The dollar gained slightly against most major currencies early on Wednesday as bottom buyers stepped in after the dollar fell to seven-week lows the previous day, reflecting rising concerns that the United States plans to give up on a two decade-old "strong dollar" policy.
Trump and trade adviser Peter Navarro criticized Germany, Japan and China, saying the trading partners were engaged in devaluing their currencies to U.S. disadvantage. The remarks indicated that the new administration is focusing on currencies as part of its approach in relation to trade.
The dollar was up 0.4 percent at 113.260 yen after dropping overnight to a two-month low of 112.080. Sterling was also higher against the dollar ahead of the Bank of England’s upcoming meeting on Thursday. The BoE is expected to revise up its outlook for inflation and growth, but uncertainty over Brexit is expected to cloud the outlook.
In the week ahead, markets will be paying close attention to Friday’s U.S. nonfarm payrolls report for January as well as Wednesday’s policy statement by the Federal Reserve. The Fed is expected to keep interest rates unchanged when it concludes its two-day meeting later on Wednesday, in its first policy decision since Trump took office.
The euro was 0.1 percent lower at $1.0791 following the previous day's rise to a seven-week high of $1.0812.
The common currency rose on Tuesday after Navarro told the Financial Times that Germany is using a "grossly undervalued" euro to gain advantage over the United States and its own European Union partners. German Chancellor Angela Merkel rejected the remarks, saying that Germany cannot influence the value of the euro, and that the country has always called for the European Central Bank to have independent policy.
For today, the European Commission is to publish its latest economic forecasts for the European Union, the U.S. is to release the ADP nonfarm payrolls report for January and the Institute for Supply Management is to release its manufacturing PMI.
Later in the day, the Federal Reserve is to announce its benchmark interest rate and publish a monetary policy statement.
Pivot: 1.077Support: 1.077 1.074 1.071Resistance: 1.0815 1.084 1.086Scenario 1: long positions above 1.0770 with targets at 1.0815 & 1.0840 in extension.Scenario 2: below 1.0770 look for further downside with 1.0740 & 1.0710 as targets.Comment: the RSI lacks downward momentum.
Gold
Gold continues to gain on Tuesday, following the travel ban to the U.S. for seven predominantly Muslim countries that led to a weaker dollar, as the new U.S. administration moves on to criticize its trading partners Germany, Japan and China of engaging in devaluing their currencies to U.S. disadvantage.
This turn of events raises uncertainty in the markets thus expectations grow for the Fed to issue cautious language in its latest policy statement on Wednesday while demand for safe-haven assets starts to gain momentum. Gold traders will be focusing on the Fed statement which is due on Wednesday, but will also keep an eye out on key economic data, with the monthly U.S. employment report in the spotlight.
Pivot: 1208Support: 1208 1204 1202Resistance: 1213 1215.5 1219.5Scenario 1: long positions above 1208.00 with targets at 1213.00 & 1215.50 in extension.Scenario 2: below 1208.00 look for further downside with 1204.50 & 1202.00 as targets.Comment: a support base at 1208.00 has formed and has allowed for a temporary stabilisation.
WTI Oil
WTI crude oil prices ended slightly higher on Tuesday, supported by a weakness in the dollar despite the fact that an increase of U.S. industrial inventories was announced.
Prices were also supported by Thursday’s official manufacturing Purchasing Managers' Index (PMI) data from China which continued in expansion in January, as the economy shows signs of stabilizing, reaching 51.3, down slightly from 51.4 in December.
The American Petroleum Institute (API) said late Tuesday that crude inventories jumped 5.8 million barrels at the end of last week, while distillate stocks rose 2.3 million barrels and gasoline supplies by 2.9 million barrels and stocks at Cushing, Oklahoma, fell by 900,000 barrels.
The estimates will be followed on Wednesday by official figures from the U.S. Department of Energy. Analysts forecast a 3.063 million barrels crude build for the Department of Energy data.
Pivot: 52.95Support: 52.35 52.2 52.05Resistance: 52.95 53.11 53.25Scenario 1: short positions below 52.95 with targets at 52.35 & 52.20 in extension.Scenario 2: above 52.95 look for further upside with 53.11 & 53.25 as targets.Comment: the RSI lacks upward momentum.
US 500
U.S. stocks were mixed after the close on Tuesday, as gains in the Utilities, Healthcare and Consumer Goods sectors led shares higher while losses in the Industrials, Basic Materials and Technology sectors led shares lower. At the close in NYSE, the Dow Jones Industrial Average declined 0.54%, while the S&P 500 index declined 0.09%, and the NASDAQ Composite index gained 0.02%.
One of the best performers of the session was Pfizer (NYSE:PFE) which posted a rise of 1.34%, while some of the worst performers were Goldman Sachs Group Inc (NYSE:GS) which fell 1.96%, JPMorgan Chase & Co (NYSE:JPM) which declined 1.63% and Intel Corporation (NASDAQ:INTC) with a drop of 1.60%.
In the week ahead, markets will be paying close attention to Friday’s U.S. nonfarm payrolls report for January as well as Wednesday’s policy statement by the Federal Reserve.
Pivot: 2268 Support: 2268 2263 2260 Resistance: 2284 2290 2296 Scenario 1: long positions above 2268.00 with targets at 2284.00 & 2290.00 in extension. Scenario 2: below 2268.00 look for further downside with 2263.00 & 2260.00 as targets. Comment: the RSI advocates for further advance.