What's in Store for the Major Pairs and US Markets Tomorrow?

After the steepest drop in US equities in history back in February, the stock market rebounded 63% and passed all-time highs from pre-crash levels. With an economy that was once booming turned into a recession, but the market did not seem to care from the belief that the Fed would keep money flowing in and the banks, during a period of almost 0% interest rates, had nowhere to put their money except in the stock market. Led by tech, the market climbed higher than ever before. USD pairs got crushed as GU and EU skyrocketed. Although the S&P has already dipped over 6% in the past week, it seems that the time to buy is not that attractive to investors. Here are some reasons why:

Illusion of the Fed

The Fed, with seemingly unprecedented power to fuel the equities market, made investors feel backed by the central bank to where the market had nowhere to go but up. There was an illusion that the Fed would never let stocks dip whatsoever, but that can only go so far. Fueling the market means printing money, which means increasing debt and inflation. If interest rates rise, the market will tumble as well, so interest rates need to stay low while the USD deals with inflation rising. Keep in mind that interest rates were already very low to begin with as Trump promised the best market we have ever seen. Once corona hit, interest rates only had so far it could go before it reaches 0% or negative. Yes, it is true that missing this most recent bull run killed bearish sentiment, but the bears aren't going to sleep forever. The Fed won't keep printing money forever, and at some point, it is not up to them where the market decides to go.

GET $5 OFF OUR VIP GROUP!

  • See trades taken by our analysts
  • Join our chatrooms
  • Access our strategy library
  • USE CODE 'FVIP1' to get $5 OFF!

The lack of new stimulus

Millions of Americans are still out of work, even more so than the great financial crisis of 2008. The unemployment numbers have been greater than 2008 for over 6 months now, and companies are still having lay-offs. Initial jobless claims data shows that the economy is not really recovering. We finally dipped below 1 million a few weeks ago, but the number each week has now been hovering in the 800,000s. The damage done is irreversible, and will take a long time to recover. Some analysts expect 8-10 years to be fully recovered. However, this will not necessarily affect the stock market and major pairs as much. The fact that Americans have been out of stimulus payments since early August shows the true colors of Congress as Democrats and Republicans continue to debate over which package is best. Now is not the time to push agendas or make Capital Hill look bad. It's time to put differences aside and help the people that need it.

Vaccine Drawbacks

News on vaccine has definitely been a major driver in the market's direction this year, but failures in the trials have brought fear back in to the minds of investors. After one patient in a voluntary vaccine trial came down with an unknown illness, the market freaked out and dipped hard with big tech leading the drop. The first step in this biological crisis is to find either a vaccine or efficient treatments to the virus and stabilize the number of cases. The number is still rising now that schools and universities are calling students back to campuses. The University of Georgia made business news when cases spiked over 1,400 positive tests. Sports teams are postponing games, some teams are not playing at all, and billions of dollars in revenue could be lost if cancellations continue.

What will tomorrow bring?

Tomorrow and next week will be interesting. Last week had moments of short-term uptrends forming before price got wiped out again. This pattern happened a lot last week. The bulls are losing momentum with all this crazy news coming out, and tomorrow may be grim. The market is following the same pattern from February: sell offs begin to bring price down before that big correction happened of -34% on the SPX500.

You can tell that the dips are becoming successfully more aggressive the higher we climb. The red candles are now overpowering the green and this recent dip has already wiped out 3 weeks of gains. The healthy thing would be for the market to correct making stock prices and value reach closer to equilibrium. Otherwise, we will see a bull market run completely by FOMO investors who want to make a quick buck on each swing up, and an inevitable correction farther in the future will be worse than if it were to do so now. Since the market has dipped back into correction territory, it's time for it to make a decision. Will we continue to buy in to the Fed-fueled rally, or will we let the market healthily correct so that it makes more sense to start investing again?
We will find out soon.


Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

Featured Pic: https://static.bangkokpost.com/media/content/dcx/2020/05/16/3633836.jpg

Looking for a Broker?

Check out our favorite brokers & reviews! Find brokers available in your country, or our top rated brokers to consider.
Find a Broker
More Articles
January 17, 2021
Weekly Forex Forecast for GBPUSD, CADJPY, GBPAUD, XAUUSD (17-22 January 2021)

Weekly Forex Forecast for GBPUSD, CADJPY, GBPAUD, XAUUSD (17-22 January 2021) Hey everyone! Welcome to this week's forex forecast for the week ending January 22nd, 2021. I'm TraderBart with A1 Trading, and this week I'll be looking at GBPUSD, CADJPY, GBPAUD & XAUUSD. GBPUSD Looking at GU on the Daily timeframe, price has been channelling […]

Read More
January 10, 2021
Weekly Forex Forecast for GBPUSD, EURCHF, USDJPY, XAUUSD (10-15 January 2021)

Weekly Forex Forecast for GBPUSD, EURCHF, USDJPY, XAUUSD (10-15 January 2021) Hey everyone! Welcome to this week's forex forecast for the week ending January 15th, 2021. It's so great to be back, I hope everyone's had a fantastic holiday, and I hope everyone's motivated to work 10x harder than last year. I'm wishing everyone nothing […]

Read More
December 21, 2020
Top Trading Ideas for 2021

Throughout the year, we've seen many changes to the way we trade, how we manage risk and how we interpret the markets. The new insights we have gained over the months usually come after years of trading and adapting to ever-changing environments. We've done all that in a matter of months! Up until the New […]

Read More

Related Articles

August 28, 2020
Economic stimulus and the Role of Central Banks

Politics preventing new financial stimulus The economic recovery in the major global economic powers depends on several important factors. One of the most vital part, the spread of the virus and the government's answers to it. With a decrease in daily cases of COVID-19 to 50,000 in the U.S.A. Yet U.S. A remains the most […]

Read More
August 26, 2020
How to Spot a Scammer

Our team has unfortunately received many reports of scammers using our content and pretending to be us.¬†While we will continue to report these accounts to the authorities as we receive reports, we may not always catch them in time. Below our a list of things to look out for before making a purchase to any […]

Read More
August 22, 2020
Legends of Investing - The Story of Warren Buffet

Warren Buffett is one of the most idolised, investors in the world. At the time of writing , his company, Berkshire Hathaway, has a market cap of $495 billion and Buffett himself has a net worth of $79 billion. His approach to value investing, combined with his influence over the companies he invests in , […]

Read More

A1 Trading Company

A1 Trading Company is a financial services and media business founded in Atlanta, USA.
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram