Daily Market Analysis by Solid ECN | *Video*

The Euro Dollar downside momentum from 1.226 eased at the Fibonacci 61.8 level near 1.118. The candles formed a "bullish Doji star" and a "hammer" pattern forecasting an upcoming trend reversal. The pattern can be spotted in the daily chart. Indicator-wise, the MACD shows a divergence in the trend. So far the outcome of the MACD divergence was the trend decline slowing down around 1.118 and moving sideways. Minor resistance exists at 1.138. With a break of this fragile sealing, the instrument would probably target 1.15. On the other hand, we'll witness more decline in the pair if the support at 1.118 fails.

GBPUSD bounced from the 38.2 retracement level of the Fibonacci, and it is trading close to the minor support at 1.341. With a breach in the said level, the pound sterling surge to 1.366 would probably be seen in the next few days. 38.2 Fibo at 1.3158 is the conservative support. If this level breaks, the next target would be level 50 of the Fibonacci retracement around 1.225.

The bulls have an outstanding performance against the bears on the JPY USD pair. Buyers didn't cute their pressure on passing the resistance at 114.4, and the market is on its way to test the sealing for the fifth time in the last 10 days. Support is at 111.66. As long as this level holds, the market trend is bullish. Resistance is at 115.53, with a break of the level, the path of the bull to 118.66 will be paved.

Growth Amid Stabilization of the Bond Market

The FTSE 100, the leading index on the London Stock Exchange, grows and currently has reached 7480.0 points, following the positive dynamics shown in 2021, when the instrument increased by 14%, showing the most significant rise in the last five years. Now, it continues its local upward trend, trading at 7467.0.

Despite the current rise in prices, the domestic stock market's information background remains rather poor. The number of new cases of coronavirus infection in the United Kingdom is steadily increasing and may soon reach 200K cases per day, which is more than 50% higher than the average daily rates of mid-December last year. Nevertheless, despite such dynamic growth, Prime Minister Boris Johnson said that the authorities did not introduce stricter quarantine restrictions due to the Omicron coronavirus strain. The official stressed that the UK is in a better position than most other European countries due to the very high vaccination rate of the population.

Meanwhile, the quotes of the leading British bonds have remained practically unchanged for the fifth session in a row: the yield on 10-year securities is 0.9720%, and global 20-year bonds are at the level of 1.2000%, which was reached on December 29.

The growth leaders in the index are Melrose Industries Plc. (+2.34%), Fresnillo Plc. (+1.71%), and Rentokil Initial Plc. (+1.35%).

Among the leaders of the decline are Kingfisher Plc. (?3.15%), National Grid Plc. (?1.78%), and Bunzl Plc. (?1.77%).

Support and resistance

The asset moves within the global ascending channel and prepares to form a local reversal, having reached the resistance line. Technical indicators are in the state of a buy signal: t indicator Alligator's EMA fluctuations range is still wide enough, and the histogram of the AO oscillator remains above the transition level.

Support levels: 7386, 7196

Resistance levels: 7520, 7700

Oil prices continue upward trend

Quotes of WTI Crude Oil are developing a "bullish" momentum. During the week, the price rose to the level of 78.12 (Murray [5/8]), which it is now actively testing.

The data published earlier of the weekly report of the US Energy Information Administration (EIA) turned out to be negative: crude oil reserves decreased by 2.144M barrels instead of the 3.283M barrels predicted by analysts, while the volume of gasoline reserves increased sharply by 10.128M barrels, which is the highest since April 2020 and indicates the refusal of the population to travel during the Christmas holidays. Nevertheless, these statistics have put only short-term pressure on oil quotes and today they have continued to grow.

In general, investors remain confident in the high demand for "black gold" from global consumers, since most of them are in no hurry to impose strict economic restrictions, despite the development of the coronavirus pandemic caused by the spread of the Omicron strain. The position of OPEC+ adds confidence to the bidders, which continued the policy of gradually increasing the monthly production level by 400K barrels per day.

A breakout of the level of 78.12 will give the prospect of further price growth to 81.25 (Murray [6/8]) and 84.38 (Murray [7/8]). A reverse breakdown of 75.00 (Murray [4/8]) and the middle line of the Bollinger Bands will become a catalyst for a decline up to the level of 68.75 (Murray [2/8]). However, this option of the movement of the trading instrument seems less likely, since the indicators signal the continuation of upward dynamics: the Bollinger Bands and Stochastic are directed upwards, the MACD histogram increases in the positive zone.

Resistance levels: 78.12, 81.25, 84.38.

Support levels: 75.00, 73.70, 68.75.

On the daily chart, the fifth wave of the higher level (5) develops, within which the first entry wave 1 of (5) formed, a correctional wave 2 of (5) developed, and the wave 3 of (5) formed. Now, the first wave of the lower level i of 3 is developing, within which a local correction has ended as the wave (iv) of i. If the assumption is correct, the pair will grow within the wave (v) of i to the levels of 1919.90?2067.60. In this scenario, critical stop loss level is 1752.82.

The European currency shows a moderate decline against the US dollar during the Asian session, correcting after a significant increase last Friday, when investors were actively buying the single currency amid the publication of upbeat macroeconomic statistics from Europe. The Consumer Price Index in the euro area in December rose by 5% after increasing by 4.9% a month earlier. Analysts had expected the dynamics to slow down to 4.7%. At the same time, the Core Consumer Price Index retained the same dynamics at 2.6%, which also turned out to be slightly better than the market forecasts of a slowdown to 2.5%. Retail Sales in November showed a record growth of 7.8% after increasing by 1.7% a month earlier. Market expectations assumed the growth of the indicator by 5.6%. In turn, the American currency came under pressure after the release of the controversial report on the US labor market for December. In particular, Nonfarm Payrolls in December 2021 amounted to only 199K, having fallen from 249K in November. Forecasts suggested an increase of 400K.

The British pound is trading near zero against the US currency during the morning session, consolidating around 1.3580 and local highs from November 9. At the end of the last trading week, the pound managed to demonstrate a fairly confident growth, which was the market's reaction to the emergence of not the strongest macroeconomic statistics from the United States. Investors were disappointed by the weak growth in Nonfarm Payrolls in December. The real dynamics turned out to be twice as bad as the market forecasts at the level of 400K, while the other parameters of the report turned out to be quite optimistic. The Unemployment Rate in December continued to decline and reached 3.9% after 4.2% in November. Statistics from the UK also did not help to clarify the situation on the market. Markit Construction PMI in December fell from 55.5 to 54.3 points, which turned out to be slightly better than the market forecasts of a decline to 54 points. Halifax House Prices in December remained unchanged at 1.1%, while investors expected it to decline to 0.7%.

The New Zealand dollar has seen a slight decline against the US currency during the Asian session, correcting after Friday's gains that interrupted a two-day "bearish" rally. Following the decline in the middle of last week, the New Zealand dollar renewed its local lows from December 21. The development of the downtrends was facilitated by the statements of the representatives of the US Fed, who signaled an imminent tightening of monetary policy in the country against the background of the continuing growth of inflation and stabilization in the labor market. In turn, Friday's report on the US labor market for December 2021 somewhat cooled the fervor of investors. Nonfarm Payrolls grew by only 199K in December, which turned out to be worse than not only the forecasts of 400K, but also the previous value of 249K. Trading activity today remains low due to the relatively empty macroeconomic calendar. Investors expect clarification of the situation with the prospects for tightening monetary policy by the US Federal Reserve, but the news will appear only on Tuesday, when the Chair of the regulator Jerome Powell will give a speech in the US Congress.

The US dollar shows restrained gains against the Japanese yen in Asian trading, testing 115.80 for a breakout. The instrument is recovering from its local lows, which were updated due to the development of "bearish" sentiments at the end of the last trading week. At the same time, the pair continues to hold near record highs. The positions of the American currency strengthened again last week after the publication of the "hawkish" minutes of the US Federal Reserve meeting, which indicated the likelihood of a faster tightening of monetary policy by the American regulator in the near future. In particular, the US Fed may agree to the early completion of the quantitative easing (QE) program, which will entail a shift in the timing of the start of the cycle of raising interest rates. Statistics from Japan, released last Friday, leave much to be desired. Household Spending in November fell again by 1.3% after falling by 0.6% in October. Analysts had expected positive dynamics to appear at 1.6%. At the same time, Tokyo Consumer Price Index in December increased from 0.5% to 0.8%.

Gold prices show a slight decline at the beginning of the new week, consolidating near 1800.00. Pressure on the instrument's position is exerted by the minutes of the US Federal Reserve meeting published last week, which indicated the "hawkish" position of the American regulator regarding the tightening of monetary policy. The US Fed notes high rates of growth in consumer inflation, as well as a tense situation in the labor market. At the same time, Friday's report on the US labor market showed weak growth in Nonfarm Payrolls. In December, only 199K jobs were created, while investors hoped to overcome 400K.