The week started with the world’s stock market futures gapping higher at the opening. The weak U.S. dollar remains the dominant theme, and investors have no alternatives but to bid for equities despite high valuations. 

Today, the United States celebrates Presidents’ Day, meaning that the U.S. banks are closed for business. As such, the price action in the North American session should remain subdued. The Dow Jones index futures reached a new high above 31,600, and the move higher triggered a similar reaction at the European opening.

As such, FTSE opened 0.65% higher, at 6,683 points, Dax opened 0.67% higher at 14,143 and STOXX opened 0.55% higher at 3,716. There is nothing to celebrate in Europe as the economic performance lags tremendously the one in the United States, but the markets simply move in sympathy with the U.S. indices.

Oil broke above $60 and did not stop until it reached $61. The market here consolidated for quite some time at the level, and resistance gave up. It was the move in oil that triggered a new leg lower on the dollar and higher on the stock indices.

Daily Analysis

The week should start slow due to the holiday in the United States and the lack of important economic data. The only thing that deserves attention is the Monetary Policy Meeting Minutes in the upcoming Asian session. The RBA was extremely dovish in February, but that did not stop the Australian dollar from rising.

As such, the minutes may provide some juicy details of the RBA’s intentions and the AUD pairs may react. All other data is of secondary importance (FXA).

Markets to Watch

Despite the Presidents’ Day, financial markets do move. The theme so far in February was a lower dollar and higher equities – will it continue this week too?

At the start of the trading week, the S&P 500, crude oil, and the USDJPY present some interesting technical setups.

S&P500

The S&P 500 exploded higher at this week’s opening on the back of a lower dollar and a bullish close last Friday. The market formed a triangle as a continuation pattern that looks like a pennant. If that is correct, the current move higher represents the breakout, and the measured move points to even higher levels.

Crude Oil

Crude oil is responsible for the gap higher in the equity markets and lower in the dollar. The market here consolidated below the $60 for quite some time, and now it managed to overcome resistance. It reached $61, and the question here is if it manages to close the day above the round number. If not, the market will watch a pullback to the previous consolidation area as a sign of a small head and shoulders pattern.

USDJPY

The USDJPY bottomed last week and remained in a bullish channel. Right now, it meets dynamic resistance, but if it manages to clear the area, the pair will have no resistance until the upper edge of the rising channel.

Winners and Losers

Oil and the S&P 500 are the big winners of the day so far. However, these are still early hours, and a long road ahead remains. Therefore, the closing of the day is more relevant. The USD, once again, remains the main loser (SPX, OIL).