Attention turns towards Powell and central banks

The USD continued to weaken against its counterparts yesterday as hopes of the market for an easing of the Fed’s rate hiking path remained present creating a more optimistic market sentiment. Given the market’s focus on the Fed’s monetary policy, we highlight the speech of Fed Chairman Powel in a symposium organized by the Swedish central bank later today. Should the Fed Chairman actually maintain an intense hawkish tone, that would come at odds with market expectations and thus could provide some support for the USD and vice versa. For the record it should be noted that Fed policymakers sounded quite hawkish yesterday with San Francisco Fed President Daly seeing rates rising above 5% while Atlanta Fed President Bostic seems to agree and adds that rates should remain above 5% for a “long time” according to Bloomberg. At this point given that the market has strong expectations for a Fed slowdown and even some cuts in the last quarter of the year it may take a very aggressive hawkish tone on behalf of Powell to actually reverse the expectations of the market. As for US stock markets we note that mixed signals were sent out as the week began yesterday, yet market focus may also be turning towards the earnings season which is about to begin at the end of the week. On the international stage, the storm on Brazil’s capital by supporters of former president Bolsonaro, seems to have had little if any effect in the markets as the situation came quickly under control and the momentum seems to have passed. Moving on to the far east, China’s hasty reopening tended to create increased hopes in the market for an improved economic performance in the coming months as well as for a softening of the blow to the global economy. Overall the developments in China despite worries for a resurgence of the virus tended to improve the market sentiment as the performance of the Chinese economy seems to outweigh at the moment any worries about the virus, thus providing some support also for the Aussie. Moving north of the US border, the Canadian dollar seemed to have some slight gains against the USD reaching a one-month high, supported by the improved market sentiment yet also by a slight rise of WTI prices yesterday, while the acceleration of the building permits growth rate for November, tended to imply a wider degree of economic activity for the Canadian construction sector.

EUR/USD rose yesterday breaking the 1.0715 (S1) resistance line, now turned to support. Despite the relevant stabilisation of the pair in today’s Asian session we tend to maintain our bullish outlook as the RSI indicator remains just below the reading of 70. Should the bulls remain in charge we may see the pair breaking the 1.0845 (R1) resistance line and aim for the higher grounds. Should the bears take over, we may see the pair breaking the 1.0715 (S1) support line and aim for the 1.0585 (S2) level.

AUD/USD remained relatively stable just above the 0.6900 (S1) support line. We tend to maintain a bias for the sideways motion to continue currently yet we have also worries that the bulls may have not left just yet. Should the buyers regain control over the pair’s direction, we note as the next possible stop the 0.7010 (R1) resistance line. Should a selling interest be expressed we may see AUD/USD breaking the 0.6900 (S1) support line and aim for the 0.6800 (S2) support level.

今日其他亮点:

Today we note the release of Turkey’s unemployment rate for November, Sweden’s GDP rate for November and Norway’s CPI rate for December, while oil traders may be more interested in the release of the weekly US API crude oil inventories figure. On the monetary front please note that besides Fed Chairman Jerome Powell, also BoE Governor Andrew Bailey, ECB Board Member Schnabel and BoC Governor Tiff Macklem are scheduled to speak. During tomorrow’s Asian session, we get Australia’s CPI rates for the month of November.