US Inflation Fears & Omicron to Drive Trading this Week
GBP/USD => The pair struggles below 1.36
EUR/USD => The fall 0.2% in early trade
Oil => Oil supported by supply disruptions
USD rises on inflation concerns
US dollar is rising at the start of the week after seeing its biggest daily fall in 6-weeks on Friday. Weaker than expected US jobs data hurt demand for the greenback at the end of last week, as 199k new jobs were added to the US economy, well below the 400k that analysts expected. Stronger than forecast wage data kept inflation concerns alive, which together with better-than-expected unemployment numbers mean that the Federal Reserve could still raise interest rates sooner rather than later. US inflation data and Fed speakers will be under the spotlight this week.
| U.S Non-farm payroll | Actual: 199k (50k) | Previous: 249k |
| U.S. Unemployment | Actual: 3.9% (0.2%) | Previous: 4.1% |
Where next for GBP/USD?
GBP/USD has been extending its rebound from 1.3160 hit in early December. However, the run higher appears to have run into resistance around 1.36 and is easing lower at the start of the week. Even so, the move over the 100 sma, combined with the bullish RSI are keeping buyers hopeful of further gains to come. Immediate resistance can be seen at 1.36, Friday’s high, ahead of 1.37 the November high and 1.38 round number and high October 29. On the flip side, support can be seen at 1.3560 the 100 sma with a breakthrough here opening the door to 1.3510 November 18 high and 1.3395 the 50 sma.
Euro looks to investor confidence data
EUR/USD rose to a two-week high on Friday following weak U.S jobs data and after eurozone inflation jumped to a record high. Inflation rose to 5% in December compared to the same month last year amid surging energy prices. ECB policymakers could be pushed towards a less dovish position should energy prices continue to rise in the coming months.
Today, EUR/USD is struggling ahead of EU investor sentiment data. Expectations are for investor morale to fall.
| EU Investor confidence | Expected: 12 (1.5) | Previous: 13.5 |
Oil edges higher, Omicron concerns cap gains
Oil trades high on Monday, however rising Omicron cases are prompting fears over the fuel demand outlook. With China confirming its first cases of in community spread of Omicron, in addition to tighter lockdown restrictions in the northern city of Tiajin, fuel demand in China, the world’s largest importer of oil could soon be affected.
However, supply disruptions in Kazakhstan and Libya are offering support to oil prices, offsetting Omicron’s fears for now. The fact that OPEC+ is failing to keep up with demand growth is also supporting the price.
Support for WTI crude oil can be found at 78.00 (round number) and 76.90 (50 sma).
Resistance can be seen at 80.00 (round number) and 84.00 (November high).
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