Market Analysis - 12th of January

The series of dollar price increases took ‘pause for the cause’, although the yields of US treasuries remained at high levels. FED members are beginning to express their views on the subject of further asset purchases under the current QE program. Robert Kaplan unexpectedly admitted that in a few months' time a discussion on the gradual phasing out of this program could be considered, that of course if the economic situation allows it. The other FED members who spoke yesterday (Barkin and Bostic) hinted that the Reserve should focus on achieving its goals for now. We have more speeches by decision makers planned.

Today, the House of Representatives intend to deal with the motion to remove President Trump from office (impeachment). The chances of that are quite slim, given that Mike Pence and some Republican members in the Senate reject the idea. The current president's term of office ends on January 20. For the markets, this brawl may not matter much indeed. The key will be any speculation as to the details of the broad fiscal program to be presented tomorrow by President-elect Joe Biden. The situation around COVID is also focused for the markets, both in the US and in the world. In Japan, a state of emergency is to be declared in three districts, while China has ordered a 7-day lockdown in Guan Province.

On Tuesday, those currencies that have been weak recently, such as NOK, AUD, NZD to GBP, perform the best. At the same time, they are the most sensitive to risk-on/risk-off fluctuations.

Yesterday the EURUSD broke 1.2173-76 support based on the former highs from 3-4 December. Today's correction is therefore within the so-called return movement. Is it just a technical setup? MFI remains negative, which seems to suggest that the larger correction is not over yet.

GBPUSD is also quite sensitive to global risk fluctuations, which can sometimes lead to a short-term reaction. This may have happened this morning when the peak was reached at 1.3566. Looking at the long-term perspective, the pound's outlook is weak and should not be overshadowed by the dollar's volatility. The combination of the new reality after Brexit and the clear lockdown, which may last until the end of March, should be visible in the macro data and in the rhetoric of the Bank of England.

On the daily chart, we can mark a downward move, and the last days have brought a number of important medium-term signals. It will be difficult to deny them.

Dominik Stone

Tokenhouse Yard

City Of London, EC2R 7AS

Disclaimer: Any Advice or information on this website is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information. By Viewing any material or using the information within this site you agree that this is general education material and you will not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here by Dominik Stone, it's employees, directors or fellow members. Futures, options, and spot currency trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This website is neither a solicitation nor an offer to Buy/Sell futures, spot forex, cfd's, options or other financial products. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology is not necessarily indicative of future results.

High Risk Warning: Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results.

© 2021 Copyright Dominik Stone International. All rights reserved.