The US dollar has initially tried to rally again during the trading session on Tuesday but continues to find the 50 day EMA as being a bit too much to overcome. The fact that we have fallen here again suggests that there should be more US dollar weakness, but you should also keep in mind that the market is going to continue to go back and forth based upon a lot of volatility in choppiness because not only is this pair trying to price in US stimulus, but it is also trying to price and risk appetite. In other words, it is a bit of a “push pull” type of scenario.
USD/JPY Video 27.01.21
Looking at this chart, if we break above the ¥104.50 level, it could open up a move towards the ¥105 level. That being said, it is not until we break above the ¥105 level solidly that I would be interested in buying this market. That being said, the market is likely to see a lot of choppiness at this point but so far it looks as if we are going to continue the overall grind lower. I think that is probably a good word here: “grind.”
To the downside, the ¥102.75 level has been supportive in the past, and could make a nice target if we get a little bit of a breakdown. That being said, I do believe that it may be noisy on the way to that area, so you are going to need to be very patient and hang on to the position, thinking of it more of a longer-term position even though it is not that far away.
The British pound has initially pulled back during the trading session on Tuesday but has turned right back around to show signs of strength again and ended up reaching towards 1.37 level. However, this is an area that also features a certain amount of resistance as of late, so do not be surprised at all to see a bit of a short-term pullback. Longer-term, I think a lot of this will be reliance on the FOMC meeting tomorrow, and whether or not Jerome Powell decides to suggest even more bearish pressure.
GBP/USD Video 27.01.21
We do need to worry about the UK economy as it is being locked down so aggressively, but at the end of the day it is difficult to imagine a scenario where this market turns around for a longer term, due to the fact that the Federal Reserve will do whatever he can to devalue the US dollar. They will do this through bond purchases, which drives down the interest rates offered. That of course is negative for the currency, and therefore it should translate into higher currencies against the greenback.
All of that being said, we need to see what happens with Jerome Powell between now and then so I would not expect a major move until after Wednesday afternoon. In the meantime, the 1.37 level extends resistance all the way to the 1.3750 level, as it has multiple times in the past. If we get above there, then we can really start to move but so far, the pair seems to be hesitating in this general vicinity, and without some type of catalyst coming out of the Federal Reserve I do not see that changing anytime soon.
The British pound has initially fallen during trading on Tuesday only to turn around and show signs of strength again. As we are trying to break above the ¥142 level for a bigger move, there is probably some work to do in the meantime. I believe that we need to get above the ¥142.50 level to start going higher from a longer-term perspective, and that may take a bit of work. The British pound has been extraordinarily resilient over the last several months, even though the economy has been locked down drastically.
GBP/JPY Video 27.01.21
Perhaps this is driven by the fact that the British pound is “historically cheap”, and therefore longer-term players will be looking at it as a potential value play. The Japanese yen of course is considered to be a “safety currency”, so that has a certain amount of effect on how people play this trade. With that being the case, I think as long as there is more of a “risk on sentiment” around the world, it is very likely that the pair will continue to grind higher. A break above the ¥142.50 level opens the possibility of a move to ¥145, and that is most likely what we will eventually see. With that being the case, I think that short-term pullbacks will continue to be buying opportunities, while the momentum continues to build.
I do believe that eventually we will probably go looking towards the ¥145 level, but I also recognize that there are a lot of variables out there right now they continue to cause havoc when it comes to risk appetite. Because of this, I do think that pullbacks are your friend, and of course position sizing will be crucial.
The Euro initially pulled back during the trading session on Tuesday to reach down towards the 50 day EMA again. We have also found that level to be supportive again, and that does suggest that we are going to try to continue the overall uptrend. That being said, we are also roughly in the middle of larger spots on the chart that have much more influence. The spots of course are the 1.23 level above, and the 1.20 level underneath. Ultimately, I think that we are simply bouncing around in this area and trying to figure out where to go next.
EUR/USD Video 27.01.21
It should be noted that the Wednesday FOMC meeting and announcement could have a major influence on this pair, but we also have to worry about the ECB stepping in and doing more as well. I think we are essentially going to see a lot of back and forth in general, carving out this 300 PIP range for more of the consolidation range. All things point to more back-and-forth trading, but it certainly seems to have more of an upward bias.
I think at this point we are looking at simple range bound trading, and as we are in the middle of the range is difficult to imagine a scenario where you should be piling into this pair right now. However, if you were to be forced to trade this pair, you would probably be better off looking higher than lower. Regardless, there are going to be other pairs out there that offer better opportunities in the short term.
The Australian dollar continues to look strong overall, despite the fact that it initially fell during the trading session on Tuesday. Looking at the 0.77 level, it does look as if it is trying to find a bit of support, but so far it does not look as if we are ready to make a “higher high.” If we do break out to a fresh, new high though, that opens up the possibility of a move to the 0.80 level. In fact, that is my longer-term thesis. This is based upon stimulus and of course the idea of more demand for commodities as Australia is such a huge producer of them.
AUD/USD Video 27.01.21
To the downside, if we do break down below the 0.77 handle, then we could go looking towards the 50 day EMA. The 50 day EMA is sitting near the 0.76 handle, and of course there is a certain amount of psychological support at the 0.75 handle. With that being said, I think you can continue to buy short-term pullbacks on the whole, but I also recognize that there is a lot of froth in the markets against the US dollar currently, so a short-term pullback of a couple of handles would not necessarily be the worst thing that could happen to the Aussie dollar.
Pay close attention to the US Dollar Index, it is currently trying to reach towards extreme lows again, an area that has caused some major issues in the past. That being said, the FOMC meeting on Wednesday will probably have the greatest influence on what happens next, as it will influence the US dollar against everything, not just the Australian dollar.
U.S. Dollar Gains Ground Against Australian Dollar
AUD/USD is currently trying to settle below the support at 0.7675 while the U.S. dollar is gaining ground against a broad basket of currencies.
The U.S. Dollar Index has recently managed to get above the resistance at 90.50 and is trying to develop additional upside momentum. The next resistance level for the U.S. Dollar Index is located at 90.70. If the U.S. Dollar Index settles above this level, it will head towards the 50 EMA at 90.80 which will be bearish for AUD/USD.
The U.S. dollar gained upside momentum amid doubts about the size of the new U.S. stimulus package. Biden’s $1.9 trillion stimulus proposal is facing opposition from Republicans who want a more targeted package, and U.S. Senate Majority Leader Chuck Schumer has already indicated that Democrats will try to pass the bill with a majority vote.
Meanwhile, commodity-related currencies like Australian dollar or Canadian dollar are under pressure on the foreign exchange market amid worries about the continued spread of coronavirus. If the current downside move in the commodity space turns into a real sell-off, Australian dollar will find itself under additional pressure.
AUD/USD declined below the 20 EMA at 0.7705 and is trying to settle below the next material support level at 0.7675. If this attempt is successful, AUD/USD will move towards the next support level which is located at 0.7635. No material levels were formed between 0.7635 and 0.7675 so this move may be fast.
In case AUD/USD settles below the support level at 0.7635, it will head towards the next support at the 50 EMA at 0.7610. A successful test of the 50 EMA will signal that AUD/USD is ready to gain additional downside momentum.
On the upside, the previous support at the 20 EMA at 0.7705 will likely serve as the first resistance level for AUD/USD. If AUD/USD manages to settle above this level, it will move towards the next resistance at 0.7725. A successful test of this level will open the way to the test of the next resistance at 0.7740.
EUR/USD is currently trying to settle below the nearest support level at the 20 EMA at 1.2120 while the U.S. dollar is gaining ground against a broad basket of currencies.
The U.S. Dollar Index is testing the resistance level at 90.50. If this test is successful, the U.S. Dollar Index will gain additional upside momentum and head towards the next resistance level at 90.70 which will be bearish for GBP/USD.
Doubts about the size of the new U.S. stimulus package have recently provided some support to the American currency on the foreign exchange market.
U.S. President Joe Biden has already signaled that he was ready to negotiate the eligibility details of the proposed $1,400 stimulus checks while U.S. Senate Majority Leader Chuck Schumer stated that Democrats might try to pass the stimulus bill with a majority vote.
Traders will also begin to prepare for the U.S. Fed Interest Rate Decision which will be announced on Wednesday. The interest rate is expected to stay unchanged but the market will be very sensitive to Fed’s comments about the current state of the economy and the outlook for the future.
EUR/USD is currently testing the nearest support level at the 50 EMA at 1.2120. If this test is successful, EUR/USD will move towards the next support level at 1.2080. RSI is in the moderate territory, and there is plenty of room to gain additional downside momentum in case the right catalysts emerge.
If EUR/USD gets below the support at 1.2080, it will move towards the next support level which is located near January lows at 1.2060. A successful test of this level will open the way to the test of the next support at 1.2040.
On the upside, a move above 1.2130 will push EUR/USD towards the resistance level which is located at the 20 EMA at 1.2155. In case EUR/USD manages to settle above the resistance at 1.2155, it will head towards the next resistance at 1.2175.
British Pound Is Losing Ground Against U.S. Dollar
GBP/USD declined below the support level at 1.3665 and is moving towards the next support level at 1.3625 while the U.S. dollar is gaining ground against a broad basket of currencies.
The U.S. Dollar Index managed to settle above the 20 EMA at 90.35 and is currently testing the nearest resistance at 90.50. If this test is successful, the U.S. Dollar Index will head towards the next resistance level at 90.70 which will be bearish for GBP/USD.
Today, foreign exchange market traders will focus on the employment data from the UK. Claimant Count Change report is projected to show that the number of people claiming for unemployment benefits increased by 35,000 in December. Analysts expect that Unemployment Rate increased from 4.9% in October to 5.1% in November due to the negative impact of the virus-related restrictions.
Traders will also pay attention to the latest developments in the U.S. stimulus story. Some Republicans have indicated that the new stimulus plan was too expensive, and U.S. President Joe Biden has already signaled that he was open to negotiating the eligibility requirements of $1,400 stimulus checks which are part of a broader stimulus package.
GBP/USD is currently trying to get to the test of the nearest support level which is located at 1.3625. In case GBP/USD manages to settle below this level, it will move towards the next support level at 1.3575. No material levels were formed between 1.3575 and 1.3625 so this move may be fast.
A successful test of the support at 1.3575 will open the way to the test of the next support level at 1.3540. In case GBP/USD declines below this level, it will head towards the support at the 50 EMA at 1.3515.
On the upside, the previous support level at 1.3665 will likely serve as the first resistance level for GBP/USD. If GBP/USD settles above this level, it will head towards the next resistance at 1.3710. A successful test of the resistance at 1.3710 will open the way to the test of the next resistance which is located at the recent highs at 1.3745.
U.S. Dollar Moves Higher Against Canadian Dollar At The Start Of The Week
USD/CAD has recently made an attempt to get above the resistance at 1.2775 while the U.S. dollar gained ground against a broad basket of currencies.
The U.S. Dollar Index managed to get above the resistance at the 20 EMA at 90.30 and is trying to settle above the next resistance level at 90.50. If this attempt is successful, the U.S. Dollar Index will head towards the next resistance level at 90.70 which will be bullish for USD/CAD.
Today, Canada reported that Manufacturing Sales increased by 0.6% month-over-month in December after falling by 0.6% in November. Tomorrow, Canada is expected to report that Building Permits declined by 5% month-over-month in December after growing by 12.9% in November, but it remains to be seen whether Canada’s housing data will have a notable impact on Canadian dollar’s dynamics on the foreign exchange market.
At this point, commodity market dynamics and Biden’s stimulus package proposal will likely remain the main drivers for USD/CAD.
USD to CAD managed to get above the resistance at 1.2750 and tested the resistance level at 1.2775 but failed to gain sufficient upside momentum. If USD to CAD manages to get above the resistance at 1.2775, it will move towards the next resistance level which is located at the 50 EMA at 1.2800.
In case USD to CAD settles above the resistance at the 50 EMA, it will gain additional upside momentum and head towards the resistance at 1.2835. RSI is in the moderate territory so there is plenty of room to gain momentum in case the right catalysts emerge. If USD to CAD gets above the resistance at 1.2835, it will move towards the resistance level at 1.2860.
On the support side, the previous resistance level at 1.2750 will likely serve as the first support level for USD to CAD. If USD to CAD manages to settle below this level, it will move towards the support at the 20 EMA at 1.2730. The next support level is located at 1.2720 so USD to CAD will likely receive significant support at the 1.2720 – 1.2730 area.
The S&P 500 has rallied a bit during the trading session on Monday to kick off the week, showing signs of further upward pressure. That being said, you should keep in mind that this is a heavy earnings week for the US stock markets, so we should get a little bit of volatility. Most of this is being driven on the speculative fever of loose monetary policy, so as long as the Federal Reserve continues to facilitate the market, the market should go higher. There is the Federal Reserve meeting this week, and they will certainly do nothing to rock the boat.
S&P 500 Video 26.01.21
Underneath, I see the 3800 level as support, and I also see the 3750 level as another support level. After that, we have the 50 day EMA at the 3690 level, and that of course the uptrend line underneath there. In other words, we have a whole slew of areas underneath that could be buying opportunities, so I have no interest in trying to get cute and short this market. Beyond that, you cannot short the US index, because they are not equally weighted. In other words, they are not designed to fall for very long and they typically do not.
The Federal Reserve will step in and protect everybody of the losses get to be too much, so at this point in time the only question you should be asking yourself is whether or not you should be long of the market, or should you be on the sidelines? Dips to offer value so I think that is probably what we will have to look towards.
Silver markets have gone back and forth during the trading session on Monday to kick off the week, as there is still a significant amount of noise and questions out there when it comes to the economy. Looking at the chart, the 50 day EMA sitting just below offers a little bit of support, just as the $26 level above is significant resistance. All things being equal, this is a market that continues to be a lot of back and forth exhaustion as we have seen over the last couple of days. The question now is whether or not we can break above the $26 level?
SILVER Video 26.01.21
If we can break above the $26 level, then it is likely that the market goes looking towards the $27.50 level, and then eventually the $28 level. That being said, the US dollar is a bit oversold though, so you should keep that in mind and recognize that the US dollar will have its say as well. The US dollar rallying typically is pretty negative for silver, which tends to have a negative correlation. Furthermore, we have to ask questions as to whether or not there is going to be industrial demand for silver, and whether or not there is going to be more stimulus coming.
As of late, there are some questions about the size of stimulus, as Joe Biden may not get the $1.9 trillion that he was asking for. If that is going to be the case, silver may not be as bullish as once expected to be. However, I do think that with all of the stimulus around the world, silver will go higher over the longer term, so I am still bullish, and I look at a breakout as only a matter of time.
GameStop Stock Rallies As Short Sellers Exit Their Unfortunate Bets
Gamestop stock is gaining more than 100% in today’s trading session as the mega-rally continues. GameStop shares got a significant impulse in early January after the company entered in a deal with RC Ventures LLC which refreshed the board and brought executives from Chewy.
The original enthusiasm quickly turned into a major short-squeeze which pushed the stock higher day by day. Importantly, the stock got very popular with retail investors who actively mentioned their bullish views on GameStop at various platforms.
The short squeeze has become much more painful for the unfortunate short sellers in recent days as GameStop’s shares rallied above the $100 level and tested the $150 level.
The current trading action signals that some traders may be facing margin calls on their unfortunate short bets as volatility increased significantly and there are big spreads between bid and offer on quotes.
The Risk Of A Pullback Is Very Significant
Analysts expect that GameStop will not have an annual profit until the fiscal period ending on January 2023. Similar stock price action can be sometimes seen in tech and biotech stocks but it is highly unusual for a retailer.
The main driver of the upside move is the major short squeeze which was fueled by the speculative activity of retail traders. Once short sellers capitulate and exit their positions, the stock will have no forced buyers and could face a wave of selling as speculators on the long side of the trade will rush to take their profits.
It should be noted that the price dynamics of GameStop shares in the upcoming trading sessions will depend exclusively on the balance between buyers and sellers rather than any fundamental news, and traders should be prepared for extreme volatility. At this point, the risk of a big pullback is very significant as RSI has reached the 95 level.
The West Texas Intermediate Crude Oil market has initially tried to rally during the trading session on Monday but gave back the gains to show lackluster performance. At this point, it is very likely that we could go down towards the $50 level, which of course is a large, round, psychologically significant figure. That is an area that had previously been resistive so of course it should be structurally supportive as well. This is not to say that crude oil markets will necessarily stop falling there, but it is the most likely of buying opportunities. At this point, we are essentially between two major areas, so I think a pullback to that area makes quite a bit of sense as we are a bit exhausted.
Crude Oil Video 26.01.21
Brent markets have initially tried to rally as well but have pulled back to show signs of weakness again. The $55 level is sitting just below and is essentially “fair value” due to the fact that the major support is at the $50 level, which is also backed up by the $51 level where the 50 day EMA is sitting at. To the upside, the $60 level looks to be resistance, based upon structural reactions in the past. With this being said, I think that we are probably best leaving this market alone until we get some type of impulsive candlestick, which we can follow. I suspect that we are at the very least need to work off a little bit of a froth, so the fact that we have done very little over the last two weeks should not be much of a surprise.
Natural gas markets have gapped higher during the trading session on Monday to show signs of strength, but quite frankly it looks like a simple bounce. This is a market that I think continues to see a lot of volatility, but at the end of the day it should be noted that we are heading towards the warmer part of the year, thereby driving down the value of natural gas in general, due to the fact that there will be less demand. That being said, the market has plenty of resistance in the form of the 50 day EMA above, so I think that might be a nice area to start shorting again if you get the opportunity.
NATGAS Video 26.01.21
The $2.80 level above is a massive resistance barrier, but at the end of the day it is likely that could end up even being the “ceiling” in the market. To the downside, the 200 day EMA does offer a little bit of support, but I think we go much lower than that. In fact, I believe it is only a matter of time before we reach towards the $2.00 level, perhaps even lower. I like the idea of fading short-term rallies at this point, due to the fact that the warmer temperatures coming should be toxic for price, and therefore I have no interest in buying this market at all this time of year. Any short-term bounce should be thought of as an opportunity to short yet again. The oversupply of natural gas will continue to be a major problem.
Gold markets have gone back and forth during the trading session on Monday to kick off the week rather quietly. The market of course moves back and forth on a handful of factors, not the least of which would be the US dollar. The greenback has been a little bit firmer during the trading session, so that has put a little bit of hesitation into the gold market itself. Furthermore, the 50 day EMA above has offered significant resistance over the last three candlesticks, but I do think that the path of least resistance is probably still higher over the longer term.
Gold Price Predictions Video 26.01.21
To the downside, the 200 day EMA offers support at the $1821 level, and that of course you have the $1800 level underneath there that could also come into play and offer support based upon the fact that it was previous support, and it is of course a large, round, psychologically significant figure. If we were to break below there, then the next support level is closer to the $1750 level and breaking that would be absolutely toxic for gold.
I still believe that more likely than not we rise over the longer term, looking towards the $2100 level. After all, there are a lot of reasons to look for safety out there, and then of course you have the monetary policy that is so loose around the world, driving up demand for wealth preservation in the form of precious metals and other assets. All things being equal, this is a market that continues to be very choppy overall, but I do think that eventually we will build up the momentum.
Advanced Micro Devices Inc. (AMD) reports Q4 2020 earnings after Tuesday’s closing bell, with analysts looking for a profit of $0.30 per-share on $3.02 billion in revenue. If met, earnings-per-share (EPS) will mark a slight profit decrease compared to the same quarter in 2020. The stock fell 4.1% in October despite beating Q3 top and bottom line estimates, with shareholders jumping ship after the company announced it would acquire Xilinx Inc. (XLNX) for $35 billion.
Is AMD Paying Too Much for Xilinx?
The stock has been running in place since early September, trading around the summer rally peak at 94.28. Outsized share gains and concerns the company is paying too much for Xilinx have weighed on buying interest but the overall pattern in the last five months looks bullish, raising odds for a sustained breakout into triple digits. Even so, Intel Corp (INTC) missteps in the last year have yet to translate into higher AMD profits.
Cowen analyst Matthew Ramsay raised his target to $110 earlier this month noting, “We expect a strong Q4 and raise our 2021 revenue estimates as AMD’s share gains in PC, server, and console markets continue to track above consensus. 2021 EPS ticks down entirely due to higher 15% tax rate, and we introduce well-above Street 2022 numbers. We upgraded Intel today on the potential of the CEO change, but AMD’s momentum is here and now (and increasing).”
Wall Street and Technical Outlook
Wall Street consensus has deteriorated to an ‘Overweight’ rating after historic share gains, based upon 18 ‘Buy’ and 12 ‘Hold’ recommendations. Two analysts now recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $13 to a Street-high $120 while the stock opened Monday’s U.S. session about $6 below the median $100 target. A breakout after an upside surprise is possible with this placement.
The stock topped out in the mid-90s in September and has failed three breakout attempts into January 2021. Price action has held high in the 5-month trading range but selling pressure has increased, dropping accumulation-distribution readings to the lowest low since July when AMD was trading more than 40 points lower. Higher-than-expected quarterly profits could overcome this deficit while an earnings miss is likely to drop price into fourth quarter support in the 70s.
Silver is trying to settle above the resistance at the 20 EMA at $25.60 while the U.S. dollar is gaining some ground against a broad basket of currencies.
The U.S. Dollar Index has once again received support near the 90 level and gained some upside momentum. Currently, the U.S. Dollar Index is testing the nearest resistance level which is located at the 20 EMA at 90.30. If the U.S. Dollar Index manages to settle above this level, it will move towards 90.50 which may put some pressure on silver and gold price today.
Meanwhile, gold is testing the key resistance level at the 50 EMA at $1870. This resistance level has already been tested several times in recent trading sessions and proved its strength. If gold settles above the 50 EMA, it will move towards the $1900 level which will be bullish for silver and other precious metals.
Gold/silver ratio has recently made another attempt to settle above the 20 EMA at 72.75 but this attempt yielded no results. In case gold/silver ratio manages to settle above the 20 EMA at 72.75, it will head towards the next significant resistance level at the 50 EMA at 73.95 which will be bearish for silver.
Silver is currently testing the resistance level at the 20 EMA at $25.60. If this test is successful, silver will move towards the next resistance level at $25.85. This resistance has been tested several times in recent trading sessions and proved its strength.
If silver manages to settle above the resistance at $25.85, it will gain additional upside momentum and head towards the resistance at $26.30.
On the support side, the nearest support level for silver is located at the 50 EMA at $25.25. A move below this level will open the way to the test of the next support level at $25.00. In case silver declines below $25.00, it will gain additional downside momentum and move towards the support level at $24.70.
The US dollar has gone back and forth against the Japanese yen during the trading session on Monday, sitting just below the ¥104 level. The ¥104 level is of course a large, round, psychologically significant figure, and therefore a lot of people will be paying close attention to it. Furthermore, it has offered a significant amount of resistance as of late so “market memory” comes into play. Ultimately, we are in a downtrend and it looks to me like we are getting a little bit stretched to continue to think of this as a potential bullish flag. At this point, it is turning to look more and more like a descending channel.
USD/JPY Video 26.01.21
Given enough time, I believe that this market will make a bigger move but in the short term it looks very likely to be choppy and sideways with a slightly downward tilt like we have seen of the last couple of weeks. The US dollar course continues to suffer at the hands of stimulus, but at the same time the Japanese yen is considered to be a safety currency, so it is a bit of a “one-two punch” considering all of the questions out there when it comes to the global economy. Given enough time, I do think that we reach towards the recent low which is closer to the ¥102.50 level.
However, you are going to need to be very patient on any type of shorting opportunity if you wish to hold onto a move down to that level. As far as buying is concerned, I am not even thinking about it until we break the ¥105 level.