Fed Chair Powell to testify today

Fed Chair Powell is set to testify later on today. The Fed Chair’s testimony is customary and thus is not out of the ordinary, however with the new US administration, lawmakers may attempt to pressure the Fed Chair to provide clarity on the bank’s monetary policy path for the rest of the year. Moreover, we would not be surprised to see the Fed Chair being asked to comment on the possible risks the administrations economic policy such as tariffs and their possible risk to inflation in the US economy. Overall, should Powell’s testimony be perceived as hawkish in nature, i.e showcasing concern about a possible uptick of inflation in the economy, then it may aid the greenback and vice versa. In our opinion, Fed Chair Powell has proven to be very diplomatic in his remarks and thus may attempt to strike a balance in his testimony and his replies to members of Congress.On a geopolitical level, according to Reuters, President Trump has stated that he would cancel the ceasefire agreement between Israel and Hamas should all hostages not be released by Saturday. The possibility of the Middle-East conflict sparking up again could lead to safe haven inflow into the precious metal.Over in Europe, we would like to note the comments made by ECB President Lagarde last evening. In particular, ECB President Lagarde stated per Bloomberg that “Greater friction in global trade would make the euro area inflation outlook more uncertain.” The comment’s made by ECB President Lagarde are interesting in their own right, and thus may warrant closer attention should they be echoed by other policymakers. In the UK we would be interested to see the comments by Governor Bailey later on today.

The S&P 500 appears to be moving in a predominantly sideways fashion. We opt for a sideways bias for the index and supporting our case is the RSI indicator below our chart which currently registers a figure close to 50, implying a neutral market sentiment. For our sideways bias to be maintained we would require the index’s price to remain confined between the 5930 (S1) support level and the 6100 (R1) resistance line. On the flip side for a bullish outlook we would require a clear break above the 6100 (R1) resistance line with the next possible target for the bulls being the 6250 (R2) resistance level. Lastly, for a bearish outlook we would require a clear break below the 5930 (S1) support level, with the next possible target for the bears being the 5770 (S2) support base.

WTICash appears to be moving in a sideways fashion after clearing our resistance now turned to support at the 71.75 (S1) level. We opt for a relatively sideways bias for the commodity’s price and supporting our case is the RSI indicator below our chart which currently registers a figure near 50, implying a neutral market sentiment. For our sideways bias to be maintained we would require the commodity’s price to remain confined between the 71.75 (S1) support level and the 76.80 (R1) resistance line. On the flip side we would immediately switch our sideways bias in favour of a bearish outlook in the event of a break below the 71.75 (S1) support level, with the next possible target for the bears being the 66.20 (S2) support line. Lastly, for a bullish outlook we would require a clear break above the 76.80 (R1) resistance level with the next possible target for the bulls being the 81.60 (R2) resistance line.

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Today we note the release of Norway’s GDP rate for Q4 in the European session, Canada’s Building Permits for December in the American session and later on oil traders may be more interested in the release of the weekly API crude oil inventories figure. On the monetary front, we note that BoE MPC member Mann, BoE Governor Andrew Bailey, Cleveland Fed President Hammack and NY Fed President Williams are scheduled to speak.