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This week traders will once again focus on US inflation. There will be plenty of opportunities to trade the dollar as we get several key economic data releases. On Friday the US December non-farm payrolls were a disappointment at 199K (400K expected) but this didn’t stop the traders to bid the dollar rivals higher. This is once again a reminder of what really counts in trading. Yes, it’s the price action. We only trade what we see, not what we expect to see. This week we have plenty of opportunities to do just that as there are several key macro news events that have the potential to move the markets. On Tuesday we’ll have the Fed Chair Powell testifying and then on Wednesday there’s the US CPI releases and on Thursday we get the US PPI numbers. The week ends on Friday with US retail and consumer data which again should provide us with added volatility as markets will be looking for hints whether the inflation is likely to continue or to peak. By reading further you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.


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EURAUD 8h chart 01 10

EURAUD retraced a bit in Friday’s trading and is now trading relatively close to a key support level (1.5730) while there’s another support level at 1.5739. SMA(20) in 4h chart coincides with the bracket created by these two support levels. As we noted earlier EURAUD is bullish above this area. However, as always, we are only interested in the long side if price action confirms our bullish thesis. There’s no point in buying a market if the price just keeps on dropping. We need to see some evidence of buyers taking control of the market, otherwise, it makes more sense to look for new opportunities elsewhere. If we see this area violated it is likely that the pair retraces deeper, perhaps to the 1.5660 – 1.5690 range. Edit: the support we were referring to was 1.5730, not 1.5702.

Gold chart 4h 01 10

Gold has been swinging pretty nicely in the 4h chart providing day traders great opportunities on both sides of the market – long and short. It’s been our view that gold is bullish above the 1784.82 support. Now the time has come to see if our hypothesis is supported by empirical evidence. Friday’s move below the above-mentioned support was quickly rejected and the price rallied. Now, however, the uptrend line that used to support the market has been a reason to sell and push the price into a retracement. If the market now proceeds to make a lower low (below 1782.59), then there’s bearish evidence against our thesis and we have to conclude that the market could move deeper before buyers get interested in it. Alternatively, if XAUUSD breaks above the 1798.64 resistance we can again conclude that the market is bullish. The other key support and resistance levels for gold are 1753, 1831.66 and 1848.76.

DAX 8h chart 01 10

DAX is trading relatively near to its all-time high. In the 8h chart, the market is in an uptrend and at the time of writing this, moves between a support level and an SMA(20). If the bulls want to see new ATH prints they need to sustain the intraday uptrend and keep on violating resistance levels. The candle formation from last Wednesday (January 5th) is bearish which could invite short sellers to try their luck near the 16287.15 high. If the bids get softer then the bulls are easily converted from the green team to the red team – or at least some of them will take profits near the resistance level should this happen. The key support and resistance levels in DAX are 15060, 15796.20, 15861, 16154.90 and 16287.15.

Macro Drivers for the USD As the most followed, invested and traded markets for risky assets are priced in the USD it is helpful to understand what macroeconomic factors impact the other side of the equation, the USD. Whether we are trading EURUSD, XAUUSD or US equity CFDs the factors impacting the dollar, the nominator in the equation, have a significant role in the formation of all medium to long-term price action. The following table summarises the most important fundamentals.

The Federal ReserveFed has started tapering and expects it to end in the summer of 2022. The central bank was forced to change its views on inflation being transitional inflation traders expect the first hike in June 2022 (the probability of a hike is 80.9% at the time of writing this).
StimulusThe US lawmakers have authorised approximately five trillion dollars of economic stimulus since the beginning of the pandemic. Now, US Congress has passed a $1.2 trillion infrastructure spending plan.
YieldsIn Q3 and Q4 2021 the benchmark 10-year US Treasury yield ranged between 1.1720% and 1.6830%. The hottest inflation readings since 1982 have pushed the 10 yr. yield higher as bonds have been selling off.
EmploymentThe December non-farm payrolls increased by 199K instead of 400K expected by the analyst consensus while the unemployment rate was a positive surprise at 3.9% (4.1% expected). Average hourly earnings came in at 0.6% (0.4% expected) moving the annual rate to 4.7% (4.2% expected).
InflationThe annual headline inflation reading for November at 6.8% (6.2% previous) is the highest CPI print in almost 40 years. The core CPI (all items less food and energy) moved to 4.9 per cent y/y (4.6% previous) This was in line with market expectations and was the biggest annual increase in core consumer prices since June 1991.

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 The Next Main Risk Events

  • USD – Fed Chair Powell Testifies
  • USD – CPI and Core CPI
  • USD – 10-yr treasury bond auction
  • USD – PPI and Core PPI
  • Unemployment claims

For more information and details see the TIOmarkets economic calendar here

 Market News & Facts 

  • ADP Employment Change 807K (405K expected)
  • US unemployment claims 207 (199k expected)
  • Bitcoin lower on Khazakstan upheaval
  • US inventories weigh on oil
  • US ISM Manufacturing PMI 58.7 (60.0 expected)
  • US JOLTS Job Openings 10.56M (11.06 expected)
  • OPEC not expected to deviate from earlier output plans
  • Biden: US to act decisively if Russia attacks Ukraine
  • Trading in Evergrande shares halted in Hong Kong
  • US Durable Goods Orders m/m 2.5% (1.9% expected)
  • US Core PCE inflation 0.5% (0.4% expected)
  • US Final GDP 2.3% (2.1% expected)
  • US CB Consumer Confidence 115.8 (111.1)
  • Canadian Retail Sales m/m 1.6% (1.0% expected)
  • Canadian Core Retail Sales m/m 1.3% (1.6% expected)

Trade Safe!

Janne Muta
Chief Market Analyst

Open a VIP Black account now at TIOmarkets.com. We want you to be able to exploit trading opportunities in financial markets with 0 commission and tight spreads. Take advantage of the best trading account in the industry: Tiomarkets VIP Black. For more details on this truly exceptional offering see here. For more analysis and commentary, visit our YouTube channel where you can find market commentary videos to support your learning and growth as a trader. 

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DISCLAIMER TIOmarkets offers exclusively consultancy-free service. The views expressed in this blog are our opinions only and made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyzes and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with any legal requirements for financial analyzes and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval. FX and CFDs are leveraged products. They are not suitable for every investor, as they carry a high risk of losing your capital. Please ensure you fully understand the risks involved. All the prices in this report are CFD prices based on price charts provided by TIOmarkets unless otherwise stated. 

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