Markets Week Ahead: Nasdaq, US Dollar, Gold, Yields, RBA Decision, OPEC, NFPs
Markets were roiled by an influx of volatility this past week owing to a monstrous move higher in government bond yields. The Nasdaq and other major stock indices faced heavy selling pressure as the 10-year Treasury yield pierced 1.5% for the first time since February 2020. This development triggered investors to rethink equity valuations and deleverage considering 1.5% is also the estimated S&P 500 dividend yield. Soaring real yields caused precious metals like gold and silver to swoon as well.
US Dollar bulls sent the Greenback snapping higher across major currency pairs thanks to the deterioration in market sentiment and relatively more attractive interest rate differentials. EUR/USD rates whipsawed sharply lower while USD/JPY jumped to a five-month high and USD/CHF surged toward the 0.9100-price level.
GBP/USD rejected the 1.4200-handle and appears to have formed a bearish shooting star candlestick on a weekly chart. NZD/USD price action gyrated as Kiwi strength, largely due to the new RBNZ housing remit, was undermined by broad-based US Dollar strength. The MSCI Emerging Markets Equity Index plunged -6.4% as EM FX weakened notably against the US Dollar.
Looking to the week ahead, traders will likely continue keeping close tabs on the recent bond selloff and corresponding surge in yields. Scheduled event risk posed by the RBA rate decision due 02 March at 03:30 GMT brings AUD/USD into focus for potential currency volatility. The DailyFX Economic Calendar details a list of expected speeches from key central bankers like ECB President Christine Lagarde and Fed Chair Jerome Powell as well. Further, the upcoming OPEC meeting stands to weigh materially on crude oil prices. Monthly nonfarm payrolls data is also on tap to cross market wires this coming Friday, 05 March at 13:30 GMT. What else are traders watching in the week ahead?
Rising Treasury yields inspired a broad selling in global equities last week. The longer-term outlook remains positive however on the back of the reflationary theme, strong earnings and vaccine progress.
USD/MXN rises to its highest level in 3 months as bonds take control of market sentiment.
GBP/USD corrects from stretched valuations, however, positioning clear is likely to entice dip-buyers.
The haven-linked US Dollar may be in a position to benefit in the short-run as economic recovery bets support longer-dated Treasury yields, making them more competitive with stocks.
Two of the main Euro-pairs, EUR/USD and EUR/GBP, are being driven by very different drivers.
Crude oil price action rocketed higher throughout February, putting in a monthly gain of 18%. The bullish trend could be in jeopardy, however, as the commodity starts to show signs of exhaustion.
Although the longer-term technical outlook for AUD remains skewed to the topside, recent developments suggest the commodity-sensitive currency could lose ground against USD and JPY.
The GBP rally vs USD came to an abrupt end and reversal; this sets cable up for more selling in the week ahead.
Gold plummeted more than 3.3% this week with price poised to mark the largest weekly decline this year. These are the levels that matter on the XAU/USD weekly chart.
The Dow Jones and Nasdaq 100 look to be on diverging technical paths as volatility spikes. Meanwhile, the S&P 500 teeters on support as it splits the difference between its sister indices.
The DXY Index’s has held onto key technical support, suggesting that bulls may have a bit more fight left yet.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.