Weekly Technical Analysis For January 27th to 31st, 2020

Get Ready For The Fed and BoE Interest Rate Decisions

EUR/USD:

The European Central Bank left key rates unchanged in the January meeting. Euro has dropped to the lowest this year versus the US Dollar after Christine Lagarde, President of the ECB, said that it will take climate change into its considerations. The crisis may trigger the usage of additional monetary stimulus.

ECB launched a review of its monetary policy strategy, which is the first review since 2003. It is expected to be concluded by the end of 2020. The ECB also predicted euro-zone GDP growth will slow slightly to 1.1% this year from 1.2% in 2019 then pick up in 2021. 

On the other hand, the coronavirus fear has increased. China put cities on lockdown and other Lunar New Year events have been canceled. The virus has also spread to the U.S., Thailand, South Korea, Japan, Australia, France, and Canada. The fear is on getting worse than better, and actions by China could impact economic growth.

In the upcoming week, the Federal Reserve will deliver its first interest rate decision for the year on Wednesday. There is no interest rate change expected from the Fed. Federal Reserve Chair Powell made clear before that there would be no further cuts to U.S. interest rates barring a major deterioration in the economy. Powell will hold a press conference following the meeting, with awaiting his insights on the policy outlook.

Besides the Rate Decision, keep your eye on US GDP Growth on Thursday. The US four-quarter gross domestic product is expected to see a growth of 2.1%, the same as the previous estimate.

The Fed’s preferred measure of inflation, the core PCE index, which calculates spending minus volatile food and energy costs, arrives along with personal spending and income numbers from the Commerce Department on Friday. The December core PCE is expected to remain unchanged at 1.6% year on year basis.

Moreover, we will focus on the Eurozone Consumer Price Index on Friday. On the year-on-year basis, the Eurozone CPI is expected to stay at 1.4% A better than expected realization may support the single currency.

The EURUSD pair dropped below the major level of 1.1052. As long as the price stays below 1.1052 on a daily basis, the downward movement may continue and we will see 1.1007 and 1.0965 as support levels. On the upside, if the pair goes beyond 1.1052, the next resistance level will be placed at 1.1114.
 
Support : 1.1007 - 1.0965 - 1.0930
 
Resistance : 1.1052 - 1.1114 - 1.1165

GBP/USD:

Looking ahead, the Bank of England’s monetary policy committee will announce the results of its latest meeting on Thursday. The BoE is expected to leave interest rates unchanged again. The meeting will be Mark Carney's last as central bank governor. 

There are expectations for clearer guidance towards lowering them in view of the global economic slowdown and the sustained deterioration in domestic conditions due to the Brexit.

We are closely watching the 1.3046 main support level in the GBPUSD pair. If the pair stays above 1.3046 on a daily basis, the key resistance levels can be seen at 1.3136 and 1.3231. On the other hand, if the pair falls below 1.3046, the next support level is holding at 1.2947.

Support: 1.3046 - 1.2947 - 1.2838

Resistance: 1.3136 - 1.3231 - 1.3313

USD/JPY:  

The USDJPY pair showed a downward movement last week. Keep your eye on the 109.09 support level. If the price stays above 109.09 on a daily basis, the fall may pause and we will face 109.39 and 109.72 as the main resistance levels. Otherwise, if the price breaks down below 109.09, we will follow the next support level at 108.79.

Support : 109.09 - 108.79 - 108.52

Resistance: 109.39 - 109.72 - 110.36

GOLD:

The Gold Price surged last Friday. Now, we will closely watch the daily resistance level of 1575. In order for the upward movement to continue, it needs to rise and sustain above 1575 on a daily basis. At this point, we will see the 1604 major resistance level. On the downside, if the price breaks down below 1555, the next support level will be at 1540.

Support: 1555 - 1540 - 1524

Resistance: 1575 - 1604 - 1642

26 Jan 20 (Sun)

08:09 pm


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