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Daily market analysis

Volatility on the first trading day of the week

January 10, 2023

U.S. equities witnessed a volatile trading session on the first trading day of the week. The initial hours of the American trading session saw equities extend their risk rally that started last Friday, however, markets turned cautious after Atlanta’s Fed president Raphael Bostic reiterated the central bank’s intentions of increasing rates beyond 5% to control inflation.

The Dow Jones Industrial Average lost 0.34% to close at 33517.65. The S&P 500 edged 0.08% lower to close at 3892.09. The tech-heavy Nasdaq Composite gained 0.63% to close at 10635.65.

The benchmark U.S. 10-year treasury yield gained 19 basis points and was last seen trading at 3.536%; while, the 2-year yield currently trades at 4.212%.

Tesla Inc’s 6% rally on Monday led the Nasdaq Composite to notch a winning session. Tesla has recently announced another round of price cuts in its China market to compete against growing Chinese-originating EV producers—specifically BYD.

Market participants will now turn their attention to the key U.S. CPI release scheduled for the American trading session on the 12th.

Main Pairs Movement

The Dollar index, which tracks the U.S. Greenback against a basket of major foreign currencies, continued to slump on the first trading day of the week. The Dollar index fell 0.71% throughout Monday’s trading as market sentiment continues to turn risk on.

EURUSD climbed 0.83% throughout Monday’s trading. The broad-based weakness of the Dollar allowed the Euro to climb for the second consecutive day.

GBPUSD rallied 0.8% over Monday’s trading. Price action for Cable could be dramatic as major economic data releases are scheduled for both the U.S. and Britain starting on Thursday.

Gold climbed above $1880 per ounce throughout Monday’s trading, but the precious metal could not hold its value as the Dollar made a late-session comeback. Gold was last seen trading at $1869 per ounce.

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair advanced sharply on Monday, preserving its upside traction and clinched fresh multi-week peaks amid investors’ re-assessment of the potential next steps by the Federal Reserve when it comes to future interest rate hikes. The pair is now trading at 1.0747, posting a 1.03% gain daily. EUR/USD stays in the positive territory amid a weaker US Dollar across the board, as the risk appetite and lower US Treasury bond yields dragged the greenback to the lowest level since June 2022 near the 103.00 mark. The solid job creation alongside easing wage pressure both boosted speculations about a slowdown in the Fed rate hike cycle, favouring an increase of 25 basis points instead of 50 bps. The wage growth seems to have lost momentum, leading traders to start pricing in some probable pause in the Fed’s hiking cycle. In the Eurozone, the Unemployment Rate in the broader Euroland remained steady at 6.5% in November. The improving market mood also provided a boost to the EUR/USD pair as investors await comments from Fed officials.

For the technical aspect, RSI indicator 72 figures as of writing, suggesting the pair is now facing heavy bullish momentum as the RSI approached overbought readings. As for the Bollinger Bands, the price is moving alongside the upper band, therefore a continuation of the upside trend can be expected. In conclusion, we think the market will be bullish as the pair is heading to test the 1.0786 resistance level. Technical readings in the four-hour chart also skew the risk to the upside.

Resistance:  1.0786, 1.0921

Support: 1.0710, 1.0624, 1.0508

GBPUSD (4-Hour Chart)

GBP/USD advances on the soft US dollar index on Monday. Market participants now expect that the US Federal Reserve would slow down rate hikes as the US inflation report and employment report cause an upbeat market mood. On the other hand, UK politics and hawkish BoE commentary also lift the GBP/USD. UK Prime Minister Rishi Sunak said that inflation is not guaranteed to decline in 2022 and that the government would need to be disciplined to curb inflation, Reuter reported. BOE’s policy maker Catherine Mann said that Price caps on energy in response to a price surge following Russia’s invasion of Ukraine might be sparking inflation in other sectors by boosting consumer spending. At the time of writing, the GBP/USD is trading at 1.218.

For the technical aspect, RSI indicator 67 figures as of writing, suggesting that the pair is in bullish mode as the indicator keeps going up. For the Bolling  Bands,  the price is moving higher between the upward average and upper bound, signalling the recent upward trend. For the price action, the price broke through the first resistance at 1.2210 and is now testing the resistance at 1.2233. If the price closes above the current resistance on the 4H chart, it may head to test the pivotal resistance at 1.2450, which is also the highest since June 2022. In conclusion, we think GBPUSD is in a bullish mode based on the current market mood and the technical analysis.

Resistance: 1.2110, 1.2233, 1.2450

Support: 1.1927, 1.1765

XAUUSD (4-Hour Chart)

The broad US Dollar weakness pushed the gold price to $1,881 on Monday, its highest since June 2022. The Us dollar index fell on an upbeat market mood amid speculation that the federal reserve has room to slow down its pace of monetary tightening. On the other hand, China opened sea and land crossings with Hong Kong on Sunday and ended a requirement for incoming travellers to quarantine, which will positively influence global growth and lift the risk appetite. At the time of writing, gold price hold around $1,872.

For the technical aspect, RSI indicator 66 figures as of writing, holding close to the overbought zone, suggesting that the pair is in bullish mode. For the Bolling  Bands, the price is moving up between the upward average and upper bound, which is a standard pattern for the upward trend. For the price action, the current pivotal support is at $1,830, which is also the critical price for bull-bear conversion. In conclusion, we think the gold price is in a bullish mode based on the current market mood and the technical analysis. On the downside, traders should aware of the critical level at $1,830. If the price drop below this level on the 4H chart, it may change the current trend.

Resistance: 1874, 1884

Support: 1830, 1775, 1735

Economic Data

CurrencyDataTime (GMT + 8)Forecast
USD                Fed Chair Powell Speaks22:00