Hello and welcome to the Key To Markets preview of the Week Ahead.
If you have any questions about this information, please contact your KTM Account Manager who will be happy to assist.
5-day performance as of January 6, 2022. 19:00 GMT
In case you missed it….
FOMC Minutes – Minutes from the December Fed meeting showed policymakers discuss the idea of reducing the balance sheet in 2022 for the first time.
Treasury yields pop – The US 30-year yield rose back over 2% while the 10-year reached 1.75% as investors bet on faster-than-expected Fed tightening.
USD/JPY 5-year high – A widening US-Japan yield spread saw dollar-yen rise to its highest since January 2017.
Speculators love USD – Bets on the USD strengthening have reached the highest since June 2019 according to COT data.
GBP tests neckline – GBP/USD rose to 1.36, the neckline to a long-term double top pattern
Gold < 1800 – The yellow metal fell back under 1800 for the first time in 2022 after Fed minutes.
ARK down 45% – Cathie Wood’s Innovation tech ETF has record 45% drawdown from its peak last year.
Jobless claims rise – Initial Claims 207K, Exp. 195K. The impact of restrictions around Omicron appears to be impacting unemployment claims.
German inflation – German CPI rose to 5.7% in December, its highest since 1992!
Kazakhstan geopolitics – An uprising in Kazakhstan (world’s largest uranium exporter) is increasing geopolitical risk, and helping oil prices go north.
The probability of four US rate hikes by the Federal Reserve this year has risen to 80% according to Fed funds futures markets – that’s high. It was the release of Fed minutes from the December meeting that spooked this price to rise from 70% to 80% this week. Fed policymakers discussed the idea of reducing the size of the balance sheet alongside rate hikes in 2022.
American inflation has remained stubbornly high and Fed Chair Jerome Powell famously retired the word ‘transitory’ a couple of months ago when referring to the price rises as temporary. As such, the monthly data will play a key role in expectations for monetary tightening this year.
With December non-farm payrolls out of the way, another major data point comes this week in the form of US retail sales. The open question for retailers was did Omicron upset the all-important holiday season?
China releases inflation data for consumers and out of the factory gate this week. It will be the latter that could fuel inflationary fears in other parts of the world. On top of its already high inflation, there is a rising fear that China’s ‘Zero Covid’ policy could lead to even more supply disruptions.
The bond market is reacting to the prospect of higher inflation with the yield on long duration bonds rising. Simultaneously the prospect of US rate hikes is seeing short term bond yields rising too. This raises the cost of borrowing and makes stocks relatively less attractive to fixed income.
Q4 corporate earnings season kicks off next week with major banking names including Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC) as well as Delta Air Lines (DAL) and weed stock Tilray (TLRY).
Here you can find analysis of the major asset classes including the major forex pairs, gold, oil, and the S&P 500.
EUR/USD remains stuck inside its sideways range with 1.13 as a midpoint. 1.105 is possible support to a breakdown while 1.15 is resistance above.
GBP/USD has continued its uptrend with a test of 1.36 resistance from the November 5 peak. 1.368 is next resistance while pullbacks could find support at 1.345 then 1.335.
USD/JPY has paused near a long-term rising trendline connecting the highs since October after breaking out to a 5-year high. 115 then 114.4 are possible support.
AUD/USD has broken down through a rising wedge pattern, possibly putting an end to its recent uptrend with 0.71 then 0.704 as possible support.
USD/CAD has broken below then tested its 20 day moving average as well as an uptrend line connecting the lows from October 27.
XAU/USD was unable to hold a break above resistance at 1815 and has since rolled back under its 20-day moving average and below a rising channel.
BRENT continues to trend higher and has fully retraced the sharp sell-off that began in late November. 84.40 to 84.80 is major resistance.
US500 has dropped back under the key 4720/30 level but remains supported by the rising trendline connecting the lows since October 1.
Thank you very much for reading – and have a great week trading!
Sign up for your Key To Markets account today or login here
The given data provided contains additional information, forecasts, analysis and market reviews published on the Key to Markets website.
Before making any investment decisions, you should know that:
– Key to Markets publishes analysis of any kind solely for information purposes and such analysis should not be construed as investment advice or a solicitation to buy or sell any financial instruments including without limitation CFDs.
– Key to Markets will not be liable for any loss or damage, which may arise, directly or indirectly from use of or reliance on the data provided by Key to Markets.
– Whilst all reasonable efforts are made to ensure that all content sources are reliable and that all information is presented, as far as possible, in a comprehensible, timely, accurate and complete manner, Key to Markets does not guarantee the accuracy or completeness of any information contained in the analysis.
– Past performance is not a guarantee of future results.