The S&P 500 is coming off its best week since November, and investors are looking for fresh catalysts to push the index higher

26 January 2021, 03:26

Market Focus

Technology shares led gains in U.S. stocks as investors awaited earnings from some of the biggest companies. The Nasdaq 100 climbed amid gains for Apple Inc., Tesla Inc., and Microsoft Corp. The S&P 500 Index ended higher, though gains were limited after the top Senate Democrat said lawmakers said an aid package was unlikely before mid-March and a U.S. health official expressed concern about vaccination delays.

The picture was more negative in Europe, with equity benchmarks in France, Spain, and the U.K. ending lower. The Stoxx 600 Travel & Leisure index lost 1.9% amid news France may go into another lockdown, the U.K. may tighten border controls, and Israel moved to bar foreign flights from entering the country.

The S&P 500 is coming off its best week since November, and investors are looking for fresh catalysts to push the index higher or at least justify current valuations. That could come from a slate of earnings reports due this week that will shed light on how the biggest tech companies are faring and whether retailers, travel companies, and restaurants are seeing any meaningful pickup in business.

Elsewhere in markets, crude oil in New York climbed toward $53 a barrel and the dollar gained. Sovereign bond yields dipped while Bitcoin rebounded above $34,000 before paring the advance.

Market Wrap

Main Pairs Movement

The dollar advanced against most of its Group-of-10 peers amid indications that more U.S. spending on pandemic relief may be delayed until March. The euro remained under pressure after the announcement that Italian Prime Minister Giuseppe Conte will resign Tuesday and try to form a new government. The dollar pared gains but is still up for the session.

Euro ranks among the biggest decliners in G-10, extending retreat from this month’s multiyear highs. The European Central Bank plans to be in the market “for an extended period” to ensure access to affordable funding, President Christine Lagarde said.

EUR/USD down 0.3% to 1.2141 after falling as much as 0.5%, the most since Jan. 15. GBP/USD pared losses, trading 0.2% lower at 1.3664 after falling as much as 0.3%. AUD/USD was down 0.1% after trading in +0.4%/-0.4% range.

Technical Analysis

USDJPY(4 Hour Chart)

USD/JPY is at 103.77, down slightly after trading in +0.2%/-0.1% range offers at 103.90 and 104.10 cap gains, according to a Hong Kong-based trader. Risk appetite is mixed with stimulus hopes to offset by COVID-19 concern. U.S. stocks are caught up in choppy trade after midday on Monday with the Treasuries making gains. As for the market take of yens, the JPY net long positions are consolidating after their recent push to the highest level since Oct 2016.

From a technical perspective, short and long-term SMAVG indicators remained flat to downward slide trends, suggesting a mixed momentum. For the RSI aspect, the indictor stands above 51 figures which suggest a bullish trend for the short term. Therefore, we expect the yen will consolidate in the tiny range between 103.65 and 104, consider first pivot support and resistance. As price action, in the 4-hour chart below, shows a strong level of resistance for which the bulls will need to foray into 104 level as strong resistance. On slideway, the last crucial support level will be at 103.35.

Resistance: 104, 104.25

Support: 103.65, 103.54, 103.34

GBPUSD (4 Hour Chart)

Sterling went to the peak at 1.3723 then trade to the lowest level of the day in the 1.365, having only very briefly managed to surpass the 1.37 level during the early part of the European morning. U.K.’s focus has for now been much more on downbeat euro price action as opposed to on U.K. news. U.K. news has been much more positive as the U.K. Prime minister was talking about potentially easing lockdown as early as mid-Feb. However, he also mentions last Friday that the new strain looks to be 30% deadlier as well as more transmissible than the original, rising the scope for tougher or longer lockdown.

From a technical aspect, short-term SMAVG is dragging down sterling, however, the price level still above the long-term SMAVG indicator. On the other hand, the RSI indicator whipsaw around 50 then closes at 48 as of writing, which suggests bearish momentum. As price action, 1.3645 would be an important support for the right end shoulder. On the slid way, the price level should stand above the orange upward trend line, otherwise, eyes on 1.36 support level.

Resistance: 1.3701, 1.3745

Support: 1.3645, 1.3606, 1.3554

XAUUSD (4 Hour Chart)

The price of XAUUSD has rallied to daily highest at 1867.97 then market turn down afterward, close at 1855.68 as of writing. At the same time, U.S. 10 years Treasuries yield has dropped to 1.031%, as much as -6.18%, which also corrected the gold market position. However, any worst views of the pandemic still could not exert momentum on the gold market.

From a technical perspective, short and long-term SMAVG indictors are both going upward that gave critical bullish trend guidance, despite the golden cross with opposite movement earlier. For the RSI view, the indicator is swirling neutral zone then close at 49.5 as market close, suggesting a bearish trend in short term. We expect that the gold position is still lacking a propel momentum as combing the suggestion above. Therefore, the current consolidation level is not too shabby for scope the resistance and support.

Resistance: 1859, 1875, 1891

Support: 1842, 1827, 1804