Home Forex Midweek Market Review: January 18, 2023

Midweek Market Review: January 18, 2023

by SuperiorInvest

The dollar finds support at the key 101.66 level as investors eye US retail sales and PPI data.

Dollar

The dollar continues the week with a slight recovery as it finds support on the exchange rate 101.66 level as speculative bulls eye US retail sales and PPI data. This renewed buying interest comes as the DXY reaches levels last seen in June 2022. The dismal performance seen in the early stages of the week can be slightly attributed to disappointing New York Manufacturing data prints, specifically the Empire Manufacturing Index, which measures the level of general business conditions in New York State and last border by 22 points when it fell to -32.9. This was after the index fell 16 points to -11.2 points in December, according to a report from the Federal Reserve Bank of New York. In the second half of the week, investors will watch recent optimism surrounding the reopening of China to influence demand for the dollar, as well as easing concerns about a global economic slowdown.

Technical Analysis (D1)

In terms of market structure, the price found support around the key 101.66 where the previous high-low was made in June 2022. However, it should be noted that the price is approaching this area in a corrective nature in the form of a descending channel, which could prove to be a potential reversal. If the bulls can defend this area, the story could remain bullish long-term, but the opposite is true if the area is canceled by sellers.

Euro

The euro is still rolling positively against the US dollar into the middle of the week as it hits a weekly high for the fourth week in a row. 1.087 level. However, this optimism in the single European currency could potentially be capped in the long term as bears anticipate the potential for a slower pace of rate hikes by the ECB after February. These dovish concerns began to enter the market following a Bloomberg report indicating that ECB members are beginning to consider a slower pace of interest rate hikes after a likely 50 basis point rate hike is planned for February. For the rest of the week, the euro will be influenced by the dynamics of the dollar as investors monitor US economic data.

Technical Analysis (D1)

In terms of market structure, the price has invalidated the longer-term downtrend formed since mid-May 2022, doing so by impulsively breaking the structure. Since then, the bulls have driven the price, making higher highs and higher lows. The current price bounced off the key level in 1.087 and if the bears are protected, the price could potentially reverse. On the contrary, if the bulls maintain the pressure, the price could break above the level and continue the uptrend.

Pound

Sterling hits a five-week high heading into midweek 1,233 against the dollar. This looseness in the UK currency comes against a backdrop of softer inflationary pressure as CPI eased 10.5% Year-on-year versus expected 10.6% suggesting that the BoE’s hawkish stance on interest rate decisions is gradually working. Further upside momentum is not out of the realm of possibility as investors factor in BoE Governor Andrew Bailey’s comments on a softer inflation print, saying that was expected and will not change the course of their hawkish narrative in their fight against record high inflation. .

Technical Analysis (D1)

In terms of market structure, the bulls controlled the narrative and tested the key 1,245 a level from which the price has since pulled back. As the price retests this top formation, two scenarios play out. Specifically, if the area is being defended by sellers, this could result in a validation of a potential reversal pattern. Conversely, if buyers break above the area, the price will continue to rise in the near term.

Gold

Gold opened the week at a record nine-month high as it continues its fourth straight weekly gain against the US dollar. However, some investor caution ahead of key US retail sales and PPI data appears to have partially halted momentum, as a three-day corrective decline characterizes price momentum so far this week. Further directional bias will largely depend on the outcome of expected economic data, as they will provide a vital piece of data in the narrative of the US Federal Reserve and its future policy direction.

Technical Analysis (D1)

In terms of market structure, gold broke out of the outer trend line during the downtrend and the bulls have been in control of the price ever since. Currently, the price action broke through significant resistance on the stock market $1,879 area creating new height. If the sellers can defend this area, the price could move back below the new high, but if the buyers maintain their interest, the price could break out and remain bullish towards $1,998 the level that represents the previous low-high.

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Ofentse Waisi

Market analyst

Disclaimer: This material is provided for marketing information purposes only and does not constitute independent investment research. The content of this publication should not be considered investment advice, investment recommendations or solicitation to buy or sell any financial instrument. All information provided is collected from reputable sources along with historical performance data and should not be taken as a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFD products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which users are fully responsible. We accept no responsibility for any loss arising from any investment made on the basis of the information contained in this publication. This publication may not be reproduced or distributed without our prior written consent.

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