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The Week ahead 06th – 10th February: markets still does not take central banks seriously

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The Week ahead 06th - 10th February: markets still does not take central banks seriously

Welcome to the Key to Markets preview of the Week Ahead.

Currency Pair Performance

5-day performance as of February 2nd, 2023. 10:00 GMT.


10 Big Stories Last Week

In case you missed it...

Fed slows the pace of rate hikes. The US central bank raised rates by 25 basis points taking the rate to 4.75%. Fed Chair Jerome Powell sounded less hawkish than expected, lifting Gold above $1950.

Snap falls 15%. The social media app posted its weakest sales growth since going public in 2017 as its advertising woes continued.

ECB raises rates by 50 basis points. Even as inflation cooled to 8.5% YoY, the ECB went ahead with another 50 basis point hike, taking rates to 2.5%. Core inflation remained at 5.2%, suggesting inflation is sticky.

Meta jumps 20% on resilient revenue. The Facebook parent posted Q4 revenue of $32.2 billion, down 4% from the previous year. The firm cut its 2023 expenses outlook & announced a $40 billion share buyback.

BoE hikes rates by 50 basis points. The UK central bank hikes interest rates for a 10th straight meeting to 4% to tame double-digit inflation.

IMF upwardly revises global growth. The IMF sees that inflation has turned a corner, and it now forecasts global growth of 2.9%, up 0.2% from October's forecast.

OPEC+ leave output unchanged. The group of oil-producing countries recommended keeping production steady. Oil fell 3% following the decision.

Amazon, Apple & Alphabet report. Big techs were in focus amid slowing demand and rising costs. Cost control is expected to be a big theme across the year.

Exxon Mobil posts record profit. The oil major posted the highest profit ever by a western oil major at $56 billion, a 142% increase YoY.

DAX hit a 50-week high. A less hawkish Fed, China reopening, and an improving domestic economic backdrop saw the DAX rise to 15500, its highest level since the week of February 16 2022.

Chart of the Week

Source: The Daily Shot

The chart shows the jump in Gold after the Federal Reserve interest rate decision and press conference.

Non-yielding, USD-denominated Gold jumped to a 9-month high above $1950 after the Fed slowed the pace of rate hikes to 25 basis points and Federal Reserve Chair Jerome Powell acknowledged progress in inflation.

"We think we've covered a lot of ground. Even so, we have more work to do."

Even though Jerome Powell said that interest rates would probably end up higher than where the market is pricing in, investors chose to focus on Powell's more upbeat outlook on inflation.

5 Things to Watch This Week

1. RBA rate decision

In the previous RBA meeting, the central bank warned that more interest rate increases were likely if inflation continued to rise, and policymakers also raised concerns over high levels of consumer spending. Since then, Q4 inflation jumped to a higher-than-expected 7.8%, raising expectations of further rate hikes. But retail sales dropped for the first time in 2022, falling by a largest than forecast 3.9%, the most significant drop since August 2020. Though inflation is expected to have peaked, the RBA is still expected to raise rates by 25 basis points, potentially with more hikes to follow.


The UK economy contracted -0.3% QoQ in Q3 as double-digit inflation and rising interest rates squeezed household incomes further, meaning that consumers reined in spending. The UK is on the brink of a recession, two straight quarters of negative growth; even if it doesn't tip into recession in Q4, it is widely expected to experience a downturn in 2023. Last week the IMF downwardly revised UK GDP for 2023 to -0.6% contraction, the weakest of all G7 nations.

3. China Inflation

Chinese inflation accelerated in December to 1.8% YoY, up from 1.6% as the economy reopened following Covid restrictions. This was still below the PBoC's 2% target. However, inflation in China could continue to tick higher as the reopening gathers pace, which could mean global inflation gets a second wind and is stickier than initially expected. Investors will be watching closely. Hotter than forecast CPI could unnerve the markets.

4. Disney earnings

Disney is due to report fiscal Q1 earnings on 8th February. The results come as the share price jumped more than 20% in January and after Bob Iger returned as CEO. Disney prioritised streaming growth in 2022 and achieved the most subscribers in the industry in Q3 2022 and Q4 with 235.7 million total members, ahead of Netflix's 223.8. After Netflix smashed subscriber forecasts in its latest results, expectations are rising high for Disney. Wall Street expects an EPS of $0.79 on revenue of 23.27 billion.

5. BP earnings

Expectations are high for BP's Q4 and full year's earnings after sector peer Shell reported its highest-ever annual profit of $40 billion on the back of surging gas prices. Exxon Mobil and Chevron also posted record profits. The extraordinary scale of earnings has renewed criticism and sparked calls for a Big Oil windfall tax. BP could also upset climate activists by cutting back on the green shift to commit to maximising profit.

Economic Calendar Highlights


Technical Analysis:

TA of the major asset classes (Forex – Commodities – Indices...).

EUR/USD (Daily Candlestick Chart)

EUR/USD is in an uptrend, posting higher lows and above the 50 SMA.

The price hit the 1.10 round number after following-through on a hammer pattern. Broken resistance at 1.092 is now support with 1.076 beneath. The next resistance is 1.118 (Mar '22 peak).

GBP/USD (Daily Candlestick Chart)

GBP/USD is in an uptrend, posting higher lows and above the 50 SMA.

1.244 resistance from the December peak is still holding. The bias is still higher but with an increased risk of a fall under the 50 SMA.

USD/JPY (H4 Candlestick Chart)

USD/JPY is in a downtrend, posting lower highs and below the 50 SMA.

The down trendline has held again on the latest test, with the price now back under the 130 round number and setting up a test of the low near 127, then 125.

Gold (Daily Candlestick Chart)

XAU/USD is in an uptrend, posting higher lows and above the 50 SMA.

A failed breakdown and hammer pattern set up a retest of long-term resistance around 1960. There is a strong chance of a counter-trend move back towards the 50 SMA.

Brent Oil (Daily Candlestick Chart)

XBRENT is range bound in a sideways trend

Price failed to test resistance near 89, eventually forming a double top and two bearish engulfing patterns. The next support is the 80 round number, then the low above 75.

US500 (Daily Candlestick Chart)

XUS500 is in an uptrend, posting higher lows and above the 50 SMA.

Price challenges long-term resistance at 4140 after surging from the broken downtrend line. The next resistance is August 2022 high at 4325.

Thank you very much for reading - and have a great week trading!

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