The new trading week began with uncertainty as many political events are
going to rock markets. Treasury Secretary Nominee Janet Yellen is going to testify
on Capitol Hill on Tuesday, inauguration of President elect Joe Biden will
commence on Wednesday, European Central Bank would elaborate its monetary
policy on Thursday, and PMI indicators for January in major economies will be
published on Friday.
All these events are of paramount importance for markets. So, investors
are nervously waiting for market reaction on Tuesday as the Wall Street will
return to its regular trading schedule after Martin Luther King Day
celebrations on Monday. Low liquidity at the beginning of the week held down
negative trends developed last week. So, Tuesday may become a litmus test to
Yellen’s words as no major economic news are expected.
The S&P 500 broad market index is very close to its weekly
resistance level at 3840 points and it fails to return to this level a sell-off
possibilities would increase.
The Q4 2020 Reporting season began with a disappointing results of
Citigroup and Wells Fargo triggering a sell-off in its shares which lost more
than 5%. Bank of America and Goldman Sachs are going to report their Q4
financials on Tuesday. They are expected to post strong revenues. However, if
the results would drop short of expectations its stocks may suffer.
Entertainment sector would start reporting this week with Netflix that
has to convince investors in its ability to gain subscribers without additional
help of national lockdowns, and to maintain the pace of production flow of new
series and movies while showing substantial revenues.
Oil market is on the borderline of decision making after last week’s
drop in crude prices. Brent crude benchmark prices are holding below $55 per
barrel flagging a possible downside swing to the $53.2 per barrel this week.
However, if Brent crude prices would be able to hold above $55.4 level than
they may rally to $59 per barrel for a short time, where a final downside swing
is much likely.
Volatility in gold prices remains high close to $1830 per troy ounce,
limiting options for a better trade. Nevertheless, if prices would rise above
$1870 per ounce it would be a good sell position with the target at $1650-1700
area.
U.S. Dollar retains a mid-term upside potential. However, during this
week’s volatilely it may drop against major currencies, which would be a
reasonable opportunity to open buy positions on the Greenback. Such options may
look attractive with EURUSD at 1.2160 and 1.2270, for GBPUSD attractive levels
for sell positions would open at the resistance level of 1.3780, and for the
USDJPY an attractive buy positions may open at the support of 100.20 or in case
of breaking through resistance 105.20 level.