Even though market sentiment started off 2022 on a sour note, there were clear winners and losers on Wall Street. Dow Jones futures declined about 0.1% this past week, while the tech-heavy Nasdaq 100 sank about 4.35% in the worst performance since February. Growth-linked capital clearly disproportionately suffered as those tied in value and cyclical equities fared better.
Might this spell a preview for the road ahead this year? The latest FOMC meeting minutes clearly further underscored a more hawkish Federal Reserve, with three rate hikes fully priced in by the end of this year. If inflationary pressures linger, the central bank also opened the door to quantitative tightening, or shrinking the balance sheet.
The US Dollar outperformed most of its major counterparts as Treasury yields soared across the curve. Cautious volatility in markets did not bode well for the sentiment-linked Australian and New Zealand Dollars. Elevated crude oil prices still worked to support the energy-linked Canadian Dollar. Despite recent inflationary pressures, gold prices could not find a stable footing.
Speaking of inflation, the next US CPI report is due this coming week. On Wednesday, headline inflation is expected at 7.0% y/y in December with core at 5.4%. These are some of the highest readings in about 30-40 years. A higher-than-expected outcome could further boost hawkish Fed monetary policy bets.
This risks bringing more volatility into the stock market as the rate of return in relatively safer Treasury yields climb. Chair Jerome Powell is sure to be questioned thoroughly at his confirmation hearing this week. Towards the end of the week, a slew of Fedspeak will cross the wires. Fourth-quarter earnings also kick off with key banks, such as Chase and Wells Fargo.
US DOLLAR WEEKLY PERFORMANCE AGAINST CURRENCIES AND GOLD
Fundamental Forecasts:
S&P 500 Forecast for the Week Ahead
Soft start to 2022 for equities as Fed hawks bring QT back into the equation.
Australian Dollar Outlook: US Dollar, Fed, RBA, Commodities. Is AUD/USD Trapped?
The Australian Dollar depreciated last week after Fed hawkishness lifted US yields and the US Dollar. Will interest rates or commodities drive AUD/USD?
Bitcoin (BTC), Ethereum (ETH) – Collapsing Into Multi-Month Support as Sellers Triumph
A bad start to the year for Bitcoin and Ethereum holders with sellers taking control and driving the price ever lower. Important support nears.
GBP Fundamental Forecast: Sterling May be due a Breather but Remains Bullish
The Pound Sterling continues its stellar performance and while it may be due a pullback, the outlook remains bullish.
Euro Forecast: EUR/USD Rebound Vulnerable to Rising US Inflation
The US Dollar Index (DXY) may reestablish an upward trend following the Federal Reserve interest rate decision as it appears to be trading within a bull flag formation.
Gold Prices Eye Fed Chair Powell Testimony and CPI Inflation Data
Gold prices fell last week as Fed rate hike bets strengthened. Bullion traders expect a busy week ahead, with Fed Chair Powell set to testify before Congress and CPI inflation data set to cross the wires.
Technical Forecasts:
Gold Technical Forecast: Gold Poised to Breakout of Fibonacci Trap
Gold prices are carving the January opening-range between key Fibonacci levels- the 618 battle lines are drawn. Levels that matter on the XAU/USD weekly chart.
USD Technical Outlook: Dollar Coil Extends Within Bull Flag, NFP Miss
Technical chart patterns dominate both weekly and daily DXY charts pointing to a bullish outlook should prices break above key levels. NFP pours old water on dollar upside.
Mexican Peso Weekly Forecast: U.S. Inflation Data May Spark a Rebound in USD/MXN
Market attention will focus on the U.S. inflation report next week. If December CPI accelerates further, bond yields are likely to gain more ground, fueling a bullish response in USD/MXN.
Stock Market Forecast for Next Week: Dipping Towards Big Support
Stocks are in pullback mode off record highs, looking towards support a bit lower to see if this is a minor correction or the beginning of a broader decline.
Canadian Dollar Technical Forecast: USD/CAD, CAD/JPY
USD/CAD has retreated to a key area of longer-term support, but CAD bulls may find more potential on the CAD/JPY chart as looked at in this week’s Canadian Dollar technical forecast.
Australian Dollar Outlook Remains Bumpy: AUD/USD, AUD/JPY, AUD/CAD, EUR/AUD
The Australian Dollar weakened this past week, setting itself up for further losses. What is the technical road ahead for AUD/USD, AUD/JPY, AUD/CAD and EUR/AUD?
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