Positive US Fed Rate Forecast Boosts Risk Viewpoint
Asian equities climbed on Tuesday, following Wall Street's strong indications overnight, as growth sectors appeared appealing ahead of key tech reports. Rising prospects for a less aggressive Federal Reserve boosted risk appetite, attracting investors to the equities market. Markets in mainland China and Taiwan, on the other hand, remain closed for the Lunar New Year vacation and will resume trade on January 30. After closing higher in the previous session, European futures are pointing to a favorable beginning this morning, which might trickle down to Wall Street later today.
In the currency market, the dollar fell slightly, while the euro remains below 1.09 following yesterday's failed breakthrough attempt. Oil bulls appear to be gaining momentum as China's economy reopens, whilst gold stays supported by US recession worries and predictions of fewer rate hikes in 2023.
The following three days will be dramatic for equities markets due to corporate earnings, with Microsoft reporting after the bell today and Tesla reporting late Wednesday. It's also a data-heavy week, with European and US economic reports in the spotlight, including PMI surveys today and US fourth-quarter GDP on Thursday. In terms of central bank meetings, all eyes will be on tomorrow's Bank of Canada rate decision, which is likely to result in a 25-basis-point rate rise.
Is the EURUSD preparing for a breakout?
Because of crucial economic data and comments from financial giants, the EURUSD might have a tumultuous week.
Monetary policy conversations between officials at the Federal Reserve and the European Central Bank continue, with attention increasingly focused on their policy meetings next week. On the one hand, a lower dollar, strong inflation in the Eurozone, and a hawkish ECB continue to support the euro. On the other hand, persistent hints of slowing inflation in the United States have fanned speculation of a less aggressive Federal Reserve. The Fed-ECB monetary policy difference is closing, which might mean more upside for the already optimistic EURUSD.
Not only will the Eurozone and US January PMIs be closely watched today, but ECB President Lagarde's speech may also have an impact on the currency pair. On the technical front, prices stay optimistic on the daily charts, with resistance at 1.09. A strong breakout and daily close above this level might indicate a move toward the next important level of interest at 1.12.
GBPUSD in the Vogue
The GBPUSD had a rough day yesterday, with values bouncing in a range of slightly around 1.24. Nonetheless, the prognosis on the daily charts remains optimistic thanks to the recent string of higher highs and lower lows. The GBPUSD might see some movement this morning as a result of the UK and US January PMIs. Bulls, on the other hand, remain in control, with support slightly above 1.23. If the currency pair can go past 1.24, an ascent toward the 1.26 zone might become a possibility. Prices might fall back below 1.2170 if the rally loses momentum and falls below 1.23.
Gold in the spotlight
Gold bulls continue to be buoyed by worries of a US recession and forecasts of a less aggressive Federal Reserve. The precious metal is undoubtedly on a roll, with five straight weekly increases, and might continue to rise provided the underlying factors stay constant. A lower dollar and bad US economic statistics may increase demand for gold in the coming days. Looking at the technical picture, prices are still optimistic, hitting new 9-month highs this morning and perhaps testing $1950 and higher.