Fed Speak keeps the dollar afloat

The dollar closed in the greens yesterday, lifted by the comments of numerous Fed speakers who keep pointing out the need for raising rates further. New York Fed President Williams highlighted that there is plenty more to do this year in order to get the supply and demand imbalances down, yet he favours rate increases to be at a slower pace. Fed Governor Cook stated that it’s appropriate to move is smaller steps and assess the effects of the cumulative tightening in regards to the economy and on inflation. She then added that her hopes for a “soft landing” have increased after the strong jobs report during last week. Fed Governor Christopher Waller raised his concerns that robust jobs numbers run the risks of fueling consumer spending which would maintain upward pressure on inflation, increasing the probabilities for becoming entrenched in the economy.  Nevertheless, the central bank’s tightening efforts appear to be working, but are “not enough”, adding that the Fed should keep a tight stance for some time. Minneapolis Fed President Kashkari once again declared his resolve that the Fed’s fund rate needs to rise further, as high as 5.4% and if the data support this, maybe even further. The consensus of the bank’s forecasts see the 5.1% as the median terminal rate. Moving towards Europe, today Germany announced its preliminary HICP rate for the month of January whose release has been postponed for more than a week. The results pointed out that inflationary pressures in the German economy eased more than expected to the 9.2%. The forecasts were calling for an acceleration to the 10% from the prior month’s 9.6%. No major reaction to the EUR has been observed so far. Later today, Riksbank is scheduled to deliver a 25-basis points rate hike raising the repo rate a 2.75% and according to the SEK OIS the probabilities for this scenario to materialise currently stand at 92%. Since the market anticipates and already priced in the above scenario, not much price reaction is expected from SEK. The release of RBA’s monetary policy statement early in tomorrow’s Asian session could provide further clues in the central bank’s outlook and Aussie traders will be sifting thought the data for any clues. The bank raised its cash rate to 3.35% on Tuesday, as it hiked by 25 basis points. Also important in tomorrow’s early Asian session, the market awaits for inflationary data from China in both the consumer as well as the producers front, for the month of January. According to estimates, the year-on-year CPI rate is expected to accelerate to 2.1% from the 1.8% of the prior month, while the year-on-year PPI rate for January is expected to record an improvement to the -0.5% level from the -0.7% of the prior month.

AUD/USD remained relatively unchanged yesterday between the 0.7000 (R1) resistance line and the 0.6880 (S1) support level. We tend to maintain our bias for the sideways motion to continue for the time being. Should the bulls take over, we may see the pair breaking the 0.7000 (R1) resistance line, aiming for the 0.7060 (R2) resistance level. Should the bears take over, we may see the pair breaking the 0.6880 (S1) support line and aim for the 0.6800 (S2) support level.

GBP/USD remained relatively unchanged just below the 1.2125 (R1) resistance line. We tend to maintain our bias for the sideways motion to continue. Should the bulls take over, we may see cable breaking the 1.2125 (R1) resistance line and aim for the 1.2280 (R2) level. Should the bears take over, we may see the pair breaking the 1.1950 (S1) support line and aim for the 1.1780 (S2) support level. 

Other highlights for the day:

Moreover we note that BoE Governor Bailey is scheduled to make statements. In the American session, we get the US weekly initial jobless claims figure, while New Zealand’s electronic card retail sales are due out just before the Asian session starts. During tomorrow’s Asian session, we note the release of Japan’s corporate goods prices for January.  

AUD/USD H4 Chart

Support: 0.6880 (S1), 0.6800 (S2), 0.6720 (S3)

Resistance: 0.7000 (R1), 0.7060 (R2), 0.7125 (R3)

GBP/USD H4 Chart

Support: 1.1950 (S1), 1.1780 (S2), 1.1620 (S3)

Resistance: 1.2125 (R1), 1.2280 (R2), 1.2420 (R3)

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