Daily Market Report

21/02/2023
11:36

The US stock market was closed on Monday in observance of President’s Day.
Last week all US major stock indexes were down while the US Dollar continue to fight for a clear direction in the near term.

Overall, market sentiment remains mixed amid global economic risks and uncertain interest rate expectations.

Looking at today’s European trading session, traders await a set of economic releases from the UK. Both the Manufacturing and services PMIs are expected to rise from 47.0 to 47.5 and from 48.7 to 49.2 respectively.

In Canada, forecasts are pointing to higher inflation in January, the CPI is due to rise from -0.6% up to 0.7% while retail sales are seen at 0.4% compared to -0.1% previously.

Looking now at the latest price action developments in the major currency pairs alongside gold.

EURUSD

The Euro managed to recover on Friday near the psychological support of 1.0600 as prices bounced back and stabilized around the 1.0700 mark.

Looking at the short-term technical picture, the trend remains bearish, however, the pair is testing an important falling trendline as per the chart below, and successful penetration of this trendline can lead to a continuation higher in the direction of 1.0722 resistance.

Moreover, a break above this resistance can trigger more demand which can push prices higher toward the 1.0770-1.0800 barrier.

On the other side, a daily close below 1.0635 support should reinforce the short-term bearish trend and weaken any potential reversal in the near term.

GBPUSD

The British pound is trying to turn higher after seeing a false breakdown of the 1.1960 hourly support. The pair found a low at 1.1915 before reversing early losses, ending the week on a positive note.

From a technical standpoint, the bearish momentum has weakened significantly after Friday’s close, and the pair is likely to remain well supported above the 1.1985-1.2000 support zone in the near term.

Therefore, a continuation higher in the direction of the 1.2075 resistance is likely in the coming hours while a daily close above it can confirm a shift to the upside in the short-term trend.

This positive scenario remains valid unless we see a daily close below 1.1960 support.

USDJPY

Following the recent rally seen last week, the pair is likely to stabilize in the coming hours on the back of profit-taking after testing a key resistance located near the 135.00 level.

Looking at the latest price action, the current advance is taking the form of a series of higher highs and higher lows, reinforcing the positive outlook. Therefore, any decline is likely to be temporary while the pair continues to trade above 133.60 hourly support.

Prices are expected to trade sideways between the 135.10 peak and 133.60 support with the nearest resistance located at the 134.55 level.

In extension, if the pair continues to hold below last week’s high, a retest of the 133.60 level remains possible.

USDCAD

USDCAD advance stalled at the 1.3520 hourly resistance mentioned in our previous report.

For the time being, we can see that the bullish momentum is running out of steam, and the short-term trend has switched to neutral again, consequently, we expect the pair to trade sideways in the coming hours.

Technically, the 1.3440 level is considered the nearest support to watch while a daily close below it can lead to another wave of decline in the direction of 1.3360.

On the opposite, if buyers manage to protect the current support, a move back higher toward 1.3520 will be highly anticipated in the coming hours.

GOLD

Gold bounced from a key support zone located between the 1825 and 1815 levels.

As of now, we can see that trend remains bearish in the yellow metal, meanwhile, if we see a clear breakout above the 1845 resistance, we can expect the current recovery to target the next barrier at $1852. It is important to note that this level represents the 61.8% Fibonacci retracement of the recent wave of decline that started from 1870 high and ended at 1818 low.

To summarize, traders should focus on the 1845 resistance today, as a failure below it can lead to a retest of the 1830 support, on the other hand, if this resistance is taken out, we can see a continuation higher in the direction of $1852 per ounce.

Economic analyst
Amine Hiani