- It’s a busy week on the economic calendar, with Humphrey Hawkins starting tomorrow.
- Chinese inflation put in a big surprise, printing at an annualized 5.4% for January.
- Fear continues to drive under the surface, with Gold, Bitcoin and USD all bid.
Gold, Bitcoin, USD Bid as Fear Continues to Drive
This week’s economic calendar is busy, with a couple of key highlights that will likely grip global markets as a series of themes remains in the spotlight. This week brings Humphrey Hawkins testimony starting tomorrow and we’ll hear more from Jerome Powell after he’s been rather quiet through the first month of 2020 trade. While the Fed has continued to remain non-committal to future action, particularly for this year, rates markets have run amok with a wide range of expectations and this week’s testimony and Q&A may provide a bit of clarity on that front.
Elsewhere, fear around coronavirus remains and this morning brought an eye-opening release of January inflation data out of China. China’s CPI increased by 5.4% in January, the highest level in eight years as coronavirus fears drove demand. This follows an aggressive spike in December to the tune of 4.5%, producing a challenging backdrop for the PBoC which is attempting to stick to stimulus measures in the effort of stoking growth.
Gold prices rallied this morning on the heels of that inflation release but, on a longer-term basis, price action is currently testing a key point of chart resistance. This comes in around the 1572 level, which is the 23.6% retracement of the November-January bullish move. The 38.2% marker of that same study came into play last week to help hold the lows, and if prices close below this resistance today, fade or pullback strategies can remain attractive ahead of the start of tomorrow’s Humphrey Hawkins testimony.
Gold Daily Price Chart
On a shorter-term basis, that potential for pullback is a bit more defined, as recent price action on the hourly has built into a rising wedge pattern, which will often be approached with the aim of bearish reversals.
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Gold Hourly Price Chart
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Bitcoin Continues Bullish 2020, Pulls Back to Support
On a similar note, it’s been a bullish outing for Bitcoin so far in the New Year; and this follows a bearish outing in the second-half of 2019 as a falling wedge formation had built on the chart. Bitcoin has tested above a big zone of resistance around the 10k level, where the psychological price is confluent with a few different Fibonacci levels of relevance.
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Bitcoin Daily Price Chart
To kick off this week, price action has promptly pulled back to test a key area of support, as taken from the 38.2% Fibonacci retracement of the 2018-2019 major move.
Bitcoin Hourly Price Chart
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US Dollar Fresh Three-Month-Highs
Going along with that risk aversion theme, US Dollar strength has continued through this week’s open, with the Greenback punching up to a fresh three-month-high. US data hasn’t been all that bad of recent, as last week’s Services and Manufacturing ISM reports led into an all-around strong NFP report on Friday.
But markets are still fully expecting at least one cut from the FOMC by the end of the year, with a whopping 82.2% current probability of at least 25 basis points of softening. This puts even more emphasis on Chair Powell’s Humphrey Hawkins testimony so that market participants can try to read the tea leaves in gauging just how dovish or hawkish the Fed might be in the remainder of this year.
US Dollar Daily Price Chart
— Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX