Global stocks kicked off the new month on a firm note after a rough and rocky January. A slew of reassuring comments from Fed officials coupled with positive corporate earnings results lifted risk sentiment, keeping equity bulls in the picture. The broader S&P500 hovered around 4500 after staging an incredible rebound last Friday. In the currency space, king dollar released its grip from the throne as Fed officials played down prospects of aggressive rate hikes. Looking at commodities, gold pushed above $1800 while oil lingered near multi-year highs.
As we highlighted earlier in the week, there is certainly no rest for market participants over the next week few days thanks to a series of key economic reports and central bank meetings!
We have the OPEC+ meeting on Wednesday, BoE & ECB central bank combo on Thursday and US jobs report on Friday. With so much going on, it may be wise to fasten your seatbelts for potentially more market volatility.
Will Brent hit fresh multi-year highs?
Action seekers should keep an eye on oil prices this week. The main risk event for oil will be the OPEC+ decision on Wednesday, topped with geopolitical tensions between Russia and Ukraine. The cartel is widely expected to keep its output policy unchanged but any surprises could spark volatility across oil markets. Looking at the technical picture, Brent remains bullish on the daily charts. A strong daily close above $90.00 may signal a move higher $92.40, $97.00 and the golden $100.00 level. Alternatively, a move back below $85.80 could signal a decline towards $85.00 and $83.00.
Dollar set to rule in February?
The mighty dollar went up in value against every G10 major in January. Although the currency has stumbled into February on a shaky note, bulls remain in a position of power amid Fed hike expectations. We expect the pending US jobs report to set the tone for the dollar this February, with a strong report injecting bulls with fresh inspiration. As for the Dollar Index (DXY), a technical throwback could be in the making with 96.00 acting as important support.
Commodity spotlight – Gold
This could be an explosively volatile week for gold due to the US jobs report on Friday. Over the past few months, the precious metal has displayed high levels of sensitivity to Fed rate hike speculation. A strong jobs report that shows robust job and wage growth may reinforce expectations of a hawkish Fed, dragging gold prices lower as the dollar jumps. If the jobs report disappoints, this could offer some relief to gold bugs, resulting in an incline back towards $1831.
Let’s not forget about the S&P500…
Is the bull party over on the S&P500? The index tumbled 5.3% last month thanks to rising interest rates, geopolitical tensions, and disappointing company earnings. Despite the sharp rebound witnessed last Friday, the S&P still remains vulnerable to downside losses. A selloff that takes prices back below 4438 could trigger a steeper decline towards 4300 and lower. Should the current upside momentum take prices beyond 4569, this could encourage bulls to jump back into the game with the first level of interest at 4670.