Australian Dollar Moves Higher Against U.S. Dollar
AUD/USD is testing 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 slowly moving towards the nearest support level at 90. In case the U.S. Dollar Index manages to settle below this level, it will head towards the support at 89.75 which will be bullish for AUD/USD.
There are no important economic reports scheduled to be released in the U.S. and Australia today so foreign exchange market traders will likely focus on general market sentiment and Biden’s $1.9 trillion stimulus plan.
While some Republicans have already raised concerns about the huge size of the new stimulus package, the stimulus plan is expected to get enough votes which is bullish for riskier assets like Australian dollar.
Oil is rebounding after the recent sell-off and other commodities are also receiving some support from investors which is an additional bullish catalyst for the Australian currency.
AUD/USD received support at the 20 EMA at 0.7710 and gained upside momentum. Currently, AUD/USD is trying to settle above the nearest resistance level at 0.7740. RSI is in the moderate territory so there is plenty of room to gain momentum in case the right catalysts emerge.
If AUD/USD settles above the resistance at 0.7740, it will head towards the next resistance level at 0.7760. A successful test of this level will push AUD/USD towards the resistance which is located at 0.7780. If AUD/USD manages to settle above the resistance at 0.7780, it will move towards the next resistance level at 0.7800.
On the support side, the nearest support level for AUD/USD is located at 0.7725. If AUD/USD declines below the support at 0.7725, it will get to the test of the next support at the 20 EMA at 0.7710. A move below the 20 EMA will be a worrisome development for AUD/USD bulls as it will signal that AUD/USD will try to develop additional downside momentum.
Shares in Schlumberger Limited (SLB) bucked broader weakness in the energy sector Friday, gaining nearly 1% after the oilfield services provider delivered a better-than-expected fourth-quarter report.
The Houston-based company reported quarterly earnings of 22 cents per share, comfortably above the 17 cent figure analysts had expected. Meanwhile, revenues of $5.5 billion topped estimates by $300 million. Notably, sequential sales rose across all four of the company’s business divisions during the period, indicating recovering economic activity. On a year-over-year (YoY) basis, top-and bottom-line growth declined 33% and 44%, respectively. Management credited increasing contributions from digital solutions and growing multiclient seismic license sales for the encouraging results.
Cash flow also improved during the quarter, coming in at $554 million despite shelling out $144 million in severance payments. Moreover, the company sees the trend continuing this year. “We are confident in our ability to further improve cash flow generation in 2021, which will allow for debt reduction,” CEO Olivier Le Peuch told investors during the earnings call, per the company’s website.
Through Friday’s close, Schlumberger shares have a market capitalization nearing $34 billion, offer a 2.05% dividend yield, and trade 33% lower over the past 12 months. However, since the start of the year, the stock has gained almost 12%. From a valuation standpoint, the shares have a forward-earnings multiple of 25.7 times, 25% below their five-year average multiple of 34.5 times.
Wall Street View
Citigroup analyst Scott Gruber remains bullish on the stock. “Schlumberger remains our top pick in oilfield services given their leverage to recovery abroad, margin expansion prospects, and free cash flow generative business model,” he wrote in a client note cited by Barron’s.
Other sell-side firms overwhelmingly share Gruber’s view. The stock receives 21 ‘Buy’ ratings, 2 ‘Overweight’ ratings, and 8 ‘Hold’ ratings. Just one analyst currently recommends selling the shares. Twelve-month price targets range widely from a Street-high $37 to a low of $17, with the median sitting at $27.
Technical Outlook and Trading Tactics
Schlumberger shares initially sold off after releasing results but staged an impressive intraday turnaround to complete a piercing line bullish reversal pattern. As added confluence, the bounce occurred at the $24 level, where price finds crucial support from the June and December swing highs. Furthermore, the 50-day simple moving average (SMA) crossed back above the 200-day SMA in early December to form a “golden cross” – a technical signal often marking the start of a new uptrend.
Active traders who enter here should consider placing a stop-loss order slightly beneath Friday’s low at $23.45 and target a move up to longer-term resistance at $31.
EUR/USD is currently trying to settle above the resistance at 1.2175 while the U.S. dollar remains under pressure against a broad basket of currencies.
The U.S. Dollar Index is currently moving towards the nearest support level at 90. A successful test of this level will open the way to the test of the next support at 80.75 which will be bullish for EUR/USD.
The recent Euro Area PMI data was a bit better than expected as Manufacturing PMI decreased from 55.2 in December to 54.7 in January compared to analyst consensus of 54.5 while Services PMI decreased from 46.4 to 45 compared to analyst consensus of 44.5. Numbers below 50 show contraction.
Today, foreign exchange market traders will focus on Biden’s $1.9 trillion coronavirus aid package proposal. The proposal faced opposition from some Republicans due ot its huge size. However, markets believe that it would get enough support so riskier assets enjoy solid demand while safe-haven assets like the U.S. dollar are under pressure.
EUR/USD managed to get above the resistance at the 20 EMA at 1.2165 and is trying to settle above the next resistance level at 1.2175. EUR/USD has already made several attempts to settle above this level in recent trading sessions but failed to develop sufficient upside momentum.
In case EUR/USD settles above the resistance at 1.2175, it will move towards the next resistance level at 1.2220 although it may also face some resistance near 1.2190. A successful test of the resistance at 1.2220 will open the way to the test of the next resistance level which is located at 1.2250.
On the support side, the previous resistance at the 20 EMA at 1.2165 will likely serve as the first support level for EUR/USD. In case EUR/USD declines below the 20 EMA, it will move towards the next support level at 1.2155.
A move below the support at 1.2155 will push EUR/USD towards the next support at 1.2130. If EUR/USD manages to settle below this level, it will get to the test of the 50 EMA at 1.2120.
British Pound Moves Higher At The Start Of The Week
GBP/USD managed to get above the resistance at 1.3710 and is moving towards the next resistance level at 1.3745 while the U.S. dollar is losing ground against a broad basket of currencies.
The U.S. Dollar Index faced resistance at the 20 EMA at 90.30 and is moving towards the support at the 90 level. If the U.S. Dollar Index manages to settle below the support at 90, it will gain additional downside momentum and head towards the next support level at 89.75 which will be bullish for GBP/USD.
On Friday, UK reported that Manufacturing PMI declined from 57.5 in December to 52.9 in January while Services PMI decreased from 49.4 to 38.8. Numbers below 50 show contraction.
Meanwhile, Retail Sales grew by 0.3% month-over-month in December compared to the analyst consensus which called for growth of 1.2%.
The reports indicated that the country’s problems on the coronavirus front have put significant pressure on the services segment while the consumer activity has started to slow down.
There are no important economic reports scheduled to be released today in the U.S. and UK, so foreign exchange market traders will focus on coronavirus-related news and Biden’s stimulus plan.
GBP/USD gained upside momentum and is trying to get to the test of the resistance level at 1.3745. If GBP/USD manages to settle above this level, it will head towards the next resistance at 1.3785. A move above the resistance at 1.3785 will push GBP/USD towards the next resistance at 1.3800.
It should be noted that GBP/USD has not visited this territory for several years so it remains to be seen whether previous levels will be relevant for today’s trading.
On the support side, a move below 1.3710 will open the way to the test of the support at 1.3665. In case GBP/USD declines below the support at 1.3665, it will head towards the next support level at 1.3625. A successful test of the support at 1.3625 will open the way to the test of the next support level at 1.3575.
Bitcoin, BTC to USD, slid by 9.97% in the week ending 24th January. Following on from a 6.02% decline from the previous week, Bitcoin ended the week at $32,320.0.
A mixed start to the week saw Bitcoin rise to a Tuesday intraweek high $37,936.6 before hitting reverse.
Falling well short of the first major resistance level at $40,389, Bitcoin slid to a Friday intraweek low $28,989.0.
The sell-off saw Bitcoin fall through the 23.6% FIB of $33,008 and the first major support level at $31,023.
It was Bitcoin’s first visit to sub-$30,000 levels since 5th January.
Finding support on Friday, Bitcoin broke back through the 23.6% FIB before ending the day at sub-$32,500 levels.
4 days in the red that included an 13.08% tumble on Thursday delivered the downside for the week.
For the week ahead
Bitcoin would need to move through the 23.6% FIB of $33,008 and the $33,082 pivot to support a run the first major resistance level at $37,175.
Support from the broader market would be needed for Bitcoin to break back through to $37,000 levels.
Barring an extended crypto rally, the first major resistance level and last week’s high $37,936.6 would likely cap any upside.
In the event of an extended breakout, Bitcoin could test resistance at the swing hi $41,969 before any pullback. The second major resistance level sits at $42,029.
Failure to move through the 23.6% FIB and the $33,082 pivot would bring the first major support level at $28,227 into play.
Barring a crypto meltdown, however, Bitcoin should steer clear of the second major support level at $24,134. The 38.2% FIB of $27,465 should limit the downside in the event of an extended sell-off.
At the time of writing, Bitcoin was up by 1.68% to $32,863.4. A mixed start to the week saw Bitcoin fall to an early Monday low $32,253.0 before rising to a high $32,919.0.
Bitcoin left the major support and resistance levels untested at the start of the week.
Ethereum rose by 13.09% in the week ending 24th January. Reversing a 1.76% loss from the previous week, Ethereum ended the week at $1,394.00.
It was a bullish start to the week. Ethereum rose to a Tuesday intraweek high and a new swing hi $1,440.0 before hitting reverse.
The breakout saw Ethereum break through the first major resistance level before sliding to a Friday intraweek low $1,039.62.
While steering clear of the first major support level at $994, Ethereum fell through the 23.6% FIB of $1,119.
A recovery on Friday and a bullish weekend, however, saw Ethereum break back through the 23.6% FIB to end the week at $1,390 levels.
6-days in the green included an 8.71% rally on Tuesday, an 11.07% jump on Friday, and a 12.92% breakout on Sunday delivered the upside in the week. A 19.34% slump on Thursday pared some of the gains, however.
For the week ahead
Ethereum would need to avoid a fall through the pivot level at $1,291 to support a run at the first major resistance level at $1,543.
Support from the broader market would be needed, however, for Ethereum to break through to $1,500 levels.
Barring another extended crypto rally, the first major resistance level would likely cap any upside.
In the event of an extended breakout, Ethereum could test resistance at $1,750 before any pullback. The second major resistance level sits at $1,692.
Failure to avoid a fall through the pivot level at $1,291 would bring the first major support level at $1,142 and the 23.6% FIB of $1,119 into play.
Barring a crypto meltdown, however, Ethereum should steer clear of the 38.2% FIB of $921 and the second major support level at $891.
At the time of writing, Ethereum was up by 3.31% to $1,440.19. A mixed start to the week saw Ethereum fall to an early Monday low $1,384.15 before striking a new swing hi $1,477.30.
Ethereum left the major support and resistance levels untested at the start of the week.
Starbucks Corp. (SBUX) reports Q1 2021 earnings after Tuesday’s closing bell, with analysts expecting a profit of $0.55 per-share on $6.91 billion in revenue. If met, earnings-per-share (EPS) will mark a 30% profit decline compared to the same quarter in 2020. The stock sold off in October after the company guided Q1 EPS below consensus but it recovered quickly and has now broken out to an all-time high in triple digits.
Looking for a Q2 Recovery
The coffee king expects U.S. business to fully recover by the end of the March (Q2) quarter. The projection could prove optimistic, given the ongoing second pandemic wave and painfully slow vaccine rollout. In addition, the company is struggling to get through the winter months, with fiscal Q1 revenue projected to fall 5% to 6% overall and 7% to 10% in December, driven by increased restrictions and tougher comparisons during the 2020 holiday season.
Credit Suisse analyst Lauren Silberman posted upbeat comments ahead of the report, noting “We continue to like SBUX on both near-term & long-term fundamentals. Near-term, SBUX should benefit from reopening & increased commuter traffic, a reduction in industry supply, and easy comparisons. Long-term, we remain positive SBUX can return to outperformance, noting strong resilience amidst a challenging breakfast backdrop, with beverage innovation and a powerful digital ecosystem to drive the most meaningful contribution”.
Wall Street and Technical Outlook
Wall Street consensus reflects skepticism about the 2021 outlook, with a ‘Moderate Buy’ rating based upon 14 ‘Buy’, 18 ‘Hold’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $94 to a Street-high $122 while the stock closed Friday’s U.S. session $8 below the median $111 target. This humble placement reflects ongoing concerns about the restaurant sector, with investors keeping their power dry while the world awaits vaccine distribution.
Starbucks’ stock completed a round trip into resistance at the 2019 high near 100 in November and broke out in early December, posting an all-time high at 107.75 on the first trading day of 2021. It’s carved a rectangular consolidation since that time and is now trading just three points above the breakout level. The company has done a good job setting expectations ahead of the report, but odds are now equally weighted between a rally continuation and failed breakout.
The S&P 500 has rallied significantly during the course of the week, breaking out to a fresh, new high. Ultimately, this is a market that I think continues to see plenty of buyers on dips, which of course offers value every time we get one. The stimulus has been on everybody’s mind, and therefore headlines coming out when it comes to stimulus suggests that we will continue to look higher. The US dollar of course has been all over the place, so therefore it continues to cause some havoc here.
S&P 500 Video 25.01.21
When you look at the uptrend line underneath, that suggests that we are going to continue to find buyers on a dip. Longer-term, I believe that we are going to go looking towards the 4000 level based upon the consolidation area that we had previously been bouncing around and. The 400 point range underneath was important, so I think that we will continue to look at that as a potential measuring move. A short-term pullback will offer buying opportunities for traders going forward, and I believe that there is a massive support level underneath at the 3600 level as well.
I have no interest in shorting this market, because quite frankly this is a market that will continue to see a lot of volatility, but more than anything else it will see people looking to take advantage of all of that cheap and free money that seems to come towards Wall Street occasionally. Stimulus, quantitative easing, and the like have been going on for 13 years and I do not see that changing anytime soon as the cycle has repeated multiple times.
The West Texas Intermediate Crude Oil market has rallied initially during the course of the week, only to turn things around and show signs of exhaustion. The candlestick for the week is a shooting star, just as the previous week was. This tells me that the crude oil market is almost certainly running out of steam, and I do think that it is only a matter of time before we perhaps make a move down to the $50 level. After that, the market could go bit lower, perhaps reaching down to the $47.50 level before finding significant support from the weekly timeframe. At this point, a lot of people are concerned about stimulus, and therefore crude oil markets may drop as a result.
WTI Oil Video 25.01.21
Brent markets have also tried to rally during the course of the week, showing signs of strength to reach towards the 200 week EMA. The 200 week EMA has offered enough resistance to turn things around and show signs of exhaustion. At this point, the Brent market looks as if it is ready to fall towards the $50 level, an area that of course is a large, round, psychologically significant figure, and is also where we are starting to see the 50 week EMA reach towards. That being the case, I think it makes sense that we trying to give back some of the initial gains from the last couple of weeks as stimulus looks to be more difficult to achieve than originally thought, and the size of it certainly is going to be smaller than the $1.9 trillion that Joe Biden asked for.
The S&P 500 initially fell during the course of the trading session on Friday to reach towards the 3800 level. The 3800 level is a large, round, psychologically significant figure that did cause a lot of noise previously as far as resistance is concerned. The fact that we pulled back there to only find buyers again suggests to me that we are ready to continue with the next leg higher. The candlestick suggests that we are going to find plenty of buyers underneath. To the upside, the market is likely to continue to look forward due to the idea of stimulus more than anything else.
S&P 500 Video 25.01.21
When you look at the chart from a longer-term standpoint, the 4000 level is the target for longer-term traders, due to the fact that we have been consolidating in a 400 point range between 3200 and 3600 above. That 400 point range extrapolates from the breakout to reach towards that 4000 level. Furthermore, the market does tend to like these big figures as targets and therefore it all is somewhat tidy. I do not know how long it takes to get there, but one thing that Wall Street might be concerned about down the road is that stimulus is perhaps threatened as far as size is concerned, and of course the timing as there are some objections to all of that.
Nonetheless, longer-term Wall Street knows that if it throws a big enough tantrum the Federal Reserve and Congress will bail them out. With that in mind, buying the dips should continue to work over the longer term with such bullish pressure underneath.
The West Texas Intermediate Crude Oil market has fallen a bit during the trading session on Friday but turned around to show signs of life again. By forming the candlestick that it did, it does suggest that perhaps market participants are going to continue to see a lot of volatility, but one thing you should pay attention to now is the weekly chart. The weekly chart has formed the second shooting star in a row. This does not suggest strength at this point, and I believe we are going to have to pay very close attention to the longer-term big picture. The stimulus was the original driver of oil going higher, but quite frankly the “reflation trade” is starting to find some doubters now.
Crude Oil Video 25.01.21
Brent markets also fell during the trading session on Friday, breaking below the $55 level one point. We have formed a bit of a hammer, so this shows that there continues to be a bit of resiliency in this market. Having said that, this also has formed a couple of shooting stars and I think it is only a matter of time before we break down. This is mainly due to the fact that stimulus looks to be very threatened at the moment, not necessarily as to whether or not it is going to happen, but how big it is going to be. If we can break down below the bottom of the candlestick for the Friday session, then I think we go looking towards the 50 day EMA underneath which sits just above the $50 level.
Silver markets have been back and forth during the course of the week, testing the $24 level for support. The $26 level above offers significant resistance, so at this point in time I think we continue to chop around in general. The candlestick does suggest that there might be a little bit of support here, and for what it is worth on the daily chart we have seen significant support right around the $24 level. I think ultimately this is a scenario where we continue to see choppy behavior but with more of an upward tilt than anything else.
SILVER Video 25.01.21
Stimulus is a bit of an open question right now, and that of course has a major influence on what happens with the US dollar. By extension, the US dollar greatly influences what happens next with silver. The silver market continues to be sensitive to stimulus because there is also a significant amount of industrial demand that could possibly come into play as well. The choppiness that we have seen over the last couple of months will more than likely continue to be the way this market moves, based upon the indecision that is almost certainly going to be part of the stimulus, but at the end of the day there will be a certain amount.
It is more about the size and timing of the stimulus at this point than anything else. Central banks around the world continue to flood the markets with liquidity, thereby driving up the price of hard assets such as silver. I have no interest in shorting this market until we can break down below the $22 level.
Natural gas markets have broken down significantly during the course of the week to slice through the $2.60 level, and then reaching towards the $2.40 level. All things being equal, when you look at the longer-term chart you can make an argument for a bit of a head and shoulders, and therefore we could see a bit of a sellout. This makes quite a bit of sense as we are trading the March contract.
NATGAS Video 25.01.21
A breakdown below the $2.30 level could open up a move down towards the lows again, perhaps reaching as low as the $1.60 level. That being said, it does not necessarily mean that we get there right away, but as temperatures rise, demand for natural gas will of course plummet. Furthermore, the entire idea of stimulus making natural gas take off to the upside is a bit of a laugh, as it has not done it over the years and of course we are still oversupplied when it comes to natural gas it is not even funny.
I believe that rallies are to be sold into, especially near the $2.80 level which is already seen a significant amount of selling pressure in the past. At this point, any time we get a bit of a rally, it should be looked at with suspicion because the oversupply of natural gas is more of a longer-term structural problem than anything else. With this being the case and of course warmer temperatures, I only sell natural gas and have no interest in trying to buy it. In fact, I do not even have a scenario where I would be a buyer of this commodity.
Gold markets have gone back and forth during the course of the week, showing signs of volatility yet again, reaching down towards the 50 week EMA. However, we have bounced from there and formed a candlestick that is essentially a hammer. This suggests that we are possibly going to see a bit of a bounce but as long as stimulus is all over the place and we are not sure what is going to happen with that scenario, it is obvious that we need to be very patient with the trade if we are involved in it.
Gold Price Predictions Video 25.01.20
If we can break above the highs of the week, that more than likely opens up the possibility of a move towards the $1900 level. Above there we then could see a move towards the $1960 level, but it may take some time to make that happen. After all, we are not completely sure about what happens next with the stimulus, just that there will be one. The stimulus probably will not be as big as originally thought, and that of course is something to pay close attention to. That could give a little bit of a lifeline to the US dollar in the short term, as it is oversold anyway.
As far as selling gold is concerned, I have no interest in doing so until we break below the $1700 level which would be a pretty significant move. Longer-term, I believe that we are going to go looking towards the $2100 level, but it may take a significant amount of effort to finally get there. Gold continues to be choppy, but it seems as if it is trying to form some type of bottoming pattern.
Silver markets have plunged below the 50 day EMA during the trading session on Friday to show signs of weakness, but we have turned around to continue the overall push to the upside from the recent bounce. When you look at the candlestick, it does make a little bit of a hammer, but given enough time I think what we are struggling with is the $26 level. If we can break above, there then it is likely that silver will continue much higher. Keep in mind that silver is highly sensitive to the value of the US dollar, and the overall idea of stimulus. Stimulus is a main driver of expectations when it comes to interest rates, which by default will drive down the value of currency over the longer term.
SILVER Video 25.01.21
Another thing stimulus will do is drive up the demand use for industrial silver, which will also more than likely drive up the price. That being said, if we can break above the $26 level it opens up a move towards the $27.50 level, and then eventually the $28 level. Alternately, if we were to break down below the candlestick for the trading session on Friday, then we probably go looking towards the $24 level again, an area that has been important recently. I do not have any interest in selling silver, but I do recognize that you need to pick your spots due to the fact that silver contracts can be quite volatile and cause massive problems for people’s accounts if they are not careful. In general, this is a market that I think eventually goes higher but we probably have a lot of wood to chop in the meantime.