Daily Market Lookup

• The U.S. dollar traded largely unchanged Thursday with the focus on the release of the latest U.S. inflation report later in the day which should provide clues about the pace of the Federal Reserve’s policy tightening. The January U.S. consumer prices release is due at 8:30 AM ET (1330 GMT), and the headline CPI is seen rising 0.5% on the month and 7.3% on the year in January, the highest number since 1982. The Federal Reserve is expected to lift interest rates by 25 basis points in March to combat these surging prices, and the question in most traders’ minds is whether this CPI number will be enough to nudge the Fed towards a 50 bp hike Cleveland Federal Reserve President Loretta Mester said on Wednesday that it is time for the central bank to begin raising interest rates, but “I don't think there's any compelling case to start with a 50 basis point" rate increase. This view seems to match the majority of her fellow policymakers who have commented, but a very high CPI print could still sway the argument. The Riksbank holds its latest policy-setting meeting later Thursday, and the hawkish pivot by the European Central Bank last week has started to put pressure on Sweden’s comparatively dovish central bank. Earlier in the day, the Reserve Bank of India kept its policy rates unchanged, and provided a dovish outlook for inflation for FY23, forecasting it at 4.5%. This surprised many in the market, resulting in USD/INR rising 0.2% to 74.952.
• The dollar was up on Thursday morning in Asia, holding a narrow range, while the riskier Australian and New Zealand dollars were near multi-week highs. Investors now turn their attention to the latest U.S. inflation data. Westpac analysts said in a note that the "explosion higher in metals markets, lift in global risk sentiment and a softish U.S. dollar" was supporting the Australian currency, adding "a close above $0.7183 would suggest a further extension towards $0.7225 and possibly $0.7275." However, currencies were broadly stuck in a holding pattern ahead of the U.S. data, which includes the consumer price index and due later in the day. The data could also provide further clues about the U.S. Federal Reserve's timeline to tighten its monetary policy. Investors are ramping up bets that the Fed will hike interest rates when it meets in March. However, Cleveland Federal Reserve President Loretta Mester on Wednesday said that she did not see a compelling case to start with a 50-basis point rate increase. However, Mester added that future rate increases after March would depend on the strength of inflation and how much it moderates or persists. Both U.S. and European government bond yields have been on an upward trend as expectations of interest rate hikes increase. These expectations quietened on Wednesday and Thursday morning, however, with yields on U.S. benchmark 10-year notes at 1.9354% in early Asian trading Thursday. This was slightly below Tuesday's 1.970%, which was a 27-month high. The euro traded at 1.1416, edging lower throughout the week after European Central Bank President Christine Lagarde said on Monday that she saw no need for an excessively tight monetary policy, calming expectations of a hike in 2022.
• Gold was down on Thursday morning in Asia, remaining within a tight range. Investors now await the latest U.S. inflation data, which could offer further clues about the Federal Reserve's timeline for monetary policy tightening. Fed fund futures traders are already pricing in more than five 25 basis point interest rate hikes by December 2022, with a 27% chance that the first hike in March will be by 50 basis points. However, the Fed will have to move faster than it has in the past to remove accommodation and tame inflation that is well above target, but it may not be necessary to start hikes with a half-percentage point in March, according to Cleveland Fed Bank President Loretta Mester. Bank of England governor Andrew will also speak later in the day. Meanwhile, geopolitical tensions in Eastern Europe continue as Russian increased military capabilities along its border with Ukraine and Belarus, the U.S. Pentagon warned. Although Ukraine believes that the standoff between Western powers and Russia can be resolved via diplomacy, there are already grounds to impose sanctions on Russia, according to the country’s Foreign Minister Dmytro Kuleba.
• Oil prices fell on Thursday, after rallying on an unexpected drop in U.S. crude inventories in the previous session, as investors await the outcome of U.S.-Iran nuclear talks that could add crude supplies quickly to global markets. Robust demand recovery from the coronavirus pandemic has kept global oil supplies snug, with inventories at key fuel hubs globally hovering at multi-year lows. U.S. crude inventories fell 4.8 million barrels in the week to Feb. 4, dropping to 410.4 million barrels - their lowest for commercial inventories since October 2018, the Energy Information Administration said. Analysts in a Reuters poll had forecast a 369,000-barrel rise. U.S. product supplied - the best proxy for demand - peaked at 21.9 million barrels per day (bpd) over the past four weeks due to strong economic activity nationwide, EIA data showed However, investors are closely watching the outcome of U.S.-Iran nuclear talks which resumed this week. A deal could lift U.S. sanctions on Iranian oil and ease global supply tightness. The White House publicly pressured Iran on Wednesday to revive the 2015 Iran nuclear agreement quickly, saying that it will be impossible to return to the accord if a deal is not struck within weeks. The restoration of sanction waivers to Iran to allow international nuclear cooperation projects, which were announced last week, along with some positive comments from Russian diplomats, suggest that the parties are moving closer towards a deal, ING's Patterson said. Separately, U.S. President Joe Biden and King Salman of Saudi Arabia discussed energy supplies and developments in the Middle East, including in Iran and Yemen, during a phone call on Wednesday. Salman also spoke about maintaining balance and stability in the oil markets and emphasised the need to maintain the OPEC+ supply agreement, state news agency SPA said. In Europe, U.S. Vice President Kamala Harris will be meeting allies and partners in Munich next week seeking to deter Russian aggression in Ukraine.

Gold – XAU

Gold on Wednesday made its intraday high of US$1835.76/oz and low of US$1824.65/oz. Gold up 0.410% at US$1833.14/oz.

Technicals in Focus:

In daily charts, prices are above 200DMA (1809) and breakage below will call for 1790. MACD is above zero line and histograms are also increasing trend and it will bring upward stance in the upcoming sessions. RSI is in overbought region and more upside is expected before it gets stretched. Stochastic Oscillator is in neutral territory and giving negative crossover to bearish stance for intraday trade.

Trading Strategy: Buy on Dips

Buy in between 1824-1778 with risk below 1778, targeting 1832-1841 and 1849-1856. Sell in between 1838-1860 keeping stop loss closing above 1860, targeting 1818-1804-1790 and 1783-1777-1769.

Silver - XAG

Silver on Wednesday made its intraday high of US$23.34/oz and low of US$23.07/oz settled up by 0.543% at US$23.29/oz.

Technicals in Focus:

On daily charts, silver is sustaining below 100DMA (26.62), breakage above will lead to 27.60. MACD is below zero line and histograms are decreasing trend and it will bring bearish stance in the upcoming sessions. RSI is approaching neutral region, indicating buy signal for now. The Stochastic Oscillator is in oversold region and giving positive crossover to show upside move for the intraday trade.

Trading Strategy: Buy on Dips

Buy in between 23.15-20.50, targeting 23.70-24.10 and 24.55-24.90- 25.40 with stop loss should be place on the breakage below 20.50. Sell in between 23.50-25.40 with stop loss above 25.40; targeting 22.50-22.10-21.90 and 21.40-21.00.

Oil - WTI

Crude Oil on Wedensday made an intra‐day high of US89.46/bbl, intraday low of US$87.40/bbl and settled up by % to close at US$88.98/bbl.

Technicals in Focus:

On daily charts, oil is sustaining above its 20DMA i.e. 68.50 which is a support level and breakage below will call for 65.40. MACD is above zero line and histograms are in increasing mode will bring bullish stance in the upcoming sessions. The Stochastic Oscillator is in neutral region and giving positive crossover for confirmation of bullish stance; while the RSI is in neutral region and more upside can be expected to reach the overbought region, which is highly probable.

Trading Strategy: Neutral to Sell

Sell in between 89.00-92.00 with stop loss at 92.00; targeting 88.20-87.60-87.00 and 86.20-85.60. Buy above 88.20-84.00 with risk daily closing below 84.00 and targeting 88.20-89.00-90.40 and 91.00-91.90-92.55.

EUR/USD

EUR/USD on Wednesday made an intraday low of US$1.1401/EUR, high of US$1.1447/EUR and settled the day up by 0.053% to close at US$1.1420/EUR.

Technicals in Focus:

On daily charts, prices are sustaining above 50DMA (1.347), which become immediate support, break below will target 1.1270. MACD is above zero line and histograms are increasing mode which will bring bullish view. Stochastic is in overbought territory and giving positive crossovers to signal for bullish outlook for intraday. 14D RSI is currently in neutral region and giving no directions to consider right now.

Trading Strategy: Neutral to Buy

Buy above 1.1400-1.1220 with risk below 1.1220, targeting 1.1485-1.1525-1.1570 and 1.1620-1.1650. Sell below 1.1485-1.1650, targeting 1.1420-1.1385-1.1310 and 1.1250-1.1200-1.1170 with stop-loss at daily closing above 1.1650.

GBP/USD

GBP/USD on Wednesday made an intra‐day low of US$1.3525/GBP, high of US$1.3588/GBP and settled the day down by 0.0384% to close at US$1.3532/GBP.

Technicals in Focus:

On daily charts, prices are sustaining above 100DMA (1.3760) is become immediate support level. 14-D RSI is currently in neutral region and direction is difficult to predict on RSI bases. The Stochastic Oscillator is in overbought territory and giving positive crossover to confirm bullish stance. MACD is above zero line but histograms are increasing lead to upward movement.

Trading Strategy: Neutral to Buy

Based on the charts and explanations above; buy in between 1.3540-1.3350 with target 1.3590-1.3640-1.3700 and 1.3750-1.3800-1.3840 with stop loss closing below 1.3300. Sell in between 1.3590-1.3840 with targets at 1.3500-1.3440-1.3390 and 1.3300-1.3250 with stop loss should be 1.3790.

USD/JPY

USD/JPY on Wednesday made intra‐day low of JPY115.31/USD and made an intraday high of JPY115.67/USD and settled the day up 0.101% at JPY115.40/USD.

Technicals in Focus:

In daily charts, JPY is sustaining above 200DMA (108.30), which is initial support on the daily chart. 14-D RSI is currently in overbought region and chances of downward are expected based on RSI. MACD is above zero line but histograms are in decreasing mode which might lead to downward movement. The Stochastic Oscillator is in neutral territory and signaling to sell as it has given negative crossover to confirm bearish stance.

Trading Strategy: Neutral to Sell

Sell below 115.70-118.00 with risk above 118.00 targeting 115.40-115.00-114.50 and 113.90-113.20-112.70. Long positions above 115.40-113.70 with targets of 115.50-116.35-116.90 with stop below 113.70.