The S&P 500 index hit a new all-time high yesterday on the back of a weak dollar, and the US equity market surge spilled over to European indices.
Tuesday started with the Bank of Japan (BOJ) delivering its outlook report and monetary policy statement. The central bank left the policy unchanged, as expected, therefore market participants can focus on the main event of the week: tomorrow’s FOMC statement and press conference.
Volatility should stay subdued before the FOMC Statement, and this lack of volatility typically translates into higher stock market prices. This is exactly what happened at the start of this trading week as the S&P 500 index made a new intraday all-time high yesterday on very slow price action.
This week is particularly important for the stock market because the big tech companies in the United States are reporting their Q1 2021 earnings. Tesla started the show yesterday by delivering a mixed result after hours: beating expectations but losing money on automobile manufacturing. Microsoft, Apple, and Facebook are next to report earnings.
The strong performance seen in the US equity markets influenced the European indices too. The Dax index in Germany sits comfortably above 15,200, the FTSE 100 in the United Kingdom remains well bid ahead of the pivotal 7,000 level, and similar can be said of the Spanish and French indices.
Commodities remain in a bullish uptrend. Gold and oil remain bid as the US dollar has a hard time bouncing from its recent lows. Copper and lumber have risen in the recent months on the back of a faster-than-expected economic recovery. The Chinese GDP released recently shows a faster economic recovery, and this week the US and Canadian GDP data is in focus. Commodities could push even higher on better-than-expected numbers.
Now that the BOJ decision is behind us, there’s not much to see today in terms of economic data. The focus is on the stock market, the earnings season, and the CB Consumer Confidence scheduled during the American session.
Markets to Watch
The FTSE 100, EUR/GBP, and USD/JPY markets are in focus today.
The FTSE 100 index broke out above a triangle that acted as a continuation pattern and remains well bid. It keeps forming higher highs and higher lows, and the path of least resistance remains the upside.
The EUR/GBP bounced from lows in what looks like an ascending triangle but now hesitates against horizontal resistance. Bulls may want to wait for a daily close above 0.8730 before going long for more continuation.
Following the BOJ decision, it’s worth looking at the bigger picture on the USD/JPY pair. Three weeks ago, the USD/JPY formed a bearish engulfing pattern on the weekly chart, and such a pattern needs the second candlestick to engulf the first candlestick’s entire body without engulfing the lower shadow. It did so right at the 100 level, suggesting the strength in the JPY is here to stay for a while.
Winners and Losers
The S&P 500 index made a new all-time high yesterday on the back of ongoing US dollar weakness.