The GBPUSD reversed back to below 1.2100 on Tuesday following the release of the latest UK inflation report as traders and investors continued to rein in their expectations for Bank of England (BoE) interest rate rises. The UK CPI data showed a further slowdown in January, the signs of cooling UK inflation raised bets on smaller rate hikes by the BOE. The annual inflation rate eased to 10.1% in January from 10.5% in December.
Technically the overall momentum remains bearish. As of this writing, the currency pair hit a fresh session low of 1.2070. The next nearest support level is located at 1.2020/1.2000. In case it breaks below 1.2000, it will head towards the next support level which is located at 1.1950 then 1.1900. However, a fresh demand for the pair can be anticipated once the pair rises above 1.2200.
Stock markets across Europe opened slightly lower after Asian shares end nearly flat. One key factor driving risk aversion today is the latest US inflation data. While US stock slightly recovered from the previous session loss ahead of January US Retail Sales data, the event is likely to cause significant movement.
On the earnings front, Roblox, Shopify and Cisco are amongst those reporting the last quarter's financial results today.
Crude oil prices fall on Wednesday morning after the latest API data showed that U.S. crude stockpiles rose more than expected and the attention now turns to the EIA weekly crude inventory report, which is set to be released later today. The API data showed the US crude inventories increased by 10.5 million barrels last week, much higher than market forecasts for a 321,000-barrel increase.
In the currency market, the US dollar is enjoying safe haven flows today amid the gloomy market mood. Moving ahead to the North American session, the USD traders will now be focused on the release of the US Retail Sales and Industrial Production figures. Meanwhile, EURUSD reversed back to near the 1.0700 area ahead of European Central Bank President Christine Lagarde's speech.
Precious metals plunged to a fresh month low of $1832 on Wednesday after the hotter-than-expected US inflation report fueled concern the Federal Reserve might think more interest rate hikes are needed. The better-than-expected CPI data means the Federal Reserve is likely to increase another 25-basis points interest rate at the next meeting to control inflation.
On the data front, the Consumer Price Index (CPI) in the United States increased by 6.4%, which was more than expected but slower than the previous reading of 6.5%. And on a monthly basis, consumer prices increased by 0.5% from December to January.
Moving ahead today, the important events to watch:
US – Retail sales: GMT – 13.30
US – Crude inventories: GMT – 15:30
Worldwide, more than 677 million people have been confirmed infected and more than 6.78 million have died. The United States has confirmed over 104 million cases and has had more than 1.14 million deaths from COVID-19, the highest total in the world.
Technical Outlook and Review
EURUSD: The currency pair remains under pressure a clear breakdown of the support at 1.0700 could open space for further declines while only recovery to 1.0800 would reverse the strong negative trend.
The important levels to watch for today: Support- 1.0690 and 1.0650 Resistance- 1.0750 and 1.0780.
GOLD: Technically the current price action signals suggest that the 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 1822/10 if the bearish momentum continues. On the flip side, the first resistance is located around 1844, a break above this level will confirm a possible move to 1850 and 1855.
The important levels to watch for today: Support- 1830 and 1822 Resistance- 1845 and 1854.
Quote of the day - Think for yourself and don’t let the market direct you. Security prices sometimes fluctuate, not based on any apparent change in reality, but on changes in investor perception- Seth Klarman.