Amid a deluge of news of new protests, rocket launches, and a general
rise in geopolitical tensions, many have forgotten about the pandemic as if it
were a bad dream.

The problem is that it is not out of the question that we will face
another coronavirus in a couple of years, which could again affect the global
financial system, and even BTC ETF approval won’t help.

Given this high-risk factor, researchers have calculated the probability
of a pandemic capable of wiping out all human life, finding it statistically
likely within the next 12,000 years.

Not surprisingly, one of the critical issues discussed at the World
Economic Forum was the threat of a new „Disease X“.
According to WHO projections, it could be 20 times more dangerous than COVID.

What is it?

„Disease X“ is an unknown disease capable of causing a new
pandemic.

Incidentally, preparations for it have been underway since 2018. Had
they not prepared, the likely number of coronavirus victims would have been
higher.

In addition to new strains of COVID-19, there are many dangerous
pathogens and viruses, such as hemorrhagic fevers, Zika virus, Ebola virus, and
so on. And they appear regularly.

In short, it is still being determined which one will force countries to
close borders and reintroduce restrictive measures, but there will be one, and
we must be prepared for that scenario.

How do you prepare for something that has yet to arrive?

Governments, having learned from the bitter experience of coronaviruses,
have realized what measures work to reduce the spread of the virus and ease the
pressure on the health system.

Regarding disease treatments, scientists, in collaboration with
pharmaceutical companies, are constantly researching various viruses to
understand their behavior.

The only catch is that this requires investment and debates about the
emergence of another „Disease X“ will likely contribute to its rise.

So far, however, the shares of Pfizer, Johnson & Johnson, and
AstraZeneca have not reacted much. But things could change quickly if the
epidemiological situation deteriorates instantly.

How can we understand the risk of a new pandemic?

Unfortunately, the average investor does not have many tools to detect
this. It would be best to respond according to the situation, as it is
impossible to be fully prepared for all scenarios.

The only hope is that countries have learned from past experiences so we
can avoid widespread lockdowns and other draconian measures next time.

Still, it may be useful to utilize the volume
indicator to detect a change in market sentiment and thus understand
whether news of another virus discovered is worthy of concern.

This article was written by FL Contributors at www.forexlive.com.

UPCOMING EVENTS:

• Monday: PBoC
  LPR, New Zealand Services PMI.
• Tuesday: BoJ
  Policy Decision, New Zealand CPI.
• Wednesday: Australia/Japan/Eurozone/UK/US
  Flash PMIs, BoC Policy Decision.
• Thursday: ECB
  Policy Decision, US Durable Goods Orders, US Jobless Claims, US Q4 Advance
  GDP.
• Friday: Tokyo
  CPI, US PCE.

Monday

The PBoC is expected to keep the LPR rates
unchanged at 3.45% for the 1-year and 4.20% for the 5-year following the MLF
decision last week. Deflationary forces
remain present, and the Chinese stock market is on a free fall with the general
sentiment being utterly dismal. It will likely require a strong catalyst to
turn things around and aggressive rate cuts might do it, so it’s worth to
keep an eye for eventual surprises.

Tuesday

The BoJ is expected to keep rates
unchanged at -0.10% with the 10-year JGB yield target at 0% with 1% as a
reference cap. The latest Japanese
CPI eased further across all measures and the
Average
Cash Earnings were a big
disappointment. The BoJ will likely reiterate once again that they are
focused on wage growth and the spring wage negotiations and that they will
not hesitate to take additional easing measures if needed.

The New Zealand CPI Y/Y is expected at
4.7% vs. 5.6% prior,
while the Q/Q measure is seen at 0.6% vs. 1.8% prior. The data will have no
bearing on the February rate decision but will certainly influence the
market’s pricing with the first rate cut seen in May.

Wednesday

Wednesday will be the Flash PMIs day with
a particular focus on the Eurozone, UK and US data:

• Eurozone Manufacturing
  PMI 44.8 vs. 44.4 prior.
• Eurozone Services PMI
  49.0 vs. 48.8 prior.
• UK Manufacturing PMI 46.7
  vs. 46.2 prior.
• UK Services PMI 53.5 vs.
  53.4 prior.
• US Manufacturing PMI 48.0
  vs. 47.9 prior.
• US Services PMI 51.0 vs.
  51.4 prior.

The BoC is expected to keep rates
unchanged at 5.00%. The data out of Canada supports the central bank’s patient
approach as the underlying
inflation measures surprised to
the upside for the second consecutive month and the latest wage
growth figure spiked to the
highest level since 2021. The Bank of Canada has
been highlighting that it places a lot of focus on those two measures and
although it expects rate cuts to come this year, the timing is much more
uncertain and data dependent.

Thursday

The ECB is expected to keep interest rates
unchanged at 4.00%. The central bank officials have been consistently pushing
back against the aggressive rate cuts expectations with consensus for the first rate cut leaning for
June compared to the market’s April forecast. The latest data saw the Core
CPI Y/Y easing further although the M/M
measure showed a worrying 0.6% increase. The Unemployment
Rate continues to hover around record
lows and wage growth remains elevated, which is something that the ECB doesn’t
see as favourable for a return to their 2% target.

The US Jobless Claims continue to be one
of the most important releases every week as it’s a timelier indicator on the
state of the labour market. Initial Claims keep on hovering around cycle
lows, while Continuing Claims after reaching a new cycle high started to trend
lower. This week the consensus sees Initial Claims at 200K vs. 187K prior,
while Continuing Claims are seen at 1840K vs. 1806K prior.

Friday

The US PCE Y/Y is expected at 2.6% vs.
2.6% prior, while the M/M measure is seen at 0.2% vs. -0.1% prior. The Core PCE
Y/Y is expected at 3.0% vs.3.2% prior, while the M/M figure is seen at 0.2% vs.
0.1% prior which would make the 3-month and 6-month annualised rates fall to
1.5% and 1.9% respectively.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

J.P.Morgan has revised its interest rate outlook for the European Central Bank.

Sooner:

• JPM expect the first rate cut in June, having previously expected the first in September.
• the ECB ho hold in July
• and then cuts in both September and October

Deeper:

• JPM expect a total of 100bps in cuts, having previously expected 75

Analysts at the firm are wary of the trend in core inflation, saying its recent slowing may be the result of the dissipating of transitory factors and making the trend difficult to discern:

• They point to stronger wage data as a factor that cause some inflation „stickiness“.
• Say that the disruption to shipping due to Red Sea attacks could also add to pressure for higher inflation

***

JPM are calling the first ECB rate cut later than many other analysts are. Market pricing is for the April meeting (see below).

***

The ECB dates to watch this year:

This article was written by Eamonn Sheridan at www.forexlive.com.

• US January UMich prelim consumer sentiment 78.8 vs 70.0 expected
• US existing home sales for December 3.78M vs 3.82M estimate
• Canada November retail sales -0.2% vs 0.0% expected
• Fed’s Daly: It’s premature to think rate cuts are around the corner
• Feds Bostic: Wants to make sure inflation is on way to 2% before cuts
• Fed’s Goolsbee: If we make good progress on inflation, we need to factor that into rates
• Baker Hughes oil rig count -2 to 497
• Atlanta Fed GDPNow growth estimate for Q4 remains at 2.4%

Markets:

• S&P 500 up 59 points to all-time high close of 4839
• CAD leads, GBP lags
• Gold up $6 to $2028
• US 10-year yields down 1.4 bps to 4.13%
• WTI crude oil down 26-cents to $73.82

The big news was in the stock market where the S&P 500 broke through the 2021 intraday high. That’s certainly not a move that looked like it would happen early on as the market showed middling gains but steady bids starting at lunchtime in New York continued until late in the day.

The turn in equities weighed on the US dollar on most fronts. Cable climbed to 1.2702 from 1.2660 and the euro rose 25 pips to 1.0894.

In general, the dollar fell 20-30 pips across the board after earlier strengthening. One notable move was in the Canadian dollar, which strengthened despite a $1 intraday fall in oil. Canadian retail sales were poor in November but the December advanced number was better and that was enough to reverse some of the recent loonie losses. USD/CAD finished the week down 56 pips to 1.3427.

USD/JPY has been the story of the past month but it took a break today. It rose to 148.50 early in New York trade but sagged back to unchanged at 148.11 on the day.

This article was written by Adam Button at www.forexlive.com.

• Highlights improving consumer sentiment data (likely today’s UMich report)
• I’ve heard cautious optimism on economy
• I see inflation coming down
• Policy is in a good place
• We’re in a great place with policy and the economy and we can start to be more patient to see what we need to do next
• We don’t want to solve the inflation problem by taking people’s jobs away
• We don’t want to loosen policy too soon
• The job this year is about calibration
• Goods prices inflation is coming down and services prices are coming down
• There is a purposeful march towards normalization
• Cyclically we’re getting to a better place

This article was written by Adam Button at www.forexlive.com.

US stocks close sharply higher with the S&P index closing at a new record level and above the 4800 level. The NASDAQ index led the way.

For the week, the major indices all closed higher for the 2nd consecutive week after sharp declines in week 1 of the 2024 trading year.

The final numbers are showing:

• Dow Industrial Average rose 395.19 points or 1.05% at 37863.83
• S&P index rose 58.87 points or 1.23% at 4839.82
• NASDAQ index rose 255.31 points or 1.70% at 15316.96

Small-cap Russell 2000 got involved as well with a 20.73 point rise or 1.08% at 1944.39.

For the trading week, the major indices all closed higher led by the NASDAQ points again:

• Dow Industrial Average +0.72%
• S&P index rose 1.17%
• NASDAQ index rose 2.26%

For the first 3-weeks of the new trading year, all three major indices are now up on the year:

• Dow Industrial Average is up 0.46%
• S&P index is up 1.47%
• NASDAQ index is up 2.0%

How are the Magnificent 7 doing in the first three weeks of the trading year?

• Nvidia up 20.15%
• Meta-+8.33%
• Apple -0.51%
• Alphabet +4.79%
• Microsoft +6.02%
• Amazon +2.23%
• Tesla -14.60%

Next week, the earnings for the fourth quarter start to kicking with some large-cap movers. Below is a sampling of some of those earnings releases:

Monday, January 22

• United Airlines
• Logitech

Tuesday, January 23

• Verizon
• 3M
• GE
• Johnson & Johnson
• Halliburton
• Procter & Gamble
• Netflix
• Intuitive Surgical
• Texas Instruments

Wednesday, January 24

• AT&T
• Tesla
• IBM
• servicenow
• Lam Research

Thursday, January 25

• American Airlines
• Southwest Airlines
• Dow
• Intel
• Visa
• T-Mobile

Friday, January 26

• American Express
• Colgate-Palmolive

Looking at next week’s economic calendar, key events and releases include:

Tuesday:

• Bank of Japan interest-rate decision

Wednesday:

• New Zealand CPI quarter on quarter 0.5% expected reaches 1.8% last quarter
• Germany, France, UK flash manufacturing and services PMI data
• Bank of Canada interest-rate decision. No change expected
• US flash manufacturing and services PMI

Thursday

• ECB rate decision. No change expected
• US advanced GDP. 2.0 expected. Atlanta Fed GDPNow estimate 2.4%
• US unemployment claims

Friday

• US PCE data

This article was written by Greg Michalowski at www.forexlive.com.

As the NY trading day winds down, keep in mind that the first event on the economic calendar next week is the Loan Prime Rate meeting at the People’s Bank of China.

Governor Pan Gongsheng left the MLF rate unchanged last week so expectations are for no change but given the rough ride in Chinese markets so far this year, I wouldn’t rule anything out.

The LPR rate was last changed in August: PBOC Loan Prime Rate cut: 1-year 3.45% (prior 3.55%) & 5-year 4.2% (prior 4.20%).

PBOC’s Loan Prime Rate:

• It
  is an interest rate benchmark used in China, set by the People’s Bank
  of China each month. While set on the 20th of the month or the first business day afterwards. The new LPR takes effect on the first day of
  the following month.
• The LPR serves as a
  reference rate for banks when they determine the interest rates for
  (primarily new) loans issued to their customers.
• Its calculated based on the interest rates that a panel of 18 selected commercial banks in China submit daily to the PBOC.
  • The
    panel consists of both domestic and foreign banks, with different
    weights assigned to each bank’s contributions based on their size and
    importance in the Chinese financial system.
  • The LPR is based on the average rates submitted by these panel banks, with the highest and lowest rates excluded to reduce volatility and manipulation. The remaining rates are then ranked, and the median rate becomes the LPR.

The LPR was last left unchanged on December 20.

There is also talk about an RRR cut as the lever to stimulate growth in Q1. At this point, I think it will take some forceful moves to stimulate growth.

After China, the focus on Tuesday will move to the Bank of Japan rate decision. Again, no change is expected but the BOJ could offer signals on its willingness to begin normalizing rates in the springtime.

This article was written by Adam Button at www.forexlive.com.

I already outlined the technical predicament for AUD/USD earlier here. And the charts for USD/CAD and NZD/USD are also pointing to a lack of technical follow through by dollar bulls on the week.

In the case of USD/CAD, the pair did manage a push above its 200-day moving average (blue line) but is ultimately seeing that falter today. That is similar to AUD/USD as highlighted in the linked post above. For USD/CAD, the ceiling appears to be at the 50.0 Fib retracement level at 1.3538 on the week.

In any case, the fall back below the 200-day moving average of 1.3480 is the more significant development in trading today. And just like AUD/USD, the near-term bias is also shifting as price falls below the 100-hour moving average of 1.3483 currently.

Looking to NZD/USD:

There was a push below 0.6100 during the week but it fell short in breaching the 200-day moving average (blue line). That coincides with the December low, which was also defended by the key level.

As such, buyers are very much still in the game. And even though the near-term chart is favouring sellers for now, the turn in broader market sentiment and resilience among other commodity currencies could help to translate to better fortunes for the kiwi.

Either way, the fact is that buyers have a clear line in the sand to make their stand now. And that is the 200-day moving average at 0.6089.

To sum up, the dollar did make a strong case for a run higher against the commodity currencies this week. But it looks like it is falling short in sealing the deal as we wrap things up before the weekend. Or is there time for yet another twist in the story?

This article was written by Justin Low at www.forexlive.com.

USD

• The Fed left interest rates unchanged as expected at the last meeting with a shift in
  the statement that indicated the end of the tightening cycle.
• The Summary of Economic Projections showed a
  downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
  was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
  in 2024 compared to just two in the last projection.
• Fed Chair Powell didn’t push back against the strong dovish pricing
  and even said that they are focused on not making the mistake of holding rates
  high for too long.
• The latest US CPI slightly beat expectations but analysts
  expect the Core PCE to print at 0.2% M/M again following the CPI data.
• The labour market continues to soften but remains
  resilient with US Jobless Claims beating expectations week after week.
• The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
• The US Retail Sales beat expectations across the board.
• The Fed members recently have been pushing
  back on the aggressive rate cuts expectations.
• The market expectation for a rate cut in March fell
  to roughly 50%.

CAD

• The BoC kept the interest rate steady at
  5.00% as expected at the last meeting with
  the usual caveat that it’s prepared to raise the policy rate further if needed.
• BoC Governor Macklem recently has been leaning on a more
  neutral side and even started to talk about rate cuts although he remains
  uncertain on the timing.
• The latest Canadian CPI beat expectations across the board with
  the underlying inflation measures remaining elevated, which should give the BoC
  a reason to wait for more data before considering rate cuts.
• On the labour market side, the latest report missed
  expectations although wage growth spiked to the highest level since 2021.
• The Canadian PMIs continue to fall
  further into contraction as the economy keeps on weakening amid restrictive
  monetary policy.
• The market expects the BoC to start
  cutting rates in Q2.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD broke
through the key trendline and
extended the rally into the 1.35 handle. This breakout opened the door for a
move into the swing high resistance around
the 1.36 handle where we can also find the 61.8% Fibonacci retracement level
for confluence. The
buyers should keep on looking for dip-buying opportunities on the lower
timeframes while the sellers will want to see the momentum changing and some
key breaks before piling in more aggressively.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we have an
upward trendline now that will define the current uptrend. From a risk
management perspective, the buyers will have a much better risk to reward setup
around the trendline where they will also find the previous swing high and the
50% Fibonacci retracement level for confluence. The sellers, on the other hand,
will want to see the price breaking below the trendline to invalidate the
bullish setup and position for a drop into the 1.3225 support zone.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
pair has been pulling back recently from overstretched levels. We can also
notice that the price diverged with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, the target for the pullback should be right around the
50% Fibonacci retracement level.

Upcoming Events

Today, the only notable events will be the Canadian
Retail Sales data and the University of Michigan Consumer Sentiment survey.

This article was written by FL Contributors at www.forexlive.com.

The near-term chart for gold tells a better story on price action in the precious metal so far this year:

During the downside push two weeks ago, gold struggled to get above the key hourly moving averages. And after a break of the 100-hour (red line) and 200-hour (blue line) moving averages earlier this week, gold suffered a significant drop and ran close towards a test of the $2,000 mark.

But amid a turn in broader market sentiment yesterday and today, gold has rebounded all the way back up to $2,029.

And that is seeing price run up against a test of the confluence of the 100 and 200-hour moving averages at $2,030.20 to $2,031.75. For sellers, keep below that region and the near-term bias will stay more bearish. For buyers, break above that and the bias will shift towards being more bullish instead.

On the week itself, gold looks poised for yet another drop but it really could’ve turned out worse. After the fall earlier this week, higher rates could’ve threatened a much steeper decline for gold if not for some resilience in broader markets. I still reckon there is a score to settle there but if in doubt, the technicals tend to act as a guide at least.

And in this case, gold is now returning to test a critical point that has defined price momentum so far this year. The next near-term move before the weekend at least will be defined by the battle between traders at the juncture above.

This article was written by Justin Low at www.forexlive.com.