The US dollar index keeps rounding above the 103.60 historical support level. The buyers have already defended this level for three weeks, highlighting their interest in the greenback. Thus, buying USD looks less risky right now.
Stock surged, but halt of vaccine trials may kill investor's mood
Stock significantly surged: S&P 500 and Nasdaq reached 6-week highs as investors were optimistic about the prospects for the additional fiscal stimulus. However, according to Bloomberg, we shouldn’t expect any action this week. There is the earnings season in the USA, and also Amazon is getting ready for its Prime Day, while Apple is going to launch soon its cutting-edge iPhone with the 5G technology.
S&P 500 has jumped above August’s high of 3 525, but then retested it again. If it manages to close above it again, it may rise to the high of September 1 at 3 555. On the flip side, the move below the key psychological mark of 3 500 will drive the stock index to the next support of 3 470.
The US dollar closed in red yesterday, but today turned to the upside. The market sentiment may deteriorate today as Johnson & Johnson’s Covid-19 vaccine trails have been stopped because of the unexplained illness. Since the global economic recovery depends directly on virus control, the trial halt may kill an investor’s mood. Elsewhere, the US election is getting closer and uncertainty over it adds some risk-averse to the market as well.
EUR/USD has broken down the significant level of 1.1800. Now we can observe a decisive moment: whether sellers will be strong enough to push the price below the 200-period moving average and the lower trendline. If yes, the pair will fall to the 38.2% Fibonacci retracement level of 1.1765. In the opposite scenario, the move above the 50% Fibo level of 1.1810 will drive it to the highs of late August at 1.1840.
Moving on, the Bank of England asked banks about their readiness for negative rates. It showed that the BoE is looking for a way to support the economy, but isn’t confident how to do that. However, the BoE’s governor emphasized that they aren’t going to impose negative rates now. This morning the British labor data came out much better than expected. Only 28 100 British filed for unemployment benefits, while 78 800 were anticipated.
The pound keeps rallying. GBP/USD has entered the ascending channel. The move above the 50.0% Fibonacci retracement level of 1.3080 will push the pair to the 61.8% Fibo level of 1.3175. In the opposite scenario, if the pound drops below the key support zone of 1.2980 - 1.3000, the way to 1.2900 will be open.
Finally, let’s talk about commodities. Oil prices sharply slumped as workers are back to work in the Gulf of Mexico after the strong hurricane Delta, and also Libya is planning to reopen its largest oilfield. As for gold, it is edging lower. If it manages to break through the strong support of $1 915, it will fall to the key psychological mark of $1 900. However, look at its previous performance, XAU/USD has failed to cross this level many times, so perhaps, this time will happen the same. The move above the 50-day moving average of $1 940 will push the price higher to $1 960.
Follow US Core Consumer Price Index at 15:30 MT time!
On the H4 timeframe, the US dollar index has formed a bullish falling wedge. At the beginning of the trading session, the price is testing the upper border of this wedge. Thus, in case of a higher-than-expected Core PCE Price Index m/m, the US dollar will skyrocket against other currencies.
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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.
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.