Financial markets consolidated the levels on the first day of the trading week after oil gapping higher at the opening on Monday. It remained the main theme of the day, as the move higher in the crude oil price triggered a corresponding move higher in the global stock markets. Remember that a higher price of oil brings higher inflation, and so, the move higher in equities is not surprising. The dollar continued to trade with a mixed tone – higher against the JPY and lower against the AUD.
The Dow, Nasdaq, and the S&P 500 futures climbed to new highs as the markets were closed due to the Presidents’ Day holiday. As such, it is interesting to see if today we see the movement confirmed by the cash markets.
Europe had a great day yesterday, at least when it comes to the equity indices. Everything was in green territory, and today the opening shows the main indices holding yesterday’s closing levels.
The price action in commodities remains dominated by the sharp move higher in the crude oil price. However, gold and silver do not follow suit yet, even though silver is trying at previous resistance.
The day ahead, once again, brings only third-tier economic data. Whenever that is the case, the market price action remains subdued.
The ZEW in Germany may offer some interesting price action, but the data is usually lagging behind the economic reality, and that is particularly true during the COVID-19 lockdowns. Two FOMC members speak today, but that is unlikely to move the markets. As such, the focus remains on the U.S. stock indices and their performance after the long weekend.
Markets to Watch
The focus today sits with three different, uncorrelated markets – silver, GBPUSD, and EURJPY.
Silver was on everybody’s lips earlier this year as it was subject to a short squeeze organized by the WallStreetBets group on Reddit. However, the squeeze failed, and silver consolidated in a possible bearish flag ever since. A break below the lower edge will open the gates to the pattern’s measured move – equal to the distance from the highs to the flag, projected from the lower edge of the flag.
One of the strongest rallies this year is seen on the GBPUSD pair. Just like the crude oil price, it only made higher highs and higher lows in 2021, targeting the important 1.40 level.
For cable, 1.40 is a milestone on different levels. Since Brexit in 2016, the pair fell from 1.50 on the night before the referendum to 1.15 a few months later. Ever since, it only consolidated, and now it is retracing almost all of that move. Expect selling orders lined up at 1.40, as market participants like to take profit at round numbers.
The EURJPY broke higher yesterday. The cross pair finished a symmetrical triangle, and the measured move points to levels higher than 130. Euro remains bid against the JPY as the dollar is only making gains against the JPY recently.
Winners and Losers
The dollar remains offered with no signs of a reversal in sight, while the march higher in the GBPUSD is nothing short of impressive.