FX.co ★ Markets are balancing in anticipation of new trends after the New Year holiday

The first working day on the global financial markets was not in the traditional framework since 2016. Earlier, stock markets started the new year optimistically, which led to an increase in demand for risky assets, and decline of the US dollar. However, this traditional pattern for recent years did not happen on Monday.

What is the reason for this? On the one hand, in our opinion, this can be explained by the usual fixation of profits previously received before the new year amid news about the decision of the Congress to adopt new incentives, as well as the beginning of the vaccination process in Western countries. On the other hand, the growing tension over the election of a senator from Georgia, as well as the expected official approval of the outcome of the US presidential election on January 6, probably also caused a decrease in demand for company shares, commodity assets, while strengthening the US dollar.

But the markets showed a growth in optimistic mood on Tuesday, which is supported by the news that the United States no longer plans to delist the three largest Chinese telecommunications companies: China Mobile, China Telecom and China Unicom. In particular, this supported stocks demand in Asia, and futures on the main America and a number of European stock indices, which are trading in the green zone.

After rising on Monday, the US dollar is declining today on the wave of investors' positive attitude towards buying company shares. An important signal for investors is a sharp decline in demand for cryptocurrencies, which received support on a wave of high volatility in the regular markets during the last two weeks before the New Year. It is difficult to say whether their rally will continue, but given the strong correlation between the cryptocurrency market, the Forex market and the demand for company shares, then the correction of US stock indices predicted by many experts, may cause a continued decline in demand for cryptocurrencies accompanied by US dollar's growth.

We believe that the market will determine its direction over the next few days. For today, we expect that the market's main dynamics, including the currency one, can be observed during the beginning of the US session, since the most significant events after the New Year are related to America. In particular, we have the official recognition of J. Biden as the winner of the US presidential elections, COVID-19 situation, and the senatorial elections in Georgia.

Forecast of the day:

Gold is consolidating after reaching a local high on Monday. If an optimistic view on the prospects for demand for risky assets is shed on the markets today, this may lead to a local price decline by 1900.00, after declining below the level of 1933.00.

The USD/JPY pair remains in a short-term downward trend above the level of 102.90. The breakdown of which as well as the worsening of the market mood, could lead to a decline to 102.70. But if a positive mood is maintained and the price consolidates above the level of 102.90, it may encourage the pair to increase to 103.30.