What happened in the US session?
The DXY traded with significant volatility on the release of the US inflation data as markets speculated over the Federal Reserve’s next interest rate decision.
What does it mean for the Asia Session?
With markets fluctuating strongly overnight, look for a brief consolidation before a resumption of the previous trend.
The Dollar Index (DXY)
Key news events today
USD Prelim UoM Consumer Sentiment
What can we expect from DXY today?
The DXY traded with significant volatility overnight due to the release of the US CPI y/y data. With markets expecting a slowdown in inflation growth, the CPI was released at 6.5% as forecasted (Previous: 7.3%). This increased the likelihood for the Federal Reserve to slow down on future interest rate hikes. On the release of the data, the DXY spiked to the downside and reached the 102 round number support level. However, this move was immediately reversed before resuming the downside again. Look for the DXY to break below the 102-round number level to indicate further downside potential, toward the next key support level of 101.30, which was last tested in May 2022.
Central Bank Notes:
- Federal Reserve hiked rates by 50bps taking interest rates to 4.50%
- Next meeting is on 2 February 2023
- Further rate increases are expected to slow
Next 24 Hours Bias
Weak Bearish
Gold (XAU)
Key news events today
No major news events.
What can we expect from Gold today?
In the lead up to the release of the US CPI data, Gold climbed steadily to the upside to reach the 1900 key resistance level. However, as the DXY traded with increased volatility, Gold reversed strongly from the 1900 level to trade down to the 1875 price level. If the DXY continues to weaken as anticipated, look for Gold to resume with the uptrend to retest the 1900 resistance level and beyond that, the 1955 price level.
Next 24 Hours Bias
Weak Bullish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The AUDUSD climbed strongly from the 0.69 price level to test the 0.6980 level, as the DXY weakened. The AUDUSD fluctuated between the price range of 0.69 and 0.6980 in the hours following the data release. If the AUDUSD fails to break above the 0.6950 price level, further upside could be limited, with the AUDUSD likely to retrace further. However, in a trend-following scenario, look for the AUDUSD to trade toward the 0.6980 swing high, and beyond that, the 0.7130 key resistance level.
Central Bank Notes:
- Cash rate stands at 3.10%
- Future rate rises will be determined by data, the outlook for inflation, and the labour market.
- Next meeting on 7 February 2023
Next 24 Hours Bias
Weak Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The NZDUSD experienced a 95pip fluctuation on the release of the US CPI data. However, inspite of the price fluctuation the NZDUSD continued to trade below the 0.6390 price level. Look for further weakness in the DXY and for the AUDUSD to climb higher, which could lead the NZDUSD to trade higher. If the price breaks above the 0.64 price level, the NZDUSD could climb toward the next key resistance level at 0.6515.
Central Bank Notes:
- Cash rate stands at 4.25%
- Central bank is likely to continue with the current path of rate adjustment
- Next meeting is on 21 February 2023
Next 24 Hours Bias
Weak Bullish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
The weakness of the DXY coupled with the news that the BoJ was set to review the side effects of its massive monetary easing policy, at the upcoming meeting on 18th January caused the USDJPY to trade significantly lower through yesterday’s trading session. The USDJPY slid from the 132.42 price level, down to the key support level of 129.50. Following such a significant move, the USDJPY could retrace higher briefly. However, look for the retracement to complete and if the USDJPY breaks below the 129.50 level, the price could continue lower toward the next support level at the price area of 126.65.
Central Bank Notes:
- Cash rate stands at -0.1%
- Expands range for 10 year JGB yield fluctuations to 0.5%, rather than the current of 0.25%
- Next meeting is on 18 January 2023
Next 24 Hours Bias
Weak Bullish
