Markets Week Ahead: S&P 500, US Dollar, Yen, NZD, RBNZ, Powell Testifies
The S&P 500, a frequent bellwether for general risk appetite, extended losses into a third consecutive week. The tendency for economic data in the world’s largest economy to surprise higher has been shrinking since the middle of July. Catching a bid lately has been the anti-risk Japanese Yen and to a lesser extent the haven-linked US Dollar.
This past week, the Federal Reserve might have left investors wanting more, especially on the quantitative easing aspect. Doubts over further US fiscal stimulus may have also played a role in keeping the USD suppressed. Sentiment-linked Crude Oil prices were on the rise, bolstered by a combination of falling US crude inventories and compliance in output from OPEC+ producers.
With that in mind, all eyes turn to testimony from Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin. They will be talking before the House Financial Services Committee on the CARES Act. Across the northern border, the Canadian Dollar will be eyeing Prime Minister Justin Trudeau. He will be offering a new agenda for a spending plan amid the economic recovery.
Following recent strength, the New Zealand Dollar awaits this week’s RBNZ monetary policy announcement. Informal contacts between the United Kingdom and the European Union around Brexit may drive volatility in the British Pound and Euro. Volatility risk, as shown by the VIX ‘fear gauge’, seems to be on the decline however. What else is in store for markets ahead?
The outlook for the EUR/USD pair has worsened after its failure to move back to the high just above 1.20 touched on September 1 despite the ECB’s decision earlier this month not to talk down the Euro.
The Japanese Yen may continue to exhibit a bullish behavior as the Bank of Japan (BoJ) appears to be in no rush to alter the path for monetary policy.
Crude oil prices could reverse lower as the OPEC Monthly Oil Market Report (MOMR) forecasts fading global demand and oversupply concerns.
The US Dollar may fall if demand for haven-linked assets fall after testimonies from Powell and Mnuchin to the House. Better-than-expected data may compound the Greenback’s selling streak.
The growth-linked New Zealand Dollar may rise on the upcoming RBNZ rate decision following rosy economic data. However, downside potential in the S&P 500 could offset NZD/USD gains
Technology stocks continue to be a source of weakness for US equities, undermining risk appetite. Meanwhile, US-China tensions simmer beneath the surface creating uncertainty.
USD/MXN pick up further downside momentum as support levels are taken out
The Dollar has bottoming potential, but that is starting to lose weight as it fails to sustain any lift; next week could be a big one for USD’s near-term outlook.
Oil prices saw a reprieve to the recent selling pressure but remain at risk while below downtrend resistance. Here are the levels that matter on the WTI technical chart.
The S&P 500 index may struggle in the near term – drifting sideways within the bounds of its Bollinger Band – but the overall trend still looks bullish.
US DOLLAR WEEKLY PERFORMANCE AGAINST CURRENCIES AND GOLD
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