JFD Team | Jan 27, 2021 03:28AM ET
EU indices gained yesterday, but the US and Asian ones traded in a more cautious manner, perhaps as investors turned more careful ahead of the FOMC decision later today. We believe that Fed Chair Powell will once again downplay the idea of QE tapering, with the Committee staying ready to expand its stimulative efforts if deemed necessary.h2 Investors Turn Cautious Ahead Of The FOMC/h2
The US dollar traded lower against all but two of the other G10 currencies on Tuesday and during the Asian session Wednesday. It underperformed the most against AUD, NZD and GBP in that order, while it gained slightly only versus SEK. The greenback was found nearly unchanged against JPY.
Yesterday, after hitting a new all-time high on our cash index, the S&P 500 drifted back down a bit, making its way closer to the short-term upside support line, drawn from the low of Dec. 21. Even if the index corrects a bit lower, as long as it remains somewhere above that upside line, we will remain positive, at least with the near-term outlook.
A slight push lower could bring the rate to the 3829 hurdle, or to the 3820 zone, marked by yesterday’s low and the low of Jan. 22. A bit lower runs the aforementioned upside line, which might provide additional support. If so, the index may rebound and make its way back to the all-time high, at 3870. If the buyers are still active, they might push the price further up, this way placing the S&P 500 into the uncharted territory.
Alternatively, if the index falls below the previously-mentioned upside line and then slides below the 3797 hurdle, marked by the current low of this week, that may temporarily spook the bulls from the field. More bears might join in, this way sending the S&P 500 further south. That’s when we will aim for the 3779 obstacle, or even the 3748 level, marked near the lows of Jan. 15 and 18.
After reversing to the upside on Jan. 19, NZD/USD started climbing higher, while balancing above a short-term tentative upside line taken from the low of that day. So far, the price structure is of higher lows and higher highs. That said, in order to get comfortable with further advances, a push above yesterday’s high, at 0.7247, would be needed.
If NZD/USD manages to climb above the 0.7247 barrier, this will confirm a forthcoming higher high, possibly clearing the way to the 0.7281 hurdle, which is the high of January 8th. Around there, the pair might stall for a bit, or even correct slightly lower. However, if the rate continues to balance somewhere above the 0.7247 area, another round of buying could be possible. The bulls may then try to overcome the 0.7281 obstacle, and if successful, the next target might be at 0.7315, which is the current highest point of January.
On the other hand, if the rate falls below the aforementioned upside line and then drops below the 0.7166 zone, marked near the lows of Jan. 22 and 26, that might open the door for further declines, as a forthcoming lower low would be confirmed. NZD/USD could then drift to the 0.7148 obstacle, or to the 0.7127 hurdle, marked by an intraday swing low of Jan. 20. If the selling doesn’t stop there, the next target might be at 0.7102, which is the low of Jan. 19.
Ahead of the FOMC decision we get the US durable goods orders for December. Headline orders are expected to have slowed fractionally, to +0.9% mom from +1.0%, while the core rate is forecast to have ticked up to +0.5% mom from +0.4%. The EIA (Energy Information Administration) report on crude oil inventories for last week is also coming out and expectations are for a slowdown to 0.430mn barrels from 4.351mn the week before. However, bearing in mind that, yesterday, the API (American Petroleum Institute) reported a 5.272mn barrels slide, we would consider the risks surrounding the EIA forecast as tilted to the downside.
As for tonight, during the early Asian morning Thursday, New Zealand’s trade balance for December is coming out, but no forecast is currently available.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.