Cable trades high ahead of BoE

  • Hawkish sentiment surrounding BOE favors the Sterling.
  • St. Louis Federal Reserve President James Bullard sounded cautious on rate hike after May , weighs on US dollar.
  • Upbeat economic data favors the uptrend of Cable.

 

Cable is trading high with upbeat economic data and hawkish sentiment surrounding BoE favoring the pound.

Rate hike expectation from BOE favors the pound. Investors are fully priced a 25-basis-point rise in the BoE’s main interest rate to 0.50% on Feb. 3 and economists poll by Reuters also expect that outcome from the meeting. At the moment, money markets are pricing the BoE’s main rate to be about 1.25% by the end of the year.

0.5% level is expected to be hit on Thursday and traders are wondering how soon and how fast the bank will start reducing its balance sheet and stop reinvesting maturing gilts.

Elsewhere, Britain Markit/CIPS Manufacturing PMI came with a reading of 57.3 which exceeds the forecast and prior readout of 59.6 This is supporting the view that the British economy is still handsomely rebounding from the COVID-19 recession and favors the pound.

On the other hand, A chorus of Fed officials said on Monday they would raise interest rates in March, but spoke cautiously about what might follow and indicated a desire to keep options open given an uncertain inflation outlook.

St. Louis Federal Reserve President James Bullard on Tuesday said he favors lifting rates at the U.S. central bank’s meeting in March and likely again in May. But he pushed back against the idea of kicking off the tightening cycle with a half-percentage point hike, and said that how high the Fed will ultimately need to lift rates is an “open question.”

Bullard told “The point of this is to get (monetary policy) better positioned right now and in coming months, and then we will be able to assess, at that point, whether we need to do more or not.”

GBP/USD 4 Hour Chart:

Support: 1.3460 (S1), 1.3401 (S2), 1.3367 (S3).

Resistance: 1.3553 (R1), 1.3587 (R2), 1.3646 (R3).

Hawkish expectation from BOE and upbeat economic data favors the pound meanwhile Fed policymakers hesitance in rate hike weighs on US dollar. We expect a bullish trend for GBP/USD.

Euro edges high amidst broad US dollar weakness

  • Fed Officials hesitance in supporting the rate hike weighs on the US dollar.
  • The recent news of Russia responding in writing to US eases the Russia – Ukraine tensions and favors the quote EUR/USD.
  • Traders await for the ECB meeting on Thursday.

 

Euro trades high against the greenback on Tuesday and is trading around intraday high at 1.1240 level. This move of the quote can be linked to the broad US dollar weakness.

The Fed officials sounded cautious on the rate hike on Monday. Fed officials said they felt it was time for the U.S. central bank to begin removing support from an economy that is growing strongly and where inflation is at its highest in four decades.

Despite of the forecasts by Wall Street analysts that five, six or even seven interest-rate hikes will be needed this year, the Fed Officials resisted laying out the kind of clear policy path that markets have come to expect from recent tightening cycles.

“We definitely are poised for a March increase,” San Francisco Fed President Mary Daly told Reuters in a brief phone interview. “But after that, I want to see what the data brings us… let’s get through Omicron, let’s look at this and let’s see.”

“I’d like us to be better positioned,” Richmond Fed President Thomas Barkin told CNBC. “Better positioned is somewhere closer to neutral, certainly, than we are now and I think the pace of that just depends on the pace of inflation.” Fed Chair Jerome Powell said last week that he and fellow U.S. central bankers were “of a mind” to raise interest rates at their March 15-16 meeting as they begin to pare back support for the economy.

Additionally, Atlanta Fed President Raphael Bostic, a non-voter on the Federal Open Market Committee told the Financial Times in an interview over the weekend the Fed could super-size a rate increase to half a percentage point if inflation remains stubbornly high.

Elsewhere, Eurozone GDP reading was mixed with quarter on quarter reading of 0.3% less than the expectation of 2.2% Whereas year on year reading was upbeat with reading of 4.6% beating the expectation of 3.9%.

It is worth noting that recent news about US receiving written letter from Moscow eases the Russia- Ukraine tension to some extent and favors the EUR/USD bulls. As per the news, Moscow’s response comes days after Washington submitted its own documents to Moscow and ahead of a planned phone call between US Secretary of State Antony Blinken and Russian Foreign Minister Sergey Lavrov Tuesday. A senior State Department official and a State Department spokesperson confirmed Monday that they “received a written follow-up from Russia.”

Market is waiting for the European Central Bank  meets on Thursday. While no policy change is expected, analysts said the Fed’s looming rate hikes will narrow the ECB’s window for action.

EUR/USD 4 Hour Chart:

Support: 1.1165 (S1), 1.1096 (S2), 1.1055 (S3).

Resistance: 1.1274 (R1), 1.1316 (R2), 1.1384 (R3).

As of now, Euro trades high against the US dollar and the traders are keen to watch the US ISM Manufacturing PMI for January, expected 60.0 versus 58.7 prior for directing their move further. In the meantime, we expect a bullish trend for EUR/USD.

Aussie trades high ahead of RBA Meeting

  • Stimulus and Upbeat Australian data underpins the bullish move of the quote – AUD/USD.
  • RBA hawks favored by upbeat inflation and job report, braces the Aussie.
  • Russia – Ukraine geopolitical tension weighs on market sentiment.

 

Australian dollar is trading high against the American dollar during Monday Asian session snapping the three-day downtrend near a multi-day low.

Stimulus and the upbeat Australian data are the majors catalysts in the uptrend of the Aussie pair ahead of the Australia’s central bank meeting on Tuesday morning.

Australia’s largest populated state made an announcement of relief measures for small and medium business owners. ANZ said “The NSW government announced on Sunday an AUD1bn package to support small and medium-sized businesses through the Omicron wave. Payments of up to AUD5,000/week for businesses with revenue between AUD75,000 and AUD50m will start on 1 February.”

Upbeat Australian data also underpins the bullish move of Aussie pair, Australia’s December month Private Sector Credit for December, up 0.8% MoM versus 0.5% forecast and 0.9% prior.

Market is expecting that the Reserve Bank of Australia (RBA) will end its bond buying campaign at its policy meeting on Tuesday and are wagering it could hike rates as soon as May given rising inflation and low unemployment.

Analysts at ANZ Bank said ‘We expect the RBA to forecast trimmed mean inflation of 3% by mid-2022 in Friday’s Statement on Monetary Policy, with unemployment falling below 4% by the end of year.”

”These numbers will be referenced in Tuesday’s RBA Board statement, though we expect the RBA Board to say it will wait until wages growth accelerates further before it lifts the cash rate.” ”Its forecast for wages growth will likely point to a rate hike in the first half of 2023 as being its central case, but Lowe is expected to admit for the first time, in Tuesday’s statement and/or his speech the following day, that a move in 2022 is a possibility if wages growth comes through faster than forecast.”

On the other hand, Russia – Ukraine geopolitical tension weighs on the market sentiment which could put a cap on the bullish move of the pair. “US senators are very close to reaching a deal on legislation to sanction Russia over its actions on Ukraine, including some measures that may take effect before any invasion, two leading senators said on Sunday,” said Reuters.

AUD/USD 4 Hour Chart:

Support: 0.6951 (S1), 0.6920 (S2), 0.6872 (S3).

Resistance: 0.7029 (R1), 0.7076 (R2), 0.7108 (R3).

Upbeat Australian data and RBA hawks favors the Aussie. We expect a bullish move for AUD/USD.

BTC/USD Weekly Forecast (31th January 2022 – 04th February 2022)

Fundamental view:

Bitcoin seesawed against the US dollar during the trading course of the week. Bitcoin had a quite disappointing year till Jan 25. 2022, However it has 12% partial recovery to $38,100 on Jan. 26. Amidst Hawkish move from Fed weighing on Bitcoin, few other catalysts favors the Bitcoin. The Central bank has left the rate unchanged however he also made a notable change of tone toward the hawkish side. The major market mover was Fed Chair noting that he will not rule out rate increase at every meeting this year. He also opened the door to 50bp rate hikes rather than standard 25bp. 

In a tweet on Jan. 25, Mike McGlone who is senior commodity strategist at Bloomberg Intelligence, is eyeing Bitcoin’s position relative to its 20-week moving average, noting that historically, current levels have marked a turning point. “The fact that Bitcoin is an up-and-coming asset, with less than $1 trillion market cap vs. about $100 trillion of global equities, that got a bit extended may give the crypto an advantage,” he commented. His comments favors the Bitcoin. Elsewhere, Binance, the world’s largest cryptocurrency exchange, wants to expand in Russia and neighbouring states where it sees prospects for new regulations that will boost its business, an executive said.

Moreover, Russia – Ukraine geopolitical tension weighs on the market sentiment favoring the safehaven US dollar and in turn weighing of the Bitcoin. Amidst all the catalyst, traders are cautiously optimistic towards Bitcoin.

The major economic events deciding the movement of the pair in the next week are ISM Manufacturing PMI at Feb 01, ADP Nonfarm Employment Change, EIA Crude Oil Stocks Change at Feb 02, Initial Jobless Claims, ISM Non-Manufacturing PMI at Feb 03 and Nonfarm Payrolls at Feb 04 for US.

BTC/USD Weekly outlook:

Technical View:

Last week’s high was 11.88% lower than the previous week. Maintaining high at 38909.8 and low at 32968.5 showed a movement of 5941 pips.

In the upcoming week we expect BTC/USD to show a bullish trend. The Instrument is trading below the 200 Simple Moving Average and the MACD trades to the upside. A solid breakout above 40024.8 may open a clean path towards 42437.9 and may take a way up to 45966.1. Should 34083.5 prove to be unreliable support, the BTCUSD may sink downwards 30555.3 and 28142.2 respectively. In H4 chart symmetrical triangle breakout upside favors prospects of a bullish trend. Bullish engulfing pattern constructs a bullish outlook for the pair in the upcoming week.

Preference
Buy: 37680.5 target at 43452.7 and stop loss at 34078.9

 

Alternate Scenario
Sell: 34078.9 target at 28143.2 and stop loss at 37680.5