Daily Analysis Report 26 Jan '2022
During the Asian session, the euro had flat trading dynamics against the US dollar, maintaining the support of 1.1300 and the local lows of December 21 last year, which were reinforced yesterday. Market traders prefer to wait for the release of today’s minutes from the US Federal Reserve meeting to see how the market reacts. No adjustments in monetary policy parameters are expected in January, but estimates for the near future will be crucial. The Fed is on the verge of starting an interest rate rise cycle, and the first step might come as early as March. This year, four modifications to the indicator are predicted and actions to reduce the US Federal Reserve’s balance. Today’s department decision will heavily influence the pair’s relationships. Data from Germany reported yesterday also lends some support to the euro. According to the IFO data, the January business optimism index increased from 94.8 to 95.7 points, beating market expectations of a drop to 94.7 points. For the same period, the economic expectations index rose from 92.7 to 95.2 points, compared to a forecast of 93.0 points.
During the morning session on January 26, the British pound showed higher trading characteristics, rising from local lows at the start of the month and testing for a breakout of the significant resistance around 1.3500. Because the underlying factors alter slightly, the increase is more technical. Today’s important event will be the US Federal Reserve’s interest rate decision. Therefore, investors are not rushing to build new long dollar positions. On the other hand, the regulator is unlikely to surprise the markets, though officials’ comments and updated estimates for the future could be significant. On January 11, the department’s chairman, Jerome Powell, presented a clear plan to normalize the country’s monetary policy: the quantitative easing (QE) program will finish in March, followed by multiple major rate hikes throughout the year. Investors anticipate the first rise from US officials in March, with four further adjustments planned for 2022. The dollar received minimal support from yesterday’s US macroeconomic data. As a result, the home price index increased by 1.1 percent in November, sustaining the previous month’s growth rate, despite economists expecting the index to fall to 1.0 percent. Over the same time, the S&P/CaseShiller house price index slowed from 18.5 percent to 18.3 percent, while the market predicted a drop to 18 percent.
The Australian currency is slightly higher, forming a shaky corrective impulse that began yesterday. In anticipation of the publication of the US Federal Reserve’s interest rate decision, the AUD/USD pair is currently challenging the level of 0.7150 for a breakout. Macroeconomic data from Australia published yesterday also lends some support to the instrument. As a result, the consumer price index for the fourth quarter of 2021 increased by 1.3 percent, following a 0.8 percent gain the previous month. Analysts predicted that dynamics would accelerate, but only by 1.0 percent. Inflation rose from 3.0 percent to 3.5 percent on an annual basis, beating expectations of 3.2 percent. Using the trimmed average approach, the core inflation index computed by the Reserve Bank of Australia increased from 0.7 percent to 1.0 percent.
During the Asian trading session, the US dollar is uncertain against the Japanese yen, stabilizing at 113.80. Traders are likely to stay focused on the US Federal Reserve’s interest rate announcement; thus, activity in the first half of the day will likely remain low. Investors do not expect the Fed to tighten monetary policy in January, but they would want confirmation of the central bank’s “hawkish” stance. The market is currently anticipating the start of the rate hike cycle in March; the rate can be raised to four times in 2022. The Bank of Japan’s stance has recently shifted slightly. Nonetheless, the regulator’s most recent regulations have compelled investors to pay attention to the country’s slowly rising inflation, which has yet to influence the monetary policy vector.
After another attempt at expansion yesterday, when the instrument tried to reclaim local highs from November 19, gold prices are consolidating near the level of 1845.00. Negative trends in US stock markets gave notable support for quotations, which accelerated after the release of new statistics from the International Monetary Fund, downgrading the projection for global economic growth amid a slowdown in the US and China’s recovery. The growing tension in Eastern Europe, where the deployment of armed forces is expanding, and the publishing of the minutes of the US Federal Reserve meeting provide more support for the shelter asset. Traders do not expect the regulator to take any measures in January to prevent excessive inflation. On the other hand, investors are focused on the possibility of an interest rate hike in March. In total, four indicator modifications are predicted between now and 2022. Also, as summer approaches, the regulator may cut its $9 trillion balance.