Markets Week Ahead: Dow, Gold, Oil, US Dollar, Yen, Inflation, Covid
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
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?
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.
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.
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.
USD/MXN finds strong resistance at 20.00 as sellers attempt to gather momentum
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.
BoE announces threshold to unwind balance sheet. EUR/GBP risking a break of YTD lows.
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?
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 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?
Cable’s sideways movement is taking the shape of a short-term wedge; it could help dictate the direction early next week.
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.
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.