Weekly Market Outlook: FOMC, BOC & Earnings in Focus
Inflation around the world has roiled the financial markets in recent weeks with most risk-assets crashing lower. With a week packed full of central bank policy announcements in how to tackle rising inflation, volatility in the markets is likely to remain high.
Most market participants are expecting hawkish tones from the Bank of Canada and the US Federal Reserve on Wednesday. Some analysts are even expecting the Bank of Canada to go one step further and increase interest rates.
Traders will also be focused on the European PMI (purchasing managers index) figures early in the week. The significant news flows this week could see some huge divergences in play between different economies which could create some long-term trends in the currency market.
Major names such as Apple, Microsoft, Intel, Tesla and others are set to release their latest earnings report this week as well.
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 FOMC Press Conference
On Wednesday 26 January at 7.00 pm GMT, the Federal Reserve will release its latest Federal Open Market Committee (FOMC) report which will then be followed up by a press conference with Fed Chairman Jerome Powell at 7.30 pm GMT.
While no changes are expected in interest policy during this meeting, if the Fed want to start to increase interest rates in March, they would need to signal that to the market this week. Therefore, it makes it a very interesting week for the US dollar and the intention the Federal Reserve will set.
While the US economic news has largely been positive in recent weeks, the US dollar has remained fairly flat and goes into this week trading around the same price levels from the beginning of the month.
Source: Admirals MetaTrader 5, USDX, Monthly - Data range: from 1 Aug 2013 to 23 Jan 2022, performed on 23 Jan 2022 at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The US dollar index monthly price chart shows a long-term range that has developed between ~103.00 and ~89.00. Currently, the price is in the middle of the range and has recently rejected significant horizontal resistance around ~96.25.
If the price can eventually break above this price level and resistance line, then there is a bullish case for the price to continue to the top of the long-term trading range. However, a more dovish tone from the Fed could see a greater pullback on the index.
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Corporate Trading Updates and Stock Indices
US stock market indices have – so far - been leading the world’s stock markets lower this year. Fears of higher interest rates and a peak in corporate growth have gripped the markets with the US technology sector and the Nasdaq 100 index being hit the hardest.
Investors will be looking towards corporate earnings to try and lift sentiment but the global stock market correction is already underway. Some companies reporting their latest earnings this week include Apple, Microsoft, Intel, Tesla and others.
Source: Admirals MetaTrader 5, SP500, Daily - Data range: from 14 Jul 2020 to 23 Jan 2022, performed on 23 Jan 2022 at 6:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. Past five-year performance of the S&P 500: 2021 = 26.99%, 2020 = +16.17%, 2019 = +29.09%, 2018 = -5.96%, 2017 = +19.08%
Last week, we highlighted that a break below the 100-day exponential moving average (green line in the chart above) will open the path towards the September 2021 lows (black horizontal line).
Since breaking the moving average and the long-term trend line we are now moving towards this support level and time will tell if it actually reaches those lows. Currently, the sentiment is very weak across global stock indices but there may be some relief before the September 2021 lows as the 50-period exponential weekly moving average is sitting above these lows.
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