This article was submitted by Michael Stark, market analyst at Exness.
The uptick in Chinese inflation as released this morning has boosted sentiment on commodities, notably oil. Meanwhile shares have generally retreated so far today, with various indices including the DAX retracing slightly from last week’s all-time highs. Inflation data from the USA is the focus of weekly forex data, with reactions by GBPUSD, XAUUSD and BTCUSD possible on Wednesday afternoon GMT.
Central banks were again fairly inactive last week with no significant meetings or decisions. The only meeting due this week is the National Bank of Poland on Wednesday at noon GMT, with no change expected to the reference rate for the zloty of 0.1%.
The key releases of regular data this week include American annual inflation and core inflation on Wednesday afternoon GMT. Record loose monetary policy and ongoing fiscal stimulus in many countries have brought inflation into greater focus so far in 2021, with expectations high that commodities will react positively to a significant uptick. The other main event is the UK’s balance of trade on Friday morning.
Gold-dollar, four-hour
Despite an unexpectedly weak NFP on Friday, the pound has continued to lose strength against the dollar so far today. Negative 140,000 was the first decline in American employment since the early stages of the crisis in March-April last year. Meanwhile the UK remains among the worst affected countries by the current wave of covid, with most of the country locked down for the next few weeks at least as vaccines continue to roll out.
From a technical perspective, support around $1.35 has yet to be clearly broken. Despite the recent movement below both the 50 and 100 SMAs, selling volume remains low this week so far and we now have clear oversold signals from both the slow stochastic (15, 5, 5) and Bollinger Bands (50, 0, 2). Both of this week’s main events – American inflation and British balance of trade – have significant potential to drive clearer movements on this chart.
30 GMT: American monthly PPI (December) – consensus 0.2%, previous 0.1%
Gold-dollar, four-hour
Gold bounced slightly this morning GMT as shares generally retreated from recent all-time highs. Traders are also awaiting important new information in the form of more details on the Democrats’ proposed fiscal stimulus, expected to be worth trillions of dollars. On the other hand, somewhat higher Treasury yields and a stronger dollar are negative factors that have limited the yellow metal’s daily gains.
The long tail of the candle from midnight GMT around the 38.2% weekly Fibonacci retracement area seems to confirm this zone’s importance, but at the same time there has been no clear break below the 200 SMA. While a strong bounce is possible if sentiment improves amid more information on stimulus, consolidation around the current area appears more favourable this week unless there are significant surprises in Wednesday’s data.
Key data this week
Bold indicates the most important releases for this symbol.
30 GMT: American monthly PPI (December) – consensus 0.2%, previous 0.1%
Bitcoin-dollar, daily
Bitcoin had arguably been overdue for a retracement given such a long period of very strong gains. The cryptocurrency had been a main focus for new traders and investors entering markets in 2020, with many millennials and zoomers preferring it to traditional instruments such as gold and blue chip shares.
Ultimately, bitcoin’s fundamentals are not clear: a wildly fluctuating price most of the time means that there is a strong disincentive against using it for purchases. Furthermore, its value is not clearly driven by any macroeconomic indicators except possibly inflation.
The exceptional speed with which the 161.8% weekly Fibonacci extension area was broken at the start of the month meant that this area had still been in view as a target for a retracement. So far, there has been no clear attempt to move below about $33,000 but BTCUSD remains overbought based on the slow stochastic (15, 5, 5) at 82. New buyers might favour entering here at a relative discount, but the general unpredictability of crypto markets makes it difficult to apply traditional hypotheses like ‘people will buy the dips’.
The main releases that might affect bitcoin this week are Wednesday’s inflation data from the USA. Many participants in crypto markets view bitcoin as the best hedge against inflation. Equally, though, large, fresh stimulus in the USA would logically lead to huge amounts of new money coming into bitcoin.
Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.
Despite an unexpectedly weak NFP on Friday, the pound has continued to lose strength against the dollar so far today. Negative 140,000 was the first decline in American employment since the early stages of the crisis in March-April last year. Meanwhile the UK remains among the worst affected countries by the current wave of covid, with most of the country locked down for the next few weeks at least as vaccines continue to roll out.
