Forex News

• The US Dollar strengthens across the FX space, a tailwind for the USD/CHF.
• USD/CHF Price Analysis: Shifted to neutral biased once buyers hurdle the 20-DMA.

The USD/CHF is surging sharply during  Friday’s North American session, as Wall Street is set to finish the last trading day of the week with losses. Therefore, the USD/CHF is trading at 0.9260, above its opening price by 1.42%.

USD/CHF Price Analysis: Technical outlook

On Friday, the USD/CHF rally broke two downslope resistance trendlines, which would pave the way for further losses. In addition, the 20-day Exponential Moving Average (EMA) at 0.9210 was reclaimed during the uptrend, exposing crucial resistance levels, which, once cleared it, could pave the way for further gains.

The USD/CHF first resistance will be the January 31 daily high at 0.9288. A breach of the latter and the 0.9307, the 50-day EMA is up for grabs., followed by January’s 12 high at 0.9360.

On the flip side, the USD/CHF first support would be the 20-day EMA at 0.9210. Bears reclaiming the latter would exacerbate a fall below 0.9200, followed by the February 3 daily low at 0.9112.

USD/CHF Key Technical Levels

• USD/CAD resumed its uptrend once it reclaimed the February 1 daily high at 1.3379.
• USD/CAD Price Analysis: A daily close above 1.3400 will exacerbate a rally to 1.3500. otherwise, further downside is expected.

USD/CAD climbs in the North American session after hitting a daily low of 1.3311 before Wall Street opened. Nevertheless, a strong US jobs report bolstered the US Dollar, the strongest currency in the FX space. At the time of writing, the USD/CAD exchanges hand at 1.3402.

USD/CAD Price Analysis: Technical outlook

Technically speaking, the USD/CAD is still neutral-to-upward biased, though it reclaimed some resistance levels after testing the 200-day Exponential Moving Average (EMA) a couple of days ago. On its way north, the USD/CAD pair conquered an upslope-support trendline that was broken on January 31, which means the uptrend could resume shortly.

Therefore, the USD/CAD next resistance would be the 50-day EMA at 1.3443. Break above, and the USD/CAD pair would rally to January 31 daily high at 1.3471, followed by 1.3500.

As an alternate scenario, the USD/CAD first support would be the 1.3400 mark. Once cleared, the USD/CAD might test the 20-day EMA at 1.3388, followed by a downslope trendline turned support at 1.3355-65, and then the 1.3300 psychological barrier.

USD/CAD Key Technical Levels

• The Pound Sterling opposes no resistance to upbeat economic data in the United States.
• US jobs data and services activity showed that the US economy remains solid despite the US Federal Reserve tightening cycle.
• For the next week, GBP/USD traders are eyeing the UK GDP and US Fed speakers.

GBP/USD nosedives and extended its losses past the 50 and 200-day Exponential Moving Average (EMA) on Friday after a surprisingly strong jobs report from the United States (US) that increased speculations that the Federal Reserve (Fed) could raise rates back above Wednesday’s 25 basis points mark (bps). At the time of writing, the GBP/USD is trading at 1.2060 after reaching a daily high of 1.2265.

GBP/USD plunged on positive US economic data, warranting further Fed tightening

Investors’ sentiment turned sour after January’s Nonfarm Payrolls report was released. Data showed that the economy added 517K new jobs against the 200K estimated; consequently, the Unemployment Rate tumbled from 3.5% to 3.4%. Additionally, December’s data was revised upward, which means the US Federal Reserve still has ways to go to curb stubbornly high inflation towards the 2% goal.

As the headline crossed the screens, the GBP/USD dived from around its daily highs at 1.2260s and collapsed 200 pips towards the 1.2060 area. In the meantime, the US Dollar Index, a measure of the greenback’s value against a basket of six currencies, rose to a new three-week high at 102.90, up 0.94%.

Later, the Institute for Supply Management (ISM) revealed that services industry activity climbed above expansionary territory, boosted by new orders, while prices paid moderated. The ISM Non-Manufacturing PMI rose by 55.2 last month, vs. 49.2 in December and above the 50.4 foreseen by analysts.

Earlier in the European session, the UK S&P Global/CIPS Services PMI had its worst month in two years, falling to 48.7, down from December’s 49.9, its lowest level since January 2021. Therefore, the S&P Composite PMI, combining manufacturing and services data, slumped to 48.5 in January from 49.0 last month.

What to watch?

Next week’s UK economic calendar will feature the Monetary Policy Report Hearings and the Gross Domestic Product (GDP) MoM and QoQ. Across the pond, the US economic docket will feature the US Federal Reserve speakers, namely Jerome Powell and John C. Williams from the New York Fed. Additionally, Initial Jobless Claims and the University of Michigan (UoM) Consumer Sentiment would shed some light regarding the status of the US economy.

GBP/USD Key Technical Levels

The ISM Service PMI released on Friday showed the index rose back above 50, into expansion territory. Analysts at Wells Fargo, point out that after just a single month under 50, the services ISM shot back up into expansion. However, they warn the breadth of services expansion has still slowed.

Key quotes:

“The slowdown in services activity to end last year now looks more like a blip rather than the start of a lasting slowdown in the sector. That's at least according to the latest ISM services release, which revealed the index advanced 6.0 points to 55.2 after a temporary drop below 50 in December.”

“While we find it easy to talk away some of the weakness in this report, month-to-month movements in the ISM can be volatile and the breadth of expansion has eased.”

“Most components of the ISM improved, with the measure of business activity up 6.9 points to 60.4 and new orders matching that index level leaping 15.2 points after registering contraction in December. New orders now match the highest level registered over the past 12 months, an indication that activity continues to hold up in the services sector.”

“The easing of supply problems is also somewhat benefiting price pressure. At 67.8 the prices paid index remains firmly in expansion, but it has declined the past four consecutive months.”

Strategists at Rabobank point out that the change in the Bank of England’s language favours the doves, they see scope for further rate rises. They continue to expect poor United Kingdom fundamentals to be a drag on the British Pound.  

Key quotes:

“The USD has found further traction on the back of the January US jobs report. That said, the single currency has still managed to climb against the beleaguered GBP, with the latter undermined by the market’s interpretation that the BoE may be even closer to peak policy rates. EUR/GBP continues to edge towards our 0.90 target. We maintain our forecast of EUR/USD1.06 on a 3 month view.”

“Weak productivity, low investment growth, high inflation, recession conditions (albeit at a less severe pace that previously signalled by the Bank), and a current account deficit are all likely to weigh on GBP this year. We continue to expect EUR/GBP to grind higher to 0.90 by the middle of the year and while we see scope for another move below GBP/USD 1.20 on a 3 month view.”

The data published on Friday by the US Bureau of Labor Statistics (BLS) showed that Nonfarm Payrolls rose by 517K in January, well above market consensus. The numbers triggered a rally of the US dollar.  Analysts at Wells Fargo point out that there is still plenty of additional economic data between now and the March FOMC meeting, including another employment report and two more CPI reports, but they argue that even after accounting for the flattering seasonal effect on January payrolls, the report argues for the Fed to stay in a hawkish mood.

Key quotes:

“Seasonal adjustment factors appear to have flattered the headline as smaller-than-usual post-holiday layoffs bolstered the payrolls numbers. But the unusually few layoffs that translated into such a strong headline gain is indicative of what remains an incredibly strong jobs market, and other details of today's report underscored this strength.”

“Benchmark revisions increased the level of employment over the past couple years and showed stronger hiring momentum heading into 2023. At the same time, the unemployment rate fell to 3.4%, the lowest reading since 1969. Average hourly earnings growth remained solid and registered a 4.6% annualized rate over the past three months.”

“We suspect members of the FOMC will be cautious in reading too much into the magnitude of January's payroll gain, but the firm pace of average hourly earnings growth and a 53-year low in the unemployment rate should keep a 25 bps rate hike at the March 22 FOMC as the base case and another possible increase in May in play.”

• WTI is set to finish the week with more than 2% losses.
• Factors like solid US jobs data and the EU’s embargo on Russian oil-related products underpin WTI.
• WTI Technical Analysis: Near-term shifted upward biased, and it might test $80.00.

The US crude oil benchmark, known as Western Texas Intermediate (WTI)., jumped after the release of a solid job report in the United States (US), though prices are still headed for a weekly loss. At the time of writing, WTI exchanges hand at $77.85 per barrel, at the time of writing.

WTI’s extended its gains on Friday due to a surprising report from the US Department of Labor (DoL) which showed that in January, the economy created 517,000 jobs, surpassing the expected 200,000. As a result, the Unemployment Rate decreased from 3.5% to 3.4%, and the previous month’s figures were revised upwards.

In the meantime, the European oil embargo on Russian refined products that would begin on February 5 is being eyed by oil traders. Russian authorities commented that the EU’s ban could lead to a further imbalance in the global energy markets.

Meanwhile, according to ANZ analysts, China’s reopening has witnessed a sharp increase in traffic in its largest 15 cities following the lunar new year holiday.

All that said, WTI might continue to trim some of its weekly losses as investors are eyeing the 20-day Exponential Moving Average (EMA) at $78.47. Once broken, that could open the door for further upside.

WTI Technical Analysis

WTI’s daily chart portrays oil forming a bullish engulfing candle pattern after bouncing from three-week lows. Although the two-candle pattern is bullish, WTI still needs to hurdle essential resistance levels on the upside. WTI’s first resistance would be the 20-day EMA at $78.42, followed by the 50-day EMA at $79.19, which, once cleated, could pave the way toward the $80.00 per barrel figure.

Gold price surged by $30 immediately after the Fed’s meeting on Wednesday evening and reached $1,960 the following day. Economists at Commerzbank see upside risks to their XAU/USD year-end forecast of $1,850.

US interest rate outlook to remain the more important driver

“The US interest rate outlook is likely to remain the more important driver in the medium term.” 

“There is still a substantial discrepancy between the market’s expectation and the Fed’s view of the inflation trajectory and the corresponding interest rate trajectory. Since Wednesday, however, the probability has increased that the Fed is shifting more toward the market’s view. This results in an upside risk to our Gold price forecast of $1,850 at year’s end.”

• US Dollar soars across the board after NFP.
• US ISM Service brings in more favourable data.
• Silver drops by more than 3% on Friday; down 8% from Thursday’s peak.

Metals extended the sell-off after the US official employment report. Silver hits fresh monthly lows near $22.50 and is having the worst day in months.

Strong labor market, Service sector expanding again

US economic data released on Friday came in above expectations, reflecting a strong labor market and an improvement in service sector activity. The numbers boosted the US Dollar and Treasury bond yields. Wall Street is moving without a clear direction.

The data published on Friday by the US Bureau of Labor Statistics (BLS) showed that Nonfarm Payrolls rose by 517K in January, significantly above the market expectation of 185K. November and December’s figures were revised higher. The unemployment rate dropped unexpectable to 3.4%.

A different report released more recently revealed that economic activity in the service sector turned into expansion territory in January with the ISM Service PMI rising from 49.2 in December to 55.2, surpassing the market expectations of 50.4. In addition, the Price Paid Index dropped modestly from 68.1 to 67.8, above consensus of 65.5.

Silver hit a fresh low after the ISM data at $22.47, the lowest since December 7. As the end of the week looms, XAG/USD attempts to trim losses and trades at $22.65, down 3.40% for the day. From Thursday’s high it has fallen 8%.

Technical added pressure to XAG/USD and suggest at the moment that more losses are likely. Price is breaking a one-and-a-half consolidation range to the downside, after being rejected again from above $24.00.

Interim support emerges around $22.50, and below is the strong barrier at around $22.00. A recovery back above $23.00 could alleviate the bearish pressure.

XAG/USD daily chart 

Technical levels

EUR/USD came briefly above 1.10 this week before falling to just below 1.09 today. Economists at Nordea note that the rate differentials continue to point toward a higher EUR/USD ahead.

EUR/USD to move about sideways in the near term

“Given that the ECB has had room for more positive rate surprises than the Fed, a higher EUR/USD is understandable.”

“The better outlook on the Euro Area’s energy balance also points toward a lower risk-premium on the Euro.” 

“In the short-term, we see EUR/USD moving about sideways as markets reprice expectations on both the Fed and the ECB, however, it is clear that the rate differentials continue to point toward a higher EUR/USD ahead. China's reopening also points in that direction due to a better outlook for the global economy.”

GBP gained further in January, mainly versus USD. Economists at MUFG Bank believe that the Pound could struggle in the near term before a sustained appreciation trend emerges.

Global risk a key support for GBP

“The sharp decline in natural gas prices and the continued reopening of China have helped lift global growth expectations and equity markets. The rolling correlation of GBP and global equity markets is currently close to multi-decade highs underlining the importance of broader market conditions.” 

“A sense of political stability, a less severe recession and policy rates peaking should help confidence in the UK improve later this year. However, there remains a probability of a worsening in global investor risk sentiment which could see GBP weaken in the near-term before a sustained appreciation trend emerges.”

• AUD/USD falls sharply by more than 100 pips on US economic data.
• The US Nonfarm Payrolls report almost tripled the market’s expectations for job creation.
• US ISM Non-Manufacturing PMI is back at expansionary territory.

AUD/USD collapsed after US economic data on Friday showed that the labor market remains tight, and it would keep the US Federal Reserve under pressure to bring down inflation to the 2% target. That, alongside the US Dollar paring Wedneadys losses on Thursday, are the reasons for today’s price action. At the time of writing, the AUD/USD exchanges hands at around 0.6970s.

US jobs data surprised investors, as further Fed action is expected

Wall Street opened the last trading session of the week with losses. The US Department of Labor (DoL) revealed January data that surprised investors, with Nonfarm Payrolls smashing expectations after the economy created 517K jobs in the month, exceeding estimates for the creation of just 185K jobs. Consequently, the Unemployment Rate fell to 3.4% from 3.5%, while December’s figures were revised upward.

Average Hourly Earnings, sought by the US Federal Reserve as a measure of wages inflation, linked to last week’s Employment Cost Index (ECI), came in at 0.3% MoM, in line with forecasts but lower than December’s report.

All the same, the AUD/USD extended its losses, but not without putting up a fight around the 0.7000 psychological barrier. Once it gave way, the AUD/USD dropped below the 20-day Exponential Moving Average (EMA) at 0.6992 ad so far is eyeing the confluence of the January 19 daily low and the 50-day EMA at 0.6871.

In the bond market, US Treasury bond yields, mainly the 10-year benchmark note rate, climbed 14.5 bps to 3.54% after falling towards a monthly low of 3.334% on Thursday.

Of late, the US economic calendar revealed that S&P Global PMIs came slightly above estimates. Meanwhile, the ISM Non-Manufacturing PMI Index, which reports the behavior of the services economy, climbed back above in expansionary territory, rising to 55.2 from 50.4 estimates and way above December’s 49.2.

AUD/USD Key Technical Levels

Gold price tumbles sharply after a solid January US Nonfarm Payrolls report. A break under $1,880 would exacerbate losses, strategists at TD Securities report.

Pricing for rate cuts has notably reversed weekly gains

“A wild beat on NFP data is creating shocking whipsaws in recent trends. Pricing for rate cuts has notably reversed weekly gains, adding further support to the broad Dollar, and pummeling Gold prices in the process.” 

“CTA trend followers are unlikely to add to downside flows until prices break the $1,880 range, which suggests the yellow metal will continue to take its cue from the broad Dollar for the time being.” 

“While central banks bought a whopping 417t in 2022Q4, pointing to substantially underreported official purchases, prices are now challenging the uptrend support driven by the recent central bank buying-binge.”

• ISM Services PMI in January rose back into the expansion territory.
• US Dollar Index clings to impressive daily gains above 102.50.

The economic activity in the US service sector expanded at a robust pace in January with the ISM Services PMI rising to 55.2 from 49.2 in December. This reading came in better than the market expectation of 50.4.

Further details of the publication showed that the prices Paid Index edged slightly lower to 67.8 from 68.1 but came in higher than the analysts' estimate of 65.5. 

The Employment Index recovered to 50 from 49.4 and the New Orders Index climbed to 60.4 from 45.2.

Market reaction

The US Dollar Index preserves its bullish momentum after this data and was last seen rising 1.05% on the day at 102.78.

• The index picks up extra pace after another solid NFP print.
• The US labour market shows no signs of weakness so far.
• The US economy added far more jobs than predicted.

The greenback adds to the optimism seen in the second half of the week and lifts the USD Index (DXY) back above the 102.00 hurdle on Friday.

USD Index in multi-session tops

The index climbed further and flirted with the area of recent peaks around 102.60 soon after another stellar prints from the US labour markets. The bull run, however, fizzled out somewhat afterwards.

In fact, the US economy almost tripled the expected job creation in January at 517K jobs vs. 185K estimated, while the jobless rate unexpectedly retreated to 3.4%. Further positive results came from the 4.4% yearly increase in Average Hourly Earnings.

Following Friday’s price action, the dollar remains en route to close the first week with gains after three consecutive pullbacks.

Later in the NA session comes the ISM Non-Manufacturing also for the month of January.

USD Index relevant levels

Now, the index is gaining 0.65% at 102.39 and faces the next up barrier at 102.63 (weekly high February 3) seconded by 102.89 (January 18) and then 103.94 (55-day SMA). On the downside, the breach of 100.82 (2023 low February 2) would open the door to 100.00 (psychological level) and finally 99.81 (weekly low April 21 2022).