Forex Analysis & Reviews: 20.01.2023 - US premarket on January 20:...

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20.01.2023 04:06 PM

US premarket on January 20: the situation on the American stock market has stabilized

Although traders' concerns about hawkish central bank policies, a severe deterioration in economic statistics, and a decrease in US firm earnings haven't changed, US stock index futures stabilized on Friday.

Although the main index was poised for its largest weekly losses since Christmas, futures contracts for the S&P 500 index were nearly flat from yesterday's closing level while those for the Nasdaq 100 jumped 0.5%. Futures for the Dow Jones Industrial Average decreased marginally.

As investors considered remarks in support of rising interest rates from officials of several central banks, including those from the United States and Europe, Treasury bonds continued to decline.

As mentioned above, the economic data that was revealed this week played a major role in the stock market sell-off as investors' expectations for the start of a recession this year increased once again. This did not stop representatives of the European Central Bank and the Federal Reserve System from repeating their hawkish stance, though.

To further lower inflation, rates will need to remain high for a while, according to Fed Vice Chairman Lael Brainard, who holds a dovish stance. She made her remarks the day after James Bullard, the president of the St. Louis Federal Reserve, predicted that interest rates would range between 5.25% and 5.5% by the end of the year.

Despite the drop in inflation and economic activity, it seems clear that the Fed will continue with its intentions to raise interest rates. Despite the possibility that the economy could experience a small recession, even the management of major American banks concurs that interest rates will keep rising.

The fact that the federal debt ceiling was exceeded added to the depressing atmosphere in the United States, and the Ministry of Finance started a special procedure to prevent payment default.

Thanks to the increase in retail and industrial company shares, the Stoxx 600 index, the benchmark for Europe, has stabilized after suffering its largest decline on Thursday.

For the second day in a row, oil contracts are increasing. The demand from China, which has increased since the nation lifted stringent restrictions relating to the coronavirus, continues to be encouraging for traders. Since May 2021, copper has grown for five consecutive weeks, which is the best performance.

Regarding the S&P 500's technical picture, things have steadied. The index may drop further, but this will require a break below the $3,891 mark. The protection of this range, however, can halt the correction. Returning $3,923 under control will be the bulls' equally important responsibility. Only after that can we anticipate a more assured upward move on the assumption that the trading instrument will strengthen by $3,961. The threshold of $3,983 is a little higher; it will be challenging to surpass it. Buyers are only required to declare themselves in the vicinity of $3,866 in the event of a downward trend and a lack of support at $3,891. The trading instrument will be immediately driven to $3,839 following its breakdown.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.