Fundamental analytics

The market is selling USD dollar, but will indices be able to keep Friday's gains?

We are starting a new trading week in which, as expected, the trading volumes should return to the normal level and by the middle of the week trading conditions should gradually normalize. The news background this week will be rich and intense, and we can see the persistence of increased volatility.

On Monday, two-day trade negotiations between the United States and China began in Beijing. This news factor is still in the spotlight. Investors hope that both parties will be able to conclude a comprehensive trade agreement before the end of the 90-day truce in an unannounced trade war.

Last Friday, US indices recovered and regained the losses of the previous trading days. The indices showed an increase of three percent, but this growth might have a technical nature, as equities were oversold. The question is now lies in the field of current equities dynamics and it arises some interest. Can indexes hold Friday achievements? In European trading hours US equity futures indicate a neutral Wall-Street start with a possible further decline. As earlier, Asia closed deeply in the red, and Europe is trading under pressure. In Europe, stock markets moved into the red zone immediately after the start, although indices showed a strong opening.

Amid the expectations of specific agreements between the US and China, oil prices jumped higher in the hope that easing trade tensions would improve the forecast for demand, while the decline in supply by major producers also supports the oil. On the chart, oil is trying to consolidate above $ 58 per barrel.

 Gold retains positive sentiment. On the background of Friday's volatility, traders fixed the  profit in the gold after a five-day rally, dropping the price to $ 1277, but the quotes very quickly returned to $ 1290, where the main resistance line now located.

On FOREX, the market continues to sell the US dollar despite strong data on the US labor market for December. These data have somewhat reduced concerns about the sustainability of US economic growth, it is clear that US economy does not show signs of overheating and slowdown so far. If interest in risk returns back to the market, and economic downturn concerns continues to ease, pressure on the US currency will continue to increase. On the other hand, sooner or later, the global economic recession will have an impact on the first economy, and, players are already pricing in slower rate hike pace 2019. This is a negative medium-term factor for the US dollar.

This week, the markets will focus on reports from recent meetings of leading regulators (on Wednesday and Friday Fed and the ECB «minutes» will come out, respectively), and we will also analyze US PMI data in the service sector, as well as figures on industrial production in Germany. On Thursday, the next speech of the American regulator head will attract the attention of the markets, and finally, on Friday, the most important data on American inflation will be in the focus of the players. The week will be interesting and volatile!