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27.01.202209:36 Forex Analysis & Reviews: US stock market on January 27, 2022

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Exchange Rates 27.01.2022 analysis

S&P500

The Federal Reserve is likely to raise the interest rate in March.

On Wednesday, main US stock indexes closed in negative territory, with the Dow Jones and the S&P losing 0.4% and 0.15% respectively. The NASDAQ changed negligibly at the end of the session.

Early on Thursday, S&P 500 futures fell by 1.3%.

Asian markets slumped on the news of an imminent Fed interest rate hike. The Nikkei 225 lost 3%, while the Shanghai Composite declined by 1.2%.

The Federal Reserve left the key interest rate unchanged at 0-0.25%, but stated it is ready to increase the rate in March, when the asset purchase program will be finished. Currently, the QE is being tapered at a rate of $30 billion per month. The Fed noted the state of the economy, high inflation, and a strong labor market. The stock market did not fall significantly, as a rate hike in March was long anticipated by market players. If the economic situation deteriorates strongly, the Fed could postpone the increase.

Early on Thursday, Brent crude oil declined to $89.30 after rising above $90 to $90.47 yesterday for the first time since 2014. US oil stockpiles data was mixed. Crude stockpiles increased by 2.4 million barrels during the week, compared with expectations for a 728,000 barrel drop. Distillate stockpiles declined by 2 billion barrels, while petroleum stockpiles rose by 1.3 million barrels - short of an expected 2.5 million barrel rise.

3.6 million confirmed Omicron cases were registered yesterday, matching the high of January 19. 535,000 infections were reported in the US, 430,000 - in France, 190,000 - in Germany, 75,000 - in Russia.

The S&P 500 is trading at 4,350 and is expected to be in the 4,320-4,390 range.

The US stock market gained 2% before the Fed's policy decision was released, as investors hoped for a more dovish Fed position. Equities declined following the meeting, but the market could still rally afterwards.

Tesla's earnings in 2021 increased sevenfold by $5.5 billion, the company said. However, the automaker's share price slumped during the market's downward correction.

Today, US GDP data for Q4 2021 is due. Economists forecast an increase of 5.6%, which could give a boost to the market. The key December inflation report will be released on Friday.

Tensions between Russia and the US over Ukraine remain high. Yesterday, the United States sent a formal response to Russia's ultimatum to NATO. In December, Russia demanded the alliance to remove its forces from Eastern Europe. Although the contents of the reply were not published, the US and NATO have firmly rejected the Kremlin's demands.

USDX is trading at 96.65 and is expected to be in the 96.40-97.00 range. The index rose significantly following the news about the Fed's rate hike. USD made gains against the Japanese yen and the euro, and could increase further.

USD/CAD is trading at 1.2720 and is expected to be in the 1.2680-1.2800 range. The Fed meeting reversed the pair upwards. USD/CAD, which is unaffected by rising oil prices, could continue its upside movement.

The US stock market could find support in US GDP data and rally today.

Exchange Rates 27.01.2022 analysis

COVID-19 statistics as of early January 27, 2022

Jozef Kovach
Analytical expert of InstaForex
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