Hello and welcome to the Key To Markets preview of the Week Ahead.
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5-day performance as of August 19, 2021. 20:30 GMT
In case you missed it….
One-case lockdown: The kiwi dollar (NZD/USD) dropped after PM Jacinda Ardern put the country into a 3-day national lockdown after one case of COVID-19.
Fed minutes: Most policymakers agreed tapering should come this year. The USD eventually gained but the kneejerk reaction was lower since there was no consensus.
EUR/USD 2021 low: The euro continues to backslide amid US dollar strength brought on by haven flows and Fed tapering speculation.
Oil tough times: Oil prices slumped to their weakest since May with WTI crude futures back to $65 per barrel amid fears economic growth has peaked.
Silver death cross: XAG/USD saw the 50 day moving average cross below the 200-day moving average to form the bearish technical signal.
Palantir gold bugs: Tech titan Peter Theil’s company has been stockpiling gold. The firm bought $50M in gold bars to protect against a ‘Black Swan Event.’
Buffett buys Kroger: Berkshire Hathaway added the US supermarket chain to its holdings for the first time, buying $11 million shares.
BABA record low: Shares of Jack Ma’s Alibaba dropped to a record low in Hong Kong as the company continues to experience fallout from new regulatory pressure in China.
Bye $1 trillion: Beijing’s regulatory crackdown has wiped out $1 billion in value from Chinese stock markets from the peak this year.
Pfizer’s boost: News that the FDA was authorising booster shots of the Pfizer covid-19 vaccine sent the stock soaring to a record high for the first time in 20 years.
The US stock market just saw its fastest doubling since WW2. It only took 354 days for the S&P 500 to double off the lows it made last March. The next shortest time was off the 2009 low, which took 540 days. The straightforward conclusion is that we just lived through one of the strongest 18 months in stock market history – if not the strongest. What’s less clear is what it means for the next 12-18 months. Bulls claim its sign of strength and bears say the market is overstretched and needs to turn lower.
Source: FX Street
The town in the mountains of Wyoming will be the centre of attention this week as central bankers gather for the Jackson Hole Economic Policy Symposium 2021 on Thursday August 26 – Saturday August 28. It will be an in-person event this year after being remote last year but major foreign central bankers like the ECB’s Christine Lagarde and the Bank of England’s Andrew Bailey will stay away. All the focus will be on Fed Chair Jerome Powell and any specifics he will offer on when the Fed will start tapering.
Part of why the US dollar has been gaining (and stock markets dipped) in the last week was fears over slowing US and global growth following soft services PMIs from China as well as weak US retail sales numbers. PMIs from the UK Europe and the US offer the most forward-looking guide on what could be happening now and beyond to Q4.
The Fed’s preferred measure of inflation – the core PCE price index is released Friday. CPI data already released for July showed year-over-year growth steady at 5.4% for a second month, although core prices rose less than expected. The last reading for the core PCE price index was 3.5%, its fastest yearly gain since 1991. Another reading like that will be hard for the Fed to ignore.
The American withdrawal from Afghanistan was handled so badly you’d think had been planned to go bad. As US troops withdrew from Kabul, there were still 11,000 Americans left in the city without a way to get to the airport to evacuate the country. Not to mention countless more Afghanis who had supported the US-backed government and need to leave. The volatile situation, which looks at risk of turning violent any moment is adding to a risk-off tone in financial markets.
The dog days of summer are upon us. The last week of August tends to have the lowest investor participation all year with many professionals on holiday (in the south of France or the Hamptons!). The result is thinner liquidity, which tend to mean more volatile price moves but less durable trends.
Here you can find analysis of the major asset classes including the major forex pairs, gold, oil, and the S&P 500.
EUR/USD dropped back again from 1.18 round number and 20 DMA resistance to make fresh 2021 lows under 1.17. A declining trendline through recent lows offers support before any move to 1.16.
GBP/USD has given back almost all its July rally. The demand zone around 1.36 is critical because a break lower would confirm a long term double top at 1.425.
USD/JPY continues to consolidate inside the horizontal channel we drew last week A bearish engulfing candlestick in the middle of the range is likely noise.
AUD/USD dropped out the horizontal range that we referred to as a likely pause in the long term downtrend. The pair now looks set for a test of the key 0.70 level.
USD/CAD never saw the weakness we thought might materialise. It broke above the supply zone around 1.26, re-tested it and rallied 200 pips above the July peak at 1.28.
XAU/USD recovered all the way back to its 1790 support turned resistance. Short-term momentum remains higher but the broader trend is sideways so the rally could peter out.
BRENT took out major support from the previous two lows at 67.0. The breakdown implies a new leg lower unless the breakdown quickly reverses thanks to buying at the 65.0 level.
US500 snapped back down to the bottom of its former channel at 4370 before bouncing off the lows. Near term weakness could be an opportunity to load up at lower demand areas.
Thank you very much for reading – and have a great week trading!
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