The Week Ahead – The Price Of Hesitation

January 28, 2022

By Orbex

EURUSD falls over divided ECB

The euro falters as the ECB lags behind its US counterpart in monetary normalization. While eurozone inflation hit a record high of 5% in December, the ECB is still debating whether price pressures will drop back below their 2% target by the end of the year.

Thus, a tightening of policy in 2022 seems to be out of reach. Policymakers’ main concern is that high prices could translate into wage increases, imprinting inflation durably.

Traders are looking for a change in their tone. Given that other major central banks have switched their narratives, the ECB could be up next. The pair stalled at 1.1460 and 1.0900 would be the next target.

GBPUSD falls ahead of BOE decision


Free Reports:

Sign Up for Our Stock Market Newsletter – Get updated on News, Charts & Rankings of Public Companies when you join our Stocks Newsletter





Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.





The sterling struggles as traders await a second BOE rate hike in a row. As the UK’s inflation reaches its highest level in thirty years, there is an increasing risk that firms would raise prices and wages.

The BOE cannot afford to let inflation take off and become sticky. Growth and unemployment rate have recovered to their pre-pandemic levels. With Omicron cases now off the peak, the central bank no longer has its hands tied.

In fact, this cements expectations for rates to cross their pre-2020 level by the summer and over 1% by year-end. The pair is looking for support above 1.3200. 1.3500 is an immediate resistance.

AUDUSD weakens as RBA hesitates

The Australian dollar suffers from a double whammy of policy divergence and markets’ flight from risk.

Domestically, a spike in Q4 inflation and added peer pressure from the Fed’s aggressive tone have put the RBA under intense pressure to act. After all, the inflationary spiral is a global phenomenon.

The market expects the central bank to end its asset purchasing program this week, and update its inflation forecast. This would pave the way for a hike sooner rather than later.

Until the RBA capitulates, the Aussie may continue south. 0.6830 is the next step past the psychological level of 0.7000. 0.7200 is a fresh resistance.

XAUUSD stalled after hawkish FOMC

Bullions plummeted after the US Fed struck a hawkish tone in its latest policy meeting. Chairman Jerome Powell signaled an interest rate increase in March, sending the US dollar to a month-high level.

Meanwhile, rising Treasury yields dent the non-yielding metal’s appeal by raising the opportunity cost. So far gold has played a limited safe-haven role amid tensions in Ukraine, which suggests that the US monetary policy is the key driver of price action.

The downside risk now is a faster pace of rate hikes if US inflation proves to be stubbornly high. The price is heading towards the demand area near 1760. 1870 remains a major hurdle.


Article by Orbex

Orbex is a fully licensed broker that was established in 2011. Founded with a mission to serve its traders responsibly and provides traders with access to the world’s largest and most liquid financial markets. www.orbex.com

InvestMacro

Share
Published by
InvestMacro

Recent Posts

Expert Says Secondary Metals Will Star in New Bull Market

Source: Streetwise Reports (10/30/24) Bob Moriarty of 321gold sat down with Francis Hunt of The…

14 hours ago

Stock indices under pressure ahead of US elections. Oil strengthened due to lower inventories

By JustMarkets The Dow Jones (US30) Index was down 0.22% on Wednesday. The S&P 500…

14 hours ago

Australia has seen a sharp decline in inflationary pressures. Silver rose to $34 an ounce

By JustMarkets At the end of Tuesday, the Dow Jones Index (US30) fell by 0.36%.…

2 days ago

AUD/USD Continues Downward Spiral Amid Economic Concerns

By RoboForex Analytical Department  The Australian dollar remains under significant pressure, with AUD/USD extending its…

2 days ago

GBPUSD could be in for mid-week “sneaky surprise”

By ForexTime GBPUSD’s forecasted volatility jumps 24% over past week UK government set to issue…

2 days ago

Bitcoin has reached the $70,000 mark. The Canadian dollar fell to last year’s lows

By JustMarkets The Dow Jones (US30) rose 0.65% on Monday. The S&P 500 Index (US500)…

3 days ago

This website uses cookies.