Hello and welcome to the Key To Markets preview of the Week Ahead.
If you have any questions about this information, please contact your KTM Account Manager who will be happy to assist.
5-day performance as of August 5, 2021. 21:30 GMT
In case you missed it….
HOOD goes crazy! Shares of Robinhood had a naturally meme-like debut in public markets. First dropping 10% then rallying as much as 100% on huge options volumes.
Swiss haven flows: The Swiss franc erased its entire 2021 loss versus the euro with EUR/CHF now probing below major support at 1.075.
Yen drop n’ pop: USD/JPY dropped sharply under 109 to its lowest since late May but then reversed 100 pips north within hours (bullish engulfing candle on daily chart).
Crude resistance: The price oil has gone sideways for a month after touching resistance from late 2018 / early 2019 peaks.
RBA hawkish surprise: The Australian central bank pushed ahead with tapering its bond buying program despite economically damaging lockdowns across the country.
BOE talking taper: The MPC judged that ‘conditions have been met’ to talk about tapering. They also laid out how they planned to combine tapering with lifting interest rates.
Ethereum London fork: Ether gained ground in anticipation of the big update to the Ethereum network on Thursday last week.
Crypto regulation: SEC Chairman Gensler says he is ‘technology neutral’ but not neutral on the need for greater cryptocurrency investor protection.
Gaming ‘opium’: Chinese state media branded online gaming as opium and likened it to a drug, sending shares of Tencent and NetEase sharply lower over fears of more state intervention.
Square buys Afterpay: Jack Dorsey’s digital payments company Square agreed to acquire Australian buy now-pay later company Afterpay for $29 billion.
Source: Thrasher Analytics
The 50-day moving average has been the perfect dip-buying spot all year for the S&P 500 BUT the gains after each touch have been getting less each time. The indicator at the bottom of the bar chart shows the performance since touching the 50 DMA.
The biggest of all the major currency pairs just formed a bearish death cross. That’s where the 50 day moving average crosses under the 200 day moving average. The idea behind the signal id that the shorter-term trend will lead the long-term trend lower. Of course, it doesn’t always work and quite often you get a counter-signal rally right afterwards. However, since it is so well known, the signal can be a self-fulfilling prophecy.
The Swiss franc and Japanese yen have been top FX performers for the last month as these currencies are often preferred in times of uncertainty as a haven asset. Some economic data from the US came in a little soft and fears over the Delta variant of covid grew, contributing to the unease. Continued strength in these forex pairs could be a warning of wider risk-off sentiment across markets, which is extra relevant when US stock indices are near record highs.
We’ve asked the question before, and the answer was no. How about now? Well things have changed since then – OPEC+ finally agreed on output cuts beginning this month, US crude inventories have started to rise, while travel warnings in China and warnings of possible lockdown orders coming in some US states have been weighing on the demand outlook. Both WTI crude oil and Brent crude oil have run into multi-year resistance from 2018/19 peaks and gone sideways since in what looks more like a continuation pattern than a reversal so far.
Absent major central banks – the macro focus this week will turn back to inflation. US consumer prices sky-rocketed to 5.5% year-over-year in June. The causes of the higher inflation a year since being lockdown are already well documented – supply chain bottlenecks etc. The question moving forward is how high they rise and how long it lasts. A high CPI number brings forward the timeline for Fed tapering and that should be dollar positive.
By the end of this week, over 90% of the S&P 500 will have reported second quarter results so earnings season is as good as done. It was likely one of the strongest quarters of earnings growth you will ever see given annual comparisons were during a recession and all the stimulus that has helped speed up the recovery. This can be a volatile time in the market because now investors have the bigger picture about how earnings season went and what the reaction to it has been so far.
Here you can find analysis of the major asset classes including the major forex pairs, gold, oil, and the S&P 500. (SEND US REQUESTS IF YOU WANT MORE ANALYSIS)
EUR/USD has made little progress since its break higher last week. Now the best opportunities appear to be on another drop to the lows at 1.175 or selling strength near the June 23-25 peaks.
GBP/USD has pulled back form under 1.40 as we suspected but it found support at 1.387. A further decline towards 1.38 offers a better value buy area.
USD/JPY produced a large bullish engulfing candlestick that provides a bullish signal near term. A drop towards 109 could be a buying opportunity, while 110.5 remains a possible sell at resistance.
AUD/USD is in a rising channel that could be part of a larger bear flag pattern, where the top of the channel offers selling opportunities, as would a break below the lower channel line.
USD/CAD has dropped back under 1.25 after a weak rally from 1.245 support and we’d expect another leg lower to 1.235 but a move over 1.26 would be bullish.
XAU/USD is still in the sideways pattern cited last week, trading in a box between 1790 and 1830. The box is almost too well-defined to expect a clean breakout.
BRENT has turned choppy but a near term bottom near 70 seems possible with selling opportunities at 72.50 then 74.
US500 is trading in a tight box under record highs. As we noted pullbacks to the 50 DMA have worked this year but may not continue to do so.
Thank you very much for reading – and have a great week trading!
The given data provided contains additional information, forecasts, analysis and market reviews published on the Key to Markets website.
Before making any investment decisions, you should know that:
– Key to Markets publishes analysis of any kind solely for information purposes and such analysis should not be construed as investment advice or a solicitation to buy or sell any financial instruments including without limitation CFDs.
– Key to Markets will not be liable for any loss or damage, which may arise, directly or indirectly from use of or reliance on the data provided by Key to Markets.
– Whilst all reasonable efforts are made to ensure that all content sources are reliable and that all information is presented, as far as possible, in a comprehensible, timely, accurate and complete manner, Key to Markets does not guarantee the accuracy or completeness of any information contained in the analysis.
– Past performance is not a guarantee of future results.