Trading volume is going to remain low
The recent selloff was clearly an opportunity
The dollar index is still not showing any clear sign of robustness
European markets are picking up a bullish sign from Asian trading session although some of the countries are still celebrating the Chinese Lunar New Year holidays. Trading volume is going to remain low as the US markets are also closed due to a national holiday- President’s Day. Qualms are lingering again over in the US about Russia interfering in the US election in 2016 and this impacted the last trading session over in the US. Nonetheless, this is something which investors have heard way too many times and the impact on the markets of this particular event is minimal. The S&P500 index closed the week on a higher note with a weekly gain of 4.3%.
Global equities are also showing more healthy signs as the recovery continues. The recent selloff was clearly an opportunity and bargain hunters have taken an advantage of this opportunity.
The energy in the Japanese yen is something which forex traders are paying close attention as the currency is drifting around a 15-month high. The Japanese economic data, export and import, confirmed that the economy is in a healthy condition and both numbers grew strongly in January from a year ago. In today’s data, we have seen the import numbers picking up more steam and this resulted in a trade deficit- something not witnessed since May 2017.
The dollar index is still not showing any clear sign of robustness and it appears that the overall bearish trend could continue. It is likely that the index could touch the level of 85 in the coming months if the momentum continues in this manner. The weaker dollar is boosting the gold shine. The precious metal could test the resistance of 1384 and this is despite the fact that the Fed could change its stance towards a more hawkish monetary policy. Gold is also an option for an inflation hedge trade and a more aggressive monetary policy by the Fed, could trigger the risk off trade. Both of these affairs are working in gold’s favour.
This is an important week for the equity and forex market. The GBP/USD touched the high of 1.4345 on January 25th but since then we have seen a correction for the pair. We have a slew of UK economic data due this week which includes the fourth-quarter GDP and employment figures. We know that some members of the BOE have adopted a more hawkish stance towards the monetary policy. If the numbers are overwhelming, it is likely that we could see more strength for Sterling.
A number of Fed’s policymakers are speaking this week, not to mention that we also have the FOMC minute due on Wednesday. The Fed is behind the curve and inflation is picking up more steam, hence the Fed would have to adopt a more aggressive stance towards their monetary policy. This is the angle through which forex traders will be gauging the message from the Fed committee.
The ECB’s monetary policy meeting accounts due on Thursday, something which will give us an idea if the ECB is going to end their tapering program as per the plan. It won’t be long before the market participant would expect the ECB to start talking about the increase in the interest rate. Such an event would be highly bullish for the euro traders.
In terms of earning, equity traders are going to keep an eye on consumer sector and Wallmart is the important name. HSBC and Barclays are the two prominent names in the banking space coming up with their earnings. In the mining area, we will be paying attention towards BHP Billiton’s earning.
