The Dollar is the king again
06 February 2023
Last week was a key one for several instruments thanks to the FED on Wednesday and NFP on Friday. FED happened to be dovish and NFP absolutely smashed the expectations, which was definitely something that only a very few were expecting. The instrument that enjoyed itself in the last week the most was the American Dollar, especially Friday, finishing with a bearish capitulation and impressive gains for the USD. Why is that? Excellent data shows that FED still has room for hikes as it does not have to worry about killing the economy at the moment.
One of the instruments for whom the situation changed dramatically is the USDJPY, where the price managed to escape the channel down formation and broke the horizontal resistance on the 131 - all that is a strong buy signal. Some serious decisions were also made on the commodities front. In two days (Thursday and Friday), gold managed to wipe out almost all gains from January! Oil also dropped breaking below key supports and aiming for yearly lows. The situation is very similar to the one that we saw in the first two days of this year when oil pretty much collapsed.
Indices showed slightly lower volatility last week. We saw a positive move after the FOMC and a small bearish correction after the NFP. The result is, of course, a mid-term buy signal, as the price is still very close to the yearly highs. The new week brings a slightly lower opening on the futures; a lower opening, however, is very often used later on to perform a bullish counter.
The calendar today is typical for a Monday, i.e. not very busy. We already learned the Germany Factory Orders that came better than expected (3.2% vs 2.1%). In a few hours, we will also find out the retail sales from the Eurozone expected to drop by 2.4%. The day will finish with the Ivey PMI from Canada, where the expectations are set to 42.3.