Trading Week Ahead: 17th – 21st January
The Weekly Wrap
It was a tough week for risk assets with Nasdaq, crypto, and high beta currencies all falling, as the double whammy of hotter than expected US inflation data and much weaker than forecast Retail Sales suggested that Omicron is taking a toll on economic activity despite being far less harmful than prior variants.
Perhaps most troubling was the continued slide lower in University of Michigan consumer sentiment readings, which slipped below the 70% mark suggesting a more gloomy state of recession, rather than the booming labor markets that are currently in play.
The massive disconnect between the actual economic activity and the perception of the economy is not only a concern for politicians running for re-election but may create negative dynamics for growth going forward.
A Look Ahead to This Week
This week the data flow is considerably slower but the start of the week will shift the focus to China where the GDP data and consumer spending figures will be scrutinized carefully. CCP’s recent clampdown on the technology sector along with some shutdowns due to Omicron breakouts could result in a negative surprise which in turn could weigh on risk appetite further.
Risk assets now find themselves at key junctures with Nasdaq flirting with 15,000 support, Bitcoin probing the 40,000 level again and ETH testing 3,000. Meanwhile, the wholesale rejection of the 116.00 figure for USDJPY indicates that risk-off flows are gathering force.
The rest of the week carries only second-tier data with inflation out of the UK, employment from Australia, and Retail Sales out of Canada dominating the docket. It is China however that is likely to have the biggest impact on macro sentiment. If the news turns out to be particularly weak, it could roil the markets on fears that lower production could further contribute to escalating cost of goods inflation while retarding global growth at the same time.
About Boris Boris Schlossberg is Managing Director of FX Strategy for BK Asset Management, Co-Founder of BKForex.com, and Managing Editor of 60secondinvestor.com.
Widely known as a leading foreign exchange expert, Boris has more than three decades of financial market experience.
In 2007, while still at FXCM, Boris started BKForex with Ms. Kathy Lien. A year later, Boris joined Global Futures & Forex Ltd as director of currency research where he provided research and analysis to clients and managed a global foreign exchange analysis team with Kathy Lien.
Since 2012 Boris has focused exclusively on running BKForex.com where he generates trade ideas and designs algorithms for the FX market in partnership with Ms. Lien.
He is the author of “Technical Analysis of the Currency Market” and “Millionaire Traders: How Everyday People Beat Wall Street at its Own Game”, both of which are published by Wiley.
In 2020 Mr. Schlossberg started www.60secondinvestor.com a free website that distills the best of institutional investment research for retail investors.
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