February 02nd Daily Analysis
February 02nd Daily Analysis
U.S. DOLLAR INDEX (USDX)
The dollar index continued its losses and fell to its lowest level in nine months after the Fed raised interest rates by 25 basis points, and the Chairman of the Fed, Jerome Powell’s reference to the progress in reducing inflation pressures while also warning that the central bank would continue to follow tighten monetary policy.
Pressure on the dollar increased after employment data was released in the private sector, which grew by 106 thousand in January, falling down from 253 thousand in the previous month. It came less than estimates of 178 thousand. Moreover, the ISM Manufacturing PMI also fell to 47.4, down from 48.4, which in turn led to more pressure on the dollar and the slowdown in the labor market, thus helping Fed to adhere to its strict policy to slow the pace of inflation.
The dollar index fell by about 1.76% from the highest point it reached in yesterday’s trading at 102.58 levels. The dollar is trading in a narrow range at the beginning of the day with oversold RSI and strong pressure from the MACD indicator, which may lead to price fluctuations during the day. Furthermore, the dollar is waiting Unemployment complaints data due to be released today.
Pivot Point: 101.47
The euro clings to gains as buyers retain the reins for the third day in a row awaiting the European Central’s meeting to set interest rates today. The ECB is expected to raise interest rates by 50 basis points, but the focus is on the comments of Christine Lagarde, the bank’s president, at the press conference to get signals about raising interest rates in the future. Meanwhile, data of inflation rates in the European Union yesterday showed a decline from 9.2% to 8.5%, which reduced expectations of tightening policy by the European Central Bank.
With the weakening of the dollar, the European currency rise to 1.1030 levels, which is the highest price level in nine months. The euro-dollar pair is likely to remain more stable with expectations of increasing interest rates today, but that depends on the extent to which Christian Lagarde advocates for more interest rate hikes.
Pivot Point: 1.0930
SPOT GOLD (XAUUSD)
Gold regained its lustre and soared above 1,950 levels, to record its highest level in more than nine months, after the Fed raised interest rates by 25 basis points, as the markets found in Jerome Powell’s speech hints the bank is expected to ease monetary policy and stop raising interest rates this year as inflation improved in the US, adding that the Bank will focus on the economic data to obtain more indicators, which put pressure on the dollar, so gold benefited from that.
Gold prices rose about $38 from the lowest level the price reached in yesterday’s trading, and the price is now trading above 1950 levels, which was the pivotal point for the price, paving the way to higher levels with positive momentum on the RSI and positive momentum on the MACD indicator. Today gold is waiting the Unemployment Claims data in the US to get additional impetus as the data came in more than expected.
Pivot Point: 1,950
DOW JONES INDEX (DJ30FT – US30)
Meta revenues exceed expectations in the fourth quarter of 2022, and US indices recorded a collective increase at the close of Wednesday’s session, after the US Fed’s decision to raise interest rates by a quarter of a basis point.
Wall Street witnessed strong fluctuations in the initial reaction to the interest rate decision and the Fed’s statement, which referred to continuous increases in interest rates during this year. However, US stocks regained their gains after Fed’s Chairman Jerome Powell acknowledged in the press conference that inflation began to recede.
The Dow Jones index closed up by 7 points, to 34,092 points, its highest close since the January 13, 2022, session, while the S&P 500 index rose by more than 1%, to close above 4,100 points for the first time in more than 5 months.
Pivot Point: 34045
WTI FUTURES (CL-OIL)
Oil prices rose in early Asian trading Thursday, February 2nd, after the Fed raised interest rates by 25 basis points.
Brent crude futures rose 56 cents, or 0.7%, to $83.40 a barrel, while US West Texas Intermediate crude futures rose 65 cents, or 0.8%, to $77.05 a barrel.
The Fed raised its target interest rate by a quarter of a percentage point on Wednesday, and still promises “continued increases” in borrowing costs in its undecided battle against inflation. A weaker dollar makes oil priced in the US currency less expensive for holders of other currencies, thus boosting demand.
Oil prices also rose after the ban imposed by the European Union on refined Russian products, which takes effect on February 5. Diplomats also said that the European Union will seek to reach an agreement on Friday regarding the European Commission’s proposal to set a ceiling for the prices of Russian oil products, after a decision was postponed on Wednesday amid divisions among the member states.
Last week, the Commission proposed that the EU apply, starting from February 5, a price cap of $100 a barrel to Russian oil products sold at a premium such as diesel and a ceiling of $45 a barrel to products sold at a discount such as fuel oil.
Pivot Point: 77.45