Weekly Market Outlook: US Data & Earnings in Focus

January 07, 2022 18:33

All of this week’s major economic data releases come from the U.S. This includes the latest consumer price inflation and retail sales figures. This data will be widely looked at considering the huge miss in the U.S. Non-Farm Payroll figures last week.  

The market was expecting 422,000 jobs to be added to the economy in December but only 199,000 jobs were added. The US dollar sank on the news as most of the market is still heavily long on the US dollar due to the forecasted three interest rate hikes this year.  

If the data continues to disappoint there could be some major market moves developing over the next month or so. Conversely, the Canadian dollar has been a star performer with consistently good data release includes last week’s better than expected employment report which helped lift the CAD further. 

It’s also the start of the US earnings season with major US banks reporting this week. 

You can learn more about some of the global themes affecting the markets in this selection of new education articles.  

Weekly Forex Calendar 

Source: Forex Calendar from the MetaTrader 5 trading platform provided by Admirals.  

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Trader’s Radar – US CPI Figures

On Wednesday 12 January at 1.30 pm GMT, the Bureau of Labor Statistics releases the latest consumer price inflation (CPI) figures. Analysts are forecasting for the yearly CPI figure to remain steady. However, the core CPI figure which excludes food and energy prices is set to rise sharply.  

A spike in the CPI figure is likely to increase the probability that the March Federal Reserve meeting will be a live one where they start to increase interest rates. However, because the US dollar trade is one of the most crowded trades in the market right now we could see profit-taking on any weak news announcements such as last week’s employment report.  

Source: Admirals MetaTrader 5, USDX, Monthly - Data range: from 1 Aug 2013 to 7 Jan 2022, performed on 7 Jan 2022 at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.  

The monthly chart of the US dollar index shown above highlights the fact the price is in the middle of a long-term trading range between 103.00 and 89.13. The price is also testing a key level of price resistance which was support in 2019.  

As much of the forecasts of what the Fed may do this year may already be priced in, traders also need to prepare for a potential pullback. Much will depend on this week’s news announcement and whether the US dollar is strong to break through resistance or if it will pull back to support levels around 94.40.  

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Corporate Trading Updates and Stock Indices 

This week is the start of the US earnings season with JP Morgan Chase and Citigroup reporting earnings on Friday. Delta Airlines also reports on Thursday.  

US stock market indices have lagged European indices so far this year due to the lofty valuations in US tech. The potential for a faster pace of interest rate rises has also hurt US stocks.  

Therefore, it’s up to this earnings season to keep the market ticking along. 

Source: Admirals MetaTrader 5, SP500, Daily - Data range: from 5 Apr 2021 to 7 Jan 2022, performed on 7 Jan 2022 at 6:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.  

The S&P 500 stock market index remains in a long-term bull trend. The chart above shows the 50-day exponential moving average (red line) is still above the 100-day exponential moving average (green line) - thereby confirming the uptrend.  

The market has often turned around these moving average levels, in particular, the 100-day moving average over the last four moves higher. This could be an area to focus on if the price returns to this level.  

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Jitanchandra Solanki
Jitanchandra Solanki Financial Markets Author, Admirals London

Jitanchandra is a financial markets author with more than 15 years experience trading currencies, indices and US equities. He is an accredited Market Technician with a BA Hons degree.