Markets Week Ahead: Nasdaq, Dow Jones, US Dollar, Fed, Gold, Crude Oil, Yen, BoJ
Investors pivoted back into growth equities this past week. On Wall Street, the tech-heavy Nasdaq Composite (+1.85%) outperformed the value-oriented Dow Jones Industrial Average (-0.80%). It was also a solid week for the US Dollar, which after persistent weakness, managed to see gains against the majority of its G10 counterparts.
Traders may be further accepting the Federal Reserve’s outlook for the economy, seeing near-term rising inflationary pressures as transitory. This is despite the fastest pace of core consumer price growth in roughly 30 years. Treasury yields are on the decline. Still, anti-fiat gold prices underperformed, perhaps driven by positioning into next week as Friday concluded.
With that in mind, all eyes are on the Fed on Wednesday. Chair Jerome Powell will almost surely be questioned about the latest CPI report and what the path for policy tapering could look like. The central bank will also release updated interest rate expectations. With volatility on the decline across financial markets, this could be a risk for a revival in market activity.
In addition to the Fed, the Japanese Yen and Swiss Franc will be eyeing the Bank of Japan and Swiss National Bank respectively. For the Euro and Canadian Dollar, inflation data will be closely eyed from Germany and Canada respectively. The Australian Dollar could be vulnerable to RBA meeting minutes if the central bank reiterates its reluctance to hike rates until much further out.
WTI crude oil prices are hovering around the highest since October 2018, closing at a new high for this year so far. The commodity could see volatility if tensions between the US and Russia worsen, increasing prospects of tougher sanctions between the two key oil producers. Joe Biden will be meeting Vladimir Putin in Geneva on Wednesday. What else is in store for markets?
Last week was all about waiting for US inflation data and the ECB; the week ahead will be spent hoping for Federal Reserve guidance on US monetary policy – and EUR/USD is unlikely to move far either way.
The Australian Dollar may struggle despite ongoing optimism from Wall Street as falling bond yields and inflation expectations sap AUD/USD’s appeal. Focus on the Federal Reserve next.
Bitcoin continues its slow move higher while the rest of the market is watching to see if the move has legs
The Federal Reserve rate decision is likely to sway the price of gold as the central bank is slated to update the Summary of Economic Projections (SEP).
USD/MXN could move lower next week if the Fed sticks to the dovish script and reiterates that now is not the time to start talking about withdrawing stimulus despite rising inflation.
The US indices await the June Fed meeting for clarity on economic projections, the state of inflation and the probable path of monetary policy. With much on the line, the event could revive volatility.
A bullish International Energy Agency (IEA) report sent crude oil above $71.00 per barrel for the first time since 2018. US and Iran will resume talks this weekend. Will a deal be reached?
The Nasdaq 100 index formed a “Double Bottom” chart pattern, which is commonly viewed as a bullish signal. The index looks set to challenge its all-time highs with upward momentum.
The Dollar plunge was halted by yearly open support for a fifth-week with the USD recovery in focus heading into FOMC. The technical levels that matter on the DXY chart.
USD/CAD has been stuck in a range for a month, but on Friday it started to break out; potential for a squeeze.
Gold prices put in a major breakout last month and, so far, buyers have held the line. But a really big Fed meeting is on the calendar for this week. Can Gold bulls hold?
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