Weekly Analysis (Jan 27 – Feb 2)

FOMC and BOE rate decisions are the key market events this week

Rate Watch

During the upcoming trading week, financial markets take direction from key interest rate decisions from the US Federal Open Market Committee and the Bank of England. The FOMC is widely tipped to keep interest rates unchanged as the US economy remains strong. Consensus opinion amongst market experts is currently split as to whether the Bank of England will cut interest this week.

Market participants will also be awaiting the release of key data from the eurozone economy, with CPI, IFO survey, GDP, and Retail Sales number in focus. The Chinese economy is also set to release PMI Manufacturing data, while the Australian economy also releases key Inflation numbers.

Monday 27th January, German IFO Survey

The German IFO Current Assessment is released by the CESifo Group and is a key indicator of the current business conditions in Germany. The IFO Institute surveys more than seven thousand enterprises across Germany on their assessment of the business situation, and also their short-term business planning.

  • The EURUSD pair is bearish while trading below the 1.1100 level, key support is found at the 1.1000 and 1.0930 levels.
  • If the EURUSD pair moves above the 1.1100 level, buyers may test the 1.1160 and 1.1230 resistance levels.

Tuesday 28th January, US Durable Goods Orders

US Durable Goods Orders is a government report and is released by the US Census Bureau which measures consumer spending on long-term purchases, products that are expected to last more than three years. Durable goods are generally sensitive to monthly volatility as US consumers may delay purchases of durable items such as cars and televisions and choose to only spend money on necessities in times of economic hardship.

  • The USDJPY pair is only bullish while trading above the 108.90 level, key resistance is found at the 109.70 and 110.20 levels.
  • If the USDJPY pair trades below the 108.90 level, sellers are likely to test the 108.40 and 107.60 support levels.

A screenshot of a cell phone Description automatically generatedWednesday 29th January, US FOMC Rate Decision

The Federal Open Market Committee meets eight times per year to decide on monetary policy and where to set the rate. Rate changes impact interest rates for consumer loans, bonds, mortgages and the US dollar’s exchange rate. Rising rates tend to cause the US dollar to appreciate while falling rates cause it to depreciate. The decision of the FOMC is usually very important, maybe more important than the actual interest rate move made by the central bank, due to it being greatly anticipated. This statement includes hints for the future and contains the Federal’s collective outlook on the economy.

  • The USDCHF pair is only bullish while trading above the 0.9780 level, further upside towards 0.9860 and 0.9910 levels remains possible.
  • If the USDCHF pair trades below the 0.9780 level, sellers are likely to test the 0.9710 and 0.9600 support levels.

Thursday 30th January, UK BOE Rate Decision

The Bank of England Interest Rate Decision is announced by the Bank of England and is a key decision on where central bank set UK interest rates. Economists are currently spilled as to whether the Bank of England will cut interest rates this month. If the central is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive for the British pound. If the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative for the British pound.

  • The GBPUSD pair is only bullish while trading above the 1.3150 level, further upside towards the 1.3230 and 1.3300 resistance levels seems possible.
  • If the GBPUSD pair trades below the 1.3150 level, sellers are likely to test towards the 1.3000 and 1.2960 support levels.

Friday 31st January, EU Consumer Price Index

The Consumer Price Index, released by Eurostat measures the changes in the price of goods and services from the perspective of the consumer. A higher value of the CPI represents significant inflationary pressures in the Euro Zone economies. This puts pressure on the European Central Bank to raise interest rates. The data does not usually affect financial markets significantly because CPI is the European Central Bank’s mandated inflation target.

  • The EURGBP pair is bullish while trading above the 0.8500 level, key resistance is found at the 0.8600 and 0.8650 levels.
  • If the EURGBP pair moves below the 0.8500 level, sellers are likely to test towards the 0.8440 and 0.8380 support levels.

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