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.
Starting winter with optimism
The market sentiment is risk-on today due to the vaccine optimism and encouraging data from China.
Moderna announced yesterday that its vaccine is 94% effective at preventing Covid-19 and 100% effective at preventing severe cases of the disease. So, now there are two vaccines: Moderna and Pfizer, which are waiting for FDA authorization. Besides, both China’s Manufacturing and Services PMI reports beat all expectations. As a result, the rebound of economic activity in the world’s second-largest economy encouraged investors.
All that positive news drove the S&P 500 to the upside. The stock index approached the all-time high of 3 665. The final push and it could be there, but it met a selling pressure just above 3 650. If it manages to break 3 665 finally, the way up to the next round number of 3 700 will be clear. On the flip side, the move below the low of November 30 at 3 615 will push the S&P 500 to the support of 3 600.
Chicago PMI report in combination with the US home sales came out worse than the forecasts. It added pressure on the greenback. By the way, the USD is trading at the lowest level since April 2018.
EUR/USD touched the key resistance of 1.2000 yesterday but failed to break it. Now it’s heading towards it again, but it may meet the barrier at 1.1975. In the opposite scenario, the move below yesterday’s low of 1.1925 will push the pair to the 50-period moving average of 1.1900.
Gold is edging higher, but it may meet the resistance of Friday’s high at $1 790. If it manages to break this level, it may jump to the key psychological mark of $1 800. In the opposite scenario, the move below $1 765 will drive the yellow metal to $1 750.
Finally, let’s talk about oil. It dropped as yesterday OPEC+ members failed to agree on further output cuts. Today they will meet again for the second day. If the WTI oil dipped below the recent highs of $44.70, the way down to the 50-period moving average of $44.00 will be open. On the flip side, the move above the resistance of $46.00 will push the price to the next round number of $47.00.
Follow US ISM Manufacturing PMI and the speech of Fed’s Powell at 17.00 MT time.
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.