January 18, 2024
Forex Daily Analysis: Currency Strength & Stock Market Shifts
CURRENCIES:
Overview:
- The U.S. dollar regained strength against major counterparts on Tuesday.
- Supported by higher U.S. Treasury yields, market expectations for a March interest rate cut fell below 59%, down from 77% just one day prior.
Fed Governor’s Comments:
- Fed Governor Christopher Waller’s statement suggested a cautious approach, indicating that the Federal Open Market Committee (FOMC) doesn’t need to ease its stance as rapidly as in the past.
- This stance contributed to the strengthening of the U.S. dollar.
Currency Performance:
- Euro, British pound, and Australian dollar experienced sharp declines against the U.S. dollar.
- Notable thresholds were breached during this pullback.
Fed March Meeting Probabilities:
- The probability chart from CME Group highlights the diminishing likelihood of a rate cut in March.
EUR/USD Technical Analysis:
- EUR/USD exhibited a decline, breaking the lower boundary of a short-term rising channel at 1.0930.
- The pair moved towards the 200-day simple moving average, a crucial support at just above 1.0840.
- Maintenance of this support is imperative; failure may lead to a retracement towards 1.0770.
- If downward pressure eases and prices rebound, technical resistance is anticipated at 1.0930, followed by 1.1020.
- Further strength could shift focus to 1.1075/1.1095 and subsequently 1.1140.
STOCK MARKET ANALYSIS:
Market Overview:
- US stocks encountered challenges on Tuesday as investors remained attentive to the trajectory of interest rates.
- The lackluster start to the earnings season, particularly with big bank results, influenced market sentiment.
Performance Indicators:
- Dow Jones Industrial Average (^DJI) concluded the session down 230 points, influenced notably by Boeing’s (BA) negative performance (-7.89%).
- S&P 500 (^GSPC) experienced a 0.4% decline.
- Nasdaq (^IXIC) closed slightly lower despite intermittent shifts into positive territory, driven by movements in chipmakers Nvidia (NVDA) and Advanced Micro Devices (AMD).
Key Stock Movements:
- Goldman Sachs (GS) stock edged slightly higher following a reported fourth-quarter earnings increase of 51% year over year.
- Morgan Stanley (MS) shares dipped up to 4% during the session but posted fourth-quarter revenue that exceeded Wall Street expectations.
Upcoming Retail Sales Report:
- Investors await Wednesday’s retail sales report, anticipating its impact on the Federal Reserve’s data-driven policy decisions.
- Last week’s unexpected cooling in US wholesale inflation increased hopes for a potential interest rate cut in March.
Fed Governor’s Perspective:
- Fed Governor Chris Waller expressed belief in the Fed’s ability to lower interest rates in the coming year, contingent on inflation remaining in check.
- He emphasized that the timing and extent of rate cuts will hinge on incoming economic data.
Corporate Developments:
- A federal judge intervened in the merger deal between Spirit Airlines (SAVE) and JetBlue (JBLU) due to antitrust concerns.
- Spirit Airlines faced a significant 47% drop in its stock value following the news of the blocked merger.
Overall Sentiment:
- The market remains cautious and attentive to various factors, including corporate earnings, interest rate expectations, and economic data, influencing trading decisions and overall sentiment.
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