Welcome to our look back at the previous month, and a look ahead to what we might expect to see throughout March and beyond.
Basically, the US Federal Reserve drove the global economy during the entire month of February. The Fed, in turn, was driven by the data. See our section on USD.
Of course, when the markets hear about the Fed and other central banks raising Interest Rates, equities slide…pretty much all month.
The charts tell the story with USD strength from start to finish in February. The reason for this is quite simple. Almost all economic data coming out of the US points to the Fed’s rating interest rates.
Some pairs, like EURUSD, XAUUSD and AUDUSD, had a bit of a pullback at the end of the month so we will watch both the Fundamentals and the Technicals to see where we go from here. Keep an eye out for our Market Blast videos on Mondays and Tuesdays for more info.
The economic calendar results drove the Fed every step of the way showing a hot labour market, low unemployment, and higher inflation. The Fed’s job is still not done and Kristalina Georgieva, current managing director of the International Monetary Fund, is encouraging central banks around the world to keep fighting inflation.
By the way, if you are waiting for the US Non-Farm Payrolls this week…stop looking. This month, we will have to wait until Friday, 10 March, for the next one.
All the optimism from Davos seems to have been washed downstream as investors are taking the Fed seriously and bailing out of the stock markets.
All 4 major US Indices fell continuously all month.
The S&P 500, for example, has fallen to a level of support from last December and November.
In December’s blog, regarding crude oil, I stated “Then, of course, we have the fear of recession which will definitely drive prices lower. Watch this space! “
During the last week in January, this did in fact happen and the hot NFP number spooked the markets with fears of higher interest rates, recession, and therefore, lower crude demand and prices fell.
This price action broke the bullish Falling Wedge and prices rose again.
The chart on WTI looks more like the Dance of the Sugar Plum Fairies than price action, as the weakening USD and fundamental events had candles bouncing all over the place. High Crude inventories, followed by a high US PCE report, followed by supply problems between Russia and Poland caused lots of volatility.
We are ending the month with price action in a Rising Wedge which is a bearish pattern so keep an eye out for our Market Blast Videos on Mondays and Tuesdays.
During February the Euro gained against almost everything except, of course, the USD.
As in every economy in the world, the European Central Bank is not exactly winning the fight against inflation. Therefore, the markets are assuming that the ECB will raise Interest Rates on the 14th of March. This is driving the EUR higher.
The new Bank of Japan governor, Kazuo Ueda, will not start until next month but the markets are trying to guess which way he wants to go. He has been hinting at more quantitative easing which tends to lower Interest rates which explains the weakness returning to the JPY.
Looking at the charts, we can see the weakness but we can also see a variety of rising wedges which may indicate a reversal soon. Watch this space!
If you followed our previous reports on the Hang Seng and the A50, we stated that investors were selling off a bit of their portfolios and buying into China. Clearly, in February they changed their minds as price action broke through the lower trend line and headed back towards the 200-day moving average.
Gold (XAUUSD) has been trending down all month driven by a stronger USD. In the USD section above, we mentioned that we had a pullback on some pairs and that includes XAUUSD.
This has caused a price gap so let’s see if a sell trade will fill the gap.
We have also been following XAUAUD. A long large falling wedge finally broke to the upside and price action has been bullish ever since. Watch your trend lines, the stochastic oscillator (or MACD) and try to buy the dip for a nice long.
That’s all for now. Make sure you subscribe to the Valutrades blogs (Click Me) and videos and we will see you here at the end of March.
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