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Despite civil unrest on Capitol Hill last week, US and global equities ended on a high to start the first full week of the new year. The Russell 2000, an index that measures the performance of most small-cap American companies, outperformed the high-tech Nasdaq 100. The S&P 500 and Dow Jones came close behind.
What was much more interesting was the history of fixed income assets. Long-term Treasury yields have skyrocketed, with 10- and 30-year rates rising further since August. Financial markets welcomed the Democratic senators who won the two elections in Georgia. This opened the door to greater fiscal stimulus, providing much needed support for a recovering coronavirus economy.
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The disappointing December non-farm payroll report supported the case for further support. As a result of rising government bond yields, gold prices may be vulnerable after the worst week since late November. Meanwhile, crude oil prices may benefit, also supported by an unexpected cut in Saudi Arabia’s production after last week’s OPEC meeting.
The US dollar may also pause, as rising yields on local bonds make it a more attractive investment, but it is unclear how far it could benefit, given the Fed’s still dovish stance. Additional stock gains they will likely continue to work against the US dollar, with Australian and New Zealand dollars ready to benefit.
Tighter blocks remain a risk to markets amid Covid-19’s new, more contagious variety. Markets will be looking at a plethora of speeches by Federal Reserve presidents like Eric Rosengren and Raphael Bostic. ECB chief Christine Lagarde is also available. Towards the end of the week, stay tuned for US sales and retail sentiment. What else is in store for the markets ahead?
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FUNDAMENTAL FORECASTS:
Sterling (GBP) Weekly Outlook: Covid-19 Vaccination Program Supports Sterling
Looking ahead, the pound will continue to draw strength from an acceleration in the UK’s vaccination program, despite the increase in the number of infections.
Australian dollar outlook: rising commodity prices to raise AUD
Australia’s success in suppressing the new coronavirus and rising commodity prices may continue to support the cycle-sensitive AUD in the coming months.
Mexican pesos forecast: USD / MXN balances in support as Covid-19 cases increase in Mexico
The USD / MXN’s strong bearish trend has stalled in recent weeks, as bearish momentum has eased.
Crude oil prices eyeing OPEC outlook report after cut in Saudi Arabia production, US stimulus
Crude oil prices may amplify gains after Saudi Arabia unexpectedly cut production ahead of OPEC’s monthly report. US fiscal stimulus bets can also support WTI.
Will the S&P 500 extend its record rally in hopes of reflection?
The seemingly unstoppable recovery in US stocks may have more room before the time is ripe for a correction. The reflux trade appears to be gaining momentum, but stretched assessments may signal the risk ahead.
Euro forecast: EUR / USD outlook on sunny market sentiment
Merchant confidence was boosted by U.S. Democrats gaining control of the Senate, suggesting new safe-haven dollar flows for risky currencies like the euro.
Gold price outlook mired by rising US Treasury yields
The price of gold falls to a new weekly low ($ 1834), with the weakness in gold largely coinciding with the recent increase in US Treasury yields.
TECHNICAL FORECASTS:
Euro Weekly Technical Outlook: EUR / USD Channel Structure in Focus
EUR / USD is trending upwards, but momentum has eased; still giving the benefit of the doubt, but keep an eye on the channel.
Pound sterling forecast: Sterling Rally falters in resistance to the trend
The pound sterling achieved three consecutive victories, with the pound sterling rally stagnating in technical resistance. Here are the levels that matter on the weekly GBP / USD chart.
Gold price forecast: (XAU) Gold anchored while Bitcoin goes to the moon
The gold bulls have just been punished this week as Bitcoin flew to the moon. Do we have a new safe haven to take the crown off or a mere pause in a larger imaging cycle?
Technical perspective of crude oil: oil outbreaks in the Saudi surprise – main levels to be observed
Strong early 2021 with crude oil rises to the Saudi surprise and the market melts.
Dow Jones, Nasdaq 100, FTSE 100 forecasts for the following week
The shares reached new heights last week, as they moved into overbought territory after more than two months of essentially continuous gains. Can they continue to push higher despite getting hot?
US DOLLAR WEEKLY PERFORMANCE AGAINST CURRENCIES AND GOLD
