February Global Macro Outlook: 3 Things You Need to Know

au.investing.com/analysis/february-global-macro-outlook-3-things-you-need-to-know-200547841

February Global Macro Outlook: 3 Things You Need to Know

By Kathy Lien   |  19 minutes ago (Feb 07, 2023 04:54)

In the following video, I explain what I believe to be the 3 most important things to know about the global macro outlook in February.

S&P 500 Faces Uncertainty Amid Blockbuster Jobs Report, Chinese Balloon Incident

Movements of the since the Fed’s interest on Feb. 1 indicate that despite the late weekly selling, the index still managed to close last week with a 1.6% gain.

Thursday’s bumpy trading pushed the S&P 500 to 4195.49 before it then lost some gains; this was followed by a selling spree again on Friday from the day’s high at 4182.40, resulting in the formation of an exhaustion candle.

Friday’s monster added another blow to bulls, further accelerating a late-week selloff. While the U.S. economy was supposed to add 185,000 jobs, the report showed it added 517,000.

Monday, the S&P 500 could get a confirmation candle for this exhaustion candle, formed on Friday, if not hold the immediate support as it was trading below the significant support at 4141.83 after a weekly gap-down opening.

Undoubtedly, some analysts feel the further direction of the S&P 500 index still looks bullish, as the current selling spree could be a temporary phenomenon.

But I find the technical formations in the daily chart make it evident that this is not the case, and evolving geopolitical events could play a decisive role in defining the further direction for equity markets.

The balloon episode has already further strained tense relations, prompting Washington to cancel a planned visit over the weekend to Beijing by Secretary of State Antony Blinken.

This incident could lead to a surge in supply bans like we saw during the tariff trade war between the United States and China in 2018-19, which pushed the S&P 500 to hit a low at 2342 on Dec. 24, 2018.

S&P 500 Daily Chart

No doubt, if the S&P 500 does not hold significant support at 9 DMA, which is at 4086 in today’s session, bears could turn more aggressive and try to break the next support at 26 DMA soon.

In such a scenario, bearish sentiment could explode enough to push the S&P 500 to hit 200 DMA support, which is at 3948 this week.

Disclaimer: The author of this analysis does not have any positions in the S&P 500 index. Readers are advised to take any position at their own risk.

EURUSD continues to step down. New lows for the day

EURUSD continues its step lower

The EURUSD
EUR/USD

The EUR/USD is the currency pair encompassing the European Union’s single currency, the euro (symbol €, code EUR), and the dollar of the United States (symbol $, code USD). The pair’s rate indicates how many euros are needed in order to purchase one dollar. For example, when the EUR/USD is trading at 1.2, it means 1 euro is equivalent to 1.2 dollars. Why the EUR/USD is the Most Popular Trading PairCompared to all tradable currencies, the euro (EUR) is the world’s second most traded currency, be

The EUR/USD is the currency pair encompassing the European Union’s single currency, the euro (symbol €, code EUR), and the dollar of the United States (symbol $, code USD). The pair’s rate indicates how many euros are needed in order to purchase one dollar. For example, when the EUR/USD is trading at 1.2, it means 1 euro is equivalent to 1.2 dollars. Why the EUR/USD is the Most Popular Trading PairCompared to all tradable currencies, the euro (EUR) is the world’s second most traded currency, be
Read this Term
continues to step down after stalling initially near the 50% midpoint of the 2023 trading range earlier today, but eventually breaking lower. The price is now testing the next target area between 1.07115 and 1.07243. A move below that level would have traders targeting the 61.8% retracement 1.06909. Sellers remain in firm control.

Taking a look at the 5-minute chart, the pair consolidated in the Asian session allowing for the 200 bar moving average (green line in the chart below) to catch up. However sellers leaned ahead of the 200 bar moving average, and that helped to keep a lid on the pair on two separate occasions. The price has since moved further away from both the 100 and 200 bar moving averages as selling intensified (helped by the break of the 50% on the hourly).

Ultimately, it would now take a move back above the 100 bar moving average
Moving average

A moving average is a statistical tool that is used to smooth out short-term fluctuations in data and reveal longer-term trends. It is calculated by taking the average of a certain number of data points over a specific period of time, and then plotting that average as a line on a chart. The most common types of moving averages are simple moving averages (SMA) and exponential moving averages (EMA).In financial markets, moving averages are often used to analyze stock prices, exchange rates, and ot

A moving average is a statistical tool that is used to smooth out short-term fluctuations in data and reveal longer-term trends. It is calculated by taking the average of a certain number of data points over a specific period of time, and then plotting that average as a line on a chart. The most common types of moving averages are simple moving averages (SMA) and exponential moving averages (EMA).In financial markets, moving averages are often used to analyze stock prices, exchange rates, and ot
Read this Term
(at 1.0752) to tilt the bias more in favor of the buyers in the short term.
Getting above the 200 bar moving average (currently at 1.0770) would also increase that short-term bias.

Until then, the sellers are in firm control as the price continues the trend move lower.

EURUSD on the 5 minute chart

PS ECBs Lagarde is scheduled to speak at the top of the hour

GBPJPY finds sellers near the 200 hour MA

GBPJPY finds sellers near the 200 hour MA

The GBPJPY
GBP/JPY

The GBP/JPY is the currency pair encompassing the British pound of the United Kingdom (symbol £, code GBP), and the Japanese yen of Japan (symbol ¥, code JPY). The pair’s rate indicates how many Japanese yen are needed in order to purchase one British pound. For example, when the GBP/JPY is trading at 165.00, it means 1 British pound is equivalent to 165 Japanese yen. The British pound (GBP) is the world’s fourth most traded currency, whilst the Japanese yen is the world’s third most traded cur

The GBP/JPY is the currency pair encompassing the British pound of the United Kingdom (symbol £, code GBP), and the Japanese yen of Japan (symbol ¥, code JPY). The pair’s rate indicates how many Japanese yen are needed in order to purchase one British pound. For example, when the GBP/JPY is trading at 165.00, it means 1 British pound is equivalent to 165 Japanese yen. The British pound (GBP) is the world’s fourth most traded currency, whilst the Japanese yen is the world’s third most traded cur
Read this Term
moved up in the early Asian trading to test the 100 hour moving average
Moving average

A moving average is a statistical tool that is used to smooth out short-term fluctuations in data and reveal longer-term trends. It is calculated by taking the average of a certain number of data points over a specific period of time, and then plotting that average as a line on a chart. The most common types of moving averages are simple moving averages (SMA) and exponential moving averages (EMA).In financial markets, moving averages are often used to analyze stock prices, exchange rates, and ot

A moving average is a statistical tool that is used to smooth out short-term fluctuations in data and reveal longer-term trends. It is calculated by taking the average of a certain number of data points over a specific period of time, and then plotting that average as a line on a chart. The most common types of moving averages are simple moving averages (SMA) and exponential moving averages (EMA).In financial markets, moving averages are often used to analyze stock prices, exchange rates, and ot
Read this Term
(blue line in the chart above).

The price failed on the first try, but ultimately traded back above only to find sellers near the swing low from January 25 at 159.47. The high price reached 159.40. That high stall at a downward sloping trendline connecting highs from January 30 and January 31 (see green numbered circle three).

After rotating lower, the pair found a base near 158.71. The price in the late London morning session was finally able to extend above the downward sloping trendline and run up toward the 200 hour moving average and 61.8% retracement of the move down from the January 26 high near 159.82. A brief move above that level found sellers and the price has since rotated back down toward the swing area between 159.396 and 159.472.

With the sellers near the 200 hour moving average and 61.8% retracement, that level is now setting itself up as a key resistance level to get to and through if the buyers are to continue their run to the upside.

Conversely on the downside, watch the 50% at 159.22 followed by the underside of the broken trendline (which currently comes in at 159.12) as support.

EURUSD Is “Suspended”

On Monday, the market major is neutral near 1.0800. The market has got all the info at hand: the decision of the Federal Reserve System to lift the interest rate by 25 base points and the confirmation of the ECB mood for it has lifted the rate by 50 base points.

The Fed will go on lifting the rate smoothly but is “mentally” preparing to put an end to the cycle. As for the ECB, it is decisive about lifting the rate until it gets inflation under control. As long as it lost quite a lot of time on monitoring the situation, things look quite logical.

The US employment market in January proved strong. The unemployment rate dropped to 3.4%, average wage grew by 0.3% m/m as expected. 517 thousand new workplaces were created by the NFP report, which is much more than forecast. The data taken together gave great support to the USD.

On H4, EURUSD has completed a wave of decline to 1.0840. Practically, this level has become a breakthrough for the ascending channel. At the moment, the market formed a consolidation range around this point, and with an escape downwards it opened a pathway for decline to 1.0750. After it is reached, a correction to 1.0840 should follow, and after that – a decline to 1.0650. Technically, this scenario is confirmed by the MACD. Its signal line is heading strictly downwards, getting ready to break through the zero level.

On H1, the pair has formed a structure of a consolidation range around 1.0840. With an escape downwards, a pathway for decline to 1.0750 will open. Then a correction up to 1.0840 and a decline to 1.0650 should follow. Technically, this scenario is confirmed by the Stochastic oscillator. Its signal line is above 50. A decline to 20 is expected.

New dollar highs for the day against the EUR, JPY, CAD, AUD and NZD

The dollars getting stronger with the greenback reaching new highs against the EUR, JPY, CAD, AUD, and NZD. The greenback is just off high levels versus the GBP and CHF as well. It has moved the most versus the JPY (up 1.24%)

EURUSD: The EURUSD has moved below the 50% midpoint of the range for 2023 at 1.07558. The pair has moved down to a low of 1.07256. That level is near swing lows going back to January 11 and January 12 before starting the move to higher levels in January. It would now take a move back above the 50% to increase the bullish bias for the pair.

EURUSD moves below the 50% midpoint

USDJPY: The USDJPY
USD/JPY

The USD/JPY is the currency pair encompassing the dollar of the United States of America (symbol $, code USD), and the Japanese yen of Japan (symbol ¥, code JPY). The pair’s rate indicates how many Japanese yen are needed in order to purchase one US dollar. For example, when the USD/JPY is trading at 100.00, it means 1 US dollar is equivalent to 100 Japanese yen. The US dollar (USD) is the world’s most traded currency, whilst the Japanese yen is the world’s third most traded currency, resulting

The USD/JPY is the currency pair encompassing the dollar of the United States of America (symbol $, code USD), and the Japanese yen of Japan (symbol ¥, code JPY). The pair’s rate indicates how many Japanese yen are needed in order to purchase one US dollar. For example, when the USD/JPY is trading at 100.00, it means 1 US dollar is equivalent to 100 Japanese yen. The US dollar (USD) is the world’s most traded currency, whilst the Japanese yen is the world’s third most traded currency, resulting
Read this Term
has extended to a new session hide in the process has moved above its 50% midpoint of the move down from the December 15 high. The level comes in at 132.689. There is also a swing area between 132.70 and 132.87 that the pair is testing currently.

USDJPY moves up to test the 50% midpoint and swing area

USDCAD: The USDCAD
USD/CAD

The USD/CAD is the currency pair encompassing the dollar of the United States of America (symbol $, code USD), and the Canadian dollar of Canada (symbol $ code CAD). The pair’s exchange rate indicates how many Canadian dollars are needed in order to purchase one US dollar. For example, when the USD/CAD is trading at 1.3500, it means 1 US dollar is equivalent to 1.35 Canadian dollars. The US dollar (USD) is the world’s most traded currency, whilst the Canadian dollar (CAD) is the world’s seventh

The USD/CAD is the currency pair encompassing the dollar of the United States of America (symbol $, code USD), and the Canadian dollar of Canada (symbol $ code CAD). The pair’s exchange rate indicates how many Canadian dollars are needed in order to purchase one US dollar. For example, when the USD/CAD is trading at 1.3500, it means 1 US dollar is equivalent to 1.35 Canadian dollars. The US dollar (USD) is the world’s most traded currency, whilst the Canadian dollar (CAD) is the world’s seventh
Read this Term
has extended above the swing area between 1.3434 and 1.3445. That area is now close support. Stay above is more bullish.

The price run to the upside has moved up to test the high price from last week at 1.34712. That level was breached briefly up to 1.3474 and the price has rotated down. Close support at 1.3445 down to 1.3434. Get back above 1.3471 and trade will look toward the high prices from January 20 1.3497 and January 19 at 1.35198. The 100 day moving average is also looming above at 1.35298.

USDCAD tests the high from last week

.

AUDUSD moves lower and into the swing area between 0.6869 and 0.6893

AUDUSD trades below its 50% retracement

The Reserve Bank of Australia is expected to announce a 25 basis point hike to 3.35% from 3.10% in the new trading day in Australia (at 10:30 PM ET).

The expected rate hike is not helping to push up the AUDUSD. After reaching a high of 0.7157 on Thursday, sellers have been moving the price in the downward direction at a quick pace.

On Friday, the US jobs report sent the dollar moving to the upside and the AUDUSD lower.

Today after a lower opening, the price tried to rally, but turned back to the downside and is making new session lows in the current hourly bar.

In the process, the price of the AUDUSD has moved below its 50% midpoint of the range since the December 20 low at 0.68926. That level is now close risk technically.

The price has also entered into a swing area (see red number circles) between 0.6869 and 0.6893. The low price has reached 0.6874 so far today.

A break below 0.6869 would add to the bearish sentiment from a technical perspective with the swing low from January 10 at 0.6858 and the 61.8% retracement of the move up from the December 20 low at 0.6830 as the next downside targets on further selling momentum.

The USDJPY is moving toward the 50% midpoint of the trading range since the Dec 15 high

The USDJPY moved lower in the Asian session and found support buyers against the high of a swing area between 131.297 and 131.567 (see green numbered circles) . The low for the day reach 131.574 before bouncing to the upside in the European session.

USDJPY up testing the 50% midpoint

The North American session has seen the price extend further to the upside. The high price just reached 132.603. That is within eight pips of the 50% midpoint level at 132.689. There is also a swing area between 132.70 and 132.87 (see red and red circles). Getting above the 50% and the swing area would increase the bullish bias from a technical perspective.

The USDJPY
USD/JPY

The USD/JPY is the currency pair encompassing the dollar of the United States of America (symbol $, code USD), and the Japanese yen of Japan (symbol ¥, code JPY). The pair’s rate indicates how many Japanese yen are needed in order to purchase one US dollar. For example, when the USD/JPY is trading at 100.00, it means 1 US dollar is equivalent to 100 Japanese yen. The US dollar (USD) is the world’s most traded currency, whilst the Japanese yen is the world’s third most traded currency, resulting

The USD/JPY is the currency pair encompassing the dollar of the United States of America (symbol $, code USD), and the Japanese yen of Japan (symbol ¥, code JPY). The pair’s rate indicates how many Japanese yen are needed in order to purchase one US dollar. For example, when the USD/JPY is trading at 100.00, it means 1 US dollar is equivalent to 100 Japanese yen. The US dollar (USD) is the world’s most traded currency, whilst the Japanese yen is the world’s third most traded currency, resulting
Read this Term
moved sharply higher on Friday after the better-than-expected US jobs report. In trading today, the price trend continued helped by reports that Bank of Japan Deputy Gov. Amamiya was being touted as the next Governor of the Bank of Japan. Amamiya replace the current head Haruhiko Kuroda.

Amamiya is nick-named “Mr. BOJ
BOJ

The Bank of Japan (BOJ) is the central bank of Japan. It was established in 1882 and is headquartered in Tokyo.The BOJ’s main responsibilities include issuing and managing the country’s currency, implementing monetary policy, and ensuring the stability of the financial system. It also acts as a lender of last resort to banks during times of financial crisis. The BOJ sets the interest rate of the country and sets an inflation target, aiming to achieve 2% inflation.The BoO has a long history, with

The Bank of Japan (BOJ) is the central bank of Japan. It was established in 1882 and is headquartered in Tokyo.The BOJ’s main responsibilities include issuing and managing the country’s currency, implementing monetary policy, and ensuring the stability of the financial system. It also acts as a lender of last resort to banks during times of financial crisis. The BOJ sets the interest rate of the country and sets an inflation target, aiming to achieve 2% inflation.The BoO has a long history, with
Read this Term
” for being the proponent of many of the bank’s unconventional monetary easing ideas.

He played a key role in drafting Kuroda’s huge asset-buying in 2013. He has also been a proponent of keeping ultra-low interest rates. He did, however, say last year that the BOJ must “always” think about the means of exiting ultra-loose monetary policy. Nevertheless he is viewed as a dove who would look to keep the stimulus going.

USDJPY Jumps Above a Downtrend Line

USDJPY shot up on Friday following the robust US employment report and opened with a positive gap today. The rally took the pair above the downtrend line drawn from the high of November 21, as well as above the key resistance (now turned into support) zone of 130.60. On top of that, today, the pair is trading above the 200-EMA, which adds credence to a short-term reversal case.

The RSI has flattened near 70, while the MACD, although well above both its zero and trigger lines, shows signs of slowing down. These signs suggest that due to the overstretched rally, a small pullback could occur before the next leg north.

The bulls could recharge from near the 130.60 zone and push for a test at the 133.00 territory, defined as resistance by the high of January 11. If they are not willing to stop there, then they may extend their march towards the next key territory of 134.80, marked by the peak of 134.80. That zone provided support as well back on December 13 and 14.

For the outlook to turn bearish again, USDJPY may need to dive below the 127.20 barrier, marked by the low of January 16. This may validate the break below an upside line drawn from that low, but most importantly, it will confirm a lower low on bigger timeframes. The next stop could be at 125.00, marked by the low of April 14, 2022, and the inside swing high of March 28, 2022.

Wrapping everything up, USDJPY surged on Friday, breaking above the key zone of 130.60. This likely signals a short-term bullish reversal and increases the case for higher resistance zones to be tested soon.

Gold Technical Analysis: Gold Price Collapses Against USD Strength – 06 February 2023

At the end of last week’s trading and amid the strong and sudden rise in the price of the US dollar following the announcement of stronger than expected figures for US jobs, the XAU/USD gold futures fell below $1900 to end the week’s trading down.

  • This is contrary to the performance throughout the week’s trading.
  • Last week’s gold gains extended past the resistance level of $1,960 per ounce, the highest it has been in nine months.
  • Strong selling operations caused prices to decline towards the support level of $1,862 per ounce, the lowest gold price in a month.

It has often been pointed out that the gold gains have pushed the technical indicators towards a strong saturation level by buying and can be corrected by sales to reap the profits at any time. Gold prices ended the week’s trading with a loss of about 2.25%, but it remains high by about 3% since the beginning of the year 2023 until its date. In the same performance, the prices of silver, the sister commodity of gold, fell below 23 dollars. Accordingly, the price of the white metal also recorded a weekly loss of more than 3%, and in addition to its decrease since the beginning of the year 2023 until its date by more than 5%.

Advertisement

The main story at the end of the week is the US employment situation, which triggered a sell-off in global financial markets amid expectations that this would lead to the Federal Reserve maintaining its quantitative easing (QT) campaign. According to the Bureau of Labor Statistics (BLS), the US economy added a staggering 517,000 new jobs in January, up from the upwardly revised figure of 260,000 in December. This was also much greater than economists’ expectations of 185,000.

The US unemployment rate also fell to 3.4%, down from 3.5% the previous month and below market estimates of 3.6%. The labor force participation rate rose to 62.4% from 62.3%. It was also announced that the average hourly income slowed to 4.4% on an annual basis, the average hourly income increased 0.3% on a monthly basis, and the average weekly hours increased to 34.7. Employment gains were broad-based, led by entertainment and hospitality (128,000), professional and business services (82,000), health care (58,000), and government (74,000).

Among other economic data, the US services PMI rose to a reading of 46.8 and 46.8, respectively, slightly higher than market estimates – a reading below the 50 level indicates contraction. The Institute for Supply Management’s (ISM) non-manufacturing purchasing managers’ index (PMI) advanced to a reading of 55.2 in January, up from a reading of 49.2. This exceeded economists’ expectations at 50.4. Employment, new orders, and business activity increased, but prices were relatively unchanged and higher than expected.

While the U.S. central bank is expected to continue raising interest rates by a quarter point over the next two meetings, investors have been betting that the Fed will cut interest rates later this year in response to slowing economic conditions. However, with a resilient labor market defying all expectations and norms, investors were at a loss.

The gold market is generally considered sensitive to interest rates because it can affect the opportunity cost of holding the bullion that does not yield a return.

The US dollar index (DXY), which measures the performance of the US currency against a basket of other major currencies, rose to 102.40 from opening at 101.75. Accordingly, the index has now moved to achieve a weekly gain of about 0.5%. A stronger profit for the dollar is a bad thing for dollar-denominated goods because it makes it more expensive for foreign investors to buy.

For the other metals markets, copper futures rose to $4.101 per pound. Platinum futures fell to $1003.00 per ounce. Palladium futures fell to $1611.00 an ounce.

Technical analysis of gold prices XAU/USD:

In the near term and according to the performance on the hourly chart, it seems that the gold price XAU / USD is trading within the formation of a sharp downward channel. This indicates a strong short-term bearish bias in market sentiment. Therefore, the bears will target extended bearish profits at around $1855 or lower at the $1843/oz support. On the other hand, the bulls will look to pounce on profits at around the $1875 resistance or higher at the $1886 resistance per ounce.

In the long term and according to the performance on the daily chart, it seems that the price of the yellow metal XAU/USD has completed a downward breakout to form an ascending channel. This indicates a sudden change in market sentiment from bullish to bearish. Therefore, bearish speculators will target an extended drop at around $1830 per ounce or lower at $1792 per ounce. On the other hand, the bulls will target the long-term profits at around $1907 or higher at the resistance $1949 per ounce.

Ready to trade today’s Gold forecast? Here are the best Gold brokers to choose from.

Gold