be attributed to the recent rally as global equities rebound from a turbulent trading week.

The Canadian Loonie lost 0.48% against the Greenback over the course of yesterday’s trading. The important Canadian Raw Materials Price Index saw a 2.9% drop, month over month.

Technical Analysis

EURUSD (4- Hour Chart)

The EUR/USD pair advanced on Monday, extending its rebound from a yearly low that touched last week. The pair was trading higher during the Asian session, preserving its bullish momentum and reached a daily high near 1.118 level in the early European session. The pair was last seen trading at 1.1159, posting a 0.10% gain. EUR/USD stays in the positive territory amid weaker US dollar across the board, as the upbeat sentiment and reducing demand for safe havens dragged the US dollar index from the highest level since July 2020. In Europe, the Eurozone Prelim GDP met estimates with 0.3% QoQ in Q4 2021. On top of that, the dovish ECB might continue acting as a headwind for the shared currency.

On the technical front, the RSI is at 36, suggesting bearish movement ahead. However, looking at the Bollinger Bands, the price rose towards the moving average after touching the lower band, which indicates that the pair could retain its upside traction. In conclusion, we think the market will be bullish as the pair is heading to test the 1.1186 resistance. A sustained strength beyond that level could trigger a short-term bounce and lift the pair back towards the 1.1300 area.

Resistance: 1.1186, 1.1300, 1.1369

Support: 1.1121

GBPUSD (4- Hour Chart)

GBP/USD advanced on Monday, recovering further from a one-month low below the 1.337 level. The pair saw heavy selling and dropped to a daily low during the European session, but then bounced back to the 1.344 area heading into the America session. At the time of writing, the cable stays in positive territory with a 0.43% gain for the day, recovering most of its intraday’s losses. The bearish momentum witnessed in the US dollar is mainly due to risk-on market sentiment, as risk-sensitive currencies like GBP outperformed the safe-haven greenback. On top of that, expectations that the Bank of England will hike interest rates at Thursday’s meeting also underpinned the British pound and acted as a tailwind for the GBP/USD pair.

On the technical side, RSI is at 51, suggesting that buyers remain in control of the pair’s action in the near term. For the MACD indicator, a positive histogram shows that the pair might keep the upside traction. As for the Bollinger Bands, the price crossed above the moving average, therefore, the upside momentum should persist. In conclusion, we think the market will be bullish as long as the 1.3358 support line holds. A breach of the 1.3525 resistance would open the door for higher prices.

Resistance: 1.3525, 1.3633, 1.3739

Support: 1.3358, 1.3174

USDCAD (4- Hour Chart)

After last week’s rally to a three-week high near 1.280 level, USD/CAD failed to preserve its upside traction and edged lower on Monday. The pair was surrounded by bearish momentum during the Asian session but then rebounded back above 1.277 area to recover some intraday’s losses. USD/CAD continues to suffer losses amid renewed US dollar weakness, currently losing 0.36%. The falling US dollar has now sent the USD/CAD pair to a daily low, but BoC’s decision to leave the benchmark interest rate unchanged last week might undermine the Canadian dollar and limit the losses for the USD/CAD pair. On top of that, the rebound in crude oil prices has lent support to the commodity-linked Loonie and dragged the pair lower, as WTI oil climbed 0.15% for the day.

On the technical front, the RSI is at 55, suggesting that the upside appears more favoured as the RSI is still above the midline. But looking at the MACD indicator, a negative histogram indicated a downward trend for the pair. As for the Bollinger Bands, the price is dropping from the upper band to the moving average, indicating that the downside traction could persist. In conclusion, we think the market will be bearish as the pair is eyeing a test of the 1.2698 support.

Resistance: 1.2814, 1.2964

Support: 1.2698, 1.2570, 1.2461