Weekly Market Outlook: FOMC, US & EU earnings in focus

Januar 25, 2021 09:30

In the last full week of the month, all eyes turn to Wednesday’s FOMC statement and press conference. While no changes are expected, traders will be keen to hear what Federal Reserve Chairman Jerome Powell thinks of the economy and when tapering could start. 

Capital flows could see its way into stock markets this week, after a lacklustre performance last week. The surge higher in US equities over Joe Biden’s US Presidential Inauguration has faded and even more worryingly, European equities did not join in. 

All attention may turn to the big tech heavyweights reporting earnings this week which includes Apple, Tesla, Facebook, Amazon, Microsoft and many others. It’s also the beginning of European earnings with a trickle of releases this week as well. 

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 - FOMC Press Conference

On Wednesday 27 January at 7.30 pm GMT, all eyes will be on the FOMC Press Conference by Fed Chairman Jerome Powell. While no policy changes are expected, the market can move on Powell’s comments so traders will be on high alert. 

The Fed has committed to doing whatever it takes to support the economy but has repeatedly said that governments need to do more as well. Joe Biden’s $1.9 trillion stimulus plan will be more than welcome for the Fed but traders will want to know if that means they will start to taper back quantitative easing.

If the Fed remains adamant in its path and if Biden’s stimulus plan can get passed, the combination could weigh on the US dollar. However, with the dollar being one of the weakest currencies for the past several months the momentum may not be as strong. 

Source: Admiral Markets MetaTrader 5, USDX, Monthly - Data range: from Nov 1, 2004, to Jan 22, 2021. Performed on Jan 22, 2021, at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

The chart above shows the monthly price activity from 2005 of the US Dollar Index - an index of the US dollar against a basket of different currencies. It shows the dollar being held in a long-term trading range in between horizontal resistance and horizontal support, shown by the two horizontal black lines drawn on the chart above. 

After the price rejected the upper resistance at around 102.99 in March 2020, the US dollar has moved lower ever since. Price is now approaching the long horizontal support level at around 89.13. This is an area which may limit any significant selling in the dollar and may attract some buyers to the market. 

However, traders may need to wait for a shift in fundamentals first. Perhaps an improving US economic picture from this week’s GDP number or most likely which countries are going to come out of lockdown restrictions the soonest to get the economy moving again. 

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Corporate trading updates and stock indices

Global stock markets painted a mixed picture last week as US indices rallied higher while European indices failed in their attempt higher. The rally in US indices happened around the time of Joe Biden’s US Presidential Inauguration. However, the rally has since faded and moved back lower. 

The failure for European stock market indices to push higher is of some concern and could be one to watch. For now, capital flows are still enjoying the US stock market - as the daily chart of the S&P 500 shows below - and may continue to do so if the Fed gives the market what they want in the FOMC press conference on Wednesday 27 Jan. 

Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from Sep 9, 2020, to Jan 22, 2021, performed on Jan 22, 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%.

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

  • Monday 25 January - Philips
  • Tuesday 26 January - Louis Vuitton, Novartis, Xerox, Starbucks, General Electric, Microsoft
  • Wednesday 27 January - KPN, Boeing, AT&T, Apple, Facebook, Tesla
  • Thursday 28 January - Diageo, McDonald’s, Amazon
  • Friday 29 January - Caterpillar, Chevron

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