Hello, welcome to the Key To Markets preview of the Week Ahead.
If you have any questions about this information, please contact your KTM Account Manager who will be happy to assist.
5-day performance as of January 27, 2022. 17:00 GMT
In case you missed it….
King dollar. Diverging monetary policy in the US to the rest of the world is helping the dollar dominate FX markets.
EUR/USD 19-month low. The dollar rally smashed the euro down to its lowest since May 2020 under 1.12.
$90 crude. Brent crude oil touched a fresh 7-year high this week, rising to over $90 per barrel.
Gold crushed. XAU/USD has dropped back sharply from 2-month highs above $1850 to back under $1800 per oz.
Fed hawks. The Federal Reserve has flipped hawkish, signalling a likely March rate hike at its meeting this week.
Nasdaq gives up 200 DMA. The Nasdaq Composite index has fallen under the 200-day moving average for the first time since May 2020.
CSI 300 bear market. China’s benchmark index of 300 stocks is now down 20% from its February peak.
Microsoft & Tesla beat. Two of the top dog tech stocks beat earnings, leaving Apple, Alphabet and Facebook next week.
Ackman buys Netflix. Billionaire hedge fund investor Bill Ackman has become a top 20 shareholder in Netflix, buying 3.1 million shares.
2x Leveraged ARKK ETF. Famed investor Cathie Wood’s ARK innovation ETF ARKK (-55%) will be available as a 2x leveraged version under ticker TARK.
Source: Bank of America
The financialization of the economy. Many thought this trend of financial assets growing as a proportion of total national assets would end after 2008. Not quite – it has accelerated hugely in the era of quantitative easing – now standing at 6.3% in the US after sitting steady around 3% for most of the 20th Century.
Source: FX Street
The BOE is on course to raise rates again at their February meeting, up 25 basis points from 0.25% to 0.5%. The UK central bank has been at the forefront of acknowledging persistent inflation, being the first of the big 5 central banks to lift-off. This hawkishness has been supporting GBP/USD, which is down but not out in the renewed dollar bull market.
Central bankers in Frankfurt have made the U-turn in acknowledging inflation but are yet to really change path in the ultra-accommodative monetary policy that involves negative interest rates and massive bond buying. The PEPP bond purchase programme that began in the pandemic will wind down in March but for now the ECB is expected to come up with a new program of buying bonds to avoid any ‘cliff-edge’, which is weighing heavily on EUR/USD.
With stagflation now a watch-word on every economist’s lips, soft jobs numbers with high inflation could hurt market sentiment. Equally, with the Fed on course to end QE and hike rates as soon as March, ‘good news’ might start to become ‘bad news’ again for stocks. A good NFP number would likely benefit the value sectors of the market but weigh on growth sectors, which due to the large weighting could drag indices lower.
The AUD/USD pair looks like it has completed a long-term head and shoulders pattern with 0.70 as the neckline. The divergence in monetary policy between the increasingly hawkish Fed and a reluctant Reserve Bank of Australia is a primary cause of what could be an extended new downtrend.
Amazon, Google-parent Alphabet and Facebook are the last of the mega cap tech names to report Q4 results this week. Apple has turned beating expectations into an artform over recent quarters and didn’t disappoint in Q4 with record sales in the holiday quarter. Tesla reported well-received results earlier in the week so it just remains for these remaining tech names to perhaps overcome the negative sentiment around the sector.
Here you can find analysis of the major asset classes including the major forex pairs, gold, oil, and the S&P 500.
EUR/USD has now broken down from the underside of its 1.12-1.14 trading range with a sharp move that looks likely to bring about a re-test of 1.10.
GBP/USD carried through with the bearish trend reversal we mentioned last week and has paused at the aforementioned 1.335 support. Next major support is 1.32.
USD/JPY reversed once again, forming a double-bottom at 113.5 and rallying back over 115. Major resistance is the 7-year high above 116.
AUD/USD did breakdown from its rising channel as we alluded to last week and has gone on to break below to 0.71 and is set for a test of the 0.70 psych level.
USD/CAD bottomed out at 1.245 to jump back over 1.27. Next resistance is 1.278-1.28.
XAU/USD failed to get over 1850 and has tumbled back under 1800 in what looks to be the beginning of an extended bearish move that could test and break the lows neat 1750.
BRENT did correct but never made it down to the 20 DMA before reaching the big 90 psych level. 92 then 95 are possible areas of further resistance.
US500 fell back to the October low under 4300 and under the 200-DMA but has held off the lows in a choppy range for 4 days.
Thank you very much for reading – and have a great week trading!
The given data provided contains additional information, forecasts, analysis and market reviews published on the Key to Markets website.
Before making any investment decisions, you should know that:
– Key to Markets publishes analysis of any kind solely for information purposes and such analysis should not be construed as investment advice or a solicitation to buy or sell any financial instruments including without limitation CFDs.
– Key to Markets will not be liable for any loss or damage, which may arise, directly or indirectly from use of or reliance on the data provided by Key to Markets.
– Whilst all reasonable efforts are made to ensure that all content sources are reliable and that all information is presented, as far as possible, in a comprehensible, timely, accurate and complete manner, Key to Markets does not guarantee the accuracy or completeness of any information contained in the analysis.
– Past performance is not a guarantee of future results.