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DAILY ANALYSIS

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Forecasting Strategy for Short Term Trade


EUR/USD

The EUR/USD pair trades near a daily high of 1.1445, a level that was last seen on November 15. The American dollar entered a sell-off spiral following the release of US December inflation figures. As expected, the Consumer Price Index came in at 7% YoY, its highest since 1982, although the core reading was upwardly revised to 5.5% for the same period, a sign that inflationary pressures are far from receding.

Nevertheless, speculative interest moved past the headline this time, with stocks rallying and government bond yields retreating further from the multi-month peaks achieved earlier in the week. Hard to explain, unless considering that the Fed has extended its forecast for high inflation at least until the end of the year while pledging to combat it.

USD/JPY

On Wednesday, after the Bureau of Labor Statistics (BLS) revealed that US inflation reached a level not seen since 1982, the USD/JPY plunges, exchanging hands at 114.60 at the time of writing. Broad US dollar weakness is due to the market participants’ expectations of the US CPI inflation figures. The Consumer Price Index (CPI) for December rose by 7.0%, higher than the 6.8% estimations, but it did not come as higher than market positioning.

USD/JPY’s pullbacks could be viewed opportunities for USD bulls if that is the case. The following support lies at the above-mentioned trendline, around the 114.35-45 area at press time. A breach of the latter would expose the 50-DMA at 114.24, followed by 114.00. To the upside, the pair’s first resistance would be 115.00. A break above the psychological double-zero level would expose November’s 24 of 2021, daily high at 115.52, followed by a challenge of the YTD high at 116.35.

GBP/USD

Cable rose further on Wednesday and broke above Fibo barrier at 1.3675 (76.4% of 1.3834/1.3161 bear-leg) to pressure 1.3700 zone (Nov 4 pre-BoE high / psychological) with 200DMA (1.3735) coming in sight. Sterling benefited from fresh risk appetite after US inflation hit multi-decade high in December, boosting expectations for Fed’s three to four rate hikes in 2022, but dollar stayed unaffected by the data, mainly to Fed Powell’s caution and less hawkish than expected stance in his testimony on Tuesday.

Bullish technical studies support the scenario, with sustained break of pivotal 1.3700/35 zone to confirm and open way for extension towards 1.3834 (Oct 20 lower top / Fibo 61.8% of 1.4249/1.3161 fall) and 1.3909 (weekly cloud top). Overbought daily techs suggest that bulls may face headwinds, with dips towards 1.3577/61 (broken Fibo 61.8% of 1.3834/1.3161 / rising 10DMA) to offer better levels to re-enter bullish market.

AUD/USD

After portraying a roller coaster ride on Wednesday, AUD/USD seesaws around 0.7285-90, the two-month high during the early hours of Thursday’s Asian session. In doing so, the risk barometer pair reveals the buyer’s indecision over the previous day’s heavy run-up, the most since late August, amid a quiet start to the day’s trading.

Although softer yields and Fed Chair Powell’s Testimony helped AUD/USD bulls during early Wednesday’s trading, the real push to the north came after the US Consumer Price Index (CPI) release. It’s worth noting that the Aussie pair not only ignored multi-year high price pressure, which should have favored bears but also ignored downbeat China inflation data and virus woes.

XAU/USD

Gold (XAU/USD) extends its rally during the week, buoyed for the fourth consecutive day as the Bureau of Labor Statistics (BLS) revealed that US inflation reached the highest level since 1982. At the time of writing, XAU/USD is trading at $1.826 during the New York session.

The market’s reaction to the US CPI headline figure was adverse, despite further cementing that the Fed would need to hike rates faster than estimated. The US 10-year Treasury yield is down almost two basis points, sitting at 1.722%, weighing on the greenback, as shown by the US Dollar Index, plunging 0.60%, sitting at 95.06.

To the upside, XAU/USD’s first resistance level would be September 3, 2021, a daily high at $1.834. Once that level is breached, the next stop would be November 16, 2021, cycle high at $1.877.18, followed by $1.900. On the other hand, gold’s first support is $1.800. The breach of the latter would expose the 100-day moving average (DMA) at $1.793, followed by January 7 daily low at $1.782.60.

WTI

Oil prices hit two-month highs on Wednesday on tight supply and easing concerns about the potential hit to demand from the Omicron coronavirus variant. U.S. Federal Reserve Chairman Jerome Powell on Tuesday said that the economy of the United States, the world’s biggest oil consumer, should weather the current COVID-19 surge with only “short-lived” impact and is ready for the start of tighter monetary policy.

Brent crude futures were up $1.24, or 1.5%, at $84.96 per barrel. U.S. West Texas Intermediate (WTI) crude futures added 2%, or $1.62, to trade at $82.84 per barrel.  OPEC+ oil producers continue to hold back more than 3 million barrels per day (bpd) in output while Iranian exports are pinned back by continuing U.S. sanctions.

#WFC

After trading in a relatively wide range for the past quarter, the share price of Wells Fargo & Company (WFC) has recently broken out to the upside ahead of the company's fiscal fourth quarter earnings announcement. Wells Fargo has recently pushed higher though a zone that is relatively thin on buying volume. Analysts are forecasting the bank to report $0.99 in earnings per share (EPS) to go along with $18.62 billion in revenue. This represents a nearly 60% expected increase in profit compared to the same quarter a year ago.

The financial sector has been on the rise of late, as investors appear to be seeking stocks based on value rather than speculative growth. Wells Fargo stock has nearly doubled the recent pace of the red-hot financial sector, rising 15.4% over the past month. This could be because bank shares overall were considered undervalued, while Wells Fargo in particular has a more attractive entry price on a per-share basis. WFC stock closed higher 0.34 point (0.61%) at 56.40 on Wednesday.

#GOOGL

Alphabet (GOOGL) closed the most recent trading day at $2.773.39, moving +1.21% from the previous trading session. The stock outpaced the S&P 500's daily loss of 0.14%. Meanwhile, the Dow lost 0.45%, and the Nasdaq, a tech-heavy index, lost 0.02%. Prior to Tuesday's trading, shares of the internet search leader had lost 7.42% over the past month. This has lagged the Computer and Technology sector's loss of 5.82% and the S&P 500's loss of 0.13% in that time.

Investors will be hoping for strength from Alphabet as it approaches its next earnings release. In that report, analysts expect Alphabet to post earnings of $26.71 per share. This would mark year-over-year growth of 19.78%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $59.3 billion, up 27.71% from the year-ago period. GOOGL stock price continous going up 33.89 point (1.21%), closed at 2.828.61 on Wednesday.

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