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.