The new trading week began with uncertainty as many political events are going to rock markets. Treasury Secretary Nominee Janet Yellen is going to testify on Capitol Hill on Tuesday, inauguration of President elect Joe Biden will commence on Wednesday, European Central Bank would elaborate its monetary policy on Thursday, and PMI indicators for January in major economies will be published on Friday.
All these events are of paramount importance for markets. So, investors are nervously waiting for market reaction on Tuesday as the Wall Street will return to its regular trading schedule after Martin Luther King Day celebrations on Monday. Low liquidity at the beginning of the week held down negative trends developed last week. So, Tuesday may become a litmus test to Yellen’s words as no major economic news are expected.
The S&P 500 broad market index is very close to its weekly resistance level at 3840 points and it fails to return to this level a sell-off possibilities would increase.
The Q4 2020 Reporting season began with a disappointing results of Citigroup and Wells Fargo triggering a sell-off in its shares which lost more than 5%. Bank of America and Goldman Sachs are going to report their Q4 financials on Tuesday. They are expected to post strong revenues. However, if the results would drop short of expectations its stocks may suffer.
Entertainment sector would start reporting this week with Netflix that has to convince investors in its ability to gain subscribers without additional help of national lockdowns, and to maintain the pace of production flow of new series and movies while showing substantial revenues.
Oil market is on the borderline of decision making after last week’s drop in crude prices. Brent crude benchmark prices are holding below $55 per barrel flagging a possible downside swing to the $53.2 per barrel this week. However, if Brent crude prices would be able to hold above $55.4 level than they may rally to $59 per barrel for a short time, where a final downside swing is much likely.
Volatility in gold prices remains high close to $1830 per troy ounce, limiting options for a better trade. Nevertheless, if prices would rise above $1870 per ounce it would be a good sell position with the target at $1650-1700 area.
U.S. Dollar retains a mid-term upside potential. However, during this week’s volatilely it may drop against major currencies, which would be a reasonable opportunity to open buy positions on the Greenback. Such options may look attractive with EURUSD at 1.2160 and 1.2270, for GBPUSD attractive levels for sell positions would open at the resistance level of 1.3780, and for the USDJPY an attractive buy positions may open at the support of 100.20 or in case of breaking through resistance 105.20 level.