/market_analysis/forex-market-analysis-us-dollar-dynamics-rate-speculations-18-jan-2024/

Forex Daily Analysis: Currency Strength & Stock Market Shifts

CURRENCIES:

Overview:

The U.S. dollar regained strength against major counterparts on Tuesday.
Supported by higher U.S. Treasury yields, market expectations for a March interest rate cut fell below 59%, down from 77% just one day prior.

Fed Governor’s Comments:

Fed Governor Christopher Waller’s statement suggested a cautious approach, indicating that the Federal Open Market Committee (FOMC) doesn’t need to ease its stance as rapidly as in the past.
This stance contributed to the strengthening of the U.S. dollar.

Currency Performance:

Euro, British pound, and Australian dollar experienced sharp declines against the U.S. dollar.
Notable thresholds were breached during this pullback.

Fed March Meeting Probabilities:

The probability chart from CME Group highlights the diminishing likelihood of a rate cut in March.

EUR/USD Technical Analysis:

EUR/USD exhibited a decline, breaking the lower boundary of a short-term rising channel at 1.0930.
The pair moved towards the 200-day simple moving average, a crucial support at just above 1.0840.
Maintenance of this support is imperative; failure may lead to a retracement towards 1.0770.
If downward pressure eases and prices rebound, technical resistance is anticipated at 1.0930, followed by 1.1020.
Further strength could shift focus to 1.1075/1.1095 and subsequently 1.1140.

Market Overview:

US stocks encountered challenges on Tuesday as investors remained attentive to the trajectory of interest rates.
The lackluster start to the earnings season, particularly with big bank results, influenced market sentiment.

Performance Indicators:

Dow Jones Industrial Average (^DJI) concluded the session down 230 points, influenced notably by Boeing’s (BA) negative performance (-7.89%).
S&P 500 (^GSPC) experienced a 0.4% decline.
Nasdaq (^IXIC) closed slightly lower despite intermittent shifts into positive territory, driven by movements in chipmakers Nvidia (NVDA) and Advanced Micro Devices (AMD).

Key Stock Movements:

Goldman Sachs (GS) stock edged slightly higher following a reported fourth-quarter earnings increase of 51% year over year.
Morgan Stanley (MS) shares dipped up to 4% during the session but posted fourth-quarter revenue that exceeded Wall Street expectations.

Upcoming Retail Sales Report:

Investors await Wednesday’s retail sales report, anticipating its impact on the Federal Reserve’s data-driven policy decisions.
Last week’s unexpected cooling in US wholesale inflation increased hopes for a potential interest rate cut in March.

Fed Governor’s Perspective:

Fed Governor Chris Waller expressed belief in the Fed’s ability to lower interest rates in the coming year, contingent on inflation remaining in check.
He emphasized that the timing and extent of rate cuts will hinge on incoming economic data.

Corporate Developments:

A federal judge intervened in the merger deal between Spirit Airlines (SAVE) and JetBlue (JBLU) due to antitrust concerns.
Spirit Airlines faced a significant 47% drop in its stock value following the news of the blocked merger.

Overall Sentiment:

The market remains cautious and attentive to various factors, including corporate earnings, interest rate expectations, and economic data, influencing trading decisions and overall sentiment.