What happened in the US session?
The S&P 500 traded sharply higher on optimism in the lead-up to the key inflation report today, closing 1.28% higher. The major currencies traded with choppy price action along the key resistance levels.
What does it mean for the Asia Session?
With markets expecting a slowdown in inflation growth for the US, look for further weakness in the DXY and for the major currencies to gain against the Greenback.
The Dollar Index (DXY)
Key news events today
USD CPI y/y
USD Core CPI m/m
What can we expect from DXY today?
The DXY currently trades at the 102.81 price level, slightly lower from the overnight consolidation at the 103-round number support level. With the release of the US CPI data, a key economic indicator of inflation, due today, expect significant price volatility on the DXY. The CPI y/y is expected to indicate a slowdown of inflation growth at 6.5% (Previous 7.1%) which could spur markets to expect the Federal Reserve to slow down on future interest rate hikes. This could lead the DXY to trade significantly lower. Look for the DXY to break below the 102.80 price level to indicate further downside potential, with the next key support levels at 102.50 and 102.00.
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?
After testing a new high of 1885, Gold retraced down to the 1870 price level to test the support level overnight. Finding strong support, Gold has reversed the brief downward move to climb higher and is currently trading back toward the 1885 price level. The price bounced from the support level as the DXY continued to weaken. Look for further weakness in the DXY and for the price to break above the 1885 price level to indicate a continuation of the uptrend, with the next key resistance level at 1900.
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 traded within a 50pip range through the trading session yesterday as the price consolidated along the 0.69 price level. The AUDUSD currently trades at the 0.6915 price level with the price action indicating the potential for a break to the upside. Look for the AUDUSD to trade strongly above the 0.69 resistance level to signal a breakout and continuation of the uptrend, with the next key resistance level at 0.7130.
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?
Despite the choppy price action and overall weakness in the DXY, the NZDUSD has resisted further upside moves as the price is capped by the 0.6390 price level. Anticipating further weakness in the DXY later in the trading session today, look for the NZDUSD to break out of the current consolidation to trade higher. If the price breaks above the 0.6390 price level, the NZDUSD could climb toward the next key resistance level at 0.6480.
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 Japanese Yen strengthened briefly early in the trading session today upon the release of news that the BoJ was set to review the side effects of its massive monetary easing policy, at the upcoming meeting on 18th January. The USDJPY spiked lower from the 132.35 price level, down to the 131.50 key support level. The USDJPY could trade lower but is likely to consolidate at the 131.50 price level for the interim. If the DXY continues to weaken, look for the USDJPY to break strongly below the 131.50 price level, with the next support level at the price area of 130.00.
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
