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Holding the Line: Patience and Outlook via Fed and Risks

Traders who participated in last week's markets and yesterday's sessions likely feel as if the broad markets are 'holding the line', this as more impetus is awaited in the coming days. There are certainly a few factors weighing into current speculative dynamics. Concerns about a possible escalation in the Middle East conflict are heightened, tomorrow's U.S Federal Reserve shadows, and ongoing quarterly corporate earnings publications are affecting behavioral sentiment.

U.S indices remain within record territories and U.S Treasury yields continued to decline yesterday. The short-term buying of U.S equity indices has stirred rumblings about the dangers of participating in a bullish marketplace, this as warnings about a possible selloff are heard. However, risk appetite remains sustained and the decline in U.S Treasury yields has helped push institutional money back into equity indices.

Day traders pursuing Forex have likely had a tougher time the past few weeks. The USD has shown an ability to strengthen and is traversing in sight of important technical price ratios - within the major currency pairs - which are traversing value realms seen around the 13th of December.

Inexperienced traders often dream of making a quick killing via profitable positions and being able to relax afterwards. However, experienced traders know the importance of having patience and not getting overly ambitious when market conditions are choppy. Financial institutions have shown a clear sign that the USD was oversold in December. Solid trading results are mostly attained through methodical approaches.

Aside from the U.S central bank's dynamics which will come tomorrow. Middle East geopolitical risks have created headlines the past few days. An attack on a Singapore flagged oil tanker last Friday caused a spike in price with WTI Crude Oil. And this past weekend's attack on a U.S military outpost in Jordan has many people anticipating a retaliatory action. WTI Crude Oil remains in what appears to be a wait and see mode as it hovers above 76.00 USD as of this writing.

As a trader it is important to push personal bias to the side, perceptions regarding the talking points of geopolitics and social policy are interesting, but sometimes not related to the daily trading results of assets being pursued. A trader can disagree with how political events are being dealt with, but they must contend with the interpretation the market is providing regarding price. Most traders suffer from some type of bias and this should be considered when speculating.

Tuesday, 30th of January, Germany Preliminary GDP - growth numbers from Germany came in negative with a result of -0.3% today. This result will continue to put pressure on the ECB to lower their interest rate in a quicker manner, this compared the likelihood they want to mirror the Federal Reserve's actions. The danger of being reactive instead of proactive is a widespread criticism of central banks, but the ECB sometimes appears to be the least aggressive regarding monetary policy. The ECB is likely to remain a step behind the reality of the lackluster economics data coming from the European Union.

Tuesday, 30th of January, U.S Consumer Confidence via Conference Board - recent retail sales data has shown American consumers continue to be aggressive buyers. Better than expected sales data has likely made the U.S Fed slightly nervous. If today's Consumer Confidence data is stronger than anticipated this could create a bit of buying momentum in the USD short-term.

Wednesday, 31st of January, U.S Federal Reserves FOMC Statement and Funds Rate - the Fed meeting may result in a lot of noise with little actual results, except to drive day traders crazy with momentary volatility. The Fed is likely to continue to point to interest rate cuts, but the hoped for cut in March is probably not going to be given voice. Instead expect a rather cautious tone speaking about inflation concerns still present, and a U.S economy which is showing a rather stubborn ability to grow.

Thursday, 1st of February, U.K Bank of England Monetary Policy Report and Official Bank Rate - no change is expected to the key lending rate from the BoE. However, the central bank will likely mention it sees signs of positive movement in the U.K economy based on the better than expected PMI numbers last week. Yet, the Bank of England will probably also mention it remains concerned with inflation. Meaning the BoE will continue to potentially dance in step with the Federal Reserve.

Friday, 2nd of February, U.S Non-Farm Employment Change and Average Hourly Earnings - following in the wake of the Federal Reserve's rhetoric which will have been seen on Wednesday, these job numbers will move the markets but may not produce their typical price action. Layoffs are starting to be seen in some large U.S tech companies, but plenty of this knowledge has already been factored into equities and Forex.


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