Daily Market Report

02/05/2023
12:52

The US Dollar rose on Monday while US stocks closed slightly lower ahead of the upcoming FED rate decision due on Wednesday.

The Dow lost 0.14%, the Nasdaq fell 0.11% and the S&P500 was down 0.04%.
JP Morgan Chase shares were up 2.1% after taking over failed First Republic Bank. Moreover, gold retreated from the $2000 psychological barrier on a stronger dollar, ending the day at $1982 per ounce.

On the other side, the Federal Reserve is expected to raise interest rates by another 25bps from 5.00% to 5.25%. A hike is widely expected; however, all eyes will be on Jerome Powell’s press conference as investors will look at key statements for future monetary policy guidance.

Looking now at the key economic releases for the day. In the UK, the final manufacturing PMI is likely to remain unchanged at 46.6, while in the US, factory orders are expected to have risen from -0.7% up to 1.3%.

Below, we will be analyzing the latest price action developments in the major currency pairs alongside gold.

EURUSD

The Euro retreated below the 1.1000 mark as sellers took control of this pair in the near term. Looking at the recent price action, the pair failed to overtake the daily resistance of 1.1075 during last week which reinforces the probability of a correction to the downside.

Meanwhile, traders should focus on the hourly support level of 1.0965 as a successful breakdown below it can expose the next support at 1.0900 in the coming hours.

From a wider angle, the key level to watch during this week will be 1.0830 and while prices continue to trade above it, the downside potential is likely to be limited in the Euro.
On the other side, if the pair managed to bounce from the support level mentioned earlier, the next barrier will be at 1.1035.

GBPUSD

The British pound traded lower on Monday after reaching a high of 1.2585 by the end of last week.

From a technical standpoint, the pair remains in an uptrend in the higher time frames, in the meantime, when looking at the recent price action, we can see a decline in the bullish momentum and the Sterling is trading inside a wide range located between 1.2580 high and 1.2350 low. Therefore, the pair is expected to trade sideways to lower in the coming hours into a downside retracement that can reach 1.2450 as initial support.

On the opposite, 1.2550-1.2585 is likely to continue acting as a strong resistance zone in the near term, and a daily close above it is needed to confirm that the recent downside movement has ended. Otherwise, the downside pressure will remain intact.

USDJPY

The pair rallied last week following the Bank of Japan rate decision, the pair managed to break above a key resistance level located at 135.10 which confirmed a bullish reversal.

For the time being, prices are expected to continue trading higher toward the next resistance zone despite being in an overbought condition, this zone stands between the 137.90 and 138.25 levels. Therefore, any decline should be considered temporary while prices continue to hold above the 135.85 level in the coming hours.

Looking at the key technical levels for today, the nearest support zone is located between the 136.70 and 136.50 levels followed by 135.85 in extension while the closest resistance is seen at the 137.70 level.

USDCAD

The pair extended its decline following the price rejection from the 1.3655 resistance level.
Technically, the trend remains neutral in this pair when looking at the higher time frames.

Therefore, traders should wait for additional price action to confirm the next direction in this pair. The 1.3520 level is likely to act as a support in the near term, on the other side, the 1.3585 level represents a resistance level followed by the 1.3600 level in extension.

In the daily chart, we can see that prices are stuck inside a big range that extends between the 1.3850 high and the 1.3220 low, consequently, the technical view is likely to stay neutral in the medium term until we see a clear breakout outside of this range.

GOLD

Gold faced heavy selling pressure from the 2005 resistance level during yesterday’s US trading session. The yellow metal bounce has faded from a key technical resistance that keeps gold under pressure in the near term.

The short-term trend is neutral, and prices are expected to continue trading sideways in the coming hours ahead of the upcoming FED rate decision scheduled for Wednesday. However, traders will focus on a key support zone located between the 1975 and 1970 levels as a break below it can lead to a deeper downside correction that can reach the 1950 level.

On the other side, a daily close above the 2005 barrier is needed to confirm the end of the current downside correction.

Economic Analyst
Amine Hiani