Weekly reviews

US dollar technical upward correction is ahead - US dollar index close to 100 points level

The dynamics of the markets of the developed countries remains restrained. Although we do not see massive sales, profit taking in some sectors continues. Yesterday, in Europe bank, oil, gas and IT sectors traded under pressure. US markets traded in a narrow range - though indices managed to recover most of the session losses. The desire of the new US administration to create new production capacity inside the country, as well as scheduled meetings with the corporation representatives, supported US stocks markets. Nevertheless, the prevailing market sentiment is far from positive.

Europe and America

Today, European stock indexes traded mixed - European investors are waiting for decision of the Supreme Court of the United Kingdom. The Supreme Court will announce a decision on the eligibility of British Prime Minister Theresa May to start Brexit procedure without Parliament’s approval. It will technically mean a transition to hard Brexit if GB government wins the case. The reaction of European markets, on Trump's administration decision to withdraw from the Trans-Pacific partnership agreement, has been relatively calm.

Published today, European economic data is mostly positive, the fact that could mitigate the negative sentiment in the markets for a difficult day.

Business activity index in the Euro area services sector in January was 53.6, while the expectations of 53.9.

Business activity index in the services sector in France, in January was 53.9, while the forecast of 53.3.

The composite index of business activity in Germany, 54.7 in January, the forecast of 55.2.

Business activity index in the manufacturing sector of Germany, in January was 56.5, with the forecast of 55.4.

Business activity index in Germany's services sector in January was 53.2, with the forecast 54.5.

Business activity index in the euro area manufacturing sector in January was 55.1, with the forecast of 54.8.

Oil

The oil market is trading without a distinct idea after Brent returned to the area of ​​$ 55.55. The level of $ 55.55 represents  medium-term balance level of $ 54- $ 56.70 channel, and fundamentally, the price is valid for the current market conditions. This week the market focus will be on US crude inventories data. According to our expectations this week, oil will remain in the range of $ 54- $ 56.70.

Forex

Today, in the Forex currency market the US dollar moved to some gain. In the coming days we expect that the strengthening of the US currency could gain momentum. US dollar index came close to the level of 100 points, this is significant, psychological level, and technical upward pullback might be expected. It is not entirely clear whether it is going to be corrective move of the dollar or it will be a return to the medium-term uptrend. Fundamental factors is rather in favor of the second option, taking into account US regulator intentions to hike the rate in the month to come. However, the technical picture is in favor of just a corrective pullback.

In results

Global market sentiment suggests continued consolidation. The excitement of Trump’s election and his promises is gradually shifting towards the world trade risks amid trade tension between US and China and the associated risks for the whole global economic growth. Metals market already reflecting this situation trading under the pressure. In addition, the new course of new US administration is not fully comprehended for markets: attention is directed to the practical steps of the new president. ECB President tried to defuse the situation and to calm the markets.  According to Draghi the ECB is ready to continue its support policy to the end of 2018. The US corporate reporting season is also a source of a positive for US investors. Today, the market focus will be on GB Supreme Court decision and home sales data in US. Again, the day promises to be tense and volatile.

chart 01.2017

chart 01.2017

chart 01.2017