IC Markets Europe Fundamental Forecast | 27 January 2023

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What happened across the Asia session?

The major currencies retraced against the US dollar briefly during the Asia session, however, current price action signals the potential for further DXY strength.  

What does it mean for Europe and US Sessions?

Anticipate increased volatility across the major currency pairs, but watch out for choppy price action as the market heads into the weekend. 

The Dollar Index (DXY) 

Key news events today

USD Core PCE Price Index m/m 

What can we expect from DXY today?

The DXY traded higher overnight following the release of the advance GDP q/q data at 2.9% (Forecast: 2.6% Previous: 3.2%). With a higher-than-expected advance GDP, this showed steady growth in the US economy in the fourth quarter of 2022. The DXY traded up to the 102-round number resistance level. Look for further strength in the DXY, which would be signaled by the price breaking above the 102 price level and the release of the Core PCE price index, a key inflation indicator for the US Federal Reserve. However, the upside potential could be limited, with the previous swing high at 102.20 and the next key resistance level at 102.50. 

Central Bank Notes:

  • Federal Reserve hiked rates by 50bps taking interest rates to 4.50%
  • Next meeting is on 2 February 2023
  • Further rate increases are expected to slow

Next 24 Hours Bias

Weak Bullish


Gold (XAU)

Key news events today

No major news events. 

What can we expect from Gold today?

As the DXY strengthened overnight, Gold reversed strongly from the 1948 price level, trading lower toward the key support level of 1920. If the DXY continues to strengthen, further downside could be anticipated for Gold. Look for the price to break below the 1920 price level to signal a continuation of the correction lower, with the next key support level at 1900. 

Next 24 Hours Bias

Medium Bearish


The Euro (EUR)

Key news events today

No Major News Events 

What can we expect from EUR today?

The EURUSD reversed strongly from the 1.0920 price level as the DXY strengthen overnight. Dropping significantly, the EURUSD traded down to the 1.0860 level, offsetting gains over the last couple of days. If the DXY continues to strengthen, the EURUSD could continue to trade lower toward the next key support level and round number price of 1.08. However, watch out for potential comments from the ECB members regarding interest rate decisions at the upcoming ECB meeting, which could cause the EURUSD to trade higher again. 

Central Bank Notes:

  • Main Refinancing Rate is currently at 2.50%
  • Significant and consistent rate hikes expected from the ECB 
  • Next meeting on 2 February 2023 

Next 24 Hours Bias

Weak Bearish


The Swiss Franc (CHF)

Key news events today

No Major News Events 

What can we expect from CHF today?

The USDCHF rebounded strongly from the key support level of 0.9165 to trade higher toward the 0.9220 price level. This move higher was due to the increasing strength of the DXY. Look for further strength in the DXY to drive the USDCHF higher, with the next key resistance level at 0.9285. 

Central Bank Notes:

  • Current policy rate is at 1.00%
  • Next meeting on 23 March 2023

Next 24 Hours Bias

Weak Bearish


The Pound (GBP)

Key news events today

No Major News Events 

What can we expect from GBP today?

Although the DXY strengthened significantly, the GBPUSD saw little volatility in comparison to the other major currency pairs. The GBPUSD traded lower from the 1.24 price level down to the 1.2370 price level. If the DXY continues to strengthen, look for the GBPUSD to break below the 1.2350 price level to signal further downside potential, with the next immediate support level at 1.23 and the key support level at 1.2260.

Central Bank Notes:

  • Interest rate is currently at 3.50%
  • Peak inflation revised to more than 15% in 2023. 
  • Next meeting on 2 February 2023 

Next 24 Hours Bias

Weak Bearish


The Canadian Dollar (CAD)

Key news events today

No Major News Events 

What can we expect from CAD today?

The USDCAD spiked strongly to the downside, from the 1.3380 price level, down toward the round number support of 1.33. However, the spike lower was unsustained as the price reversed sharply, with the USDCAD consolidating along the 1.3350 price level toward the end of the trading session. If the DXY continues to strengthen as anticipated, look for the USDCAD to trade higher. However, to confirm further upside potential, the USDCAD would have to break above the 1.34 price level, with the next key resistance at 1.35.

Central Bank Notes:

  • Increased interest rates to 4.50%  
  • Indicated that the BoC was likely to pause on future rate hikes. 
  • Next meeting on 8 March 2023

Next 24 Hours Bias

Weak Bearish


Oil

Key news events today

No Major News Events 

What can we expect from Oil today?

Energy prices traded higher with significant volatility due to the DXY and the expectation for increased demand arising from China. The volatility of energy prices could slow down with the OPEC meeting looming as the DXY develops the next directional trend. Look for WTI trading along the 81.00 price level, to retrace lower toward the key support level of 80.00. Similarly, Brent could break below the 87.00 round number support level to trade down toward the next key support level of 86.00. 

Next 24 Hours Bias
Weak Bearish