Key Talking Points:
- GameStop leads a volatile session in the US
- DAX 30 tests the lower bound of its range
- EUR/USD sees bearish pressure increase
Market sentiment: volatility has returned to US markets as a swarm of retail investors seem to be working together to prop up US equities ahead of key earnings being released. The latest stock to fall victim to excessive speculation is GameStop, jumping from $19 to over $160 in just two weeks, before dropping back down to $80 within a matter of minutes, causing a short-squeeze and gamma trap, meaning sellers and options traders had to pile into the market to keep up their positions.
Elsewhere, market sentiment is struggling to keep up with the quick moves in the US, with risk-off prevailing in the Asian session and European equities attempting to break higher.
DAX: Sellers are struggling to gain the upper hand on the DAX 30 as the German index continues to find strong support at the 13,600 mark, keeping within its range from the last month. This consolidation is allowing for momentum to build in either direction, with yesterday’s pullback allowing for overbought conditions to ease further. The long-term bias remains tilted to the upside as bulls attempt to break the all-time high (14,140) although there are some strong resistance areas along the way as the DAX remains bound by its tightening range (13,995 – 13,600).
DAX 30 Daily chart
| Change in | Longs | Shorts | OI |
| Daily | 2% | -5% | -1% |
| Weekly | -5% | -9% | -6% |
EUR: The Euro continues to be coming off recent highs against the US Dollar whilst horizontal support at 0.8863 remains a key area stopping sellers in EUR/GBP. The common currency has been unable to keep the strong support it saw coming into the new year, with even the slow-moving yen moving ahead of the euro, mostly due to vaccine distribution issues and the continued spread of the virus through the continent.
The bearish case for EUR/USD continues to form as the pair hovers just above key support at 1.2121, which was already broken last week, weakening the effect it may have in stopping selling pressure. I think all eyes will be on the psychological 1.20 mark to really decide where momentum is going in the longer-term, so a break below 1.2050, the low from January 18th, is likely to increase bearish momentum.
EUR/USD Daily chart
| Change in | Longs | Shorts | OI |
| Daily | 1% | 12% | 4% |
| Weekly | 1% | -4% | 0% |
Learn more about the stock market basics here or download our free trading guides.
--- Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
