Forex

Last year, the economy held up well in the midst of inflation, conflict, and the Fed's decision to slow the rate of expansion. It is highly unlikely that 2023 will see a repeat performance.

According to data released by the Commerce Department on January 12, US gross domestic product recorded an annual growth of 2.9% in Q4 of 2022. That represented a strong close to a topsy-turvy year in which the economy shrank in the first six months, sparking talk of a recession, only to return in the second half. The growth rate was down to 0.3% compared to Q3 data (3.2%) but represented a healthy finale after accounting for inflation.

The US economy is inevitably expected to face fresh challenges in 2023. Inflation is still too high, and Fed is predicted to keep raising interest rates in an attempt to hold prices under control.

The Eurozone Manufacturing Purchasing Managers Index (PMI) for January came in at 48.8, exceeding estimates of 48.5 and the previous reading of 47.8. The index topped out after five months. The services PMI for the bloc reached a six-month high in January, coming in at 50.7 vs. the projected 50.2 and December's 49.8.

In January, the S&P Global Eurozone PMI Composite increased significantly to 50.2 from a predicted 49.8 and 49.3 the month prior. The gauge registered a fresh seven-month high.

The EUR/USD reached its best levels in months in January. Danske Bank analysts note that their risk scenario for the currency pair has come to pass. They are aware of the possibility that this will persist in the short term. Still, they feel that markets have overestimated the EUR's capacity for growth and that financial conditions could tighten again in the long term.

The British Pound has been under an overall bullish momentum throughout the first month of the new year. However, on January 27, GBPUSD encountered extreme selling pressure as it struggled to gain acceptance above the 1.2400 level.

The 200-day SMA, which is presently bouncing around $1.0309, and the price passing above them, both indicate an uptrend, according to the daily EURUSD chart. Nevertheless, another indication of a likely bullish trend reversal is the moving average's beginning to level off after its downward movement.

However, the RSI is observed printing an early negative divergence, thereby supporting a bearish move from the weekly barrier at $1.0954-1.0864 that converges with the daily primary resistance.

The 20-day EMA and a bearish trendline are the next resistance levels for the USD/JPY, which, if overcome, could take the pair higher toward the swing high of January 24 at 131.11. The next barrier level for the pair would be 130.00. The break above will reveal the 131.57 high from January 18.

Commodities

The price of a March-dated WTI crude barrel fell from US$1.33 to US$79.68. The price of March Brent oil, the industry standard, was recently down $0.88 to US$86.59 per barrel. WTI reached a 7-week high on January 23 before hitting resistance around 100 MA. The chart prints an evening star pattern on the daily timescale that hints at a further decline below the crucial $80 per barrel threshold.

Gold failed to exceed $1,950 on January 26 and initiated a short-term downtrend. However, the price found support near $1,920 and may rejoin the overall bullish trend to hit the last year's high near $2,070.

Early in January, XAG/USD reached a peak of 24.775 after briefly testing the 24.220 level of the 61.8% Fibonacci retracement of the rise from 2008 to 2011. Despite the bulls' past week's attempts to retake this level, prices fell as a result of a rejection of the 17 January high of 24.670.

Indices

These prominent US indices increased by 2.5 and 4.7 percent, respectively, to surpass their 200-day SMA. These indices are important speculative guides (SMA). Any sane person would consider that to progress, but this technical advancement may not necessarily be accompanied by conviction.

The S&P 500 broke through significant technical resistance at 3920 on January 9 only to fail to maintain the gains that should at least give bulls pause. Fundamentally, if there was a desire to invest in the advance, event risk could have contributed to the market's rise. In keeping with the recently issued CPI report, the US fourth quarter's GDP released was above expectations, while the Fed's preferred inflation gauge.

Market Events

The PMI Services and Manufacturing Indexes for the Eurozone, the UK, and the US was released on Tuesday, January 24. The report suggests GBP Flash Manufacturing PMI hits 46.7(+3.09%), whereas US Flash Services PMI reaches 46.6(+4.25%). On January 26, Fed published the US Advance GDP report that suggests a 0.3% increase in Q4 GDP compared to the forecast of 2.6%. Besides, the core PCE price index released on January 27 indicates the index rises by 0.1% and hit 0.3% as forecasted.