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Jerome Powell, Chairman of the Federal Reserve, spoke on Wednesday and reiterated his commitment to providing support to the economy, stressing that the job market needs to return to full employment. Powell stated that the Fed will not tighten policy solely in response to an improvement in the labour market. The Fed Chair also downplayed inflation, which came out at 1.4% yearly in January, lower than expected.
Powell’s comments and weak inflation sent investors to buying stocks, lowering yields but only marginally impacting the dollar. Gold prices are off their highs above $1,850.
Lisa Cook, an economist who is considered a dove, will reportedly be nominated to the Federal Reserve’s boar.
Weekly jobless claims are due out on Thursday and are expected to show an ongoing decline. Nevertheless, applications remain at elevated levels.
UK: Prime Minister Boris Johnson lowered expectations about foreign summer holidays amid ongoing uncertainty about the virus and despite the UK vaccinating some 20% of its population. On the Brexit front, the EU has pushed back the date for ratifying its accord.
In Europe, Germany extended its lockdown as coronavirus cases remain stubbornly high. The old continent is trying to reignite its sluggish vaccination campaign. EUR/USD is holding above 1.21 ahead of the EU’s publication of new economic forecasts.
Bitcoin has been extending its downside correction and trades at around $45,000 after hitting record highs near $48,000. Elon Musk, who announced that his company Tesla would invest in BTC, returned to tweeting about Dogecoin. US Treasury Secretary Janet Yellen warned of the misuse of cryptocurrencies for illicit activities. On the other hand, Mastercard will support selected digital coins on its network.
“Contrary to expectations of some market participants, America’s stimulus plans have yet to produce inflation as January’s Consumer Price Index figures have demonstrated – only 1.4% yearly in both headline and core gauges. That is well below the Federal Reserve’s 2% target.”
“Federal Reserve Chair Jerome Powell stressed that any future inflation will likely ‘not mean that much’ and moved to talk about the labor market. Powell said that the US should strive to reach full employment, which is one of the Fed’s mandates. More importantly, he added that the bank will not automatically tighten policy solely on improvement in the job market. It does not get more dovish than that.”
“The Relative Strength Index on the 4-hour chart has dropped below 70 – exiting overbought conditions and allowing for more rises.”
“Some resistance is at the daily high of 1.2130, followed by 1.2150, where the 200 SMA hits the price. Further above, the upside target is 1.2190, which was a stubborn cap in January.
“Some support awaits at the daily low of 1.2115, followed by 1.2050, a clear separator of ranges. The next cushions are 1.20 and 1.1960.”
The USD/CHF pair continues to ease lower and Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, is closely watching the 0.8830/23 zone as a break below here would trigger a fall to the 0.8758 mark.
“USD/CHF has continued to drift lower and this failure calls into question the base pattern we had been watching. Currently, we are concerned that the up move already looks to have ended. The Elliott wave count is neutral but attention has now dropped to 0.8830/23, the 18th December low.”
“Only failure at 0.8823 will trigger a retest of the 0.8758 recent low.”
“Below 0.8758 would target 0.8703/.8698, the 2014 lows. Failure here will introduce scope to 0.8317, along term Fibo.”
Gold meets resistance near $1,850
Gold prices briefly tested the 200-day SMA beyond $1,850 on Wednesday, just to give away part of those gains and close the session around $1,840 per ounce troy afterwards. The move was on the back of rising open interest and volume and is indicative that further decline could lie ahead in the very near-term.
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