The main market tendency today is that the US dollar is rising against its major peers and riskier assets such as stocks and oil are plummeting.
Daily News: lots of news after the weekend
- North Korea surprised again. The country is building its nuclear weapon. Despite an agreement between the US and NK, North Korea doesn’t want to lose its power. Tensions are escalating.
- Some comments on trade tensions. Mr. Trump said that "the European Union is possibly as bad as China, only smaller". "They send a Mercedes in, we can't send our cars in. Look what they do to our farmers. They don't want our farm products. Now in all fairness, they have their farmers ... But we don't protect ours and they protect theirs". Let’s see whether there will be more comments on trade tensions. The aussie and the Japanese yen should react.
- The Japanese yen reacted to negative news a little bit. USD/JPY tested the resistance at 110.90 but couldn’t break it and rebounded. Despite the rebound, bulls still prevail as the USD is still strong. The resistance lies at 110.90. If the US dollar index weakens, the pair will turn around to the support at 110.20 (200-day MA).
- The US dollar index rebounded from the support at $94.50. Up to now, it has been moving up. The resistance lies at $95. Today traders will look at ISM manufacturing PMI data (17:00 MT time). The forecast is weaker than the previous data, however, if the actual data is greater than the forecast, the US dollar index will go up further.
- The euro couldn’t stick to new highs and it weakened again. At the end of the last week, the EUR was supported by the agreement on the migration deal (EU economic summit). As a result, EUR/USD closed above the resistance at 1.1665. But an unstable situation in Germany is weighing on the European currency. It seems that Germany is meeting a coalition crisis again. Germany’s interior minister and leader of the Christian Social Union (CSU) Horst Seehofer has threatened to resign because of the conflict with Mrs. Merkel over migration. Let’s see whether parties will be able to come to an agreement. EUR/USD broke the support at 1.1665 and is trading near the next one at 1.1645. No important economic data will be released today, as a result, risks of the further fall are high.
- Donald Trump doesn’t stop surprising. You should remember that he was against an OPEC activity and considered a NOPEC deal (No Oil Producing and Exporting Cartels Act). This bill would make OPEC subject to antitrust laws by removing a state immunity shield created by judicial precedent.
However, a weekend tweet shocked the oil society.
Mr. Trump asked Saudi Arabia to increase the amount of oil it produces. And according to him, the Saudi King Salman agreed. However, Saudi media hasn’t confirmed a willingness of Saudi to produce more. Oil reacted to this news. The greater production will lead to lower prices. As a result, both oil benchmarks reacted negatively.
On Friday, Brent managed to climb to $79.70. But Monday trading appeared to be weak. Brent is trading near $78.50. No important data will be released today, as a result, there are risks of the fall to the support at $77.55. If there is some positive news for the oil market, Brent will be able to rise to $79.85.
WTI is weaker than it was on Friday as well. WTI is trading near $73.85. Positive news will pull the benchmark up. The resistance is at $76.60. Otherwise, it will turn around to the support at $72.15.
That’s all for today! Follow market news with FBS!
The European Central Bank will publish the monetary policy statement with the interest rate decision on January 21, at 14:45 MT time.
Joe Biden is going to unveil a Covid-19 relief package of about $2 trillion. After this announcement, the 10-year Treasury yield rose, adding support for the USD.
The US dollar’s weakness offered a boost to emerging-market currencies and oil.