Daily Market Analysis by Solid ECN | *Video*

Australian currency updates local lows

The Australian dollar is developing a strong "bearish" momentum in tandem with the US currency, testing the level of 0.7120 for a breakdown and updating local lows from February 8.

In addition to technical correction factors at the end of the week, the downtrend was facilitated by strong macroeconomic statistics on inflation in the US, published the day before. The data showed a further acceleration in domestic consumer inflation to 7.5%, which is likely to require the US Federal Reserve to tighten monetary policy sooner during 2022. The start of the interest rate hike cycle is expected in March, when the quantitative easing (QE) program comes to an end.

The focus of investors today will also be on the Fed Monetary Policy Report and data on Michigan Consumer Sentiment Index for February.

Support and resistance

In the D1 chart, Bollinger Bands are reversing horizontally. The price range is almost unchanged, but it remains rather spacious for the current level of activity in the market. MACD is reversing downwards preserving the previous weak buy signal. Stochastic, having rebounded from the level of "80" is declining, signaling in favor of the development of correctional dynamics in the ultra-short term.

Current showings of the indicators do not contradict the further development of the "bearish" trend in the short term.

Resistance levels: 0.716, 0.72, 0.7250, 0.73.

Support levels: 0.71, 0.705, 0.7, 0.695.

The European currency shows an active decline against the US dollar during the Asian session, developing an extremely uncertain corrective trend that can be traced this week. EUR/USD is testing the level of 1.1380 for a breakdown and is located not far from the local lows of the previous day. The pressure on the instrument's positions intensified yesterday with the publication of statistics on consumer inflation in the US, which strengthened the belief that the US Federal Reserve can act faster in terms of tightening monetary policy. In January, the Consumer Price Index rose by 0.6% in monthly terms and by 7.5% in annual terms, which turned out to be stronger than market forecasts at 0.5% and 7.3%, respectively. Consumer Inflation excluding Food and Energy over the same period increased by 0.6% MoM and by 6% YoY, which also turned out to be higher than the growth by 0.1% projected in both cases. Investors today are focused on the January statistics on consumer inflation in Germany.

The British pound is trading downward against the US currency during the morning session, testing 1.3520 for a breakdown. The development of corrective dynamics is due to the appearance of strong US statistics on inflation, which forces investors to act ahead of the curve. There is practically no doubt that the US Federal Reserve will start a cycle of raising interest rates during the March meeting. Now the question is how fast the US regulator will tighten its monetary policy and whether the risks of rising consumer prices were correctly assessed from the very beginning. Today, investors expect the release of a block of macroeconomic statistics from the UK on GDP dynamics for Q4 2021. Forecasts suggest some slowdown in the national economy from 6.8% to 6.4%. In addition, December data on the dynamics of Industrial Production and NIESR GDP Estimate for January 2022 will be published during the day.

The Australian dollar is developing a strong "bearish" momentum in tandem with the US currency, testing the level of 0.7120 for a breakdown and updating local lows from February 8. In addition to technical correction factors at the end of the week, the downtrend was facilitated by strong macroeconomic statistics on inflation in the US, published the day before. The data showed a further acceleration in domestic consumer inflation to 7.5%, which is likely to require the US Federal Reserve to tighten monetary policy sooner during 2022. The start of the interest rate hike cycle is expected in March, when the quantitative easing (QE) program comes to an end. The focus of investors today will also be on the Fed Monetary Policy Report and data on Michigan Consumer Sentiment Index for February.

The US dollar shows weak growth against the Japanese yen in Asian trading, trying to consolidate above 116.00 and updating local highs since the beginning of the year. The day before, the US currency received a strong impetus to growth, reacting to data on the dynamics of consumer prices in the US, continuing to update record highs. It is likely that rising inflation will require the US Federal Reserve to take additional steps to tighten monetary policy, but so far the US regulator calls for a gradual and balanced approach. The dollar received additional support yesterday from the US Monthly Budget Statement for January, which showed a notable increase in the budget surplus by 119B dollars after a deficit of 21B dollars in December. Analysts were expecting a 25B dollar surplus.

Gold prices are declining, correcting after the upward rally of January 31. Significant pressure on the instrument is exerted by macroeconomic statistics from the US on inflation for January, released the day before. Annual consumer price growth accelerated to 7.5%, the highest since 1982 and above average market forecasts of 7.3%. Rising inflationary pressures have led to a revision of a possible schedule for an interest rate hike in 2022. In particular, now most of the analysts expect a rate correction during the March meeting of the US Federal Reserve at once by 50 basis points.

At the beginning of the week, the quotes of "black gold" approached the level of 96.00 for the first time since October 2014, reacting to a further escalation of tension in Eastern Europe. In particular, due to the situation around Ukraine, there were concerns among traders about the export of Russian oil and the introduction of new Western sanctions.

During the day, the US will release statistics on manufacturing inflation and publish the traditional report from the American Petroleum Institute (API) on stocks for February 11. The previous report showed a decrease of 2.025M barrels.

Bollinger bands show steady growth on the daily chart: the price range expands from above but not as fast as the "bullish" sentiment develops. MACD grows, keeping a poor buy signal and above the signal line. Stochastic demonstrates similar dynamics, but the indicator line is close to its highs, reflecting that the instrument may become overbought in the ultra-short term.

Resistance levels: 94.5, 95.5, 96.5, 97.5.

Support levels: 93.34, 92, 91, 90.

Gold market insight by Solid ECN Securities

Investors build up positions in gold again.
Gold is trading near the three-month high due to increased demand for shelter assets. At the moment, the metal quotes have broken the level of $1,850 per ounce and are trying to consolidate above it.

The upward dynamics in the asset is the reaction of investors to the likelihood of an imminent increase in the US Federal Reserve interest rate against the backdrop of rising annual inflation, which last month rose to a record high for 40 years and amounted to 7.5%.

Traders fear that instead of the expected 0.25%, the agency will immediately increase the figure by 0.50% or even more to prevent the continuation of negative dynamics with consumer prices in the country. Experts note that this could lead to a sharp drop in the bond and stock markets, which will turn into even more problems for the regulator. The bond market is at its peak in 2019, and the yield on 10-year US Treasuries is already close to 2%, amounting to 1.960%. Investors no longer believe in the further growth of securities and opt for gold, noting that the US Federal Reserve cannot stop the emerging negative trend, and as a result, the agency will again resort to measures to stimulate the economy.

Support and resistance
On the daily chart, the price has left the global sideways channel and is now trying to renew the high of the last year. Technical indicators keep a buy signal: fast EMAs on the Alligator indicator are above the signal line, and the AO oscillator histogram is confidently trading in the buy zone, forming new rising bars.

Support levels: 1861, 1830.
Resistance levels: 1890, 1940.

GBPUSD Market insights by Solid ECN Securities

Development of flat dynamics in the short term.
GBPUSD has shown a poor upward trend against the US currency during the morning session, holding near the level of 1.355. Since the beginning of the month, it has been developing a generally flat dynamic in the short term. The instrument reacted insignificantly due to the improvement in the geopolitical situation in Eastern Europe after there were signs of a resolution of the tense situation solely from the standpoint of diplomacy.

Yesterday, the market focused on macroeconomic statistics from the UK. Thus, the indicator of average wages for December, excluding bonuses, slightly corrected which is better than market forecasts. In turn, wages, taking into account bonuses for the same period, increased, contrary to analysts' expectations of a slowdown to 3.9%. Jobless claims fell by 31.9K for January, while the unemployment rate for December was unchanged.

Support and resistance
Bollinger Bands show a moderate increase on the daily chart: the price range narrows, indicating an ambiguous nature of trading in the short term. MACD falls, keeping a poor sell signal and below the signal line. Stochastic shows similar dynamics and rapidly approaches its lows, indicating that GBP may become oversold in the ultra-short term.

Resistance levels: 1.3565, 1.36, 1.365, 1.37.
Support levels: 1.35, 1.346, 1.3435, 1.34.

Silver market update by Solid ECN Securities

Silver prices are consolidating near 23.5
The instrument still cannot recover to the local highs renewed on February 15. Then the reason for the wave of sales was the weakening of geopolitical tensions in Eastern Europe when it became clear that the forecasts and assumptions about possible military operations on the territory of Ukraine did not materialize.

Although investors have turned their attention to the usual macroeconomic background and started predicting the actions of world regulators, certain geopolitical risks remain, and therefore the demand for safe assets is not completely reduced. Also, despite the further growth of inflationary risks, the US Federal Reserve is in no hurry to adjust its monetary policy vector.

On Thursday, American investors focus on the Initial Jobless Claims release. It is expected that the value for the week of February 11 will decrease from 223K to 219K.

Support and resistance
On the daily chart, Bollinger bands grow moderately. The price range narrows slightly but remains quite spacious for the current level of activity in the market. MACD tries to reverse downwards and prepares to form a sell signal (the histogram should be below the signal line). Stochastic shows a more confident decline and signals further development of downward dynamics in the nearest time intervals.

Resistance levels: 23.6, 24, 24.37, 24.67.
Support levels: 23.32, 23, 22.7, 22.4.