Weekly Market Outlook: US dollar short squeeze and earnings in focus

Februar 08, 2021 10:00

In a relatively light week for economic news, all eyes turn to the US dollar short squeeze and whether or not it has the legs to continue. While last week’s US Non-Farm Payroll number  slightly missed expectations, Biden’s $1.9 trillion coronavirus relief plan has moved one step closer. 

The political situation between Republicans and Democrats may also give further clues to whether the stock market can keep on rallying higher after an impressive push up in the last week, with US indices recording new all time highs. 

There is also a range of different earnings announcements due from European and US companies, from the likes of Twitter, Uber, ABN Amro, Coca-Cola, AstraZeneca, NVIDIA and Walt Disney, among others. 

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

Weekly Forex Calendar

Source: MetaTrader 5 trading platform provided by Admiral Markets

 

Did you know that three times a week, three professional traders talk through the markets live and show you how to identify potential trading opportunities? Reserve your complimentary spot in the Admiral Markets Spotlight webinar now by clicking the banner below!

Free Trading Webinars

 

Trader’s Radar - The British Pound (GBP)

The British pound was one of the most volatile currencies last week. On Thursday, the Bank of England commented that they believe negative interest rates will now not be necessary due to a stabilizing economy and the success of the coronavirus vaccine rollout. However, they did expression caution and asked banks to be ready for negative interest rates in six months time. 

This helped lift sentiment around the pound causing a huge move higher. The weeks prior to this saw the British pound range trade after many of the pound pairs approached long-term horizontal resistance levels. The failure of sellers to step in and drive the market lower is a sign of strength. 

There are some still big concerns regarding the outcome of a deal between the EU and the City of London which many are saying is unlikely. Considering UK financial services contributes more than £75 billion in tax revenue to the UK, employs 3% of the UK workforce and produces 11% of total UK Government tax receipts, one would expect pound traders to be cautious. 

However, with the UK leading the race in the coronavirus vaccine rollout, the bulls are in control in the short-term. 

Source: Admiral Markets MetaTrader 5, GBPUSD, Monthly - Data range: from Feb 1, 2006, to Feb 5, 2021. Performed on Feb 5, 2021, at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

 

In the long-term, monthly price chart of GBPUSD above it’s clear to see the break of the long-term descending trend line that has developed since 2008 and 2014. Now that buyers are above this level, they may target the next level of resistance which is just under the 1.4000 price level. 

With both the British pound and US dollar showing general strength across the other pairs, the pound could strengthen as the US dollar becomes more exhaustive. Traders may well drop to lower time frames to identify bounces off key support levels such as moving averages. 

If you’re feeling inspired and ready to trade live in the market, you can open a live trading account by clicking on the banner below and accessing an impressive range of trading features to support you in your journey.

Trade Forex & CFDs

 

Corporate trading updates and stock indices

Global stock market indices produced an impressive rally last week with the US indices, such as the S&P 500 and Nasdaq 100 index surging to new all-time highs. European indices also joined in on the action with the DAX 30 falling a few points shy of its all-time high price level. 

Traders will therefore be looking for momentum to continue in this direction. The trigger may be the finalisation of Biden’s $1.9 trillion coronavirus relief bill, as investors look towards the economy after the coronavirus vaccine rollout. 

The FTSE 100 was the laggard as the British pound continues to strengthen. You can learn more about the inverse correlation between the FTSE 100 and the British pound in the ‘Investing in the UK Stock Market After Brexit’ article. 

Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from Sep 23, 2020, to Feb 5, 2021, performed on Feb 5, 2021, 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 circa: 2020 = +16.17%, 2019 = +29.09%, 2018 = -5.96%, 2017 = +19.08%, 2016 = +8.80%, 2015 = -0.82%.

In the daily chart of the S&P 500 stock market index above, it is clear to see the bounce from the ascending trend line (black line) and the 50-period exponential moving average (red line). Buyers surged back into the market and pushed it towards a new all-time high. Traders will be looking for clues that this momentum can continue. 

Sentiment in global stock markets may also be impacted by the range of earnings announcements due this week from European and US companies. Some of these include:

  • Tuesday 9 February - Lyft, Cisco Systems, Twitter, 
  • Wednesday 10 February - Uber, ABN Amro, Heineken, Coca-Cola
  • Thursday 11 February - AstraZeneca, Roku, NVIDIA, Walt Disney

Did you know that you can use the Trading Central Technical Ideas Lookup indicator to find actionable trading ideas on this index and thousands of other instruments across Forex, stocks, indices, commodities and more?

You can get this indicator completely FREE by upgrading your MetaTrader 5 trading platform provided by Admiral Markets UK Ltd to the exclusive Admiral Markets Supreme Edition!

Download MetaTrader 5 Supreme Edition

INFORMATION ABOUT ANALYTICAL MATERIALS:

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admiral Markets investment firms operating under the Admiral Markets trademark (hereinafter “Admiral Markets”) Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
  3. With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  4. The Analysis is prepared by an independent analyst, Jitan Solanki (analyst), (hereinafter “Author”) based on their personal estimations.
  5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.
  6. Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  7. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.
Avatar-Admirals
Admirals
Eine Komplettlösung für das Bezahlen, Investieren und Verwalten Ihres Geldes

Admirals ist mehr als ein Broker. Wir sind der Dreh-und Angelpunkt für Ihre Finanzen, indem wir Ihnen eine breite Palette von Finanzprodukten und -dienstleistungen anbieten. Wir machen es möglich, persönliche Finanzen durch eine Komplettlösung für das Investieren, Ausgeben und Verwalten von Geld anzugehen.