The first trading day of the week brought nothing new to financial markets. The U.S. stock market indices recovered some of the losses from the end of the previous week, while the U.S. dollar moved with a mixed tone.
The Nasdaq 100 index in the United States recovered the 13k level, a critical level for the tech sector that is seen as stretched at the current valuations. On the other hand, the Dow Jones was not able to recover the 33k level, in yet another day that shows divergences in the market. Yet, with all the major indices close to all-time highs, one should be cautious calling the start of a bear market, as the path of least resistance remains the upside.
In Europe, the Dax is firm above 14,500 points now, after it broke an ascending triangle’s horizontal base at 14,200 last week. Despite the fact that most European economies are in lockdown due to the COVID-19 pandemic, the stock market indices remain elevated, reflecting the ongoing consumer confidence that the pandemic will eventually be over.
Commodities are a tad lower, led by the crude oil price that found support at the $60 level. Gold is the one that keeps them all anchored, as it keeps a bullish bias despite the weakness in silver or oil.
The most important event of the week is the two-day testimony of the Fed Chair, Jerome Powell, in regards to the CARES act. Starting today, he will testify together with the U.S. Treasury Secretary, and the remarks will move financial markets. Therefore, do not expect much of a price action until the U.S. comes online and the two-day testimony begins.
Moving forward, Euro traders may want to consider the Euro summit at the end of the trading week. The leaders will meet to discuss various subjects, with the top priority being the vaccination roll-out.
Markets to Watch
Gold, EURUSD, EURGBP – markets in focus today.
Gold appears to anchor the price action in commodities, as it looks bid at current levels. After it broke higher from a falling wedge pattern, gold prepares to take out the 50% retracement level. Most of the time, the price action following a falling wedge retraces at least 50% of the entire pattern, so gold bulls will try to push the yellow metal through it.
This is the euro’s week. The most important exchange rate of the FX dashboard looks weak as it failed twice to get back above the 1.20 level. It tried to do so twice – once in the previous ECB meeting and the other time during last week’s Fed press conference and monetary policy decision.
If it breaks below the previous low seen at 1.1847, the market is vulnerable to more downside, as bears prepare for a return to 1.15.
Today we also have a speech from the Bank of England’s Governor, so the GBP pairs may experience higher volatility than usual. The EURGBP cross pair bounced from support for the third time in a row in what seems to be a triple bottom. If that is the case, the pair should recover some of its recent losses.
Winners and Losers
AUD, JPY – the main losers so far in the trading week, while gold looks constructive.