Markets Week Ahead: Dow, EUR/USD, Oil, Fed Symposium, PMIs, Delta
Markets weathered a broad rise in anti-risk sentiment last week. The Dow Jones dropped -1.1% on balance as equity investors seemingly grew more fearful of the delta variant and its contribution to slowing global growth. With the latest US retail sales report underscoring bleak consumer sentiment, hard economic data appeared to emphasize this narrative and likely weighed negatively on risk appetite in similar fashion.
Nasdaq price action notched a mere -0.3% decline for the week, though, as big tech continues to defy gravity and keep market cap weighted indices afloat in spite of worsening breadth. Meanwhile, the S&P 500 Index stumbled -0.6% and the Russell 2000 underperformed given its -2.5% slide. Major stock indices outside of the US faced selling pressure too with the exception of the ASX 200. The DAX 30, FTSE 100, and CAC 40, for example, fell -1.1%, -1.8%, and -3.9% respectively. Chinese tech stocks bled lower due to more government crackdowns on the sector, which sent the Hang Seng Index plummeting -5.8% and into bear market territory.
Major commodities also plunged last week. Crude oil price action crashed -9.2% and copper prices sank -5.8% on the back of mounting concerns over the delta variant of COVID-19 and the material headwind it poses to global GDP growth. This weighed negatively on commodity currencies like the Australian Dollar and Canadian Dollar, but boosted demand for safe-haven currencies like the US Dollar and Japanese Yen. Not to mention, FOMC minutes were released and hinted at the possibility of Fed tapering “in coming months.”
US DOLLAR WEEKLY PERFORMANCE AGAINST CURRENCIES AND GOLD
FX traders propelled USD/CAD 309-pips higher and AUD/USD 231-pips lower correspondingly. NZD/USD price action swooned 139-pips on the week as the unexpected RBNZ decision to leave rates on hold fueled Kiwi weakness. US Dollar strength was felt against other peers like the Euro and Pound Sterling as well. In fact, the broader DXY Index surged 1% to a nine-month high last week as EUR/USD and GBP/USD weakened sharply. Whether or not the US Dollar can sustain its bid likely hinges on the Federal Reserve’s upcoming Jackson Hole Symposium and expected speech from Fed Chair Powell.
Focus for the Fed symposium will likely be placed on language surrounding the timeline for tapering asset purchases and possible delays to it amid growing downside risks to economic outlook that have stemmed from the recent course of the pandemic. The DailyFX Economic Calendar details additional high-impact event risk on the docket next week, including the release of core PCE inflation data. Monthly PMIs from IHS Markit and the latest ECB meeting minutes are slated to cross wires as well. What else is in store for markets in the week ahead?
The US Dollar (via the DXY Index) has moved up to fresh yearly highs as traders have begun to anticipate the Fed’s stimulus withdrawal.
Last Thursday’s dramatic drop in EUR/USD below the critical 1.17 level has opened the way for further steep losses in the pair although some consolidation either side of 1.17 is likely first.
The cryptocurrency market is looking in good shape ahead of the weekend with prices breaking out of their recent consolidation phase and pressing higher.
A quite week for spot gold after a rollercoaster August. Markets await further guidance as Jackson Hole Symposium looms. XAU/USD looks to dollar drivers.
With markets breaking key levels across the board, FinTwit has come alive during the summer months. SPX falls, Aussie tanks and Jackson Hole is eyed.
Emerging market currencies have continued to underperform relative to select G10 counterparts as risk appetite fades. Jackson Hole and US data ahead.
The Fed Economic Symposium in Jackson Hole, Wyoming may influence the near-term outlook for GBP/USD if the central bank provides details of a potential exit strategy.
The Australian Dollar will be under pressure to shrug off a strengthening USD as commodities risks increase, Delta spreads and the Fed moves into view.
Investors turn their focus to the Jackson Hole Symposium as global stocks suffer a setback.
GBP/USD price action plunged nearly 250-pips last week and closed below a key moving average. Will the British Pound Weaken further against the US Dollar or can the cable cling on to critical support?
Gold prices look primed for a turn lower in the near term, despite prices seeing upside lately. XAU/USD’s technical posture offers actionable trade setups.
The Nasdaq 100 index plunged below the 20-Day SMA line and has entered a technical correction. The MACD indicator edged lower, suggesting that downward momentum may be building.
Australian Dollar plummeted more than 3% with a major technical break risking further Aussie losses. The levels that matter on the AUD/USD weekly technical chart.
The US Dollar rose, but prices ended on an uncertain footing last week. Key developments to watch are USD/CAD’s shooting star, EUR/USD’s wedge, AUD/USD’s hammer and GBP/USD’s triangle.
USDCAD made an incredible effort to break from the onerous congestion checking so many other markets to post one of the most convincing trends in FX. Is this a trend that can continue to run or just an taught rubber band due a larger reversal?
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