Weekly Market Outlook: Central banks, earnings and the Presidential Inauguration

Januar 18, 2021 12:00

It’s a big week ahead for traders and investors and economic data, company reports and politics all take centre stage. The 59th Presidential Inauguration is set to take place on Wednesday 20 January. However, investors will be on edge following the attack on Capitol Hill in Washington.

From an economic standpoint, traders will be focused on the Bank of Canada statement and press conference on Wednesday, the Bank of Japan statement and press conference on Thursday and the European Central Bank (ECB) press conference at 1.30pm GMT on Thursday as well. 

Stock markets have already reacted to Joe Biden’s $1.9 trillion stimulus package announced and will now be focused on the earnings season which kicked off last week. With mixed results from banks such as JP Morgan and Citigroup, all eyes turn to heavyweights such as Goldman Sachs, Morgan Stanley and Bank of America.  

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

Weekly Forex Calendar

Source: Forex Calendar provided by Admiral Markets UK Ltd.

 

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Trader’s Radar - ECB Press Conference

On Thursday 21 January at 1.30 pm GMT, all eyes will be firmly on the euro and the ECB Press Conference. While no changes are expected in the bank’s monetary policy, traders will be keen to learn more about the bank’s view of the euro. The currency appreciated more than 16% against the US dollar last year, from March lows to January highs. 

The currency already started to give back some gains last week, largely thanks to a more bullish US dollar across the board. However, the euro fell against most other major currencies as traders adjust portfolios in front of the high risk press conference.

While the €750 billion stimulus recovery fund has already started to be distributed, many analysts believe this is not enough now that many countries have gone back in lockdown. Some analysts believe the Eurozone is now facing a double-dip recession and the growing political crisis in Italy - where the ruling coalition party is on the verge of collapse - is not helping. 

Source: Admiral Markets MetaTrader 5, EURUSD, Monthly - Data range: from Sep 1, 2005, to Jan 15, 2021. Performed on Jan 15, 2021, at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

In the long-term monthly chart above of EURUSD, it’s clear to see the long-term descending trend line from the highs of 2007, 2011, 2013 and 2017. Price finally broke through this level of resistance in late 2020. 

However, the price has now moved straight into another long-term resistance line, as shown by the black horizontal line at around the 1.2239 price level. This level provided significant support in 2010 and 2013, before breaking through in 2014 and finding resistance in 2017. 

Traders may well use these levels to lean against for short positions as the narrative surrounding the euro and US dollar starts to change. A break back above this horizontal resistance line would be a clear sign of strength from the buyers. 

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Corporate trading updates and stock indices

Last week, global stock markets struggled to continue the gains initiated from the beginning of the year. European stock indices spent most the recent week in a tight trading range, even after the DAX 30 broke to record highs only recently. While US stock indices tried to push higher before settling down for the week, it was Asia stock market indices which performed the best. 

Many analysts and fund managers are now looking towards emerging markets, after bemoaning the lofty valuations in the US stock market. Some are also concerned about Joe Biden’s plans which could derail any further momentum towards the upside. 

However, the distribution of flows has been unequal in most cases as some stocks continue to outperform. For example, smaller tech companies have received a boost from investors who are exiting the bigger tech names which are more overstretched. 

Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from Apr 22, 2020, to Jan 15, 2021, performed on Jan 15, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

Past five-year performance of the S&P 500 circa: 2020 = +16.17%, 2019 = +29.09%, 2018 = -5.96%, 2017 = +19.08%, 2016 = +8.80%, 2015 = -0.82%.

The daily chart of the S&P 500 above is still confirming an uptrend with the 20-period (blue) 50-period (red), 100-period (green) and 200-period (black) exponential moving averages all moving upwards. These moving averages have not only helped to confirm the trend bias but have also acted as support levels for buyers. 

Both traders and investors will also be watching the companies that are due to report their latest quarterly earrings. Some of these include:

  • Tuesday 19 January - Bank of America, Goldman Sachs, Halliburton, Netflix
  • Wednesday 20 January - ASML, Morgan Stanley, Alcoa, Procter & Gamble
  • Thursday 21 January - Intel, IBM
  • Friday 22 January - Schlumberger

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