XAUUSD analysis Market is moving in the Descending channel and the market has fallen from the lower high area of the channel
The United States consumer price index report for January will put the disinflation optimism to the test at a time when fixed-income markets are anxious about how much further the Federal Reserve needs to tighten monetary policy.
Unwinding many months of slowing, the general consensus is that the headline inflation rate in the United States will increase by 0.5% in January, driven mostly by increasing oil costs. The so-called core inflation is expected to increase by 0.4% for the month when food and energy costs are excluded from the calculation.
USDJPY is moving in an Ascending channel and the market has fallen from the higher high area of the channel.
On the other hand, the financial markets are bracing for a scenario in which the Consumer Price Index (CPI) comes in higher than expected, calling into question the narrative that inflation in the US economy is heading lower.
US Employment Rate
The worries came on the heels of an unexpected increase of half a million jobs in the United States, which sent shares and bonds falling the previous week. The outcome was much above the forecasted average monthly gain of 401,000 jobs for 2022, which economists had predicted would only be an increase of 188,000 jobs.
USDCAD is moving in an Ascending channel and the market has fallen from the higher high area of the channel.
The unemployment rate in the United States has dropped from 3.5 percent in December to its previous level of 3.4 percent, which is the lowest level in 53 years. Since then, market prices for terminal US Federal Reserve interest rates have increased to 5.15 percent from 4.9 percent, and current projections call for a reduction of around 30 basis points in the second half of 2023.
Adjustments made to the weighting for shelter expenses are a key source of uncertainty for forecasters. These changes may exert upward pressure on the CPI in the near term as rents continue to be high.
Feds Powell Remarks
Jerome Powell, the chair of the Federal Reserve, stated on Tuesday that the central bank might be forced to raise its benchmark interest rate more than it now predicts if the labor market in the United States continues to strengthen in the coming months or if inflation measurements pick up speed. Powell’s comments came after the government released a monumental report the previous week indicating that companies added 517,000 jobs in January, which is over double the growth seen in December.
EURUSD is moving in the Descending channel and the market has rebounded from the lower low area and reached the resistance area of the channel.
The rate of unemployment is now at 3.4%, which is at its lowest level in 53 years. Even though price pressures are easing and Powell said he anticipates a significant decline in inflation this year, he warned that so far, the central bank is only seeing the very early stages of disinflation. This is despite the fact that Powell said he envisions a significant decline in inflation this year. There is still a very long way to go.
Even with the Federal Reserve raising interest rates considerably, by 4.5 percentage points, to a range of 4.5% to 4.75%, the labor market has remained unexpectedly robust. This is the quickest increase in interest rates in the last four decades.
Bowman Speech
Governor Michelle W. Bowman recently gave a speech where he revealed, “The economic outlook and the outlook for inflation continue to be highly uncertain. Global and domestic factors are contributing to heightened uncertainty, and I expect that we will continue to be surprised by economic and geopolitical developments and by the incoming data. While we have seen modestly lower inflation readings in recent months, overall inflation remains high.”
GBPUSD is moving in the Box pattern and the market has rebounded from the horizontal support area of the pattern.
“Measures of core services inflation have been persistently elevated, and labor demand exceeds the supply of available workers, which is leading employers to increase wages in an effort to retain and attract workers. The ongoing tightness in the labor market puts upward pressure on inflation, even if some components of inflation moderate due to improvements in supply-side factors. The longer high inflation persists, the more likely it is that households and businesses may come to expect higher inflation in the longer term.”
“Should that be the case, the FOMC’s job of lowering inflation would be even more challenging. Given the highly uncertain environment, my views on the future path of monetary policy will continue to be informed by the incoming data and its implications for the outlook. I will continue to look for consistent evidence that inflation remains on a downward path when considering further rate increases and at what point we will have achieved a sufficiently restrictive stance for the policy rate.”
US Treasury Yields Data
Yields on U.S. Treasury bonds were all over the place on Monday as investors waited for vital inflation statistics and fretted about the possible influence on future choices regarding monetary policy made by the Federal Reserve. At the current rate of 3.73%, the yield on the 10-year Treasury note was down 1.7 basis points. The yield on the 2-year Treasury note increased by 3.6 basis points, and it is currently trading at 4.547%.
AUDUSD has broken the Descending channel in Upside.
The future course of inflation and the Federal Reserve’s monetary policy were analyzed by investors, along with the chance that the Fed will increase interest rates again in the near future. On Tuesday, important data pertaining to inflation, including the report on the consumer price index for the month of January, is anticipated. Many investors are holding out hope that the statistics will show that inflation is beginning to moderate.
The Federal Reserve has been implementing policy measures, such as an increase in interest rates, in an effort to bring the economy down to a more sustainable level. Concerns have been growing about the rate at which interest rates are being increased as well as the possibility that maintaining current levels for an extended period of time may cause a recession in the United States economy. Many investors are keeping their fingers crossed that the Federal Reserve will refrain from raising interest rates this year.
The week before last, numerous officials from the central bank gave hints that interest rates may go up, but they said that any choices about policy would be based on economic data. On Monday, Fed Governor Michelle Bowman is scheduled to deliver remarks, and then during the week, a number of other Fed speakers are scheduled to deliver their presentations. Investors will be monitoring their comments for any new insights they may provide.
Don’t trade all the time, trade forex only at the confirmed trade setups.
🎁 80% NEW YEAR OFFER for forex signals. LIMITED TIME ONLY Get now: forexgdp.com/offer/
