Weekly Report - Market Outlook 20210118

2021/01/19    |     151    |     Author:安山集團

The dollar hit a snag?


Technically, the daily downtrend of the US Dollar Index has recently hit a halt, and the willingness of short-term traders to play the market here to build a floor may be strengthened.

When we zoom out to the weekly line, we see that the ups and downs here are just a normal reaction to the market’s downtrend hitting a historically important resistance range. At this point in time, it is difficult to say that the current downtrend is over. From a trend-tracking perspective, there is still a potential for the DXY to move further down to around 83.5. We should continue to observe the trend in the pace of growth for the next 3 to 5 weeks.


Chart 1 dollar index daily line  source: CHOICE


Chart2 dollar index Weekly line   source:CHOICE


A smooth transition of power in the US presidency would boost market risk appetite

Incoming White House Chief of Staff Ron Klain announced on 16th January 2021 local time President-elect Joe Biden's priorities for his first 10 days in office, including dozens of executive orders. Among the executive orders to be released are those that require the Department of Education to extend a freeze on student loans; rejoin the Paris Climate Accord; lifting the Trump administration's travel ban on seven countries in West Asia and North Africa; extending the foreclosure freeze; extending the tenant eviction ban. On January 21, U.S. President-elect Joe Biden will sign executive actions aimed at addressing the COVID-19 crisis and safely reopening schools; between January 22nd and 30th he will instruct his cabinet to tackle the economic crisis.


Even though he has not yet taken office, Biden has been actively sending policy signals. For financial markets, the positive significance of this signal is mainly reflected in two aspects: the direct release of the current policy effect; Four years on, policy continuity and predictability are back on track. A smooth transition of power in the US presidency could boost risk appetite to some extent.


The race between virus spread and vaccine coverage

The global COVID-19 pandemic has not been contained effectively. China, which has been significantly ahead of other economies in controlling the pandemic for the past three quarters, has also seen a new round of transmission.


Chart 3 Cumulative number of confirmed COVID-19 overseas  Source:CHOICE


Chart 4 Cumulative number of confirmed COVID-19 cases in China Source:CHOICE

Although the change is still small from a global perspective, not enough to arouse panic in the public and is minimal compared to the growth curve of a year ago, difficulties caused by seasonal factors are still difficult to eliminate in the short term. While an effective control system is in place, with the virus continuing to spread in China's northern provinces, investors in mainland China may have a better sense of how difficult it is to contain a pandemic in Europe and the U.S.


Mutual will occur naturally as the virus continues to spread, and epidemiological reports have been reported in several countries since a mutated version of the virus became more infectious in the United Kingdom. Fortunately, the mutations detected so far are not enough render the vaccines ineffective, but the race is on between the spread of the virus and the pandemic.


This brings a lot of uncertainty to the behaviour of policymakers and financial markets, and 2021 is destined to be a year of high volatility.


Amber Hill Group is a fast-growing global investment firm dedicated to providing personal financial planning to high-net-worth clients around the world. The core quantitative trading systems created by the Group have performed well, and the assets under management of the Group's subsidiaries and affiliated companies exceed US $1,000,000,000.