EURUSD
- EUR/USD is hovering around 1.0700 during the early European session on Wednesday. The pair has maintained this position after dropping to three-month lows. The specific levels, especially those around multi-month lows, are crucial for technical analysis and can signal potential trends.
- The ZEW institute's auspicious prints reveal an improvement in Economic Sentiment in both Germany and the Eurozone in February. Economic sentiment indices reflect the expectations of financial professionals regarding the economic outlook. An improvement could be viewed positively for the Euro.
- Despite the improvement in economic sentiment, ZEW officials reported that respondents' evaluation of the current economic situation has declined to its lowest point since June 2020. This indicates a concerning state for the German economy. It suggests that while there's optimism about the future, the present economic conditions are challenging.
- From the European Central Bank (ECB), Board member P. Lane expressed optimism about the bank's progress in reducing inflation and believed that the price trend was favorable. Positive remarks from ECB officials about inflation trends can impact market expectations regarding potential interest rate changes.
- Furthermore, it's highlighted that the extent of interest rate cuts will depend on progress towards the desired price goal. This emphasizes the importance of inflation trends in shaping the ECB's monetary policy decisions. Inflation is a critical factor influencing central bank decisions.
| SMA (20) | Falling |
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| RSI (14) | Slightly Falling |
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| MACD (12, 26, 9) | Falling |
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Closing statement: EUR/USD is at a notable level, and recent economic sentiment improvements are contrasted by concerns about the current economic situation in Germany. The optimism expressed by ECB Board member Lane about inflation trends and the emphasis on progress toward price goals indicate that economic indicators, especially inflation, will continue to be significant drivers for the EUR/USD pair.
GBPUSD
- GBP/USD lost traction and declined below 1.2600 in the European session on Wednesday. Specific levels, especially psychological ones like 1.2600, are important in technical analysis and can act as support or resistance.
- The decline in the Pound Sterling is attributed to the UK Consumer Price Index (CPI), which showed a 0.6% monthly decline in January. CPI is a key indicator of inflation, and a decrease may raise concerns about economic health. The monthly change indicates short-term inflation trends.
- Jobs data from the UK showed that wage growth slowed, and vacancies fell for the 19th straight report, dropping by 26K from the August-to-October period. Employment and wage growth are critical indicators for the health of an economy and can impact currency values.
- The data published by the UK's Office for National Statistics (ONS) revealed that inflation in the UK, measured by the change in the Consumer Price Index (CPI), held steady at 4% in January. While steady inflation is generally positive, the impact of the monthly decline needs to be considered.
- Strong economic data from the United States (US) is mentioned as a factor influencing GBP/USD. Robust economic data from the US suggests that the Federal Reserve (Fed) might keep interest rates higher for a more extended period. Interest rate differentials between countries often influence currency movements.
| SMA (20) | Slightly Falling |
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| RSI (14) | Slightly Falling |
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| MACD (12, 26, 9) | Slightly Falling |
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Closing statement: the decline in GBP/USD is attributed to the UK's CPI decline and mixed jobs data. The impact of steady inflation and the influence of strong US economic data, suggesting a potential divergence in monetary policy between the UK and the US, are highlighted. These factors collectively contribute to the dynamics of the GBP/USD pair.
GOLD
- Gold is consolidating near the lowest level in two months, around $1,990. Specific price levels, like $1,990, are important in technical analysis and can act as support or resistance.
- The steep sell-off in gold is attributed to a hot US inflation report. Inflation reports can influence gold prices as they impact the perceived value of holding precious metals as a hedge against inflation.
- The US Federal Reserve's (Fed) pushback against early and aggressive interest rate cut expectations is mentioned. This suggests a more hawkish stance by the Fed, which tends to support the US Dollar but may weigh on non-interest-bearing assets like gold.
- The market now prices out a March Fed rate cut, and chances of a rate cut in May are seen around 65%. Expectations of interest rate changes by the Fed can significantly impact gold prices.
- The US Dollar's potential uptrend is highlighted, especially if risk aversion intensifies. Gold and the US Dollar often have an inverse relationship, meaning a stronger dollar may lead to lower gold prices.
- While a bearish momentum for gold is anticipated, the possibility of a rebound cannot be ruled out if investors decide to take profits off the table. Market sentiment and investor behavior are crucial in understanding potential price reversals.
Closing statement: the analysis suggests that gold is currently under pressure due to the impact of a hot US inflation report, the Fed's stance against rate cut expectations, and the potential strengthening of the US Dollar. However, the possibility of a rebound exists, depending on future market dynamics and investor behaviour.
CRUDE OIL
- West Texas Intermediate (WTI) oil price is mentioned to be on a path to resume its winning streak, currently trading around $77.50 per barrel during the Asian trading hours on Wednesday. The specific price level provides context for the market's current position.
- The OPEC monthly oil market report raises concerns about the group's adherence to recent production cuts. In particular, only Kuwait and Algeria have implemented their share of cuts, while Iraq's output remains above the agreed quota. Adherence to production cuts is crucial for stabilizing oil prices.
- The American Petroleum Institute (API) reported a significant increase in US crude inventories. According to the API Weekly Crude Oil Stock report, crude inventories surged by 8.52 million barrels for the week ending on February 5. High inventories can signal oversupply and potentially weigh on oil prices.
- The unexpected upside surprise in US inflation data is mentioned as exerting downward pressure on oil prices. Higher inflation can lead to expectations of higher interest rates, which may dampen demand in the oil market. Oil prices are sensitive to changes in interest rate expectations.
- Investors are eagerly awaiting the release of the US Energy Information Administration's (EIA) Crude Oil Stocks Change data for the week ending on February 9. There are expectations of a decline in stockpiles of crude oil and its derivatives in the United States. Inventory levels are closely monitored as they impact supply-demand dynamics.
| SMA (20) | Slightly Rising |
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| RSI (14) | Slightly Rising |
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| MACD (12, 26, 9) | Slightly Rising |
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Closing statement: the analysis suggests that while WTI oil prices are on a winning streak, concerns about OPEC's adherence to production cuts, a significant increase in US crude inventories, and the unexpected upside surprise in US inflation data are factors currently influencing the market. The upcoming EIA data release will likely provide further insights into the supply-demand balance in the US oil market.
DAX
- On Tuesday, ZEW Economic Sentiment numbers for Germany and the Eurozone beat forecasts. The positive sentiment among analysts in February is highlighted, indicating optimism despite concerns about the German economy. Positive sentiment can contribute to increased investor confidence.
- The hotter-than-expected US Consumer Price Index (CPI) Report on Tuesday impacted the buyer demand for riskier assets. The report showed a decline in the US annual inflation rate from 3.4% to 3.1% in January, with the core inflation rate holding steady at 3.9%. This data influenced market dynamics and risk appetite.
- On Wednesday, investor attention is warranted for the second estimate of Q4 GDP and preliminary Q4 employment change figures for the Eurozone. These economic indicators provide insights into the health of the Eurozone economy, impacting investor sentiment and market movements.
- Investors are advised to track European Central Bank (ECB) commentary, specifically from ECB Vice President Luis de Guindos and Executive Board member Piero Cipollone, who are scheduled to speak. ECB commentary can provide insights into monetary policy and the central bank's outlook, influencing market sentiment.
- Later in the Wednesday session, Federal Reserve (Fed) speeches need consideration. Reactions to the US CPI Report and views on the timelines for Fed interest rate cuts could move the dial. The Fed's stance on interest rates can impact global markets, including the DAX.
| SMA (20) | Slightly Rising |
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| RSI (14) | Slightly Falling |
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| MACD (12, 26, 9) | Slightly Rising |
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Closing statement: In summary, the analysis indicates that positive sentiment from ZEW Economic Sentiment numbers, the impact of the US CPI Report, Eurozone economic indicators, ECB commentary, and Fed speeches are key factors influencing the DAX. Investors are closely monitoring economic data and central bank communications for insights into market trends.