Markets weighing Warsh’s intentions

Peter Iosif, ACA, MBA IronFX

Markets weighing Warsh’s intentions

The nomination of Kevin Warsh as the next Fed Chairman by US President Trump created mayhem in the markets. The USD gained, US equities experienced a moderated drop, precious metals took a brutal beating and the crypto market retreated substantially shrinking its market cap. A dove was anticipated to be nominated by Trump, while Mr. Warsh is considered as leaning more on the hawkish side. The markets were obviously taken by surprise and now are focusing on the next possible comments Warsh may make, and should they sound hawkish we may see the markets’ reaction intensifying in the coming days. Also we highlight the drop of oil prices in today’s Asian session as the easing of market worries for a possible US attack on Iran eased, weighing on the commodity’s price.

RBA’s interest rate decision

The Aussie is losing ground against the strengthening USD, yet Aussie traders are focusing on the release of RBA’s interest rate decision in tomorrow’s Asian session. The bank is expected to hike rates, yet we are worried that the bank may prefer to remain on hold. A possible hike accompanied also by a hawkish outlook, could provide support for the Aussie while a failure of the bank to hike rates could take the markets by surprise and cause AUD to lose even more ground.

Charts to keep an eye out

WTI’s price tumbled in today’s Asian session, breaking the 62.40 (R1) support line, now turned into a resistance level. We note that the upward trendline guiding the commodity’s price was broken in a first signal of an interruption of the upward movement yet the RSI indicator despite dropping failed to break below the reading of 50 which highlights the easing of the bullish market sentiment for WTI, yet no bearish sentiment has emerged yet. Hence, we expect a possible stabilisation of the commodity’s price for the time being. For a bearish outlook to emerge we would require WTI’s price breaking the 59.80 (S1) support line, opening the way for the 56.00 (S2) support level. Should the bulls take over we expect the commodity’s price to break the 62.40 (R1) resistance line and continue to break also the 66.20 (R2) resistance barrier.

AUD/USD dropped on Friday hitting the floor at the 0.6940 (S1) support line stabilizing somewhat for now. The RSI indicator retreated below the reading of 70, implying an easing of the bullish market sentiment for the pair, yet the bullish predisposition of the market seems to remain for now. Nevertheless, upward trendline which was guiding the pair for the past two weeks hence we switch our bullish outlook in favour of a sideways motion bias for now. Should the bears take over, we may see AUD/USD breaking the 0.6940 (S1) support line and start aiming for the 0.6800 (S2) support level. For a bullish outlook to reemerge we would require AUD/USD’s price to break above the 0.7090 (R1) resistance line paving the way for the 0.7280 (R2).

Other highlights for the day

Today we get Germany’s HCOB, Canada’s S&P Global and the US ISM manufacturing PMI figures all for January, while in the UK BoE Deputy Governor Breeden and Atlanta Fed President Bostic speak. In tomorrow’s Asian session, we get Australia’s December Building approvals.

As for the rest of the week

On Tuesday we get France’s preliminary HICP rates also for January and the US JOLTS job openings for December. On Wednesday we get Euro Zone’s preliminary HICP rate for January, the US ADP national employment figure for January and the ISM non-manufacturing PMI figure also for January. On Thursday we get from the UK BoE’s interest rate decision, from the Euro Zone ECB’s interest rate decision, the US weekly initial jobless claims figure, and from the Czech Republic CNB’s interest rate decision. On Friday we get the US employment report for January and Canada’s employment data for the same month.

Calendar follows

WTI daily chart

Support: 59.80 (S1), 56.00 (S2), 51.40 (S3).
Resistance: 62.40 (R1), 66.20 (R2), 70.00 (R3).

AUD/USD daily chart

Support: 0.6940 (S1), 0.6800 (S2), 0.6620 (S3).
Resistance: 0.7090 (R1), 0.7280 (R2), 0.7455 (R3).

Author

Peter Iosif, ACA, MBA

IronFX

Mr. Iosif joined IronFX in 2017 as part of the sales force. His high level of competence and expertise enabled him to climb up the company ladder quickly and move to the IronFX Strategy team as a Research Analyst. Mr.

EUR/USD drops to daily lows near 1.1840 ahead of US data

EUR/USD now comes under further selling pressure, slipping back to the area of daily lows near 1.1840 on Monday. The pair’s daily pullback comes on the back of the continuation of the rebound in the US Dollar as investors keep assessing the “Warsh” trade. Moving forward, markets’ attention is expected to be on the release of the US ISM Manufacturing.

GBP/USD turns negative around 1.3670 on stronger USD

GBP/USD faces some increasing selling pressure, building on recent losses and revisiting the 1.3670 zone at the beginning of the week. Cable’s decline comes in response to the persistent advance in the Greenback while traders have started to shift their focus to the upcoming BoE event.

Gold trims gains, flirts with $4,800 prior to US data

Gold is bouncing off monthly lows near the $4,400 region per troy ounce on Monday. The broader downtrend remains in place, with pressure coming from a firmer US Dollar following Kevin Warsh’s nomination as the next Fed chair.

Crypto Today: Bitcoin, Ethereum, XRP extend correction amid mixed ETF flows, dwindling retail interest

Bitcoin consolidates above $77,000 after plummeting and testing April’s tariff-triggered lows, as investors remain cautious. Ethereum extends losses toward the psychological $2,000 support amid ETF outflows. XRP holds below its April low at $1.61 as futures Open Interest drops to $2.81 billion.

Warsh effect ripples through markets, central banks on deck this week

The first full month of the year is behind us, and, honestly, it has been rather more dramatic than most had anticipated when toasting the New Year. We wrapped up last week with US President Donald Trump announcing his Fed Chair pick.

Ripple steadies after sell-off as low on-chain activity, retail interest weigh

XRP rebounds from last week’s support at $1.50 but struggles below resistance at $1.77. Active addresses on the XRP Ledger dropped below 18,000 on Sunday amid risk-averse sentiment. Retail interest in XRP continues to decline, with futures Open Interest dropping to $2.81 billion.