• 2024 GDP growth forecast seen at 0.8% (previously 1.2%)
• 2025 GDP growth forecast seen at 1.5%
• 2024 inflation forecast seen at 2.7%
• 2025 inflation forecast seen at 2.2%

In short, they are viewing softer growth and a further easing of inflation pressures. That being said, the 2025 forecast for inflation is still reflecting a projection above the ECB’s 2% target. On the growth projections, the main drag remains the German economy. The commission sees Europe’s largest economy only growing by 0.3% now compared to its previous 0.8% forecast in November last year.

This article was written by Justin Low at www.forexlive.com.

The sharp move higher in Treasury yields and the dollar yesterday resulted in a steep drop in gold. Of note, the fall took out the January low as well as the $2,000 mark. But at least for the time being, buyers are able to hang on as the 100-day moving average (red line) at $1,989.90 is not firmly broken just yet.

As mentioned earlier, the next leg higher in the dollar might be tougher to come by. And gold is part of that consideration as well, amid its correlation with bond yields for the most part. As such, it might require 10-year Treasury yields breaking its own 100-day moving average of 4.342% to really move the needle lower in gold.

That said, there are still some critical support layers that buyers can rely on even if we do see a continued drop this week. The December lows around $1,973-75 will be the first before the 200-day moving average (blue line) at around $1,965.54. Thereafter, the November low of $1,949 will come into play.

Gold is stuttering so far to start the new year. However, I still retain a more bullish conviction on the precious metal in the long-term. The structural view remains that gold is likely to shine once central bank rate cuts start being realised. It is a bet on the disinflation narrative essentially and I’d argue that right now, we’re just in a pit stop.

But for trading this week, the downside might not be done just yet. There is still US retail sales and PPI figures still to come later in the week. Those might be catalysts for traders to react further following the CPI yesterday.

This article was written by Justin Low at www.forexlive.com.

Yesterday,
the Nasdaq Composite sold off following a hot US CPI report
that sent Treasury yields and the US Dollar higher as the market priced out
rate cuts further. The most frightening part was that the Fed Chair Powell’s
preferred measure, the Core Services ex-Housing, jumped by 0.85% M/M which was
the biggest increase since April 2022. The market might even look past this
report as the Fed is not expected to restart hiking rates anyway, but it should
start getting harder and harder for the bulls to keep the conviction at these
levels.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq Composite
yesterday fell into the key trendline where we
have also the red 21 moving average for confluence. This is
where we can expect the buyers to step in with a defined risk below the
trendline to position for another rally into the all-time high. The sellers, on
the other hand, will want to see the price breaking lower to invalidate the
bullish setup and position for a drop into the 15150 support.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that besides the
trendline and the moving average, we have also the 50% Fibonacci retracement level
standing around the 15635 support. This gives the buyers another layer of
confluence. What happens here will likely decide where the market will go in
the next few weeks as a strong bounce should lead to a rally into the all-time
high, while a break lower will likely trigger a selloff into the 15150 level.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
buyers will need to break above the most recent swing high at 15765 to confirm
the rally into the all-time high. If the price fails and falls back into the
trendline, the chances of a downside breakout will increase.

Upcoming
Events

Tomorrow we will see latest US Jobless Claims figures
and the US Retail Sales. On Friday, we conclude the week with the US PPI data
and the University of Michigan Consumer Sentiment survey.

This article was written by FL Contributors at www.forexlive.com.

• Prior -0.3%; revised to +0.4%

That’s a big jump in industrial output on the month but it comes with a bit of a caveat. Of note, Ireland saw a 23.5% jump in industrial output on the month so that is skewing the overall data slightly. Looking at the breakdown, the outlier there sees a 20.5% increase in capital goods on the month. Meanwhile, durable consumer goods (+0.5%), energy (+0.3%) and non-durable consumer goods (+0.2%) also saw increases. The production for intermediate goods (-1.2%) was the only one to see a decline.

This article was written by Justin Low at www.forexlive.com.

No changes to the initial estimate as the euro area economy grounded to a standstill in Q4 last year.

This article was written by Justin Low at www.forexlive.com.

With the
US presidential election drawing closer, the question of which outcome would be
better for the global economy is gaining urgency. Both sides have their sound
strategies, but let’s focus on the impact on the dollar by taking a
closer look at the dollar index chart.

Analysts
suggest that a Trump victory would be a more bullish scenario for the dollar,
while a Biden re-election is seen as more neutral. Overall, the dollar is
expected to continue strengthening against major currencies ahead of the US
presidential election and depreciate afterward.

Why is
the former president beneficial to the dollar?

Donald
Trump reportedly considers imposing new trade restrictions with the EU if he
returns to the White House, essentially reigniting the trade wars.

This
includes the introduction of a minimum 10% tariff and countermeasures against
European taxes on digital services. In addition, he promises substantial
tariffs that could significantly affect trade with China.

Biden,
for his part, has already prepared new restrictions against China, which the
administration is ready to implement before the elections. Overall, the trend
towards protectionism has only just begun.

But what
about the Federal Reserve’s possible interest rate cut?

Amid continuing tensions in the Middle East and the
reluctance of the parties to agree on a peace plan, businesses face rising
logistics costs.

This
increase in transport costs is likely to be reflected in the prices of consumer
goods in the future. In this context, the regulator seems hesitant to address
the issue with an early rate cut.

For
instance, Atlanta Fed President Raphael Bostic, who is voting on the Federal
Open Market Committee’s policy decisions this year, suggests that the first
move might come sometime in the summertime.

However,
two factors could force the regulator to reconsider its stance. First, as has
been repeatedly pointed out, keeping rates at a high level affects not only the
population but also the commercial real estate market and regional banks.

As a
result, the latter’s paper losses have soared again to record levels. If
investors start withdrawing money, as they did last year, a banking crisis
could resume.

To avoid
this scenario, the regulator is likely to initially resort to printing more
money and may have to consider a sudden rate cut if that is not enough.

The
second potential pressure factor is the labor market. Officially, January’s
monthly employment report surprised economists with creating 353,000 new jobs, well above expectations.

However,
every month, there are reports of massive layoffs in various companies. Perhaps
some of the newly unemployed are not being considered, and not everything is as
rosy as it seems.

What
should traders do?

Frankly
speaking, it is impossible to be ready for every scenario, so it is more
reasonable to act depending on the developments, keeping an eye on
macroeconomic indicators and pre-election polls.

This article was written by FL Contributors at www.forexlive.com.

The laggard on the day is the Swiss franc, following the softer-than-expected inflation report here. USD/CHF is up 0.6% to 0.8806 now, running into a test of its 100-day moving average at 0.8807:

Besides that, the only other mover on the session has been the pound. GBP/USD is up 0.3% to 1.2660 after the UK jobs report earlier here. That said, the pair remains rangebound in the bigger picture as it settles back into the range between 1.2600 and 1.2800.

Elsewhere, EUR/USD and USD/JPY are both flattish at around 1.0774 and 149.38 respectively currently. The former continues to rest in and around the technical channels outlined here while the latter is waiting to see if there is any spark to ignite a test of the 150.00 mark.

It all comes down to the US CPI data later in the day now. That will be the key driver for trading sentiment in the sessions to come.

In other markets, stocks are down as traders heed some caution ahead of the main event. S&P 500 futures are lower by 20 points, or 0.4%, currently. Meanwhile, the bond market is rather lethargic with 10-year Treasury yields flat at 4.167%. Despite the slow mood there, things should pick up after the data release with eyes on the ceiling at the 4.20% mark potentially.

This article was written by Justin Low at www.forexlive.com.

Japanese
Candlesticks have been a crucial tool for Forex traders for many years. These
charting patterns offer valuable insights into market trends and price
movement, enabling traders to make well-informed decisions. Our article will
provide a comprehensive guide to understanding Japanese Candlesticks, including
the various common patterns and their practical application in Forex trading
strategies.

Fundamentals of Candlesticks

Prior to
going into the world of Japanese Candlesticks, it is needed to grasp their
historical background and inception. Candlestick charting has its roots in
Japan, dating back to the 18th century. It gained widespread recognition thanks
to the contributions of financial analyst Steve Nison.

The idea
behind candlestick patterns is to visually illustrate price movements during a
particular timeframe. Every candlestick holds crucial data regarding the
opening, closing, high, and low prices of a trading session.

A
candlestick is made up of three main parts: the body, upper shadow (wick), and
lower shadow (wick). The body shows the range between the opening and closing
prices, while the shadows indicate the high and low prices. Through careful
analysis of these elements, traders can acquire valuable insights into market
sentiment and possible price reversals.

Reversal
patterns can indicate a shift in trend direction, while continuation patterns
indicate a brief consolidation or retracement before the trend continues.
Through precise identification of these patterns, traders can make necessary
adjustments to their trading strategies.

Types of Common Candlestick
Patterns

There
are two main categories of Japanese candlestick patterns: single candlestick
patterns and multiple candlestick patterns. Traders should be aware of both
bullish and bearish patterns that may signal potential buying or selling
opportunities.

Therefore,
we put together a selection of the most popular candlestick patterns that we
believe will be valuable to you in forex trading. These patterns can
effectively indicate price reversals and breakout points in the market.

Single Candlestick Patterns

Single
candlestick patterns provide quick indications about the market sentiment. Some
notable examples include:

• Doji: Doji is well-known for its ability to balance between buyers and
  sellers, resulting in a candlestick that has an almost coincident open and
  close. A small, horizontal line on the chart represents the moment of
  market indecision, indicating a Doji’s appearance.
• Hammer: A hammer candlestick is a unique pattern that technical analysts
  use to indicate a possible bullish reversal in the trading of a financial
  security. A bullish reversal pattern formed by a small body and a long
  lower shadow. Its dependability becomes apparent when it emerges following
  a long period of decline and lines up with established price support
  levels.
• Shooting Star: A shooting star candlestick is a price pattern that occurs when the
  price of a security opens, rises, and then falls back down to a level
  close to the opening price. Shooting star candlestick patterns indicate a
  potential shift in price direction, suggesting a possible bearish trend.
  Shooting star candlesticks consist of a compact body, an extended upper
  tail, and a brief lower tail.

Multi-Candlestick Patterns

Multi-candlestick
patterns are formed by a combination of two or more consecutive candlesticks.
These patterns offer valuable insights into market reversals and continuations.
Examples of popular multi-candlestick patterns include:

• Engulfing Pattern: A bullish engulfing candlestick is a type of candlestick pattern
  characterized by a green candlestick that opens lower than the previous
  day’s close and closes higher than the previous day’s opening. One way to
  identify a potential trend reversal is by observing a small red
  candlestick followed by a larger green candlestick the next day. A
  reversal pattern where the second candle completely engulfs the prior
  candle.
• Three White Soldiers: This candlestick pattern is commonly used by traders to identify
  potential trend reversals or the continuation of an existing uptrend. A
  series of three candlesticks with minimal shadows at the top or bottom
  close at progressively higher levels, creating a distinct pattern.
• Evening Star: The Evening Star is a candlestick pattern that indicates a potential
  bearish reversal. It is formed by three candles: a large bullish
  candlestick, followed by a small-bodied candle, and finally a bearish
  candle. Evening Star patterns indicate that a price uptrend is approaching
  its conclusion. Contrary to the Evening Star, the Morning Star pattern is
  considered a bullish reversal candlestick pattern.

Applying Candlestick Patterns in Forex
Trading

Utilizing
Japanese Candlestick patterns in Forex trading can significantly enhance your
trading strategy. However, it’s essential to understand how to effectively
apply these patterns to maximize their benefits and mitigate risks.

• Timing Trades with Candlestick Patterns

One of the primary advantages of candlestick patterns is
their ability to help traders identify potential trade setups and market
reversals. By mastering the timing of trades using candlestick patterns,
traders can improve their entry and exit points, leading to more profitable
trades.

To effectively time trades, it’s crucial to combine
candlestick patterns with other technical indicators and price action analysis.
For example, if you spot a Hammer candlestick pattern forming after a prolonged
downtrend, you may wait for confirmation from other indicators, such as a
bullish divergence in the RSI or a bullish engulfing pattern on higher
timeframes, before entering a long position.

• Recognizing Price Levels

Another valuable aspect of candlestick patterns is their
ability to identify important support and resistance levels on the price chart.
By analyzing candlestick patterns near these key levels, traders can anticipate
potential reversals or breakouts, providing valuable trading opportunities.

For instance, if you observe a Doji pattern forming near a
significant support level on the EUR/USD chart, it could indicate indecision in
the market and a potential reversal in the downtrend. However, it’s essential
to wait for confirmation from other technical indicators or price action
signals before entering a trade to ensure higher probability setups.A personal
anecdote underscores the significance of patience when trading with Japanese
Candlestick patterns. Once, I noticed a Doji pattern forming on a major
currency pair, signaling potential market indecision and a reversal. While I
was tempted to enter a trade immediately, I exercised caution and waited for
confirmation from other technical indicators.

Ultimately,
my patience paid off as the Doji pattern was followed by a prolonged bearish
candle, indicating a continuation of the downtrend. By resisting the urge to
rush into a trade and carefully analyzing the market conditions, I avoided a
potentially costly mistake.

• Risk Management Using Candlestick Patterns

Effective risk management is crucial for long-term success
in Forex trading. While candlestick patterns can offer valuable insights into
market sentiment and potential price movements, they should always be used in
conjunction with proper risk management techniques.

Traders can manage risks using candlestick patterns by
setting stop-loss orders based on the pattern’s reliability and their risk
tolerance. For example, if you enter a trade based on a bullish engulfing
pattern, you may place your stop-loss below the low of the engulfing candle to
limit potential losses if the trade goes against you.

While
candlestick patterns provide valuable insights into market sentiment and price
movements, it’s essential to consider the broader market context when making
trading decisions. Factors such as economic news, geopolitical events, and
market sentiment can influence the reliability of candlestick patterns.

Ignoring
the larger market context may result in misleading signals and potential
financial losses. Therefore, traders should always assess candlestick patterns
in conjunction with other technical indicators, fundamental analysis, and
market trends to make well-rounded trading decisions.

In
conclusion, mastering the application of Japanese Candlestick patterns in Forex
trading requires a combination of technical analysis skills, risk management
strategies, and patience. By timing trades effectively, recognizing important
price levels, and considering the broader market context, traders can harness
the power of candlestick patterns to improve their trading performance and
achieve consistent profitability.

This article was written by FL Contributors at www.forexlive.com.

It’s a slight drop compared to December with it being the 25th straight month below the 50-year average of 98. There are lingering concerns surrounding the economy and inflation but small business owners are hoping for a soft landing still.

This article was written by Justin Low at www.forexlive.com.

USD

• The Fed left interest rates unchanged as
  expected while dropping the tightening bias in the statement but adding a
  slight pushback against a March rate
  cut.
• Fed Chair Powell stressed
  that they want to see more evidence of inflation falling back to target and
  that a rate cut in March is not their base case.
• The latest US GDP beat
  expectations by a big margin.
• The US PCE came
  mostly in line with expectations with the Core 3-month and 6-month annualised
  rates falling below the Fed’s 2% target.
• The US NFP report
  beat expectations across the board by a big margin.
• The ISM Manufacturing
  PMI
  surprised to the upside with the new orders index, which is considered a
  leading indicator, jumping back into expansion. Similarly, the ISM Services PMI beat
  expectations across the board with the employment sub-index erasing the prior
  drop and prices paid jumping above 60.
• The US Consumer
  Confidence report came in line with expectations but
  the labour market details improved considerably.
• The market now expects the first rate cut in May.

CAD

• The BoC left interest rates unchanged at
  5.00% as expected and dropped the language about being prepared to hike if
  needed.
• The latest Canadian CPI beat expectations across the board with
  the underlying inflation measures remaining elevated.
• On the labour market side, the latest report beat
  expectations but we saw a contraction in full-time employment and a fall in
  wage growth.
• The Canadian PMIs improved in
  January although they remain both in contractionary territory.
• The market expects the BoC to start
  cutting rates in June.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD remains
stuck in a big range between the 50% Fibonacci retracement level and
the resistance around
the 1.3540 level. There’s not much to do here other than waiting for a breakout
but in the meantime, traders can “play the range” by buying at support and
selling at resistance.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the pair recently
bounced on the 61.8% Fibonacci retracement level of the entire US NFP rally.
The sellers will want to see the price breaking lower to increase the bearish
bets into the 50% Fibonacci retracement level. The buyers, on the other hand,
will keep on stepping in around the 61.8% Fibonacci retracement level to
position for a rally into the 1.3540 resistance targeting a break above it.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the price
has been diverging with
the MACD
falling into the 61.8% Fibonacci retracement level. This is generally a sign of
weakening momentum often followed by pullbacks or reversals. In this case, it
might be a signal of an impending reversal, but the price will need to break
above the 1.35 handle to confirm it. In the meantime, we could have another
smaller range here.

Upcoming Events

Today we have the main event of the week, that is,
the US CPI report. On Thursday we will see latest US Jobless Claims figures and
the US Retail Sales. Finally, on Friday, we conclude the week with the US PPI
data and the University of Michigan Consumer Sentiment survey.

This article was written by FL Contributors at www.forexlive.com.