Market Crash Incoming?
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.
USD gets stronger due to new virus strain
Fundamentals
- The market sentiment deteriorated as the new Covid-19 variant engulfed the UK. Other countries closed their borders to stop the virus spread. As a result, riskier assets such as S&P 500, oil, the AUD, the NZD dropped.
- As for the US stimulus package, the process has almost ended. The last step is the signature of Donald Trump, and a $900 billion US pandemic relief package will be unveiled. That should underpin stocks and improve the market sentiment, but “will do little to accelerate the arrival of an economic recovery,” said JPMorgan.
- The pound is weakening amid the Brexit talks and the new lockdown in the UK. Travel bans to contain the new coronavirus variant also deteriorated the market sentiment. However, officials claim that the existing Covid-19 vaccines should provide protection against the new virus strain as well.
- All eyes on the final US GDP at 15:30 MT time and the US consumer confidence at 17:00 MT time.
Watch our daily trading plan!
Technical tips
EUR/USD
The most traded pair dropped enormously yesterday, but the 50-period moving average stopped it from further falling one more time. If the pair tumbles below the psychological mark of 1.2200, the way down to the 50-MA at 1.2180 will be open. However, the pair shouldn’t cross this strong support as it has failed to do it so far, that’s why we can expect the pullback to the upside. Resistance levels are 1.2240 and 1.2270.
GBP/USD
GBP/USD is still trading in a descending channel despite all the headwinds. Now it’s trading sideways near the key psychological mark of 1.3400. If it jumps above yesterday’s high of 1.3450, the way up to the next resistance of 1.3500 will be open. In the opposite scenario, if it drops below the 200-hour moving average of 1.3300, it may drop to the next support of 1.3200.
Gold
XAU/USD is moving in a descending channel. It touched the intersection of the top of its range and the 100-period MA near $1 915, therefore the way up was closed, and the price went down. If it breaks through yesterday’s low of $1 860, it may fall to the low of December 14 at $1 825. Resistance levels are $1 890 and $1 915.
WTI oil
Oil dropped after the new virus variant had been found in the UK. It has approached the key support of $46.50. It’s unlikely to break this level by the first attempt as it has failed to cross this level several times this month already. Besides, the 100-period MA lays at the same level, which should limit the further falling as well. If it manages to break it, the doors will be open to the low levels of early December at $45.50. To trade WTI oil with FBS, you need WTI-21G, which expires on January 19.
Similar
What Currency Will Overperform?
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.
Investor Positivity May Fade After Powell's Speech and CPI Release
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.
Latest news
The Most Important News For Today
Credit Suisse's collapse is in focus. What are the consequences of this problem? Let's discuss it here.
Crucial News For The Following Week
Consumer Price Index, Existing Home Sales, US Fed rate decision - all of these things we will discuss in our new review. Don't miss it out!
Focus on Banks' Meeting and NFP
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.
