Welcome to Key To Markets preview of the Week Ahead.
5-day performance as of January 11, 2024. 11:30 GMT
Source: finviz.com
In case you missed it…
US inflation was hotter than expected. CPI rose to 3.4% y/y up from 3.1% in November, core CPI also cooled by less than expected to 3.9% from 4%.
The World Bank warned on global growth. Concerns over interest rates and the Middle East mean that the World Bank expects global growth of 2.4%, the slowest since the pandemic.
Microsoft’s investment in OpenAi may face EU scrutiny. The EC said that it would check to see whether MST’s multi-billion-dollar stake in Open AI should be reviewed under merger regulation.
Bitcoin swung after the SEC’s X (Twitter) account was compromised. The SEC posted on its X account that the Bitcoin ETF was approved before the tweet was deleted – and then it was approved.
Apple attracted a third broker downgrade. The tech giant was downgraded to neutral by Redburn after Barclays and Piper Sandler downgraded the stock last week on valuation concerns.
Yen selloff continued. After a weak start to 2024, the yen fell further as the market reassessed the likelihood of the BoJ moving away from negative rates soon.
Amazon cuts hundreds of jobs. The tech and e-commerce giant cut jobs in Prime Video and MGM Studios. More than 27,000 employees have been let go since 2022.
Q4 earnings season kicked off. At the time of writing, Q4 S&P 500 EPS is expected to grow 1.3%, according to FactSet. This would mark the second straight quarter of growth.
Eurozone unemployment fell to a record low. Unemployment in the region dropped to 6.4% in November from 6.5%, a record low, which could add to ECB caution regarding rate cuts.
Saudi cuts the selling price of oil. Saudi Arabia slashed its official selling price of oil to Asia importers at a 27-month low amid concerns about slowing demand from China.
ETH/USD surged this week, more so than BTC/USD on the news that the SEC approved Bitcoin ETF. Ether the second largest cryptocurrency rose 10% on the news of the approval, to a 20 month high while BTC/USD remained little changed after surging 160% across the past year.
The market reaction reflects bets that Ether will be the next ETF to get an approval from the SEC and the ETH/USD price is yet to reflect that outcome. Meanwhile, BTC/USD had been rallying for months on the ETF narrative, which is close to exhaustion for now.
Given Ether’s size, liquidity and existing CME futures, it looks to be a likely next candidate.
1. UK CPI
UK inflation has been slowly trending lower, cooling to 3.9% in November. The markets will be keen to see whether the downward trajectory continues. The level is still almost double the Bank of England’s target 2% rate. The market has reined in aggressive BoE rate cut bets for this year, with around 116 basis point cuts priced in for 2024, down considerably from the five lots of 25 basis point cuts previously expected.
2. US Q4 Banks Earnings continued
Morgan Stanley and Goldman Sachs are due to report Q4 earnings on Tuesday, the 16th of January. Following a disappointing initial nine months to 2023, investment banking activities are expected to be in a better place in the year’s final quarter. An improved risk environment in Q 42023 may have supported a revival in dealmaking. Bad loans and NIM will also be in focus.
3. China GDP
China’s GDP data, retail sales, and industrial production figures are all due to be released on January 17. Given ongoing concerns regarding the health of the Chinese economy, these figures are likely to be watched carefully. Chinese industrial production and retail sales jumped last month thanks to favorable comparisons. However, retail sales could slow as falling home prices feed consumer insecurity. The data comes after the World Bank lowered the Chinese GDP forecast to 4.5% growth this year, marking a 0.1% downward revision from its June forecast.
4. US Retail Sales
The US economic calendar is relatively light, with the main focus being on US Retail sales data, which are expected to rise 0.3% MoM in line with November’s reading. Continued growth of retail sales could feed the soft landing narrative. Should sales come in much stronger than forecast, they could see the markets rein back fed rate cut bets further. Meanwhile, an unexpected fall in sales could see the market ramp-up dovish Fed bets.
5. Davos Economic Forum
Davos World Economic Forum takes place across the week with leaders from business governments and civil society as well as the global media set to attend. While the event doesn’t tend to be market-moving, it will draw attention to global risks in 2024, which include climate change, technology, geopolitics, and AI misinformation in an election year.
Source: FXstreet.com
TA of the major asset classes (Forex – Commodities – Indices).
Summary
EUR/USD (D1)
The EUR/USD pair is showing moderate bullish tendencies, supported by a near-term base at 1.093 and a stronger foundation at 1.082. Resistance is seen at 1.104 with a further barrier at 1.116. The RSI at 51 indicates a balanced momentum without a strong bias to either side.
GBP/USD (D1)
For GBP/USD, the bullish momentum appears weak, with initial support noted at 1.259 and additional support at 1.243. The currency faces resistance at 1.289 and may encounter a tougher ceiling at 1.304. The RSI at 60 suggests mild bullish sentiment.
USD/JPY (D1)
USD/JPY is currently exhibiting weak bearish trends. Support levels are found at 143.1 and a further dip could test support at 140.7. On the upside, resistance lies at 145.7 with a second potential resistance at 148.3. An RSI of 53 indicates slight bearish momentum but is relatively neutral.
XAU/USD (Gold vs. US Dollar) (D1)
XAU/USD maintains a moderate bullish trend with support at 2030 and additional support at 1986. Resistance is anticipated at 2073, with a stronger test of the uptrend at 2145. With an RSI of 52, the market is showing neutral momentum.
Brent Crude Oil (D1)
Brent Crude Oil is in a state of neutrality, finding support at 76.21 and secondary support at 72.33. Resistance is formed at 84.04, and further pressure might come at 87.69. The RSI stands at 58, indicating a lack of strong directional momentum.
S&P 500 Index (D1)
The S&P 500 shows a moderate bullish trend. The index is supported at 4703, with an additional support level at 4618. It faces upward resistance at 4805, and a push beyond could see resistance at 4900. An RSI of 64 is indicative of moderately bullish momentum, possibly edging towards overbought conditions.
Thank you very much for reading – and have a great week trading!
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