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.
Vaccine news improved sentiment
There are three main market drivers: vaccine, Brexit, and US stimulus package. The market sentiment has improved due to the vaccine positive news. The first vaccines of Pfizer and BioNTech will be delivered to the USA today, but it will take months before it will be available for everyone. The widespread inoculations should stop the Covid-19 spread. The US predicts that 100 million Americans will be inoculated by April.
As for the US stimulus package, a bipartisan group of lawmakers is expected to unveil a $908 billion today. If it happens, riskier currencies and stocks will be boosted. However, there are some doubts that Congress will pass it.
Speaking about Brexit, the EU and the UK confirmed that they would continue negotiating. That gave a hope that the deal could be reached finally. According to Bloomberg, the Brexit agreement may be struck this week! It will push the pound upward.
Let’s look at the charts. EUR/USD is edging higher. If it manages to break the resistance zone of 1.2160-1.2170, it may jump to the round number of 1.2200. The support of 1.2110 is really strong as it lies on the 50-period moving average, which it has failed to cross so far, and the chain of recent lows. Therefore, the pair is likely to pull back rather than break out this level. Anyway, the next support will be at the low of December 8 at 1.2075.
Moving on to the pound, GBP/USD is trading inside the ascending channel. It briefly moved outside it on Friday, but then turned back. Indeed, the pair is really sensitive to any Brexit developments, that’s why it’s so volatile these days. If it rises above the key resistance of 1.3400, the way up to 1.3460 will be open. On the flip side, the move below the low of December 10 at 1.3300 will drive the price to Friday’s low of 1.3200.
Gold has started the week on the back foot amid the vaccine rollout. Indeed, the prospect of the soon recovery has undermined the yellow metal. It bounced off the 38.2% Fibonacci retracement level of $ 1 840. The way down to the support of $1 825 is clear. If it manages to break it down, it may drop to the 23.6% Fibo level of $1 810. In the opposite scenario, if it closes above the resistance zone of $1 840-1 845, it may jump to the 50% Fibo level of $1 865.
Finally, let’s talk about oil. Brent oil is trading above $50 a barrel. The current risk-on sentiment should drive oil prices further up. The move above the high of December 10 at $51.00 will push it to the next resistance at the round number of $52.00. Support levels are at the 50-period moving average of $49.00 and recent lows of $48.50. To trade Brent oil with FBS, you need BRN-21G.
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