Market update: US dollar drifts, US indices hitting fresh highs

The NASDAQ, S&P 500, and Dow Jones have all reached new record highs, which means that the recent dip in the stock market from December to early January, has been completely reversed. This is great news for investors.

S&P 500 daily chart

Japan hits highs, China faces challenges amidst Fed-market dynamics

On the other hand, things are a bit different in Japan and China. The Nikkei 225 in Japan has hit a fresh 34-year high, while the Hang Seng in China is experiencing ongoing weakness. Why is this happening? Well, it all boils down to a battle between the Federal Reserve (Fed) and the financial markets. The Fed is trying to talk down interest rates, but the markets are expecting rate cuts. As a result, the Fed has had some success in lowering rate cut expectations, but the overall sentiment in the market remains positive.

One interesting thing to note is that there is currently a "Fed blackout period," which means that there will be no speeches or comments from Fed members ahead of the FOMC meeting on January 31st. So, we can expect a quieter period of news related to the Fed.

US dollar technical analysis

Moving on to different markets, let's talk about the US dollar. It has been trading around a 50% retracement level, with the 200-day and 50-day moving averages acting as important levels of support and resistance. The major event for the dollar during this week will be the US Core PCE, which is the Fed's preferred measure of inflation. This could have an impact on the dollar's performance.

Eurodollar technical analysis

It has been trading within small ranges and is supported by the 200-day simple moving average. The German and Eurozone PMIs, as well as the ECB monetary policy meeting could be key factors influencing the Eurodollar in the coming week.

There have been some interesting developments with cable (GBP/USD) as well. It has been trading within tight ranges, but if it breaks above a certain level, we could see it move higher. Cawley mentions a bullish indicator called the 50-day, 200-day moving average crossover for cable.

Gold technical analysis

Gold has a negative formation, but it has been making higher lows recently. There is support around $2,000 per ounce, and it will need some significant news or events to break out of its current pattern.

Overall, it has been a quiet day with no major economic events or US earnings announcements. However, we should keep an eye on upcoming earnings releases from companies like American Airlines, Tesla, Netflix, and Visa, as they could have an impact on the market.

So, to summarise, the US stock market is performing exceptionally well, Japan is seeing record highs, and China is experiencing some weakness. There is a battle between the Fed and the markets over interest rates, leading to a positive market sentiment. The US dollar, Eurodollar, cable, and gold all have different factors that could influence their performances in the coming week. While it has been a quiet day overall, upcoming earnings releases are worth watching out for.

GBP/USD daily chart

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