Two great weeks on the market, will there be a third one?
16 January 2023
There is no doubt that the previous week was really something with a lot of interesting moves and unusual market activity. Some instruments are currently so stretched that their overbought or oversold status points at imminent correction. Let’s see whether the third week of January brings us a correction of the moves seen in the first two weeks.
This week started with new local extremes. EURUSD has reached the highest levels since the end of April. USDJPY has reached the lowest levels since the end of May and DAX futures opened at the highest levels since the middle of February. There is space for improvement, but also space for correction and a high opening may actually be an invitation for the latter.
Asian Indices started the new week without a clear path. Nikkei dropped 1.14% but Shanghai Composite Index climbed 1% higher. American and European futures opened high but are currently losing some of the gains. As we mentioned, high openings in low liquidity can sometimes be an invitation to a further sell-off.
The Forex market starts the new week with a small twist. I am sure you are perfectly aware of the fact that Yen was gaining sharply in the past few days and weeks but today, it’s the weakest currency in the pack. The drop is very small and as for now, it can be only treated as a non-significant correction of the recent strengthening. Perhaps not even a correction yet, but rather the first small step towards it.
In today’s calendar, we have Martin Luther King celebrations in the US and the market will be closed there. Futures, however, are trading as usual. The World Economic Forum kicks off today - expect many headlines from Davos about the general status of the economy and perspectives for the future. At the end of the European session, we will also hear a speech by the Bank of England Governor, Mr Bailey.