The trading week was marked by last weekend’s announcement that the U.S. Senate passed the new COVID-19 relief bill. The new round of stimulus moved fast as Democrats pushed for quick delivery of the new stimulus, and it will enter into force today, as the President’s signature is expected. 

This is only a formality, and the markets took the new for granted – they rallied from the opening, with Dow Jones making multiple all-time highs. Other indices followed as well, and even the Nasdaq100, which corrected the previous week, had one of its best days in months, celebrating more stimulus.

A survey in the United States showed that about $20 billion of the new stimulus would end up in financial markets. Hence, the move higher in stocks is not surprising, and it fueled a rally in other parts of the world too. For instance, the Dax in Germany broke above 14,200 and made new all-time highs despite the European economies lagging the recovery momentum seen in the United States.

Crude oil remained elevated, confidently holding above $60 and reaching as high as $68. A combination of tight supply, higher demand, and faster global recovery put pressure on the price of oil.

Gold recovered from the lows as well, a move that fuels hopes that a temporary bottom is in place. Unsurprisingly, the dollar declined as well, on the back of the renewed risk-on sentiment.

Weekly Analysis

Canadian job numbers are revealed today, one week later than usual. Normally, the jobs data in Canada is released at the same time as the NFP in the United States, but sometimes there is a week in between. The decision from the Bank of Canada this week failed to move the Canadian dollar, which remains tightly correlated to the price of oil. Perhaps the jobs data today will succeed where the Bank of Canada failed?

Besides that, traders should not have higher expectations from the rest of the trading day, as the focus shifts to the all-important Fed meeting next Wednesday. As such, the stock market’s volatility will likely drive the price action for the end of the trading week, as traders already have an eye on what the Fed might say and do.

The European Central Bank (ECB) committed yesterday to more easing in the quarter ahead, pressured by the unwanted tightening of financial conditions. The Euro did not react to the message, and so today is important to see if we might have a late reaction, especially on the EURUSD exchange rate.

Markets to Watch

FTSE100, Dax, AUDUSD –  markets in focus today.

FTSE100

FTSE100 looks extremely interesting here. It consolidated so far in 2021, while other indices advanced to new all-time highs (e.g., Dow Jones, Dax). However, the setup looks constructive if we consider the entire move from the 2020 lows. As such, FTSE100 formed a bullish flag that completed its measured move at the end of last year. Since then, it consolidated in a symmetrical triangle that appeared to have broken recently. Two measured moves attract bullish traders now. One is the triangle’s measured move, calculated as the longest segment projected from the breakout point. Another is the measured move of a possible pennant. In both cases, FTSE100 looks constructive, and only a move below the lowest point of the triangle would invalidate the bullish setup.

Dax Index

Dax made a new all-time high this week. It broke above the horizontal resistance given by an ascending triangle, and now the focus shifts to the triangle’s measured move, seen above 15,200 points. The breakout came at the time the United States Senate approved the new fiscal aid package, as Dax moved in a tight correlation with the U.S. indices.

AUD/USD

One of the most interesting setups on the FX market comes from the AUDUSD pair. The pair’s rally in the last year is nothing short of impressive. However, it shows some signs of weakness, both from a technical and fundamental perspective. From a technical analysis point of view, the market broke below the lower edge of a rising wedge pattern, and retested it – just like it is supposed to do. From a fundamental perspective, the RBA is more aggressive in its forward guidance, calling for more easing down the road.

Winners and Losers

U.S. and European stock markets are winners of the week, as well as the crude oil price that printed a new high of the year above $68. The JPY remains one of the weakest G10 currencies.