Forex fundamental analysis

A review of last week's important events 

Last week was the first working week of 2023. As mentioned in last week's analysis, due to the banks' reopening, on the first days of the week, the symbols were able to have good movements and a growing trend, which led to good trading opportunities for the traders.

This week, the published US employment data was very well. On Wednesday, the US employment status was published at 10.47 million, strengthening the US dollar in related symbols. On Thursday, two important data of the private and nonfarm sector employment change report - ADP and the unemployment claim index were both published very well, and USD continued to strengthen, such that the gold symbol, Dow Jones stock indices, Nasdaq, and EURUSD all experienced good drops until the USDJPY symbol showed a decent rise till the end of Thursday.

On Friday, due to the release of good data in the last two days, traders had included the anticipation of good NFP data in the price. And for the dollar to continue its strong path, the NFP data should have been released far beyond expectations. However, despite the release being good, this data was published slightly above expectations because the number was considered for the dollar-related symbols' price. Such process is called "Anticipating news in the financial market." So, since the release of good employment data on Friday, the dollar weakened, and a symbol like gold regained its good downward movement on Wednesday and Thursday.

On Wednesday, when the Federal Reserve's monetary policy statement was published, this institution emphasized its aggressiveness on interest rates again, as before, and greatly reduced the possibility of a rate cut at the end of 2023, reducing that possibility to virtually zero.

However, contrary to the adequate employment data, the PMI data of the ISM institute was not good. On Wednesday, the PMI of the manufacturing sector came out at 48.4. But on Friday, the non-manufacturing sector's PMI, which the market expected to be 55, was released at 49.6 and gave the US an actual recession warning, and USD weakened extremely in related symbols.

Note that a recession in the US can change the dollar's behavior, i.e., if the traders give the possibility of a recession, the US dollar can be in demand as a safe asset. Therefore, one should pay attention to the traders' behavior during the recession.

The economic calendar review from January 9 to 13

The most important data and events are related to the US dollar in the coming week. USD can make good fluctuations this week as well.

Mr. Powell, the US Federal Reserve's chairman, will give a speech on Tuesday at 02 pm UTC. He will most likely maintain his previous stance as well as repeat and emphasize the last points.

However, this week's most important data, the US inflation index for December, will be published on Thursday at 01:30 pm. Annual Core Consumer Price Index -Core CPI is (Previously: 0.6% | Forecast: 5.7%) and Monthly Core Consumer Price Index -Core CPI (Prev: 0.2% | Fore: 0.3%) and Consumer Price Index - CPI Annual (Prev: 7.1% | Fore: 6.5%), Consumer Price Index - CPI monthly (Prev: 0.1% | Fore: 0.1%). This inflation data is significant because it is the Federal Reserve's policy basis in economic stability and inflation control.

After last month's inflation data release, which was accompanied by a decline, analysts believed that inflation has distanced itself from its peak and interest rates will rise at a slower pace, and they expected the Federal Reserve's final interest rate to be below 5%, but the Federal Reserve announced its final rate higher than market expectations and also dismissed the possibility of a rate cut in 2023. Therefore, the US dollar became strong at the end of 2022.

If inflation continues its downward trend this month, we can assume that analysts and traders expect the Federal Reserve to slightly change its policies and reduce the final rate, and as a result, the US dollar will weaken in related symbols, but if the inflation data rises again, the dollar can strengthen.

During the inflation data release, symbols related to the dollar may fluctuate a lot; in such conditions, capital management is very important.

On Friday at 03 pm, the University of Michigan's consumer sentiment index for January (prev: 59.7 | fore: 60) and the University of Michigan's consumer expectations index for January (prev: 59.9 | fore: 60) will be published.