The dollar rose against the other major currencies on Friday, as expectations for fresh central bank easing bolstered risk appetite, dampening safe haven demand for the yen and the Swiss franc.
The euro remained on the defensive after European Central Bank Mario Draghi signaled Thursday that fresh easing measures could be rolled out as soon as the bank’s next meeting in March. EUR/USD was at 1.0796 late Friday, down 0.72% for the session and ended the week with losses of 1.12%.
Global stocks strengthened after major declines since the start of the year, and oil prices rebounded 10%, one of the largest daily rallies ever.
Indications of further possible stimulus also underlined the diverging monetary policy stance between the Federal Reserve and other world central banks.
In the week ahead, investors will be looking to Wednesday’s Fed policy statement, for any indication that the bank is considering slowing the path of interest rate increases this year.
Markets will also be looking to Friday’s data on U.S. fourth quarter gross domestic product, which is expected to show that growth slowed to a modest 0.8% from 2.0% in the third quarter.
Today in the euro zone, the Ifo Institute is to report on German business climate and ECB head Mario Draghi is to speak at an event in Frankfurt.
EUR/USD
The euro fell sharply on Friday, closing below 1.08 for the first time in more than two weeks, as Mario Draghi continued to reiterate that further easing measures from the European Central Bank could be on the way if current economic conditions persist.
The currency pair traded in a broad range between 1.0790 and 1.0877 before closing near session-lows down 0.72%. It marked the third straight loss for the euro against the dollar and the fourth in the last five sessions. After opening the new year with a positive week in the first week of January, the euro fell against the dollar for the second straight week. The euro is down mildly against its American counterpart by approximately 0.5% since the start of 2016.
Today investors’ s focus will be on the Ifo Institute report on German business climate and especially on ECB head Mario Draghi’ speech at an event in Frankfurt.
Pivot: 1.0845Support: 1.0775 1.0745 1.0715Resistance: 1.0845 1.0865 1.0895Scenario 1: short positions below 1.0845 with targets @ 1.0775 & 1.0745 in extension.Scenario 2: above 1.0845 look for further upside with 1.0865 & 1.0895 as targets.Comment: as long as 1.0845 is resistance, look for choppy price action with a bearish bias.
Gold
Gold prices inched lower on Friday, as sharp gains in global equity markets and a broadly stronger U.S. dollar dampened the appeal of the yellow metal.
Expectations of fresh central bank stimulus in Europe and Japan bolstered sentiment in global financial markets on Friday. Global stocks strengthened after major declines since the start of the year and oil prices rebounded 10%, one of the largest daily rallies ever.
Despite Friday’s losses, gold prices rose $7.40, or 0.52%, on the week. Prices of the precious metal are almost 4% so far this year as many investors sought refuge from turmoil in global equity markets.
In the week ahead, investors will be looking to Wednesday’s Federal Reserve policy statement and to Friday’s data on U.S. fourth quarter gross domestic product, to gain more information on the strength of the greenback.
Pivot: 1072Support: 1072 1046 1000Resistance: 1135 1157 1191Scenario 1: long positions above 1072 with targets @ 1135 & 1157 in extension.Scenario 2: below 1072 look for further downside with 1046 & 1000 as targets.Comment: the RSI is supported by a bullish trend line.
WTI Oil
Oil futures soared 9% on Friday, to move further away from the lowest level since 2003, amid heavy short covering, as equity markets rallied throughout the world on the back of expectations for fresh central bank stimulus.
On the New York Mercantile Exchange, crude oil for delivery in March jumped $2.66, or 9.01%, to end the week at $32.19 a barrel, the most since January 11.
Prices advanced also because traders closed out bets on lower prices ahead of an upcoming snowstorm in the U.S. and amid hopes that major central banks will announce fresh stimulus measures.
Market analysts viewed the 14% surge on Thursday and Friday as a classic dead-cat bounce from oversold conditions. Gains were likely to remain limited in the near-term, amid a persistent global supply glut and worries over the health of the global economy, particularly China.
In the week ahead, investors will be looking to Tuesday API’s weekly report on U.S. oil supplies and to Wednesday EIA’s weekly report on oil supplies.
Pivot: 35Support: 25 23.3 20Resistance: 35 38.5 43.5Scenario 1: short positions below 35 with targets @ 25 & 23.3 in extension.Scenario 2: above 35 look for further upside with 38.5 & 43.5 as targets.Comment: technically the RSI is below its neutrality area at 50.
Wall Street surged 2% on Friday, to wrap up its first positive week of 2016, as a cold snap in the United States and Europe sent oil prices sharply higher.
A 4.3% jump in the S&P energy sector laid the foundation for the S&P 500's strongest session so far this year. After dropping earlier this week to 2014 lows, the S&P 500 has recovered in the past two sessions to end the week 1.4-percent higher. But the index is still down 7 percent in 2016 and remains at levels touched last August when fears of trouble in China's economy rattled global markets.
On Friday the Dow Jones industrial average rallied 1.33%; while the S&P 500 surged 2.03% and the Nasdaq Composite jumped 2.66%.
Apple (O:AAPL) rose 5.32% and gave the biggest boost to the S&P 500 and the Nasdaq. Despite widespread concerns about potentially weak iPhone demand, Piper Jaffray recommended buying Apple's shares heading into its quarterly results this week.
Pivot: 1878 Support: 1878 1848 1811 Resistance: 1920 1935 1950 Scenario 1: long positions above 1878 with targets @ 1920 & 1935 in extension. Scenario 2: below 1878 look for further downside with 1848 & 1811 as targets. Comment: the RSI is mixed to bullish.