Article by: ETO Markets
A study of the US industrial and service sectors performed better than expected, indicating that both segments of the US economy are expanding, and this gave the market a positive start to the day. Earnings from a number of Dow Jones components and Friday's inflation snapshot from the Personal Consumption Expenditures report will be crucial for the remainder of the week.
The US S&P Global Manufacturing Purchasing Managers Index for January reached a 15-month high of 50.3. This figure indicates a rotation toward expansion in the manufacturing sector, as it was significantly higher than the prior print of 47.9. If the reading is greater than 50, the industry is growing.
Moreover, the preliminary GDP readings for Q4 are expected to be 2% annually, down from 4.9% in Q3. On the same day, December Durable Goods Orders are expected to increase by 1.1% as opposed to the previous print of 5.4%.
In Australia, Businesses have typically expected a reduction in price increase during the previous six months, according to the Reserve Bank of Australia's Bulletin, with the assumption that prices will, on average, continue above the RBA's inflation target range of 2.0–3.0%. The Bulletin also states that slower demand growth and more competition are expected to be contributing reasons to a further slowdown in the growth of firms' prices in the future quarters.
It's critical to emphasize that market players have already factored in roughly 120 basis points of rate cuts for this year, ahead of the impending ECB event. On the other hand, there is a developing disagreemenp0t on when the European Central Bank would lower the policy rate for the region between participants in the market and ECB rate-setters.
The EUR/USD pair seems to have immediate support around the 38.2% Fibonacci retracement at the … level, with the major support at the … level following. The pair may traverse the region surrounding psychological support at … and the 50% retracement level at … if the primary support collapses.
On the upside, a major level at … further complicates the path, and the psychological level at … acts as an instant barrier. Bullish momentum in the pair could be stimulated by a successful breach over the key barrier.
The Manufacturing PMI for Australia improved, rising from 47.6 to 50.3. The Services PMI increased as well, going from 47.1 to 47.9. In comparison to December's 46.9, the Composite PMI increased to 48.1.
However, the softening of the labour market, albeit still reasonably tight, and the December decrease in inflation indicators appear to have cemented the view among market investors that the RBA would maintain its rate-hike stance, at least until February.
The AUD/USD pair is currently testing the higher end of the range, as seen by the 4-hour chart. The 200-SMA is at … , and the 100-SMA is near … , coming up next on the upside. This region's performance reveals a likely move to the tops around ... There is still a fair area of disagreement around … when looking south. When this zone is crossed, there is no meaningful disagreement until ...
