DAX Remains Strong, And So Does Oil

The trading week was poor in terms of relevant economic data that had the potential to move markets. As such, the price action followed in the same direction as last Friday’s closing – a lower USD due to a weaker than expected NFP report. 

The U.S equity markets remain elevated on the expectations of further stimulus from the new administration in Washington. The so-called “Biden” stimulus is expected toward the end of the month, and we might say that it is already priced in. However, no one knows how the market may react to the news, so the feeling is that this is what keeps the market afloat and close to all-time highs.

In Europe, the Euro bounced back from last week’s lows. It rose close to two hundred pips against the dollar, as other G10 currencies did too. However, it trades mixed against other currencies; for example, the EUR/JPY is only marginally higher, while the EUR/GBP cross continues its bearish move. Dax in Germany still struggles at the highs, and it looks for direction, just like other European indices do.

Moving to commodities, oil is the star of the week. It moved close to $59, and one can feel the importance of the psychological $60 level. Gold, on the other hand, was unable to overcome horizontal resistance and was rejected yesterday in a fresh sign of dollar strength. Will that strength spill over to other dollar pairs?

Weekly Analysis

Inflation in the United States remains subdued. The data for the month of January revealed that the core inflation for the month of January, the one that excludes food and energy prices, remained flat for the month. However, the headline CPI increased by 0.3% on a monthly basis, following another increase by 0.4 in the previous month. Yet, the market is not worried about inflation at this point because the Fed only cares about the core data.

Speaking of the Fed, Jerome Powell held a speech on Wednesday. While he did not move the markets, he did mention that the real unemployment rate in the United States is likely to close to the 10% level rather than what the latest data showed.

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Disclaimer: None of the content in this article should be viewed as investment advice or a recommendation to buy or sell. Past performance/statistics may not necessarily reflect future ...

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