1, Stocks Calm After Crazy Week With Google in Focus
Dow 30 Futures, 4-Hour Chart Analysis
The week kicked off in a quiet fashion in global financial markets, with China being closed for the whole week due to the Spring Festival celebrations. European stocks and US equity futures are slightly lower before the bell on wall Street, and after a very busy week for economic release and quarterly earnings, markets will have slightly less catalysts to digest on the first week of February.
The Dow is clinging to the 25,000 level thanks to the post-Christmas recovery, but with the global economy clearly slowing, we believe that risks are skewed to the downside here, and with valuations still being sky high in the US, traders should be defensive here.
Google parent Alphabet will report earnings after the close, and as it was the case throughout this earnings season, the firm’s guidance will be under scrutiny, and especially the effects of the maturing smartphone market hold risks for the growth of the otherwise very stable core advertising business. Facebok’s positive report is a good omen for the tech giant, but following the very bullish January, the stock could have a hard time to gain ground post-earnings.
2, Dollar Bounces Back as US Economy Still Stands Out
USD/JPY, 4-Hour Chart Analysis
While the Dollar got under pressure last week, due to the Fed’s sharp dovish shift, the US economy continues to outperform its global peers, and despite the recent pullback, the long-term uptrend is intact in the reserve currency. Today we got further evidence of the broad weakness in Europe, with the British Construction PMI and the Sentix Investor Confidence both missing the consensus estimates,