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IC Markets Europe Fundamental Forecast | 01 February 2023

What happened across the Asia session?

Most major currencies gained against the US dollar as the DXY retraced briefly to the downside.  

What does it mean for Europe and US Sessions?

Look out for significant volatility across all major currencies with the US Federal Reserve interest rate decision due during the US session. 

The Dollar Index (DXY) 

Key news events today

USD ADP Non-Farm Employment Change

USD ISM Manufacturing PMI

USD JOLTS Job Opening 

What can we expect from DXY today?

Overnight, the DXY retraced strongly to the downside, after reaching the 102.40 price area. The correction lower was partially due to the weaker-than-expected consumer confidence at 107.1 (Forecast: 109.1) and slower growth in wage inflation. Currently trading below the 102 price level, the DXY is likely to consolidate along the current level with brief downside potential in the lead-up to the US Federal Funds rate decision on Thursday morning. However, if the price breaks above the 102 price level, the DXY could continue to climb to the upside, with the immediate resistance level at 102.50, and the key resistance level at 103. Alternatively, if the DXY continues to trade strongly lower, the price could slide lower toward the previous support level of 101.35. 

Central Bank Notes:

  • Federal Reserve hiked rates by 50bps taking interest rates to 4.50%
  • Next meeting is on 2 February 2023
  • Further rate increases are expected to slow

Next 24 Hours Bias

Weak Bullish


Gold (XAU)

Key news events today

No major news events. 

What can we expect from Gold today?

Early in the trading session yesterday, Gold dropped strongly down to the 1900 price area, as the DXY climbed. However, as the price failed to break below the round number support level, Gold rebounded strongly to the upside, reversing the losses to trade along the 1930 price level. If the DXY recovers in strength, look for a rejection of the 1930 price level to signal further downside with the 1900 support level a potential target. However, watch out for choppy price action as markets stay primed for several major news ahead. 

Next 24 Hours Bias

Weak Bearish


The Euro (EUR)

Key news events today

EUR CPI Flash Estimate y/y 

What can we expect from EUR today?

Yesterday, the EURUSD traded significantly lower, down to the 1.08 price level before correcting significantly higher during the US market session. The price reversed to the upside, offsetting losses from the day to reach the 1.0870 price area. If the DXY continues to weaken, the EURUSD could continue trading higher from the current level, up toward the immediate resistance level of 1.0915. Alternatively, if the DXY recovers in strength, price action on the EURUSD could signal a reversal from the 1.0975 price level, with the 1.08 round number level as a key support level. 

Central Bank Notes:

  • Main Refinancing Rate is currently at 2.50%
  • Significant and consistent rate hikes expected from the ECB 
  • Next meeting on 2 February 2023 

Next 24 Hours Bias

Weak Bullish


The Swiss Franc (CHF)

Key news events today

No Major News Events 

What can we expect from CHF today?

The USDCHF traded significantly lower from the 0.9290 resistance level, down to the 0.9160 price level. This move lower was due to the weakness in the DXY overnight. If the DXY continues to weaken, the USDCHF could break below the 0.9150 price level to trade significantly lower, down to the next key support level of 0.9090. 

Central Bank Notes:

  • Current policy rate is at 1.00%
  • Next meeting on 23 March 2023

Next 24 Hours Bias

Weak Bullish


The Pound (GBP)

Key news events today

No Major News Events 

What can we expect from GBP today?

The GBPUSD traded with choppy price action along the 1.23 round number support level, with no clear directional bias. With the price consolidating along the 1.2320 price level, look for a breakout to the upside if the DXY continues to trade lower. However, watch out for the US Federal Reserve interest rate decision due early Thursday morning, which could see the GBPUSD trade with significant volatility. If the price breaks below the 1.23 price level strongly, the GBPUSD could trade lower to the next key support level of 1.22. 

Central Bank Notes:

  • Interest rate is currently at 3.50%
  • Peak inflation revised to more than 15% in 2023. 
  • Next meeting on 2 February 2023 

Next 24 Hours Bias

Weak Bullish


The Canadian Dollar (CAD)

Key news events today

No Major News Events 

What can we expect from CAD today?

Overnight the Canadian GDP m/m was released as expected at 0.1%. While this could have seen the USDCAD trade slightly lower, the USDCAD dropped significantly from the 1.3450 price area, down to the 1.33 round number support level. This move lower was primarily driven by the deep retracement of the DXY. If the USDCAD breaks below the 1.33 support level, further downside could be anticipated, with the next key support level at 1.30. However, the next directional move on the USDCAD is likely to be highly dependent on the volatility of the DXY. 

Central Bank Notes:

  • Increased interest rates to 4.50%  
  • Indicated that the BoC was likely to pause on future rate hikes. 
  • Next meeting on 8 March 2023

Next 24 Hours Bias

Weak Bearish


Oil

Key news events today

No Major News Events 

What can we expect from Oil today?

The deep retracement in DXY overnight led to energy prices bouncing off the key support levels to trade significantly higher. WTI bounced off the 76.50 price level to reach and consolidate along the 79.00 round number level. If the DXY continues to weaken, WTI could break out to the upside and trade higher toward the next resistance level of 82.00. Similarly, Brent traded higher from the 83.00 price area and is currently trading at the 85.50 price level. Look for a bullish breakout, pushing price higher toward the next resistance level of 88.50. 

Next 24 Hours Bias
Weak Bullish

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