1, Stocks Calm After Crazy Week With Google in Focus
Dow 30 Futures, 4-Hour Chart Analysis
The week kicked off in a quiet fashion in global financial markets, with China being closed for the whole week due to the Spring Festival celebrations. European stocks and US equity futures are slightly lower before the bell on wall Street, and after a very busy week for economic release and quarterly earnings, markets will have slightly less catalysts to digest on the first week of February.
The Dow is clinging to the 25,000 level thanks to the post-Christmas recovery, but with the global economy clearly slowing, we believe that risks are skewed to the downside here, and with valuations still being sky high in the US, traders should be defensive here.
Google parent Alphabet will report earnings after the close, and as it was the case throughout this earnings season, the firm’s guidance will be under scrutiny, and especially the effects of the maturing smartphone market hold risks for the growth of the otherwise very stable core advertising business. Facebok’s positive report is a good omen for the tech giant, but following the very bullish January, the stock could have a hard time to gain ground post-earnings.
2, Dollar Bounces Back as US Economy Still Stands Out
USD/JPY, 4-Hour Chart Analysis
While the Dollar got under pressure last week, due to the Fed’s sharp dovish shift, the US economy continues to outperform its global peers, and despite the recent pullback, the long-term uptrend is intact in the reserve currency. Today we got further evidence of the broad weakness in Europe, with the British Construction PMI and the Sentix Investor Confidence both missing the consensus estimates, and in light of last week’s US Employment Report and the better-than-expected ISM Manufacturing PMI, the Dollar might catch a bid this week.
The EUR/USD pair is yet again hovering near the 1.1440 level, with the 1.15 level stopping the post-Fed rally, while the USD/JPY pair is knocking on the door of the 110 resistance today, with the Yen being relatively weak amid the continued risk rally. Should the bounce in risk assets run out of air, the Yen and the Dollar could rise together against the risk on currencies, but until then, the pair could even test the 111.50 level in the coming days.
Today we will have US Factory Orders coming out, with the consensus being an increase of 0.3% in the measure, while tomorrow’s US ISM Non-Manufacturing PMI (57.0 expected) could define the whole week for forex markets.
3, Oil Drifting Higher But Rally Weakening
WTI Crude Oil, 4-Hour Chart Analysis
While the WTI crude contract has been drifting higher in the past weeks, ever since the early-January swing high, the crucial commodity only scored marginal new highs, with the $54-$54.50 per barrel resistance zone halting the counter-trend move. The rally has been clearly running out of steam, but for now the rising short-term trend is still intact and oil still hasn’t given a sell signal, but as always, the grueling topping process will likely end abruptly, and bulls shouldn’t hold positions here.
We have been looking for a possible bull trap above the $55 per barrel level, and that pattern could form as early as the coming days, which would be a good opportunity for new short positions in the commodity. That said, the risk rally could still grind higher, but given the weakening bullish momentum, bearish risks are increasing, while fundamentals continue to be negative for the commodity.
Major Stock Indices
S&P 500 Futures, 4-Hour Chart Analysis
Nasdaq 100 Futures, 4-Hour Chart Analysis
VIX (US Volatility Index), 4-Hour Chart Analysis
DAX 30 Index CFD, 4-Hour Chart Analysis
FTSE 100 Index CFD, 4-Hour Chart Analysis
EuroStoxx50 Index CFD, 4-Hour Chart Analysis
Nikkei 225 Futures, 4-Hour Chart Analysis
Shanghai Composite Index CFD, 4-Hour Chart Analysis
EEM (Emerging Markets ETF), 4-Hour Chart Analysis
EUR/USD, 4-Hour Chart Analysis
GBP/USD, 4-Hour Chart Analysis
EUR/GBP, 4-Hour Chart Analysis
AUD/USD, 4-Hour Chart Analysis
Gold Futures, 4-Hour Chart Analysis
Copper Futures, 4-Hour Chart Analysis
Featured image from Shutterstock