The Forex Market Wrap is here!
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Forex Market Wrap: 3rd February
This week, three central banks announced their rate decisions: the Federal Reserve, the Bank of England, and the European Central Bank. In addition, the Non-Farm Payroll data was released. Here’s a breakdown of what happened.
The Federal Reserve hiked interest rates to 4.75% and discussed the market being in a deflationary environment. However, their focus was primarily on the NFP data that was to be released. The NFP data came in better than expected, with jobs rising to 517k from 260k and the unemployment rate falling to 3.4% from 3.5%. This is the opposite of what the Federal Reserve wanted to see and may force them to take further action.
The Bank of England hiked interest rates from 3.50% to 4.00% reluctantly, as they still see a recession in the UK, but expect it to be of a shorter duration. The ECB also hiked interest rates by 50 bps, bringing their rate to 3.00%. President Lagarde expects rates to continue to rise to combat the rising inflation in Europe.
The USD Index failed to close below the 101.50 level this week, as a strong jobs number brought the bulls back in. The price now looks set to move higher, back towards the resistance at 103.75.
AUDUSD was one to watch, as the price traded up to the 0.7100 level. However, the opportunity for the price to fall back towards the previous highs of 0.6875 now looks likely.
The price of USDJPY remained range-bound this week, but if the USD continues to strengthen, we could see USDJPY break through the key 131.00/131.50 resistance and trade towards 135.00.
GBPJPY was a currency to watch this week, but the price failed to trade above the 162.00 highs, leading to a break back towards the 156.00 lows.
In conclusion, this week’s central bank decisions and data releases provided a mixed bag for the forex market. The Federal Reserve, the Bank of England, and the European Central Bank all hiked interest rates, but the NFP data came in better than expected, bringing the bulls back into the USD Index. AUDUSD and GBPJPY were also in focus, with the latter failing to trade above key resistance levels. Stay tuned for further updates in the coming weeks.
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