Daily market commentary: The US dollar touches a seven-month low

Forex

The US dollar touched a seven-month low in relation to other major currencies, during early Monday trading. Last week’s release of US inflation numbers confirmed, as expected, the slowing down of the rise in consumer prices, strengthening the conviction of those who believe that the Fed will moderate the pace of its ongoing monetary tightening cycle.  The greenback ended last year as the top performer amongst major currencies, gaining 8% as a result of the Federal Reserve’s aggressive shift towards monetary tightening. However, the tide appears to be turning, as a slowdown in US inflation creates scope for a more benign Fed. Such a scenario which may weigh on the dollar, especially as other central banks are running behind and still have some way to go before switching to a more dovish approach.

Ricardo Evangelista – Senior Analyst, ActivTrades

Daily Market Commentary

European Shares

Stocks slid lower at the beginning of a new trading week in Europe, after Asian shares registered patchy performances overnight, as bullish sentiment takes a break.

Consumer cyclicals and tech shares are among the worst performers today, while healthcare and energy stay as the most resilient sectors, preventing the STOXX-600 from falling further.

Today’s drift in the stock market isn’t really seen as threatening for traders. It can be explained by a technical correction move, where investors usually take some profits out following the strong market rally started since the beginning of 2022. Reassuring news on the macro front, such as a decrease on price pressure, fading recession worries and the reopening in China have significantly lifted market sentiment in January. However, some traders have now started to “sell the news” following the latest US inflation print that came out as expected, sending shares to a newly established support level, as a “pull-back” price action.

With the lack of significant data release today, apart from the BoE’s Governor Bailey speech in the afternoon, we expect most EU benchmarks to trade sideways or even deepen the current correction towards former resistances that recently became support levels.

The STOXX-50 index already trades slightly above its immediate very-short-term support at 4,140.0pts, testing the lower band of its bearish channel. A break-out of this zone could quickly send prices below 4,100.0pts, at 4,080.0pts where the 23.6% Fibonacci retracement level looms.

Pierre Veyret– Technical analyst, ActivTrades 


Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.

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