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France PMI Manufacturing ticked down from 55.6 to 55.5 in January, matched expectations. PMI Services dropped notably from 57.0 to 53.1, below expectation of 55.3, a 9-month low. PMI Composite dropped from 55.8 to 52.7, a 9-month low too.

Joe Hayes, Senior Economist at IHS Markit said: "Given the surging number of daily COVID-19 cases we've seen in France, it's no surprise to see softer PMI numbers in January.... Supply chain issues continue to impact the economy, particularly manufacturers, but we do appear to have seen the worst as delivery times lengthened to a far weaker extent than seen during much of 2021. That being said, the inflationary side effects remain in play and are being exacerbated by rising staff costs and energy prices."

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The FTSE 100 stalls as appetite subside across risk assets. An overbought RSI on the daily chart suggests over-extension after a month-long rally.

A pullback is necessary for the bulls to catch their breath. A drop below 7530 and then 7470 further weighs on short-term sentiment as profit-taking intensifies.

The index is about to test 7380, a fresh demand zone from the November-December double top on the daily timeframe. The bulls need to reclaim 7540 before a rebound could gain traction.

The Canadian dollar slipped after disappointing retail sales in November. A bearish RSI divergence at the recent high (91.15) indicates a loss of momentum in the rally.

The first drop below 90.60 prompted some buyers to bail out. Then the rebound met stiff selling pressure at 91.90. And this is a sign of exhaustion after a four-week-long uptrend.

The loonie now has fallen through the major support at 90.60, with 89.80 as the target. As the RSI goes oversold, traders may look to sell the next bounce near 91.05.

The Swiss franc rallied as traders poured into safe-haven currencies.

The pair previously bounced off the critical floor (0.9090) on the daily chart. An oversold RSI in this demand zone brought in some buying interest.

However, sentiment remains downbeat with the greenback struggling to clear offers around 0.9180. A fall below said support would trigger a new round of sell-off towards 0.9020 as late buyers rush to the exit. On the upside, a bullish breakout would open the door to the recent peak at 0.9275.

The US 500 cash index has witnessed a pullback from its all-time high, reaching a 3-month low amid increasing negative forces. The index has also crossed below its 50- and 200-day simple moving average (SMA), which points towards an overall bearish outlook. However, the price is currently trading below its lower Bollinger Band, indicating that an immediate upside movement should not be ruled out.

Short-term momentum indicators are reflecting a mixed picture for the index. The MACD is found below zero and its red signal line, suggesting that the negative forces might be gaining further traction. However, the RSI has entered its 30 oversold region indicating that an immediate upside movement is not out of the equation.

Should the bears maintain control, initial support might be found at the 4,390 level before sellers target the 4,270 hurdle. A break below the latter could intensify selling pressures, sending the price to test its June low at 4,137. Breaching below this point, could open the door towards the May low at 4,034.

On the flip side, if the price crosses above its 200-day SMA currently at 4,440, buyers might then shift their attention towards the 4,495 hurdle. Moving above from this point could send the price to test the 4,550 barrier before targeting the 50-day SMA currently at 4,670. A cross above the latter could turn the fortunes around for the pair, sending the index to test its November high at 4,745.

In brief, despite the fact that the latest downside move seems overextended, the short-term outlook for the pair is bearish. For sentiment to change, sellers would need to break above the 50-day SMA.

Last week was painful for investors, especially those with portfolios heavily tilted towards tech stocks and speculative assets like cryptocurrencies. The S&P 500 declined 5.7%, notching its third straight weekly loss, and closed below its 200-day moving average. Losses in the Nasdaq Composite deepened further after the index entered correction territory a week earlier and the index is now down 15.1% from the intraday peak recorded in November 2021. Both indices logged their biggest weekly declines since the onset of the pandemic in March 2020.

Stimulus withdrawal and expectations of tighter monetary policies are not the only reasons driving stocks lower; it’s the negative earnings surprises from some of the biggest firms that are worrying investors. Lockdown-beloved stocks are being punished the most, with Netflix plunging 21.8% on Friday after the streaming giant anticipated weak subscription growth as competition heated up from Disney and other players. A day earlier, shares of Peloton Interactive, the provider of at-home exercise equipment, lost 24% of its value after the company said it was reviewing the size of its workforce and other reports of halting production due to falling demand. Zoom, the video conferencing software maker, is now trading at a fraction of its 2020 peak, having lost 74% of its value since.

Again, cryptocurrencies failed to protect portfolios as a hedge against the market turmoil or higher inflation. Most digital assets have lost a quarter to a third of their value this year, with Bitcoin, the most prominent digital token dropping to a six-month low at $34,625.

However, the general outlook is not as gloomy as it appears in some asset classes. The weak results for companies that profited during the worst of the pandemic are a bullish signal for the public in general. Fears of Covid-19 and its variants have diminished incredibly over the past few weeks. Many countries are now scrapping most of their pandemic restrictions, with social distancing likely to be something of the past.

Companies benefitting from the reopening of economies like airlines, restaurants, and other hospitality firms may continue to benefit despite anticipation of higher interest rates and bond yields. Given that inflation is not going away anytime soon, investors should consider being overweight cyclical companies with high profit margins and reasonable valuations. Tech will remain a long-term play despite the current turmoil, but one needs to be selective and focus on firms with solid balance sheets, profit margins, and growth prospects.

This week, big players in the tech industry will release their Q4 2021 results, including Apple, Microsoft, Tesla, and IBM. Robust results are required to help equities recover from last week’s selloff. However, the Fed’s monetary policy meeting, which wraps up on Wednesday, remains the main event of the week.

EUR/USD

We still cannot witness a successful downward breach at the 1.1321 support zone as the bulls thwarted the breakout attempt during the previous trading session. At the time of writing, the currency pair is located just above the mentioned zone, and the most likely scenario is for another attempt at breaching it, followed by a test of the next significant support at 1.1279. This week, we are expecting a lot of long-awaited economic news that would affect the volatility of the currency pair. Among the most anticipated is the announcement of the Fed interest rate decision (Wednesday; 19:00 GMT), as well as the GDP data for the U.S. (Thursday; 13:30 GMT).

USD/JPY

The bears failed to reach the support zone at 113.50 and, at the time of writing, the bulls are trying to take control. Their first goal is expected to be a test of the resistance zone at 114.21 and a successful breach here would strengthen the appreciation of the U.S. dollar against the Japanese yen, which could lead to an additional appreciation towards the local highs at around 116.00. On the other hand, if investors lose their confidence in the U.S. dollar, influenced by this week’s decision of the U.S. Federal Reserve, then we could witness a sharp decline towards the support zone at around 110.00.

GBP/USD

It seems that, during the last week, the bears managed to take full control, leading the pair towards the support area at around 1.3571, which completely disrupted the upward trend for the Cable. The consolidation phase under the mentioned support is likely to continue, with the potential to fall towards the next significant support area at 1.3483. The announcement of the Fed's interest rate decision (Wednesday; 19:00 GMT) will be crucial for the future of the currency pair.

EUGERMANY40

The sell-off for the German index was limited to just below the support level at 15500 and, at the time of writing, we are seeing consolidation around this level. It is quite possible that the decline will continue, but we should also not exclude a short-term upward correction here, which is likely to remain limited below the 15665 resistance zone. The implementation of this pessimistic scenario could signal the end for the upward trend of the EUGERMANY40 index. The next significant support is found at around 14800.

US30

The downtrend for the U.S. blue-chip stock index continues, with the bulls currently managing to limit the sell-off to just above the support at 34000. We may see a short-term upward correction, after which the downtrend may continue. A breach of the support zone at 34000 would significantly boost the sell-off. The news, mentioned in the EUR/USD analysis, will be crucial for the future of the U.S. index.

USDJPY has been plunging since early January when it recorded a five-year high of 116.33. Despite posting a moderate rebound after the pair found its feet at the 113.47 level, the price dipped again as positive momentum evaporated.

The decline is likely to resume as short-term oscillators indicate a bearish near-term bias. The MACD histogram is found beneath both zero and red signal line, while the RSI is flatlining in the negative territory. Moreover, the 50-period simple moving average (SMA) crossed beneath the 200-period SMA, endorsing the pair’s negative short-term outlook.

Should the negative momentum intensify further, the price might drop towards the recent low of 113.60. Breaching this barricade, the bears could then target the 113.47 region before the spotlight turns to 113.28. If downward pressure persists, the 113.13 hurdle could appear on the radar.

On the flipside, bullish actions may encounter initial resistance at the recent high of 114.03. Conquering this barricade, the price could ascend towards 114.22 or higher to test the 114.55 obstacle. Piercing through these resistance points, buyers might then aim for the 114.78 level.

Overall, the eventual resumption of the downside trajectory remains the most likely scenario for USDJPY. However, a profound break above 115.05 could alter its short-term picture back to positive.

Cryptocurrency prices continued their sell-off during the weekend as investors continued focusing on multiple events. For example, there are worries about the rising bond yields in the United States. Just last week, the ten-year bond yields rose to a two-year high while the 2-year and the 10-year rose to a two-year high. Rising bond yields are a sign that investors expect the Federal Reserve will start hiking rates. They also declined as investors continued worrying about the regulatory environment. On Thursday, Bank of Russia warned that the country should ban cryptocurrencies.

American futures tilted lower on Monday as investors worried about the rising risks in the market. The losses accelerated after the weak quarterly results by the likes of Netflix and the weak announcement by Peloton. Later this week, US indices like the Dow Jones and S&P 500 will react to the latest results by most American giants. Some of the top companies that will publish their quarterly results this week are Microsoft, IBM, Verizon, Texas Instruments, and Raytheon, Tesla, Intel, and Abbott Labs. According to FactSet, the S&P 500 is likely to report earnings growth of more than 25% for the fourth quarter straight.

The economic calendar will have no major events today. The most important ones will be the flash manufacturing and services PMI data from several countries. Economists expect the data to show that business activity in key countries like the US, UK, and Europe bounced back in January as countries assessed the impacts of the omicron variant. Investors will also focus on the price of oil and natural gas as tensions between the US and Russia escalated.

EURUSD

The EURUSD pair was little changed on Monday morning. The pair is trading at 1.1340, where it has been in the past few days. The pair is slightly above the ascending trendline that connects the lowest levels since December. It is also below the upper side of the ascending triangle pattern. The pair is along the 25-day and 50-day moving averages. Therefore, the pair will likely remain in this range today.

GBPUSD

The GBPUSD pair continued its downward trend on Monday morning. It is trading at 1.3550, which was lower than this year’s high of 1.3748. It has moved below the 61.8% Fibonacci Retracement level. At the same time, the 25-day and 50-day moving averages have made a bearish crossover pattern. The Relative Strength Index (RSI) has also dropped. Therefore, the pair will likely keep falling as bears target the 50% retracement level at 1.3500.

CADJPY

The CADJPY pair has been in a strong bearish trend in the past few days. The pair dropped to a low of 90.28, which was the lowest level since January 3. The pair managed to move below the key support at 90.55, which was the lowest level on January 14 while the Relative Strength Index has been in a bearish trend. Therefore, there is a likelihood that the pair will keep falling with the next target at 90.75.

The Aussie Dollar started a fresh decline from well above 0.7270 against the US Dollar. The AUD/USD pair traded below the 0.7225 support to move into a bearish zone.

The pair even traded below the 0.7200 level and the 50 hourly simple moving average. A low was formed near 0.7170 and is currently consolidating losses. An immediate resistance on the upside is near the 0.7185 level.

The next major resistance is near the 0.7200 level, above which the pair could rise steadily towards the 0.740 level in the near term. Any more gains could send the pair towards 0.7270 on FXOpen.

An immediate support on the downside is near the 0.7170 level. The next key support is near the 0.7150 level. A clear break below the 0.7150 support could lead the pair towards the 0.7100 support.