A week full
of events started on a flat note as Asian and European indexes were mixed but were
primarily looking down. The U.S. Dollar is recovering after this morning’s
losses while crude prices are slightly going down.
These
slightly pessimistic tunes are relatively common for Mondays but as today is
Martin Luther King Jr. Day in the U.S., the holiday is greatly contributing to lower trading
activity. The next four trading days are expected to be much more eventful. The
Q4 2022 reporting season will resume on Tuesday after the Bank of America and
JPMorgan slightly surprised investors with better-than-expected revenues, while
Wells Fargo and Citigroup were disappointing. The show will continue on Tuesday
with Morgan Stanley and Goldman Sachs that are known to traditionally beat forecasts
with the strongest results in the sector. Netflix will take over on Thursday,
while macroeconomic data, Davos Forum statements, and the expected reach of the
debt ceiling in the U.S. are expected to shape the landscape of this trading
week.
Macroeconomic
data will begin with China’s 2022 Gross Domestic Product (GDP), December Consumer
Prices Index (CPI) for Canada, the UK and the Eurozone, as well as December
Producer Prices Index (PPI) and retail sales in the U.S.. Forecasts suggest
further cooling down of the global economy, while the speed of such a slowdown
remains clouded.
Federal
Reserve (Fed) members are expected to give quite a few speeches this week in
which they are thought to provide details on the Fed’s plans amid seemingly
lower inflation threats. The European Central Bank (ECB) President, Christine
Lagarde, will also speak on Friday but
first she has to understand what the Fed will do this year amid slowing but
still high inflation.
The U.S. is
expected to reach its debt ceiling at $31.4 trillion this Thursday, according
the U.S. Treasury. This may force the ministry of finance to introduce
extraordinary vehicles to finance government spending that would consequently
lead to higher Dollar liquidity that could limit the effects of the Fed’s
hawkish monetary policy. But the debt ceiling issue is usually a whistle for
Republicans and Democrats to begin large debates around the economic policy
that may have negative implications in the market during the existing, tangible
and potentially negative situation.
Technically,
the S&P 500 index is within the upside formation with the primary target at
4100-4200 points. The index is now in the resistance zone between 3980 and 3990
points. It is likely to continue within this range in the first half of this
week, or a scale down towards the support at 3900 points. The second half of
next week is expected to be more positive, as the index may climb to the next
resistance level at 4060-4090 points.
Brent
prices are slightly rolling back to the area of $84-85 per barrel. Overall,
Brent crude prices over $78-80 per barrel are seen to be a temporary departure from
this level which could end a new selloff wave to the nearest support at $68-70
per barrel. The lowest targets are currently seen at $60-70 per barrel. The
outlooks of the International Energy Agency and the Organisation of the
Petroleum Exporting Countries (OPEC) concerning the crude market that are expected to be released this week,
may whip up market activity.
Gold prices
are moving inside the mid-term, upside formation with targets at $2000-2100 per
troy ounce by the middle of 2023. As prices have exceeded the upper margin of
$1880-1900 per ounce, the outlook for
future price movements is quite uncertain. Odd price growth over the last week
may suggest a further price rally without any stopovers, but also signal a
possible swift change of a trend to the downside during elevated volatility.
The money
market has been divided. It continues to experience elevated volatility that
prevents the use of short-term signals. So, it is better to place orders that
are attached to longer perspectives. But now the U.S. Dollar is seen to be
weaker against some currencies and stronger towards others like the Euro.
Whether or not we will see the Dollar moving in different directions against a
basket of other currencies remains to be seen in January. Nonetheless, short
trades for EURUSD opened at 1.06700-1.07200 with a downside target at 5000
points below the opening level and the same 5000 points for a stop-loss order
should be considered very attractive this January.