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World’s largest currency hoard, Chinese foreign currency reserves shrunk by $99.5 billion to $3.23 trillion in January according to People’s Bank of China (PBOC) statement released on Sunday . The stockpile declined to the lowest since 2012 as China started selling Dollars to control the Yuan depreciation and to stem the capital outflow. However, the figure of $3.23 trillion is slightly better than the forecasted $3.21 trillion by the economic analysts.
The number of new jobs created in US increased by 151,000 in January which came lower than the forecast for 189,000, while the unemployment rate fell to the almost 8 year low at 4.9 percent against the forecast of 5 percent according to the released statement of US ‘Bureau of Labor Statistics’ .The average hourly earnings m/m rose by 0.5% against the forecast 0.3 percent. This signals a resilience in the current U.S. job market .It also helps stabilize the outlook for inflation and growth going forward, given that wage rate growth can act as a precursor to income and consumer spending growth.
Argentina has made a $6.5 billion cash offer to holders of the bonds that the country defaulted on in 2002. Argentina has been shut out of the global bond markets, since it defaulted on $100 billion of sovereign debt it owed at the time. Legal battled between the country and the investors(including large US hedge funds) has continued over the years. New Argentinian President Mauricio Macri has indicated a willingness to resolve the protracted dispute in a bid to bring the Argentinian economy back into the international fold.
Investors and traders shall be keenly awaiting any statements from a key meeting between Venezuelan Oil Minister Eulogio Del Pino and Saudi Oil Minister Ali – Al Naimi, following discussions between the Venezuelan, Omani and Qatari ministers earlier in the past week. The oil markets have been trading in a volatile range over the past few sessions based on perceptions of an emergency meeting or an OPEC led production agreement between OPEC and non-OPEC producers. The importance of this meeting becomes greater, in light of the volatility in the Crude Oil Market and the expectations attached to initiatives the market expects from producers, so that the supply demand imbalance can be addressed.
Another key event the market shall focus on in the coming week includes the testimony of Fed Chief Janet Yellen to the House Financial Service Committee at Capitol Hill. The markets shall be keen to pick insights into the future of US interest rate policy, after conflicting signals from different central banks around the world.
EURUSD was strongly bullish last week as it surged 2.95 percent over the previous week .Last week , Euro posted its largest weekly gain since March,2015 against the US Dollar despite losing some ground on Friday after the release of the US labor market report.
Fig: EURUSD Daily Technical Chart
EURUSD crossed above SMA50 on the weekly chart last week with a major spike through the average. On the daily chart the price crossed both 50 day and 200 day moving averages and Stochastic also turned up higher. The immediate resistance of EURUSD is at 1.1250 - the breakout of which would spur the current bullish momentum further. It has formed interim support at the 1.1120 level. The major support of EURUSD is at the 1.1050 level - breakdown of which would invalidate the current bullish scenario. The weekly bias is bullish. A sustained move above 1.1200 would open up the way towards the next significant resistance level at 1.1430.
Buy Digital Call Options above 1.1250. Buy Digital Put Options on a break below 1.1040 and/or above 1.1370.
GBPUSD gained 1.80 percent against the Dollar last week despite trimming gains over the last two days of the week. Last week, it created a high at 1.4667 boosted by a strong rally but retreated from there after the release of ‘MPC Official Bank Rate Votes’ details on Thursday, as no MPC member voted to increase the interest rate. On Friday, it fell further on the back of the US employment report.
Fig: GBPUSD Daily Technical Chart
On the Daily chart, price still remains below SMA50 and SMA200. Stochastic started to turn up higher after having strong rallied towards the upside last week. GBPUSD completed 50 percent retracement of the selloff from 11th December 2015 to 21st January 2016 last week at the 1.4667 level. Currently SMA50 at 1.4700 is working as immediate resistance. Major support is at 1.4350 breakdown of which might resume the previous selloff. It formed interim support at the 1.4450 level. A sustained move above 1.4650 might spur further advance towards the 1.4800 level.
Buy Digital Calls above 1.4675. Buy Digital Puts on a break below 1.4580 and/or above 1.4770.
USDJPY posted the greatest weekly drop since October, 2008 as USD plunged 3.45 percent against the Japanese Yen last week. It happened just a week after the Yen weakening on adoption of negative interest rate by BOJ.
Fig: USDJPY Daily Technical Chart
USDJPY has been strongly bearish after hitting and being rejected by the strong resistance zone at 121.67 on 29th January,2016 .It ended last week at the 116.81 level after making an abortive attempt to go higher. The weekly bias in USDJPY is strongly bearish. The next major support level is at 115.94 level which might be evacuated easily if current bearish momentum sustains. A sustained move below the 116.00 level might open the way towards 110.00.
Buy USDJPY Digital Put Options below 115.65. Buy USDJPY Digital Call Options above 116.80 and/or at/below 113.50.
Gold recorded its highest weekly gain since July, 2013 last week. It climbed by 5.15 percent last week as investors are rushing towards gold as a safe haven, seeking refuge from from plunging global stocks in current fragile economic condition, as well as volatile currency markets.
Fig: Gold Daily Technical Chart
On the Daily chart, price has crossed above 50 day and 200 day moving averages and stochastic has also turned higher. Price crossed above the SMA50 on weekly chart with a strong up-move last week. Gold ended higher at the 1173.06 level breaching the 1169.00 level. The next significant level is the high of 16th October, 2015 at 1191.42. If the current bullish momentum sustains, it is expected that Gold may trade above the 1200.00 level soon.
Buy Digital Call Options above 1170.00. Buy Digital Put Options on a break of 1158.00 and at/above 1186.00.
Crude Oil dropped 8.06 percent last week propelled by the overwhelming supply of Oil and a lack of initiatives to cut production significantly.
Fig: Crude Oil Daily Technical Chart
Crude Oil was rejected by the resistance at 34.80 last week and resumed falling lower in a choppy market. The break of interim support at 29.40 would pave the way towards the 13 year low at the 25.80 level. The weekly bias remains strongly bearish as the price was rejected from 50 day moving average on the Daily chart.
Buy Digital Put Options on a break below 29.00. Buy Digital Call Options if the market sustains above 30.60 or at/below the 26.80 level.