At the beginning of each month, Axi will cover both fundamental and technical analyses that traders might potentially want to watch out for in the markets.
Key Market Themes
While the number of new COVID-19 cases has stabilised somewhat, the focus is now increasingly shifting towards the race to get people vaccinated.
The vaccination campaign is making only slow progress in Europe, and the latest dispute between the EU and AstraZeneca shows that tensions are running high. Should the European Union fail with its vaccination strategy, its members states may decide to go their own way. This would seriously damage trust in the EU, and could put the Euro as well as European equity markets under pressure.
Moreover, a slow vaccine rollout could also mean longer lockdowns and threaten the global recovery. Investors will therefore closely monitor the latest vaccine developments and distribution process.
The actual impeachment proceedings against former US President Donald Trump are unlikely to move markets. However, they could overshadow Joe Biden's first few weeks in office, and move the focus away from the stimulus talks. Markets would likely react negatively to any further delay.
This weekend, a group of Republican senators have proposed an alternative plan for further economic stimulus, worth $600 billion. That figure is quite lower than what Biden has been proposing, but could get the talks moving again. The US economy is losing momentum, and while the Fed has signaled that no end of its ultra-loose monetary policy is in sight, further fiscal measures are crucial to prevent a double-dip recession.
The currency is likely to remain under pressure in the medium-term, as the Federal Reserve is in no rush to tighten its policy, and with more stimulus measures just around the corner. However, much will depend on global investors' risk appetite. Vaccine delays and the prospect of a prolonged period of lockdowns could trigger a rush into safe havens, which would benefit the Greenback.
GBPUSD - the uptrend is looking healthy, and Cable managed to bounce off the major support area at 1.3480-1.3520. The Weekly chart is suggesting that the currency pair is not yet in overbought territory. The next major level to watch is $1.40, and while GBP bulls might struggle to overcome that hurdle soon, there appears to be more room to the upside from the current levels.
The short-term outlook for the Aussie Dollar is mixed. The direction of the currency will primarily depend on whether the global risk-on sentiment will persist in the near-term. For traders, the key level to watch is 0.75, which is also the 38.2% Fibo level of the November-January rally.
XAU/USD - Following a stellar performance in 2020, gold has been struggling to gain momentum in recent weeks. The slightly stronger US Dollar has been weighing on the precious metal. At the same time, there has not been a real rush into safe havens as of now, and stocks remain attractive for investors. XAUUSD recently broke below the 200 DMA, and a retest of the $1800 level appears likely in the near-term.
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Investors are still digesting the latest statements from the US central bank, which surprised markets with a far more hawkish stance than expected