Bulls take the upper hand at the beginning of the week whipped by the
new U.S. administration and Democrats. All the tricks are performed to drive
markets to new all-time highs. Those tricks are from Democrats’ legal
deceptions to turn flunk the Republicans in large $1.9 trillion relief bill
voting to hanky-panky with U.S. labor statistics where unemployment at 6.3% in
January was claimed to be a weak result. So, everything is used just to push
the large relief bill through the Congress.
It seems that Democrats are simply in a hurry to approve stimulus
measures as the pandemic situation in the United States is waning. The number
of new infections is decreasing, vaccination process is speeding up. So, may be
in a month time the large stimulus package would seem to be clearly excessive.
Nevertheless, such hasty efforts are winding up inflation expectations
and U.S. Treasuries yields. The U.S. ten-year benchmark Treasuries yields rose
to 1.20% on Monday beating eleven month highs. If the inflation data this week
would support such expectations with CPI readings above 1.5% we may see another
rally in bond yields.
Technical picture confirms such concerns as S&P 500 broad market
index reached a strong resistance level
at 3,900 points, where a decision making point for a further rise to 5,200
points or for a correction to 3,350 and further to 2,850 points should be made.
The correction is more likely, but it does not mean it should start right now.
With all the support from the Democrats the index may rise to 3,975 points or
even to 4,070 points before a correction.
Oil market has a similar situation as global targets for crude prices at
$60 per barrel of Brent crude benchmark are achieved. Now is the proper moment
for a mid-term decline cycle. But, again. It is not clear when this cycle is
actually going to start. So, it is better to be patient and wait till the mid
of this week when crude reserves and OPEC monthly reports would be published.
Gold prices are rising in unusual manner together with Treasuries’ yields.
If yields continue to rise it would certainly pressure gold prices forcing them
to drop below $1800 per troy ounce. If this level would be broken, next targets
would be at $1650 and at $1700 per ounce.
Currency market has an exciting story too. The Euro has to choose the
direction to go in the mid-term with upside target at 1.21600 and 1.22650, and
downside targets at 1.16200. Technical picture suggests that the rise of the
Euro is more likely. However, rising U.S. Treasuries yields may curb any attempts
of the Euro to perform significant upside movements above 1.20500-1.20700.
The British Pound is better lest aside for trading until it would
perform any significant volatility. Ideally, the GBPUSD may rise to 1.39000,
where growth cycle may reverse. The target for the pound in this scenario would
be at 1.36700.
The USDJPY would be interesting to sell at 106.400. But, would the pair
reach this level is highly questionable.