The US dollar has pulled back a bit against the ¥104 level, an area that has been important more than once. In the short term, it looks as if the market is simply going back and forth and trying to figure out what it wants to do next. We have been in a longer term downtrend, so I think at this point in time the market probably continues to go to the downside. Short-term rally should continue to offer selling opportunities right around that ¥104 level, and I think that the resistance probably extends all the way to the ¥105 level.
Near the ¥103.50 level, I think there is a certain amount of support in that general vicinity that is worth paying attention to, especially if we can break down below there. If we do break down below there, then it is likely that we go down towards the ¥102.50 level, perhaps even lower than that. We have been in a very extended downtrend for a while, and I simply just do not see that changing in the short term.
Furthermore, if we are going to massive amounts of stimulus, one would have to think that eventually the US dollar needs to continue going lower. What makes this trade a little bit more confusing at times is the fact that it also is highly sensitive to risk appetite, so it is a little bit of a “push/pull” type of situation in the short term, and that explains a lot of the choppiness that is seen on the chart.
The British pound has rallied to kick off the trading session on Wednesday on the bullish foot. However, the market has pulled back from the 1.3750 level again, an area that seems to be a bit of an issue in general. With this being the case, I think that the market probably finds pullbacks as attractive, especially near the 1.35 handle underneath as it is not only a large, round, psychologically significant figure, but it is also an area that features the 50 day EMA now.
Because of this, I think what we are looking at here is the opportunity for value hunters to come back into the marketplace and take advantage of what is typically going to be thought of as “cheap pounds.”
The 50 day EMA itself of course attracts a lot of attention, but at the end of the day I think what we are seeing here is the likelihood of a “continuation of the buy on the dips attitude” that we have seen for so long. Stimulus is one of the main drivers of this pair to the upside, and although we already know that there is going to be more stimulus coming out of the United States, the reality is that we do not know how much of it there will truly be at the end of the day.
Because of this, I think what we are looking at is an opportunity to take advantage of what has been a very strong trend, but currently is suffering at the hands of a little bit of doubt when it comes to whether or not the stimulus package is going to be as massive as once thought.
The British pound has rallied a bit during the trading session on Wednesday, but continues to struggle with the ¥142.50 level, as we have pulled back significantly from that level. Nonetheless, this is a market that will continue to be supported underneath, as there are plenty of buyers on dips from everything that we have seen. The more, I do think that the “risk on trade” will probably continue to be the favored one, but we have a lot of work above that we need to get through.
The ¥140 level underneath continues to be rather important from not only a large, round, psychological important figure standpoint, but the fact that it has previously been both structurally supportive as well as resistive. Because of this, I think that we probably get a short-term pullback towards that area before we may get a bit of extended buying pressure. The 50 day EMA sits just below the ¥140 level as well, so that makes that area interesting from that standpoint. Furthermore, the trend has clearly been to the upside when it comes to the British pound in general, so there is no need in fighting that.
It appears that the trend is trying to build up enough momentum to go to the upside even further, so even though this candlestick suggests that we are going to fall in the short term, I do not like the idea of shorting this pair, rather I think that we are more than likely going to continue to see a deaf opportunities to buy the dip that it is exactly what we should be doing over the longer term.
The Euro initially tried to rally during the trading session on Wednesday but then turn things around to show signs of negativity. At this point, it looks like we are probably going to go down towards the 1.20 level, although I am not necessarily looking to sell this pair. Quite frankly, this is a pullback that is desperately needed, and therefore I think that it is welcomed by both bullish and the parish traders alike.
The ECB has been active behind the scenes doing what is tantamount to yield curve control, so that may work against the Euro going forward. The Euro has been rising rather rapidly and although there has been no direct intervention in the currency markets, the reality is that the market had gotten far ahead of itself as it reached towards the 1.23 level. The weekly chart looks somewhat ominous, but really at the end of the day I think there are plenty of buyers near the 1.20 level, extending down to the 1.19 level where buyers would be looking for value based upon the idea of stimulus in the United States.
However, it should be noted that the $1.9 trillion stimulus package that Joe Biden suggested is not necessarily a “slam dunk”, and I think at this point in time it is likely that we will see a lot of noise when it comes to the idea of that stimulus shrinking the US dollar. The consensus is of course that the US dollar continues to fall in value, but we had gotten so overextended that a correction was desperately needed. We are still in the midst of that correction.
The Australian dollar has rallied a bit during the trading session on Wednesday as we continue to see more of a grind to the upside. The Aussie of course is part of the “reflation trade”, and therefore I believe that the Australian dollar probably continues to be bullish more than anything else, but at this point in time I think that what we are looking at is a little bit of exhaustion, perhaps the market will try to build a bullish flag here.
This does not mean that I am willing to sell this market, just that I am not expecting a lot over the next few sessions.
To the upside, I believe that the 0.80 level is the target, but it will take a while to get to that area. In time will more than likely be bought into as they offer value, extending all the way down to the 0.75 handle, especially as the 50 day EMA has broken above that region.
However, I do recognize that this probably comes down to stimulus more than anything else, so that is worth paying attention to. Stimulus of the United States will continue to weaken the US dollar but there are some questions about whether or not Joe Biden can get a huge package through Congress, and as long as that is the concern it will more than likely cause a bit of hesitation.
However, once it is all said and done, there will be a lot of stimulus, and therefore it is likely that we will continue to see buyers on these dips regardless. I have no interest in trying to short this market anytime soon.
As expected, fourth quarter net earnings of $2.30 per share and adjusted earnings of $2.52 per share declined as care patterns normalized, while COVID-19 costs rose, and further rebate effects were recognized. That was higher than the market expectations $2.41 per share.
The Company affirmed its recently issued full year earnings outlook for 2021, including net earnings of $16.90 to $17.40 per share and adjusted net earnings of $17.75 to $18.25 per share. The largest insurance company by Net Premiums’ said its full-year 2020 revenues of $257.1 billion grew $15.0 billion or 6.2% year-over-year, reflecting broad-based revenue growth across the businesses.
“Adj. EPS $2.52 vs. $2.41 consensus. 4Q MLR 190 bp better than consensus but the full year MLR was only 10 bp better than UNH’s full year guide of 79.2%. Optum results were better-than-expected across the board. Management noted continued restoration of care patterns in 4Q20– positive for the group as it indicates better visibility into 2021, all else equal, although we look for more detail on the call,” said Charles Rhyee, equity analyst at Cowen and company.
Eighteen analysts who offered stock ratings for UnitedHealth in the last three months forecast the average price in 12 months at $395.61 with a high forecast of $462.00 and a low forecast of $359.00.
The average price target represents a 12.33% increase from the last price of $352.19. From those 18 analysts, 16 rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.
Morgan Stanley gave a base target price of $462 with a high of $529 under a bull scenario and $261 under the worst-case scenario. The firm currently has an “Overweight” rating on the health care company’s stock.
Several other analysts have also recently commented on the stock. Cowen and company raised the target price to $370 from $360. Bernstein upped the stock price forecast to $413 from $403. Jefferies increased the price objective to $375 from $335. UnitedHealth Group had its target price hoisted by Deutsche Bank to $404 from $359. The brokerage currently has a buy rating on the healthcare conglomerate’s stock.
In addition, Raymond James increased their target price to $405 from $355 and gave the stock a strong-buy rating. Truist increased their target price to $420 from $400. Credit Suisse Group increased their target price to $395 from $355 and gave the stock an average rating.
“UnitedHealth Group is the number one Medicare Advantage player with 28% market share, the number two Medicare PDP player with 20% market share, and the number two commercial player with 15% market share. United’s model is enhanced via vertical integration with its OptumRx PBM platform, which is one of the three largest PBMs in the country,” said Ricky Goldwasser, equity analyst at Morgan Stanley.
“With a large lead in breadth of services offerings and considerable exposure to government businesses, UnitedHealth is well positioned for any potential changes in the US healthcare system. A strong balance sheet and continued solid cash generation give flexibility for continued M&A.”
Netflix, Inc. (NFLX) shares surged over 12% in extended-hours trade Tuesday after the streaming content provider reported better than expected fourth-quarter sales on the back of robust subscriber growth. The company also said it is considering returning free cash flow to shareholders through buybacks.
Revenues for the fourth quarter (Q4) came in at $6.64 billion, slightly above the $6.63 billion consensus mark analysts had forecast. Moreover, the top line grew 20% from a year earlier, thanks to a boost of 8.5 million paid subscribers during the period. The company disclosed quarterly earnings per share (EPS) of $1.19, with the figure falling shy of Wall Street estimates of $1.30 a share and contracting 8% on a year-over-year (YoY) basis.
As of Jan. 20, 2021, Netflix stock has a market value of $221.68 billion and trades 7.21% lower on the year. However, the shares have gained nearly 50% over the past 12 months as investors piled into names that benefited from consumers spending more time at home during the pandemic.
Returning Free Cash Flow to Investors
CFO Spencer Neumann raised the prospect of returning excess free cash flow to investors while remaining on the lookout for strategic investments. “We put a premium on balance sheet flexibility, so we’re going to continue to invest aggressively into the growth opportunities that we see, and that’s always going to come first,” he said, per CNBC. “But beyond that, if we have excess cash, we’ll return it to shareholders through a share buyback program,” Neumann added. He also told investors that the company would no longer need to raise external financing for its daily operations.
Wall Street View
Citi’s Jason Bazinet maintained his ‘Neutral’ rating on Netflix shares earlier this month but raised his price target to $580 from $450. The analyst cautioned price hikes might limit new subscribers in coming quarters, resulting in a loss of market share to Disney’s streaming service, Disney+.
Elsewhere, the Street sentiment remains mostly bullish. The shares receive 21 ‘Buy’ ratings, 4 ‘Overweight’ ratings, and 12 ‘Hold’ ratings. Just one sell-side firm currently recommends selling the shares. Price targets range from as high as $700 to as low as $235, with the median pegged at $580.60. Watch for a flurry of additional upgrades over the next few weeks after yesterday’s upbeat quarterly update.
Technical Outlook and Trading Tactics
Since climbing to a new all-time high in mid-July, Netflix shares have remained stuck in a 110-point trading range. Premarket data indicates the stock will open around $565 today, placing the price toward the range’s upper trendline.
Those looking to play a breakout should plan entries above key resistance at $575 while managing risk with a stop-loss order placed around $20 below the execution price. Consider using a measured move to set a profit target. For example, add the trading range distance, as measured in points, to the breakout level. ($105 + $575 = $680 profit target)
The Dollar/Yen is trading lower on Wednesday, reversing yesterday’s rally as the choppy trade continues for a fifth straight session. The price action suggests traders are trying to decide if the risk is on or risk is off.
The five-day counter-trend rally in March 10-year U.S. Treasury notes could also be confusing traders after the recent steep rise in interest rates. Traders seem to wait for yields to make their next move before committing to a direction in the Dollar/Yen. Higher yields will widen the spread between U.S. Treasuries and Japanese Government bonds, making the U.S. Dollar a more attractive investment.
At 07:32 GMT, the USD/JPY is trading 103.745, down 0.160 or -0.15%.
In other news, on Tuesday, U.S. Treasury Secretary nominee Janet Yellen, appearing before the Senate Finance Committee, urged lawmakers to “act big” on the next coronavirus relief package, adding that the benefits outweigh the costs of a higher debt burden. This news gave risk appetite better support, helping to boost the U.S. Dollar.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through 104.398 will signal a resumption of the uptrend. The main trend changes to down on a trade through 102.593.
The minor trend is also up. A trade through 104.198 will indicate the buying is getting stronger. The minor trend will change to down on a move through 103.524.
On the upside, resistance is a series of retracement levels at 104.135, 104.499 and 104.821.
The minor range is 102.593 to 104.398. Its 50% level at 103.496 is potential support and a trigger point for an acceleration to the downside.
Daily Swing Chart Technical Forecast
The price action the last seven sessions suggests the direction of the USD/JPY will be determined by trader reaction to a pair of 50% levels at 103.496 and 104.135.
A sustained move under 103.496 will indicate the presence of sellers. If this move generates enough downside momentum then look for a potential acceleration with 102.593 the next major downside target.
A sustained move over 104.135 will signal the presence of buyers. This could lead to a labored rally with initial targets coming in at 104.198, 104.398 and 104.499.
AUD/USD gained upside momentum and is trying to settle above the resistance at 0.7740 while the U.S. dollar is losing ground against a broad basket of currencies.
The U.S. Dollar Index is currently trying to settle below the nearest support level at the 20 EMA at 90.35. If this attempt is successful, the U.S. Dollar Index will move towards the psychologically important 90 level which will be bullish for AUD/USD.
Today, Australia reported that Consumer Confidence declined from 112 in December to 107 in January. Australia’s economy enjoyed a significant rebound thanks to the country’s success in virus containment and the economic strength of its main trading partner, China, so it remains to be seen whether the recent decline of Consumer Confidence is a start of a new downside trend.
Tomorrow, foreign exchange market traders will focus on employment reports from Australia. Employment Change report is expected to show that employment increased by 50,000 in December, while Unemployment Rate is projected to decline from 6.8% to 6.7%.
AUD/USD managed to get above the resistance at 0.7725 and is trying to settle above the next resistance level at 0.7740. If this attempt is successful, AUD/USD will move towards the next resistance level which is located at 0.7760.
In case AUD/USD gets above the resistance at 0.7760, it will head towards the resistance at 0.7780. A move above this level will open the way to the test of the resistance at 0.7800.
On the support side, a move below 0.7725 will push AUD/USD towards the next support level at the 20 EMA at 0.7700. In case AUD/USD declines below this level, it will head towards the next support level at 0.7675. A successful test of this level will open the way to the test of the support at 0.7660.
The greenback has been helped since the start of the new year by rising U.S. Treasury yields and some investor caution about the strength of the global economic recovery from the coronavirus pandemic. However, the short-term move hasn’t been strong enough to sway longer-term traders from changing their bearish outlook.
At 07:00 GMT, March U.S. Dollar Index futures are trading 90.335, down 0.141 or -0.16%.
In other news, Yellen, appearing before the Senate Finance Committee on Tuesday, urged lawmakers to “act big” on the next coronavirus relief package, adding that the benefits outweigh the costs of a higher debt burden.
Yellen also said the dollar’s value should be determined by market forces, adding that the United States should oppose attempts by other countries to artificially manipulate currency values to gain trade advantage.
Daily Swing Chart Technical Analysis
The main trend ticked higher on the daily chart last Friday when buyers took out 90.720. However, the lack of follow-through to the upside following the surge to 90.790 suggests the move may have been fueled by short-covering and buy stops rather than new buyers. A trade through 89.890 will change the main trend to down.
The main range is 92.730 to 89.165. Its retracement zone at 90.950 to 91.370 is new resistance.
The minor range is 89.890 to 90.790. The index is currently straddling its 50% level at 90.340.
The short-term range is 89.165 to 90.790. Its 50% level at 89.980 is the last potential support before the 89.890 main bottom.
Daily Swing Chart Technical Forecast
The early price action suggests the direction of the March U.S. Dollar Index on Wednesday will be determined by trader reaction to the pivot at 90.340.
A sustained move under 90.340 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into 89.980 and 89.890. The latter is a potential trigger point for an acceleration to the downside.
A sustained move over 90.340 will signal the presence of buyers. If this move can attract enough buyers then look for the rally to possibly extend into 90.790, followed by a resistance cluster at 90.950.
EUR/USD is trying to settle back above the resistance at 1.2155 while the U.S. dollar is losing ground against a broad basket of currencies.
The U.S. Dollar Index declined below the support level at 90.50 and is currently testing the next support level at the 20 EMA at 90.35. In case the U.S. Dollar Index settles below this level, it will gain additional downside momentum which will be bullish for EUR/USD.
Yesterday, EU reported that Euro Area ZEW Economic Sentiment Index increased from 54.4 in December to 58.3 in January despite the negative impact of the second wave of the virus.
Today, foreign exchange market traders will have a chance to take a look at Euro Area inflation data for December. Inflation Rate is projected to decline by 0.3% year-over-year while Core Inflation Rate is expected to grow by 0.2%. Most likely, prices will remain weak in the EU in the upcoming months due to the negative impact of lockdowns in the first quarter of this year.
EUR/USD managed to get above the resistance at 1.2130 and is trying to settle above the next resistance level at 1.2155. If this attempt is successful, EUR/USD will get to the test of the resistance at the 20 EMA at 1.2165. The next resistance level is located at 1.2175, so EUR/USD will likely face strong resistance in the 1.2155 – 1.2175 area.
In case EUR/USD manages to settle above this resistance area, it will gain additional upside momentum and head towards the resistance at 1.2220. A successful test of this level will push EUR/USD towards the resistance at 1.2250.
On the support side, the previous resistance level at 1.2130 will likely serve as the first support level for EUR/USD. In case EUR/USD declines below this level, it will get to the test of the next support at the 50 EMA at 1.2115. A move below the 50 EMA will push EUR/USD towards the next support level which is located at 1.2080.
Silver futures are trading respectably higher on the day, scoring the largest percentage gain of all of the precious metals.
Dollar weakness was a definitive factor in today’s gains. As of 4:11 PM EST, the U.S. dollar index is currently trading down 27 points (-0.30%) and fixed at 90.48.
Currently, February 2021 gold futures are up to $9.20 (+0.50%) and fixed at $1839.10. March Silver futures have gained approximately $0.40, fixed at $25.26. Spot gold had fractional gains of $2.00 which was due to dollar weakness overcoming the selling pressure.
President-elect Joe Biden has just arrived at Joint Base Andrews, as he prepares to be sworn in as the 46th president of the United States. This new administration will bring forth a completely different set of policies, and market participants will focus intently on his proposals to rebuild our economy and eradicate Covid –19.
Expectations are that he will greatly increase fiscal stimulus and continue as long as needed. He has already proposed a $1.9 trillion package. While fiscal aid is proposed is essential for the economy. At the same time, we are aware that the more fiscal stimulus that is allocated the greater the United States digs deeper into debt.
The Fed has stated they will be maintaining the current highly accommodative monetary policy, which includes quantitative easing and the purchase of approximately $120 billion of assets a month in which they will add to their current balance sheet.
The question becomes what long-term effects will these actions have upon our national debt and budget deficit. As we reported last week data from the Federal Reserve Bank of New York indicated that the national debt has risen by almost $7.8 trillion during the Trump administration. This additional debt amounts to $23,500 in additional Federal debt for every individual in the United States according to the associated press.
The most alarming fact is that the United States Treasury Department acknowledged that the budget deficit rose by 60.70% during the first three months of this fiscal year which began in October. Current projections indicate that by the second quarter of last year we had a jump to 127% of our GDP. This enormous mounting national debt is still coupled with massive unemployment that will likely lead to a major devaluation of the U.S. dollar and a tremendous rise in the price of gold over the upcoming years.
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U.S. Dollar Is Losing Ground Against British Pound
GBP/USD is currently trying to settle above the resistance at 1.3665 while the U.S. dollar is losing ground against a broad basket of currencies.
The U.S. Dollar Index managed to settle below the support at 90.50 and is trying to get below the next support level at the 20 EMA at 90.35. If the U.S. Dollar Index declines below the 20 EMA, it will head towards the 90 level which will be bullish for GBP/USD.
Today, the UK will provide inflation data for December. Analysts expect that Inflation Rate increased by 0.2% month-over-month. On a year-over-year basis, Inflation Rate is projected to grow by 0.5%. Meanwhile, Core Inflation Rate is expected to grow by 1.3%.
In addition to UK inflation data, foreign exchange market traders will focus on the Inauguration Day in the U.S. The U.S. dollar pulled back from recent highs as the support from the recent increase in U.S. Treasury yields was not sufficient enough to push it higher, and traders will keep an eye on any dovish comments from Biden’s economic team.
GBP/USD gained upside momentum and is trying to settle above the nearest resistance level at 1.3665. If this attempt is successful, GBP/USD will head towards the next resistance at 1.3710. RSI is in the moderate territory, and there is plenty of room to gain additional momentum in case the right catalysts emerge.
A move above 1.3710 will open the way to the test of the resistance at 1.3755. In case GBP/USD gets above the resistance at 1.3755, it will move towards the resistance at 1.3785.
On the support side, the nearest support for GBP/USD is located at 1.3625. In case GBP/USD declines below this level, it will move towards the next support level which is located at the 20 EMA at 1.3585.
The next support is located at 1.3575, so GBP/USD will likely receive material support in the 1.3575 – 1.3585 area. A move below this support area will push GBP/USD towards the support at 1.3540.
The Australian Dollar is edging higher on Wednesday despite weaker than expected consumer confidence in January. A measure of Australian consumer sentiment slipped from a decade high in January as new as new outbreaks of COVID-19 in Sydney and Brisbane spooked people, though the spread has now been contained with relatively few cases and no deaths, according to Reuters.
At 06:39 GMT, the AUD/USD is trading .7736, up 0.0038 or +0.49%.
The Westpac-Melbourne Institute Index of Consumer Sentiment released on Wednesday fell 4.5% in January, from December, when it rose 4.1%.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. The main trend changed to down when sellers took out .7666 on Monday. A trade through .7805 will change the main trend to up.
The minor range is .7820 to .7659. Its 50% level at .7740 is a potential upside target. Since the main trend is down, sellers could come in on a test of this level.
The short-term range is .7339 to .7820. If the selling pressure continues then look for the move to possibly extend into its 50% level at .7579.
The major retracement zone support comes in at .7405 to .7308.
Daily Swing Chart Technical Forecast
The direction of the AUD/USD into the close on Wednesday will be determined by trader reaction to .7740. Sellers are going to try to form a secondary lower top following a test of this level.
A sustained move under .7740 will indicate the presence of sellers. If this move creates enough downside momentum then look for a breakdown under .7659 and a possible test of the main bottom at .7643. Taking out this level will reaffirm the downtrend.
A sustained move over .7740 will signal the presence of buyers. If this move generates enough upside momentum then look for the rally to possibly extend into .7805. Taking out this main top will change the main trend to up with .7820 the next upside target.
March E-mini NASDAQ-100 Index futures closed higher on Tuesday as U.S. Treasury Secretary Janet Yellen advocated for a hefty fiscal relief package before lawmakers to help the world’s largest economy ride out a pandemic-driven slump.
In other news, Netflix shares rose more than 11% following the closing bell on Tuesday after the streaming television provider reported paid subscriber additions for the fourth quarter topped Wall Street expectations.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. The trend turned back up when buyers took out the previous main top at 13028.75 late in the session. The new main bottom is 12727.00. A trade through this level will change the trend to down.
The minor range is 12491.25 to 13125.00. Its 50% level at 12808.00 is new support.
The short-term range is 12217.00 to 13125.00. Its 50% level at 12671.00 is additional support.
The main range is 10936.25 to 13125.00. Its retracement zone at 12030.50 to 11772.25 is the major support area controlling the near-term direction of the index.
With two changes in trend in as many sessions, conditions are very choppy, but this is the daily chart, so you have to expect two sided price action before the next major move. Professionals have to shake the trees a little to rattle the weaker traders.
Now that the trend has turned back up, the follow-through move becomes the key as to whether the change in trend was fueled by buy stops or aggressive new buyers.
The longer the index spends under the record high at 13125.00 set on January 8, the more the chart pattern will look distributive, which tends to indicate lower prices are coming.
The real key to the next move is whether the next catalyst encourages investors to chase the market higher and buy strength, or pushes them to look for value at much lower levels. It comes down to determining how much bang for the buck can they get buying a new contract higher versus buying a near-term correction into support.
March E-mini Dow Jones Industrial Average futures finished higher on Tuesday. The blue chip average was supported by a surge in shares of component Goldman Sachs Group, which rose 2.5% as its fourth-quarter profit more than doubled, dwarfing estimates after another blowout performance at its trading and underwriting business.
Goldman Sachs on Tuesday beat analysts’ expectations for fourth-quarter profit and revenue on strong performance from the firm’s equities traders and investment bankers. The bank posted earnings of $12.08 a share, crushing the $7.47 estimate of analysts surveyed by Refinitiv. Revenue of $11.74 billion exceeded expectations by about $1.75 billion.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through 31116 will change the main trend to up. A move through 30506 will signal a resumption of the downtrend.
The minor range is 31148 to 30506. The market is currently straddling its 50% level at 30827.
The second minor range is 29760 to 31148. Its 50% level at 30454 is potential support.
The short-term range is 29318 to 31148. Its 50% level is another potential support level.
Daily Swing Chart Technical Forecast
Tuesday’s price action suggests the direction of the March E-mini Dow Jones Industrial Average futures contract over the short-run will be determined by trader reaction to 30827.
A sustained move over 30827 will indicate the presence of buyers. If this generates enough upside momentum then look for a test of 31116. Taking out this level will change the main trend to up. This could trigger an extension of the rally into the next main top at 31148.
A sustained move under 30827 will signal the presence of sellers. This could lead to a retest of Friday’s minor bottom at 30506, followed by 30454. If this fails then look for an extension of the selling into 30233. This level is a potential trigger point for an acceleration to the downside.
Natural gas prices broke down on Tuesday, as the cold weather that was expected to move into the U.S. failed to come about. While the weather is expected to be cooler than normal across the west coast over the next 6-10 days, its expected to turn warmer than normal across most of the mid-west during the next 8-14 days. The EIA estimates that natural gas consumption was down 2.5% year over year in 2020.
Natural gas prices broke down on Tuesday, declining 7%. Prices broke through and upward sloping trend line. Target support on the February contract is seen near the December lows at 2.26. Resistance is seen near the 10-day moving average at 2.70. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum is poised to turn negative as the MACD is expected to create a crossover sell signal.
Consumption was Down in 2020
The EIA estimates that U.S. natural gas consumption averaged 83.1 billion cubic feet per day in 2020, down 2.5% from 2019. EIA expects that natural gas consumption will decline by 2.8% in 2021 and by 2.1% in 2022. Most of the decline in natural gas consumption is the result of less natural gas use in the power sector, which EIA forecasts to decline because of rising natural gas prices. These declines are partly offset by rising natural gas use in other sectors.
Gold prices consolidated on Tuesday following the long U.S. holiday weekend. The range was less than $12 per ounce as the world awaits the U.S. Presidential inauguration on Wednesday. The dollar moved lower, helping to buoy the yellow metal as U.S. yields took a hiatus from moving higher. Senate Majority Leader Mitch McConnell said that President Trump provoked the mob that stormed the Capitol earlier this month, casting blame on the violent attack president.
Trade gold with FXTM
On Tuesday, gold prices consolidated, holding just above an upward sloping trend line that comes in near 1,825. A close below this level would lead to a test of the November lows at 1,764. Short-term momentum has reversed and turned negative as the fast stochastic generated a crossover sell signal. The current reading on the fast stochastic is 18, below the oversold trigger level of 20. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) line generated a crossover sell signal. The MACD histogram is printing in the red with a downward sloping trajectory, which points to lower prices.
Yellen Hearing to Be Treasury Secretary was Held on Tuesday
Janet Yellen told lawmakers she would make the needs of America’s workers her core focus if confirmed as the next U.S. Treasury secretary. The former Chair of the Federal Reserve said that she would ensure the U.S. has a competitive economy that offers good jobs and wages workers in cities and rural areas.