USD Sees Little Reaction to Upbeat Claims and Philly Fed Data

The number of Americans filling for unemployment benefits was 0.190 million in the week ended January 14, compared to 0.205 million reported in the previous week. Today’s reading came in well below market expectations of 0.214 million.

Continuing claims reading, which lags initial jobless claims data by one week, rose to 1.647 million from 1,634 million, while analysts expected an increase to 1.660 million.

The Philadelphia Fed Manufacturing Index increased to -8.9 in January from -13.8 in December and below market expectations of -11.0.

Housing starts for  December came in at 1382k, compared to market estimates of 1.359 million. Building permits at 1.33million, much lower than expected 1.37 million

EURUSD is rather unimpressed by today's data. The pair continues to trade around 1.8000 level.

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Chart of the day Platinum

Precious metals are underperforming today as the US dollar strengthened. USD has erased some of the gains, allowing precious metals to trim part of the losses. Nevertheless, precious metals continue to trade lower with gold dropping 0.2% while silver and platinum are dropping 0.8%. Release of US data pack for December at 1:30 pm GMT, including core PCE inflation, is likely to trigger some USD volatility, and it should also lead to more action on the precious metals market.

Taking a look at the PLATINUM chart at D1 interval, we can see that the price of this precious metal has dropped below the $1,030 support zone yesterday and is now trading back within a recent range. Bulls managed to recover some gains and push the price off daily lows today but, unless a break back above $1,030 zone is delivered, the next move from a technical point of view could be a pullback towards the lower limit of the range ($970 area). A potential higher-than-expected US PCE reading may benefit the US dollar and this, in turn, should exert pressure on precious metals.

Silver - Growth is possible.

If the assumption is correct, the XAGUSD pair will grow to the area of 26 – 27. In this scenario, critical stop loss level is 22.64.

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USDCHF Declines Again

The USDCHF pair couldn’t hold for long time above 0.9240 level, to trade with strong negativity and reach 0.9160 level now, which puts the price under expected additional negative pressure in the upcoming period, targeting visiting the recently recorded low at 0.9085 as a next negative station.

Therefore, the bearish bias will be expected for today unless breaching 0.9240 and holding above it. The expected trading range for today is between 0.9085 support and 0.9210 resistance.

Bitcoin is Fighting for 24,000 USD Level

Cryptocurrencies gained on the wave of Jerome Powell's comments and the double-dip of the previous 25bp US rate hike. Although the Fed is far from declaring victory over inflation, and Powell hinted at a possible return of inflation if the central bank does 'too little,' markets particularly liked the comments regarding the 'global disinflation' process that has begun. As a result, the largest cryptocurrency is struggling to rise near its summer 2022 highs.

Bitcoin soared above $24,000 but was quickly knocked off these levels by supply and is now struggling to return to levels near the summer 2022 peaks. The strongest gainers are again altcoins including Binancecoin, Algorand, Sushi and Avalanche;

The volume of the cryptocurrency market rose by nearly 30% yesterday on a daily basis, to about $61 billion. The capitalization of the entire market is now around $1.1 trillion;
Meta Platforms' successful report supported sentiment on U.S. index contracts primarily the NASDAQ, with which Bitcoin correlates;

Wall Street is approaching a key day of earnings season, with today's post-session shows from Apple, Alphabet and Amazon likely to affect volatility and investor activity in the evening hours in the cryptocurrency market as well;

If positive sentiment continues traders may increase speculative exposure around Elon Musk's 'favorite cryptocurrency,' Dogecoin in view of recent comments by Tesla's CEO, who suggested integrating Twitter with both traditional finance and cryptocurrencies.

The sudden surge of interest in Bitcoin in 2023 caused a massive increase in the average daily number of transactions on the network. Their number has grown exponentially from less than 200,000 to nearly 350,000 in a month, the largest increase in the history of a major cryptocurrency.

Bitcoin chart, H4 interval. The largest cryptocurrency remains above the SMA200 (red band) and SMA100 (black band), which is also the lower limit of the upward formation. Bitcoin has also reached the vicinity of the summer 2022 maxima, although this is the second time it has been pushed back by supply from levels above $24,000. The 50 SMA average (blue band) is approaching the cross with the SMA200, which in the past has most often heralded a prolonged price rebound, and has also crossed the SMA100 for the first time in nearly 10 months, which was a resistance even during summer of 2022.

Morning Wrap - US500

S&P 500 (US500) failed to break above the 4,165 pts resistance zone last week and started to pull back. The move lower is being continued today. Tensions between China and the US are picking-up after the US Air Force shot down a Chinese spy balloon over the weekend.

Chart of the Day - USDCAD

USDCAD has been trading in a descending triangle pattern since October 2022. The pair failed to break above the resistance zone ranging below the 1.3500 area yesterday and can be seen pulling back today. USDCAD is expected to get more volatile later today as traders will be offered comments from both - Fed Chair Powell (5:40 pm GMT) and BoC Governor Macklem (5:45pm GMT).

Solid jobs data led some to believe that the Fed may switch back to a 50 bp rate hike at its next meeting and Powell's comments will be key in shaping expectations further. Macklem will deliver a speech titled "How monetary policy works" at CFA Society Quebec. Speech will surely touch on the topic of monetary policy as the title implies. More importantly, Macklem will answer reporters' questions afterwards at 7:00 pm GMT and it could be a chance for more details on the current policy outlook.

USDCAD is trading around 1% below upper limit of the triangle pattern and around 1.2% above the lower limit. While today's speeches from BoC and Fed heads may not lead to an immediate breakout, they could set the tone for the coming days, which may lead to a breakout. A textbook range of the breakout from the pattern in either direction is 720 pips.

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EURUSD Attempts to Rebound

Fed's Bowman pointed out today that the US central bank still has a lot of work to do in order to achieve financial stability. Bowman emphasizes that further tightening of monetary policy is needed in order to achieve the desired level of inflation. Bowman also points out that interest rates need to reach restrictive levels and will stay there for a long time.

Volatility is rather limited today as the market awaits tomorrow’s US CPI report. EURUSD rebounds despite  the fact that yields are rather muted, which is attributed to good market sentiment.

Chart of the Day - GBPJPY

UK inflation data for January was released today at 7:00 am GMT. Release showed a bigger slowdown in price growth than expected, with headline CPI gauge moving down from 10.5 to 10.1% YoY (exp. 10.3% YoY). Core gauge dropped from 6.3 to 5.8% YoY (exp. 6.2% YoY). Unsurprisingly, lower inflation reading was taken as dovish with investors increasing bearish BoE bets. This, in turn, triggered a pull back on GBP market.

Taking a look at GBPJPY chart at H4 interval, we can see that the pair has managed to climb above the resistance zone ranging below 38.2% retracement of the downward move launched in October 2022 recently but this breakout was short-lived. Pair pulled back below it this morning but has bounced off the daily lows and it looks like another attempt to break above 38.2% retracement may be on the cards. However, if bulls fail and bears regain control, a deeper correction may be on the cards. In such a scenario, 156.76 zones will be a key support to watch. However, 23.6% retracement in the 159.30 area may also provide some support given that it saw numerous price reactions over the past 2 months.