The dollar rose against the other major currencies on Friday after an unexpected decision by the Bank of Japan to adopt negative interest rates and U.S. gross domestic product data which broadly matched economists’ expectations.
The dollar rallied against the yen after the BoJ’s shock decision to cut its deposit rate into negative territory as part of an ongoing effort to combat deflation.
The Fed raised interest rates for the first time in almost a decade in December and has indicated that it intends to tighten monetary policy further this year, while the BoJ has joined the European Central Bank in cutting rates below zero.
The dollar also received an additional boost after data on Friday showed that the U.S. economy grew at an annual rate of 0.7% in the fourth quarter, compared to forecasts for growth of 0.8% after 2% growth in the third quarter.
In the week ahead, investors will be awaiting a flurry of survey data on manufacturing and service sector growth from China, the U.S. and the U.K. amid growing concerns over the outlook for the global economy. Central bank meetings in the U.K. and Australia will also be in focus. But investors will be mainly awaiting Friday’s U.S. jobs report for January, for fresh indications of the strength of the labor market.
Today The U.K. is to produce a report a manufacturing activity; in the U.S. the Institute of Supply Management is to release data on manufacturing activity; and ECB President Mario Draghi is to testify about the bank’s annual report for 2015 before the European Parliament, in Strasbourg.
The euro was lower against the U.S. dollar on Friday, after the release of mixed economic reports from the euro zone, while the greenback regained some strength due to positive fourth-quarter U.S. growth data.
Preliminary data on Friday showed that the annual rate of inflation in the euro zone rose by 0.4% this month, in line with expectations and after an uptick of 0.2% in December. Core CPI, which excludes out food and energy costs, increased by 1.0% in January, exceeding forecasts for a 0.9% rise and after a 0.9% gain.
arlier Friday, data showed that German retail sales fell 0.2% in December, compared to expectations for a 0.5% gain and after a revised 0.4% increase the previous month. And a separate report showed that Spain’s gross domestic product grew 0.8% in the fourth quarter, matching forecasts.
Today investors will focus on ECB President Mario Draghi’ speech about the bank’s annual report for 2015 before the EuropeanParliament, in Strasbourg.
Pivot: 1.0885Support: 1.08 1.077 1.075Resistance: 1.0885 1.0925 1.097Scenario 1: short positions below 1.0885 with targets @ 1.08 & 1.077 in extension.Scenario 2: above 1.0885 look for further upside with 1.0925 & 1.097 as targets.Comment: as long as 1.0885 is resistance, look for choppy price action with a bearish bias.
Gold
Gold prices inched higher on Friday, drawing support from weak U.S. GDP data, that raised hopes the Federal Reserve may slow any planned interest rate hikes.
Gold prices rallied to a three-month peak of $1,128.00 on Wednesday, as market players viewed the Federal Reserve’s policy statement as slightly dovish. As expected, the Fed kept interest rates unchanged at the conclusion of its policy meeting and said it was "closely monitoring" global economic and financial developments.
Traders are anticipating just one more rate hike this year, most likely in July, compared with four according to Fed policymakers' guidance. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report for January to gauge if the world's largest economy is strong enough to withstand further rate hikes in 2016.
Pivot: 1110Support: 1110 1104.5 1099Resistance: 1128 1135 1144Scenario 1: long positions above 1110 with targets @ 1128 & 1135 in extension.Scenario 2: below 1110 look for further downside with 1104.5 & 1099 as targets.Comment: the RSI is mixed to bullish.
WTI Oil
Oil prices rallied for the fourth straight session on Friday, amid speculation OPEC and non-OPEC producers may be edging closer to a deal to cut production in an effort to tackle one of the biggest supply gluts in decades.
A day earlier, prices climbed 87 cents, or 2.56%, after Russian energy minister Alexander Novak said Saudi Arabia proposed to cut oil production by each country by up to 5%.
Crude oil for delivery in March tacked on 40 cents, or 1.2%, to end the week at $33.62 a barrel.
In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report for January, but market players are also looking out to data on China's manufacturing sector released on Monday, amid ongoing concerns over the health of the world's second biggest economy.
Pivot: 32.8Support: 32.8 31.7 30.6Resistance: 34.1 34.84 35.9Scenario 1: long positions above 32.8 with targets @ 34.1 & 34.84 in extension.Scenario 2: below 32.8 look for further downside with 31.7 & 30.6 as targets.Comment: a support base at 32.8 has formed and has allowed for a temporary stabilisation.
U.S. stocks surged on Friday, after the Bank of Japan provided a jolt to global equity markets worldwide with a surprise decision to lower interest rates into negative territory, for the first time in the history of the central bank.
The Dow Jones Industrial Average gained 2.45%, while the Nasdaq Composite index added 2.38%, on a bullish day for stocks. The S&P 500 Composite index, meanwhile, rose 2.47%, as all 10 sectors closed in the green. Stocks in the Technology, Industrials and Financials industries led, each gaining more than 3% on the session.
Despite Friday's rally, the major indices still ended January with one of their worst months to start a year on record.
In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report for January to gauge if the world's largest economy is strong enough to withstand further rate hikes in 2016.
Pivot: 1950 Support: 1821 1738 1650 Resistance: 1950 2010 2080 Scenario 1: short positions below 1950 with targets @ 1821 & 1738 in extension. Scenario 2: above 1950 look for further upside with 2010 & 2080 as targets. Comment: the RSI is mixed to bearish.