U.S. dollar falls on weak private jobs data. Tensions between Russia-Ukraine impact commodities

3 February 2022, 02:33

Market Focus

US equities rose for four consecutive days despite the fact that private payroll fell by 301,000 in January as Omicron slammed the labour market. The Dow Jones Industrial Average climbed 0.6% while the S&P 500 rose 0.9%. In meantime, the Nasdaq climbed 0.5%, led by Alphabet after its strong earnings report. Notably, even though the Nasdaq closed in green, it plunged more than 1% at the last minute. The main culprits were Meta Platforms Inc and Spotify Technology SA, which both sank nearly 20% after the forecasts fell short of estimates. The market now has its eye on Thursday and Friday’s economic data.

While the markets are closely monitoring the hike of interest rates in several countries, a Russian invasion of Ukraine could potentially divert attention as it might send shockwaves through the financial markets. Tensions between the two countries have not yet had much impact on the stock markets. However, they have impacted some commodities already, such as crude oil. Even though some believe that the invasion might not happen as the US and the UK have promised swift retaliation in the form of economic sanctions, the stakes are still high.

Main Pairs Movement

Gold advanced as the US economic data showed the US is shedding jobs. Gold was also boosted by easing concerns over the outlook for a strong hawkish tone on interest rates by the US Fed. Moreover, none of the Fed officials are going to speak this week, so gold bears get temporary relief. Gold was up 0.32% at the end of the day, hovering nearly $1,800.

AUD/USD was up 0.1% as Australia’s yield curve flattened after the RBA speech. From the technical perspective, the currency pair was capped by a critical daily resistance block, which was guarding the double top’s neckline near 0.7165.

The pound closed with positive action as the markets eyed its interest rates decision. Its rival currency, the US dollar, weakened on Wednesday after the ADP report showed a surprising decline in January. GBP/USD was up 0.41% at the end of the day.

Technical Analysis

EURUSD (Daily Chart)

The EUR/USD pair rose above 1.1300 with the initial reaction to the EU inflation data, which showed that the EU CPI edged higher to 5.1% in January from 5% in December. This surpassed the market expectation of 4.4% by a wide margin and helped the euro gather strength. However, as the Wall Street opening turned out mixed, with NASDAQ opening high but slumping heavily after, the pair pared some of its intraday gains, and is trading at around 1.1310 at the moment.

On the technical front, the RSI for Euro has finally come back to 50, the first time in two weeks, and the price action has breached the 50 DMA, only one step ahead of the 20 DMA, indicating improved market sentiment. On the upside, if the pair could close above its 20 and 50 DMAs, then it is expected to knock on its next resistance 1.1400. On the contrary, if the pair fails to cling to the 1.1200 threshold, then a sharp decline to its yearly low is anticipated.

Resistance: 1.1400, 1.1620

Support: 1.12000, 1.1000, 1.0780

GBPUSD (Daily Chart)

Cable is currently trading at 1.3580, around 0.40% higher as it eyes the start of the New York session’s highs of 1.3587 during midday trade. The pound climbed for the fourth session in a row on Wednesday, reaching a 5-day high against its U.S peer. Traders bet the Bank of England (BoE) will raise rates on Thursday, along with a disappointment in US jobs data, softer greenbacks, and rebounding US stocks, supporting Cable to stretch further north.

On the technical front, the RSI for Cable reads 56.09 as of writing, indicating the bulls have outplayed the bears on the spot, depicted as the pair penetrated the 1.3500 psychological resistance/support and is approaching the critical resistance at 1.3600. The pair now trades above its 20 and 50 DMA, but is still too far away from the pivot point at around the 200 DMA to fully reverse to a bullish trend. To the north, Cable is going to face the heavy 1.3600 resistance, followed by the long-term downtrend, and then the 200 DMA currently at 1.3717; in cases to the south, the pair is underpinned by the year-to-date lows around 1.3400, followed by the December lows around 1.3200.

Resistance: 1.3600, 1.3715, 1.3830

Support: 1.3400, 1.3200

XAUUSD (Daily Chart)

Gold climbed in the North American session as US T-bond yields fell amid risk-on market mood, undermining the Greenback. As of writing, XAU/USD is trading at $1,808 a troy ounce, up 0.40% during today’s trades. The market sentiment is mixed, as European bourses remain in the green, while US equity Nas100 indices fluctuate between gains and losses amid the dismal ADP Jobs report. Meanwhile, the Dollar Index extended its losses throughout the week to three straight days, down 0.34% and sitting at 95.94.

On the technical side, Gold’s price is again capped by the $1,810 resistance, pulling back to linger at around the $1,800 to $1,810 area. If XAU/USD fails to break the $1,810 area, the upside would remain limited and a break higher could clear the way for a rally initially to the 20 DMA at $1,816.6, above the next key resistance lies in the $1,830 area. On the flip side, a slide back under $1800 would increase the bearish pressure. A daily close under $1,790 is needed to suggest more losses ahead. Key support levels are eyeing $1,765.

Resistance: 1816.6, 1830, 1860

Support: 1800, 1765, 1720