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  • The future taper isn't enough to urge the Dollar to a critical bullish break. In turn, $EURUSD has reversed shy of of August's trough and keeps in play an inverse head-and-shoulders pattern with a neckline at 1.19 https://t.co/EgUtX6Pmvy
  • USD/CAD testing short-term moving average support. Traders have cut their long exposure over the week. Get your market update from @nickcawley1 here:https://t.co/iEL5cbFnHs https://t.co/6kLkUFkFvU
  • In the West, that qualifies as a default action. Let's see how it is treated in the world's second largest economy https://t.co/PKWy7SE8Dt
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  • The flash September US PMIs slowed more sharply than expected. That was a general trend across the developed world with most economies continuing to slow from their post-Pandemic peak recovery paces https://t.co/TgkUDlOyAe
  • 🇺🇸 CB Leading Index MoM (AUG) Actual: 0.9% Expected: 0.7% Previous: 0.8% https://www.dailyfx.com/economic-calendar#2021-09-23
  • $SPY showing some strength, support at the 50, res at the 23.6 $SPX $ES https://t.co/hYmriFrTKR
  • 🇺🇸 Markit Manufacturing PMI Flash (SEP) Actual: 60.5 Expected: 61.5 Previous: 61.1 https://www.dailyfx.com/economic-calendar#2021-09-23
  • Heads Up:🇺🇸 CB Leading Index MoM (AUG) due at 14:00 GMT (15min) Expected: 0.7% Previous: 0.9% https://www.dailyfx.com/economic-calendar#2021-09-23
  • Bank of England left policy measures unchanged as expected with the Bank Rate remaining at 0.1% and gilt purchases at GBP 875bln.Get your $GBP market update from @JMcQueenFX here:https://t.co/px04sJbCuq https://t.co/uwJLHi8YGL
Markets Week Ahead: Dow, Gold, Oil, US Dollar, Yen, Inflation, Covid

Markets Week Ahead: Dow, Gold, Oil, US Dollar, Yen, Inflation, Covid

Rich Dvorak, Analyst
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Markets were relatively quiet this past trading week, though there were some bouts of volatility. Major stock indices continued to oscillate higher with the Dow Jones, Nasdaq, and S&P 500 each gaining about 1% on balance and notching new all-time highs. Arguably most eye-catching was the ASX 200, however, given its 6% rally on the week. This came on the heels of some stabilization in recent selling pressure across neighboring Chinese equities. And while the latest RBA decision revealed that the central bank intends to forge ahead with taper plans, confidence in medium-term outlook seemed to spur investor risk appetite.

The Bank of England gave its own monetary policy update that struck a similarly hawkish tone. In fact, the BoE announced a reduction to its policy interest rate threshold for further unwinding its balance sheet. This helped fuel Pound Sterling strength against most FX peers like the Euro, Yen, and US Dollar. GBP price action surrendered gains to its US Dollar counterpart later in the week, though, as markets reacted to solid nonfarm payrolls data. In fact, the broader US Dollar Index ended up recording its biggest weekly gain since the June Fed meeting that was accompanied by hawkish dot plot projections.

US Dollar demand across the board of major currency pairs tracked the shift higher in Treasury yields with the ten-year spiking a noteworthy 17.3 basis points off its weekly low. Sovereign bond yields rebounded more broadly too, which created headwinds for the Japanese Yen. As such, this influx of US Dollar strength and rotation out of bonds benefited USD/JPY in particular. Rising yields also placed considerable downward pressure on precious metals. Gold price action plunged -3% on the week while the price of silver plummeted nearly -5% to print its lowest weekly close since December 2020.

MAJOR CURRENCIES AND GOLD PERFORMANCE AGAINST US DOLLAR

US Dollar Performance Chart versus Gold Euro Yen Pound Aussie Loonie Kiei

As for other major commodities, we saw crude oil price action nosedive -7.7% to record its sharpest weekly decline in nine months. The commodity, which is closely linked to outlook for global GDP growth, faced heavy selling with traders growing increasingly weary over the latest wave of covid and the delta variant spreading across developed economies. Not to mention, the latest round of manufacturing and services PMI data out of the United States, though strong overall, highlights the possibility that economic growth might be peaking.

Correspondingly, how crude oil trades next week has potential to set the tone for broader risk trends. So too does data on covid-related hospitalizations and ICU bed capacity given their posturing as lockdown bellwethers. The DailyFX Economic Calendar outlines additional high-impact event risk facing markets in the week ahead. US inflation data stands out in particular as does the consumer sentiment report. Looking elsewhere, the release of UK GDP data and an interest rate decision from Banxico could garner some attention from traders. What else is in store for markets in the week ahead?

FUNDAMENTAL FORECASTS

Australian Dollar May Wobble on Global Covid Cases, Fedspeak, Iron Ore Price Drop

The Australian Dollar may be vulnerable as a combination of rising Covid cases around the world, Fedspeak about tapering asset purchases and falling iron ore prices weigh on AUD/USD.

Gold Fundamental Forecast: XAU/USD Eyes CPI After NFP Plunge

Gold Prices plunged lower after a hotter-than-expected NFP report bolstered the US Dollar and Fed rate hike bets. The yellow metal turns its focus to CPI inflation figures.

Nasdaq 100 Index Forecast: Eyeing 15,300 With Upward Trajectory Still Intact

The Nasdaq 100 index may be challenging a key resistance level at 15,300 this week amid an upward trend. The MACD indicator edged lower however, suggesting that momentum may be weakening.

Euro Forecast: EUR/USD Likely to Hold its Ground in Week Ahead

The Euro is currently being pulled one way by a growing Eurozone economy and the other by a dovish ECB. The result is likely to be opportunities to trade the range in EUR/USD.

Mexican Peso Weekly Forecast: USD/MXN on the Lookout for Banxico Meeting and Fed Commentary Post NFP

USD/MXN finds strong resistance at 20.00 as sellers attempt to gather momentum

Bitcoin (BTC), Ethereum (ETH) Looking To Push Higher as Support Levels Hold

The crypto market is pushing higher going into the weekend with Bitcoin eyeing a cluster of prior highs that are currently acting as overhead resistance.

British Pound Forecast: BoE Talks End Game, EUR/GBP Drops to Yearly Lows

BoE announces threshold to unwind balance sheet. EUR/GBP risking a break of YTD lows.

TECHNICAL FORECASTS

Crude Oil Outlook: Bull Trend in Jeopardy as Lower Highs Form

Crude oil price action plunged -8% last week with the latest selloff putting the broader bullish trend in jeopardy as lower highs form. Is more pain ahead or will support keep the commodity afloat?

US Dollar Technical Outlook: DXY Breakout or Fake-out?

The US Dollar rebound may be short lived as price continues to hold technical resistance- looking for inflection ahead. The levels that matter on the DXY weekly chart.

Gold Price Forecast: Gold Tanks After NFP, Trendline Tempers the Lows

Gold prices put in another bearish leg after a strong NFP report, and support is holding on by a thread. Might sellers be on the verge of a large push lower in Gold prices?

GBP/USD Technical Forecast: Waiting on Resolution of Sideways Grind

Cable’s sideways movement is taking the shape of a short-term wedge; it could help dictate the direction early next week.

AUD/USD Decline Following US NFP Report Brings July Low in Focus

AUD/USD may test the July low (0.7289) following the US Non-Farm Payrolls (NFP) as the exchange rate gives back the advance from the start of the month.

Canadian Dollar Forecast: The Stars Align for More USD/CAD Strength

The Canadian dollar could remain on the back foot in the near term as strong U.S. jobs data fuels speculation of an earlier-than-expected Fed tapering announcement.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES