Market Focus

Stocks shifted from earlier losses to mostly rises Friday afternoon even as investors viewed a much stronger-than-expected jobs report as strengthing the case for the Federal Reserve to continue with its hawkish monetary policies. The S&P 500 went higher during intraday trading, closing up 0.52% at 4,500.61, while the Dow Jones lost steam to close at 35,089.15, down 0.06%. Meanwhile, Nasdaq rose by 1.58% to 14,098.01.

Inflationary pressures in the U.S. continued to heat up at the start of the year, likely putting a Federal Reserve interest rate increase next month on autopilot. The consumer price index (CPI) jumped about 7.3% in January from a year ago, the largest annual advance since early 1982, according to the median projection in a survey of Wall Street economists. Excluding volatile energy and food categories, the core CPI is anticipated to have risen 5.9%.

The inflation data rose in tandem with the government’s latest employment report, which showed newfound momentum in the labour market and faster wage growth that spurred bets that the Fed will be more aggressive in raising rates.

It’s a light week for Fed-speak. The relative silence from Washington probably reflects the fact that both Chairman Jerome Powell and Governor Lael Brainard await Senate confirmation — Powell for another four years at the helm, and Brainard to become vice-chair.

Elsewhere, Russia’s central bank may increase rates by 100 basis points, perhaps the biggest move in another week of anticipated global tightening by monetary officials from Poland to Peru.

Main Pairs Movement

The U.S. dollar traded mixed against its Group-of-10 peers in the early Sydney trade Monday.

EUR/USD rose 0.1% to 1.1462 on Friday, while spot posted its best week since March 2020, climbing 2.7%. AUD/USD added 0.1% to 0.7081 after closing the day 1% lower in New York, trimming its weekly advance to 1.2%. NZD/USD quoted 0.4% lower to 0.6610 amid thin price action given that New Zealand markets are closed for a public holiday. USD/JPY steady at 115.29; closed up 0.3% on Friday for a second day of gains.

For commodities, gold advanced 0.17% amid choppy trades on Friday, and sliver’s price action acted in line with the yellow metal, though with greater volatility, up 0.46% intraday. Crude oil prices continued to post fresh highs as the Ukraine-Russia conflict advances day by day. WTI surged 1.98% to $91.95, and Brent jumped 1.92% to $92.74.

Cryptocurrencies got a huge lift on Friday. Bitcoin skyrocketed 11.42% to $41574.25, while Ethereum mounted 11.11% to $2994.99.

 

Technical Analysis

EURUSD (4- Hour Chart)

The EUR/USD pair edged lower on Friday, taking a break after the previous day’s rally amid ECB President Christine Lagarde’s hawkish comments. The pair stayed relatively quiet during the Asian session, flirting with the 1.144~1.148 area. The pair was last seen trading at 1.1427, posting a 0.06% loss on a daily basis. EUR/USD stayed in the negative territory amid the recovering US dollar, as the US Nonfarm Payrolls (NFP) beat estimates and rose by 467K in January, pushing the DXY index above the 95.50 level. The much stronger than expected job data provided support to the Greenback and weighed on the EUR/USD pair, which surrendered most of its daily gains. In Europe, the hawkish message from the ECB event yesterday might keep acting as a tailwind for the Euros, as investors now expect a potential ECB lift-off in September or December.

On the technical side, RSI indicator 70 figures as of writing, suggesting that the pair is in the overbought zone now, and a trend reversal could be expected. Looking at the Bollinger Bands, the price dropped towards the moving average after touching the upper band, which indicates that the pair could retain its downside traction. In conclusion, we think the market will be bearish as long as the 1.1479 resistance holds. The pair might need to make a technical correction before climbing higher.

Resistance: 1.1479, 1.1599

Support: 1.1284, 1.1196, 1.1132

 

GBPUSD (4- Hour Chart)

GBP/USD declined on Friday, continuing to suffer from its heavy intraday losses following the release of the US Nonfarm Payrolls. The pair was surrounded by bearish momentum most of the day, dropping to a daily low below the 1.3520 mark, ending its five-day winning streak. At the time of writing Cable stays in negative territory with a 0.51% loss for the day, witnessing some profit-taking movement. The Bank of England’s decision to raise the benchmark interest rate by 25bps to 0.50% had pushed Cable to its strongest level in two weeks at 1.362 yesterday. But BOE Governor Andrew Bailey said that rate hikes were mainly due to concerns about inflation, instead of the better UK economy.

On the technical front, the RSI is at 47 as of writing, suggesting that the downside appears more favoured as the RSI sits below the midline. Meanwhile, the Bollinger Bands showed the pair had crossed below the moving average, therefore the downside momentum should persist. The MACD indicator also has a negative histogram. In conclusion, we think the market will be bearish as the pair has failed to break the 1.3608 resistance. The risk-off market mood and rebounding US dollar might continue to weigh on the pair in the near term.

Resistance: 1.3608, 1.3739

Support: 1.3456, 1.3372

 

USDCAD (4- Hour Chart)

USD/CAD remained its upside momentum on Friday, attracting some buying for the second successive day despite surging oil prices. The pair was trading higher in the Asian session and soared above the 1.277 level after the release of US jobs data, now looking steadily around weekly tops. The bullish momentum witnessed in USD/CAD is caused by renewed US dollar strength, as the pair is currently rising 0.67% on a daily basis. An uptick in US Treasury bond yields, along with the cautious market sentiment both extended some support to the USD/CAD pair. On top of that, crude oil has reached seven-year highs at $93.00/barrel amid the winter storm that recently hit the US. The tensions between Ukraine and Russia also sent the black gold higher.

For the technical aspect, RSI is at 63 as of writing, suggesting bullish movement ahead. But for the Bollinger Bands, the pair moved immediately back inside the band after moving out of the bands, therefore a downside movement could be expected. In conclusion, we think the market will be slightly bearish as long as the pair struggled to break above the 1.2790 mark at the moment, appearing to run out of bullish momentum due to skyrocketing oil prices.

Resistance: 1.2790, 1.2941

Support: 1.2669, 1.2575, 1.2461