This week may be the most important since the year started as the Fed assess the economic outlook and the US presents fresh NFP readings.
Risk-on is back
The focus of traders’ attention shifted from concerns about the virus resurgence to hopes for a US stimulus package. As a result, the market sentiment improved, driving riskier currencies and stocks to the upside.
- Treasury Secretary Steven Mnuchin proposed to House Speaker Nancy Pelosi to unveil the Covid-19 stimulus package of $916 billion.
- US regulators gave an early hint that they are going to approve Pfizer’s vaccine. The US FDA will announce the final decision on Thursday. If it gives the green light, Pfizer will start the vaccine distribution in 24 hours. This optimistic news encouraged investors, that’s why the S&P 500 hit the record high of $3 700.
- As for the Brexit front, no progress has been made so far in negotiations of the EU and the UK. Anyway, GBP/USD is edging higher amid the upbeat sentiment on the market.
- Japan’s machinery orders showed the highest increase in over a decade.
- Chinese consumer prices dropped for the first time since 2009.
The most traded pair is heading to Monday’s high of 1.2155. If it manages to cross it, the way up to the high of December 4 at 1.2180 will be clear. According to UOB Group, the move above 1.2200 is likely as long as it trades above 1.2040. Support levels are at the 1.2100-1.2095 area and 1.2050.
Gold has pulled back from the resistance of $1 875. Now it is trading sideways at the 50% Fibonacci retracement level of $1 865. If it manages to close above the $1 875 level, the doors will be open towards the 61.8% Fibo level of $1 890. On the flip side, if it drops below the 100-period moving average of $1 840, it may fall to the next support of $1 825.
The aussie is rallying higher amid the overall risk-on market sentiment. It has approached the key resistance of 0.7450, which it has failed to cross a few times so far this month. The breakout will drive AUD/USD higher to the round number of 0.7500. There is strong support at the 50-period moving of 0.7400, which will be hard to cross for the pair. The next support will be at 0.7350.
The S&P 500 has reached an all-time high of 3 700. The way up is clear for further fresh highs. The next resistance may be at 3 750. The 50-period moving average has been nicely supporting the stock index so far. That’s why we can assume that it may stop the S&P from falling below 3 670. The next support levels are 3 645 and 3600. To trade the S&P 500 with FBS, you need the S&P 500-20Z.
Follow the rate decision of the Bank of Canada at 18:00 MT time.
S&P Global, a private banking company, will release a monthly change in British Flash Manufacturing Purchasing Managers Index (PMI) on January 24, 11:30 GMT+2. The index is a leading indicator of economic health as businesses react quickly to market conditions, and purchasing managers hold the most current and relevant insight into the company's view of the economy.
The United States Bureau of Labor Statistics will publish the US Consumer Price Index (CPI) m/m on January 12 at 15:30 GMT+2. The index measures a change in the price of goods and services purchased by consumers.
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The RBA and the Bank of Canada will add volatility to the AUD and the CAD, while USD is expected to be boosted by the Non-farm payrolls.