Precious metal and commodities concluded their final trading session of the last week on a modestly positive note while major U.S. indexes closed mixed on Wall Street after several Federal Reserve officials flagged the likelihood of continued interest rate hikes despite the soft inflation signals.
This week the economic calendar will bring investors the fourth quarter US GDP report, PCE price index and durable goods orders data. The main event on the calendar for monetary policy this week is the meeting of the Bank of Canada on Wednesday. While Chinese markets will be shut for China's week-long Lunar New Year holiday.
On the earnings front, the companies scheduled to release their last quarter financial results this week will be Logitech, Tesla, Microsoft, Intel, Boeing, Mastercard and Visa.
The precious metal hit a fresh 8-month high as Investors have been buying into the safe-haven metal as global market sentiment remains cautious. The metal also firmed up on sustained investment as well as jewellery demand supported by bullish overseas cues. However, the metal struggles to find long-term direction as it continues to move up and down in a narrow channel. This week, the main drivers for the precious metal remain the comments from the FED policymakers and the movement of the US dollar.
For this week, 1940 remains the key resistance to watch. However, as long as the metal is trading above 1900, a pullback rally is likely to continue up to 1950/60. On the downside, the first nearest support level is located in 1918. In case it breaks below this level, it will head towards the next support level which is located near 1900 then 1890.
The dollar index, which measures the greenback against six other major currencies initially regained upside momentum last week supported by hawkish comments from FED policymakers but the index failed to extend gains beyond 103 after the recent US economic data showed retail sales, producer prices, and industrial production fell more than expected in December. The greenback is expected to be extra volatile this week as the US will release the latest durable goods orders and GDP data.
Technically the current price action signals suggest that a medium-term bearish trend remains intact. On the downside, the decline is more extensive, and it will be hard to rule out a run towards 101.50 and 101 if the bearish momentum continues. On the flip side, the USD needs to stay above 103 to have a chance to develop upside momentum in the near term. If the greenback breaks and closes above 103, the next upside level to watch is 103.50 then 103.80.
The currency started with a strong bullish note on Monday and hit a fresh 9-month high of 1.0925. The upside momentum was boosted after European Central Bank president Christine Lagarde reiterated that further interest rate raises would follow in order to bring inflation back to the ECB’s two-percent target. The market is pricing in a 90% chance the ECB increases rates by 50 basis points at their February meeting. For Euro this week, the economic data is limited to the manufacturing data from Eurozone and Germany.
This week, the key resistance is around 1.0930, a break above this level will confirm a possible move to 1.1000 then 1.1030 minimum. On the downside, any meaningful pullback now seems to find some support near the 1.0850 and 1.0800 zones, below which the slide could further get extended towards the 1.0770 and 1.0730 regions.
Dow Jones and other US stock indexes ended mixed last week after several Federal Reserve officials maintained that the Fed would need to maintain its hawkish tone in the next few months. This week, the US Personal Consumption Expenditures (PCE) Price Index data will likely have a significant effect on the Dow Jones and other US indices because the PCE data is said to be the Federal Reserve’s preferred measure of inflation.
Technically the current price action signals suggest that a short-term bearish trend remains intact. On the downside, the decline is more extensive, and it will be hard to rule out a run towards 32,900 and 32,600 if the bearish momentum continues. On the flip side, the index needs to stay above 34,000 to have a chance to develop upside momentum in the near term. If the dow breaks and closes above 34,000, the next upside level to watch is 34,400 then 34,700.
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