Equity markets climbed in Europe yesterday
Ichimoku Kinko Hyo CNH/JPY: The CNH/JPY pair is trading above the Kumo…
EUR/USD: calm before storm on Thursday
Information is not investment advice
What will happen?
Traders can’t wait for Thursday to come! Why? Two significant events will be out: the US inflation report and the ECB policy decision. They will probably shake the markets!
What to expect from ECB?
ECB is expected to avoid discussing any changes as the German ZEW economic sentiment came out worse than expected, that’s why the bank doesn’t have enough reasons to tighten the policy.
What to expect from US inflation?
If the US inflation is greater than the market forecast, the Federal Reserve may start discussing tapering (cutting asset purchases), which in theory would push the USD up. In the opposite scenario, if the US inflation is less than anticipated, the USD may weaken. However, it seems that traders do not expect the Fed to react even if inflation is hot as according to the central bank, inflation is only transitory. No action from the Fed – the USD is likely to fall. Follow the report and catch the overall market flow!
Tech outlook
On the EUR/USD chart, the diamond pattern has recently occurred. The pair broke through the lower line at the right, which meant the trend changed its direction downwards and it was interpreted as a sell signal. The pair dropped to 1.2100. From that point, EUR/USD has recovered some of its losses and started modestly rising.
The pair has already crossed the 50-period moving average. It needs to break above the 100-period moving average of 1.2200 as well to confirm the bullish momentum. If it manages to cross it, the way up to the high of June 3 at 1.2215 will be open.
On the flip side, if it drops below the support zone of 1.2170-1.2160, it may fall to the 200-period moving average of 1.2140 and then to the low of late Mat at 1.2130.
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European Currencies Ahead of the Banks' Statements
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
Will the FOMC Surprise the Markets?
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates? Recall that the Federal Open Market Committee had previously ended the year 2022 with a 50bps hike, and an indication from Powell, the committee chairman, that the Fed could consider raising interest rates by 75bps in the course of the year 2023.
What awaits the Oil Market in February?
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.
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