The Brazilian real was the best-performing currency of the 20 global currencies we watch on Friday, while the Russian rouble was the worst. The New Zealand dollar led the major currencies, while the US dollar lagged.
U.S. Dollar Index
Despite a fairly positive nonfarm payrolls (NFP) data, the US Dollar Index (DXY) fell by 1% on Friday.
Aspects that traders may experience
Even while the NFP data showed a significant increase in employment in December, it also revealed a slowing in pay growth. Analysts also noted that since seasonal factors were the main reason employment surfaced, future reports would likely be substantially lower. After the Institute for Supply Management (ISM) reported that its non-manufacturing PMI declined from 56.5 in November to 49.6 in December, the U.S. dollar continued to fall. Since May 2020, the services PMI has not done so, indicating deterioration in the industry that accounts for more than two-thirds of U.S. economic activity. As investors thought that the Federal Reserve (Fed) will pause the rate rise pace since the economy is faltering, DXY continued to fall throughout the Asian session. In February, there is a 25% likelihood of a 50 basis point (bps) increase, down from a 50% possibility a month earlier, according to Reuters’ analysis of the Fed fund futures market. DXY will probably move in the direction of 100.00 if it breaks below the crucial support level around 103.40–103.00.
XAUUSD
The U.S. dollar declined on Friday as U.S. economic data confirmed predictions of a less hawkish Fed policy, which led to a rise in gold prices of 1.77%, reaching its highest level in seven months.
Aspects that traders may experience
The XAUUSD was boosted by a decrease in US Treasury rates. Jim Wyckoff, a senior analyst at Kitco Metals, said that gold might move sideways to higher in the first quarter after hedge funds showed renewed interest in buying long positions at the beginning of the year. The weaker U.S. dollar made buying gold abroad more accessible throughout the Asian session, which saw gold prices jump further. On Tuesday at 2:00 PM GMT, Fed Chair Jerome Powell will deliver a speech at the central bank conference in Stockholm. This week’s release of the Consumer Price Index will provide more hints on the rate of rate increases. Near 1,880, XAUUSD comes up against fairly strong resistance, and a short-term correction is likely.
EURUSD
On Friday, the euro rose 1.18% but failed to hold over 1.07000.
Aspects that traders may experience
The market is betting that the Fed will be less hawkish in Q1 and Q2, which has increased risk sentiment. As a result, risky currencies like the euro and the pound surged on Friday. The economic calendar for the eurozone is currently very light. At 10:00 a.m. GMT, unemployment numbers are the only significant event. Bulls are aiming towards 1.07000, although a brief drop in the direction of 1.06300 is anticipated in the near future.