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Weekly Focus: U.S. Investors May Not Support Falling Stocks

Investors in the United States return to the stock market after long holidays and Martin Luther King Day celebrations. And this return was sounded by blues music in the market. The S&P 500 broad market index futures fell more than 1% to 4600 points pointing to investors’ worries as the Federal Reserve (Fed) may add some hawkish tunes to the monetary policy during its meeting next week.

No significant macroeconomic data is scheduled to be published on January 25-26, when the Federal Open Market Committee (FOMC) will host Fed members that may decide on further monetary tightening. This means that stock indices will be practically naked in front of the Fed’s hawkish buzz, and no fresh corporate reports will be present to mute it.

This should not obstruct investors from monitoring some corporate reports, such as those from the Travelers (TRV), Goldman Sachs (GS) and Netflix (NFLX). Some highlighted corporate financial results may solace the overall negative picture. But the overall sell sentiment dominates the stock market.

The S&P 500 index is moving in a very unfavorable environment. Downside pressure continues to keep any upside efforts from materialising as the index is trading below the important resistance level of 4680 points. Its weakness may result in a further downside movement towards 4500 points. This downside pressure may decrease at the end of the week. But if the S&P 500 index closes this week below 4580 points, a downside scenario with the targets at 4350-4400 points may become the single option.

Crude prices have almost hit their maximum upside targets for now. Brent crude prices rose to $88.13 per barrel while the resistance zone is at $88.50-89.50. The upside move may continue for a while, but next week crude prices may receive a strong signal for a turnaround.

Gold prices are seen to be weak, at least until the end of January. By that time any buy positions with a target at $1840 per ounce should be considered with extra caution. The recent spike in U.S. 10-year Treasury yields to 1.85% suggests gold prices may plummet any time soon towards $1800 per ounce.

EURUSD returned below 1.14000. This may seem rather strange as the pair is moving inside the upward channel and this suggests an upside movement to 1.15200-1.15300 by the end of this week. If the pair continues to be traded below 1.14000-1.14300, there would be no reason to hold buy operations as the pair may slide to 1.13300.

GBPUSD is still within the upward channel despite the recent decline. The key support levels for the pair are located at 1.36200-1.36300. If these levels are broken the pair may fall to 1.35000, and its direction may move to the downside. So far, any trades made with this pair are not seen to be attractive.