European and US stocks soared yesterday, and they are set to extend their gains today. There is no doubt that there is strong demand for riskier assets, and risk-off derivatives have fallen out of love—for now. Looking at yesterday’s European GDP numbers, investors are clear that economic damage wasn’t as bad as they thought, especially the Q4 GDP number, which was a lot more promising. Having said that, the extension of the current lockdown and the EU failing to get mass people vaccinated means that we are bound to see some economic weakness during the first quarter of this year.
The major catalyst that can derail positive sentiment is the US NFP data, which is due on Friday. However, we are likely to get a small flavour of this today when the US ADP numbers will be released. This data usually sets the tone for the US NFP. The forecast for the US ADP is for 48K, while the previous reading was -123K. The health of the current economic recovery will also be measured by looking at the US ISM manufacturing number, which is also due today. All of these numbers are very much likely to bring higher volatility to the dollar index, and this means that currency pairs such as the EUR/USD and GBP/USD are likely to remain highly volatile today.
Of course, the economic numbers are likely to bring higher volatility in gold prices too. Gold prices have been very much stuck in a sideways pattern. There is no clear trend when it comes to the precious metal’s price. Gold price continues to consolidate between $1803 and $1874. Having said that, bulls are still very much in control of the price on the weekly time frame as the gold price is still trading above the 50, 100, and 200-week simple moving averages. As long as the price stays above these averages, we have hope for more upward swings.
As for silver, after a massive sell-off yesterday, silver has paused its big drop, and the price may begin to consolidate around the 25 to 26 price range. The Reddit frenzy is completely over, and retail Reddit traders are no longer interested in this trade as they know that it goes very much against their ethos, meaning hedge funds are long on silver, and retail investors do not want to support this move.
Amazon and Alphabet
In stock news, we had earnings reports from two tech giants last night, and they are likely to set the narrative for the Nasdaq index today. Both Amazon and Google’s Alphabet smashed Wall Street’s target. Their stocks soared in after-market hours. What took many investors by surprise is that Jeff Bezos will no longer be the CEO of the company but an Executive Chair. This doesn’t mean that Amazon is likely to face more challenges, not likely at all. This is because the upcoming CEO transformed the landscape for Amazon by pushing Amazon into a service giant. Amazon reported its first $100 billion quarter, which was fueled by pandemic and holiday shopping.