Key Events This Week: Hawkish ECB Meeting Could Spur More Euro Gains

Tapering remains a key theme for markets in the coming week filled with these potential market-moving events:

Monday, September 6

Tuesday, September 7

Wednesday, September 8

Thursday, September 9

Friday, September 10

Will the ECB inch towards tapering?

All eyes will be on ECB President Christine Lagarde, a notable dove, and whether she might warm up to the hawkish tones emanating from within the Governing Council. If so, then the euro could climb higher, noting that the shared currency still holds year-to-date declines against most of its G10 peers.

With the worst of the pandemic now behind the Eurozone economy, the ECB may have to start thinking about reining in its emergency asset purchases, or at least start talking about it as many major central banks have started doing, including the Fed. After all, Eurozone inflation hit 3% in August, its highest in a decade and above the ECB’s 2% target.

However, some ECB officials are still preaching caution, while European Union economy commissioner Paolo Gentiloni just this past weekend warned against a premature tightening of policy, which he labelled would be a “big mistake”. He reiterated the thought that inflationary surges of late would be a “temporary phenomenon”, a similar sentiment expressed across the Atlantic as well.

EURUSD to reflect ECB vs. Fed tapering expectations

Besides pitting the doves against the hawks within the ECB, traders and investors are also comparing the ECB against the Fed in their respective journeys towards tapering.

Recall that as recently as 27 August, Fed Chair Jerome Powell had stated that he was open to throwing his weight behind starting to rein in the US central bank’s own purchases before the end of this year. But those comments came before last Friday’s shockingly low nonfarm payrolls print (235k vs. expected 733k).

The hiring downshift in the US labour market could complicate the Fed’s tapering timeline.

Euro traders will similarly be monitoring the data out of Germany, the EU’s largest economy, over the coming days to see if the ECB might also be given reasons to hold up on the thought of tapering. Note that recent confidence readings for German businesses and consumers came in lower than expected due to disruptions from the Delta variant.

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Still, if the ECB is seen to be moving closer to normalizing its policy settings, at a time when the Fed is forced to pause, that could help EURUSD break sustainably above the psychological 1.19 mark, with bulls then potentially eyeing next the late-June high of around 1.1975 as the next resistance level of interest.

If the euro surges, that should also prompt the benchmark dollar index (DXY) to unwind more of its recent gains, given that the euro accounts for 57.6% of the DXY.

However, if the mid-week speeches from Fed officials sound defiantly hawkish even in the face of last month’s US hiring slump, that should buttress the greenback.

Hence, pay attention to euro this week, which is bound to reflect market expectations on the ECB’s policy outlook.

A surprise hawkish pivot could prompt this equally-weighted euro-index to break to the upside, having been trading sideways since mid-April.

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For a look at all of today’s economic events, check out our economic calendar.

Written by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Trade of The Week: Oil Shaky Ahead Of OPEC+ Meeting

Despite bulls dominating the scene last week, both Brent and WTI Crude have posted their first monthly loss since March.

The terrible combination of Delta worries and China growth concerns may spell trouble for oil as September kicks off while widespread flooding from Hurricane Ida could keep bears in the vicinity. With these negative themes stacked against oil and clouding the demand outlook, all eyes will be on the highly anticipated OPEC+ meeting on Wednesday afternoon.

Will OPEC+ Stick to Planned Output Hike?

Markets widely expect the cartel to maintain its current plan to increase production by 400,000 barrels per day despite pressure from the United States to pump more.

The question is whether expectations match or differ from reality?

Given the ongoing developments revolving around Covid-19, the cartel may reiterate that the variants pose a particular risk and may tweak production hikes accordingly. This could be in the form of reducing or halting the 400,000 bpd increases if the demand outlook starts to look unfavourable.

On the flip side, the positive vaccine-related developments across the globe have boosted optimism over a pickup in fuel demand. Looking beyond the risk associated with the Delta menace, other factors could fuel the demand recovery – allowing OPEC+ to stick with its production revival plan until the end of December 2022.

Demand outlook set to improve?

It was only a few weeks ago that the International Energy Agency (IEA) cut its forecast for global oil demand for the rest of 2021 due to the Delta variant. Interestingly, OPEC stuck to its prediction of a strong recovery in world oil demand this year and further growth next year.

OPEC could be on the money, especially when factoring in the stalled prospects of renewed Iranian exports, ongoing government stimulus, and improvement in gasoline demand as road and airline travel rebound.

It does not end here. According to a Bloomberg report, demand seems to be improving in the world’s second-largest oil consumer with traffic on China’s busy streets recovering as lockdown restrictions ease.

Let’s not forget about the US jobs report

The NFP report is likely to be the biggest market-moving event of the week, especially after Federal Reserve Chair Jerome Powel offered no concrete taper signals at Jackson Hole last Friday.

Investors will closely scrutinize the jobs report for fresh clues to when the Federal Reserve will begin asset tapering. A strong jobs report may boost sentiment towards the US economy and fuel taper bets consequently propelling the dollar higher. As the value of the dollar rises, the prices of both Brent and WTI crude fall. Alternatively, a disappointing jobs report could cool taper talk bets, essentially weakening the dollar – pushing oil prices higher.

Brent & Crude remain in bearish channel

Taking a look at the technical picture, Brent crude remains in a bearish channel on the daily charts. Despite the sharp rebound witnessed last week, the commodity is still on route to concluding August roughly 4.6% lower.

The recent candlesticks on the daily charts suggest that bulls could be exhausted with sustained weakness below $73 triggering a decline back towards $70.30 – a level where the 100-day Simple Moving Average resides. A break below this point could see Brent sink towards $67.46, $67 and $64.60, respectively. Alternatively, a solid daily close above $73 may pave a path towards $75 and potentially higher.

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We see a similar story on WTI Crude with prices down over 6.57% in August and trading within a bearish channel on the daily charts. Resistance can be found at around $69.50 with the 50-day Simple Moving Average just above this level. A strong breakout and daily close beyond $69.50 could encourage a move towards $72 and $73.50, respectively. Should $69.50 prove to be reliable resistance, a decline towards $67, $65, and $61.50 could be on the cards.

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Written on 01/09/2021 by Lukman Otunuga, Senior Research Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Will the Powell Rally Rollover into September?

China’s factory activity expanded at a slower pace in August, raising concerns over the country’s economic growth. King dollar extended losses as US Treasury yields remained subdued while gold flirted near key resistance levels. In Europe, stocks have opened in the green as investors evaluate the latest inflation print from the continent released this morning before the September ECB meeting.

August has certainly been another positive month for global equity markets with the dovish comments from Federal Reserve Jerome Powell last Friday adding icing to the cake. Equity bulls are loving Powell’s messaging, especially after he stressed that Fed tapering and rate hikes are mutually exclusive events. With the S&P 500 on track for its seventh straight monthly advance and hitting its 12th all-time high this month, the path of least resistance certainly points north.

As we head into the new trading month of September, the key question is how much further can stock markets rally before bears enter the scene? Risks in the form of the Delta menace, concerns around China’s slowing economic growth and regulatory crackdown among other themes could impact upside gains. In the meantime, the overall market mood remains mixed with all eyes on the US jobs report on Friday.

Dollar humbled by Powell

The dollar is struggling to nurse the wounds inflicted by Jerome Powell’s dovish speech last Friday. It has weakened against every single G10 currency this morning with the Dollar Index dipping below 92.50.

Investors who were expecting the Fed Chair to make an official taper announcement or even provide fresh insight into the central bank’s plan on tapering were left empty-handed. Powell offered no concrete taper signals and made it clear that the Fed was in no rush to raise interest rates, despite the recent spike in inflation. According to Powell, the “substantial further progress” test has been met for inflation while there has also been “clear progress towards maximum employment”.

Given how he highlighted how there was “much ground to cover to reach maximum employment”, this makes Friday’s jobs report all the more important. Before this major risk event, investors will be offered appetisers in the form of the US August consumer confidence report and weekly jobless claims.

Currency spotlight – NZDUSD

The New Zealand dollar entered Tuesday’s session with a spring in its step, appreciating against every single G10 currency. Buying sentiment towards the currency remains supported by optimism over the lockdowns successfully reducing new Covid-19 infections. This optimism seems to have overshadowed the fact the New Zealand business sentiment fell in August, even before the lockdowns were enforced across the country. Looking at the technical picture, the NZDUSD has the potential to push higher if prices can conquer the 0.7080 – 0.7110 zone, where the 100 and 200-day Simple Moving Averages reside.

Commodity spotlight – Gold

After experiencing a sharp appreciation last Friday, gold continues to hover around key resistance levels. The precious metal may remain on standby ahead of the heavily anticipated US jobs report on Friday. In the meantime, gold is likely to be influenced by the dollar, treasury yields and risk sentiment. Should bulls fail to secure a daily close above $1818, prices may drift lower back towards $1800 in the near term.

Written on 31/08/2021 by Lukman Otunuga, Senior Research Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Key Events This Week: Cooling US Jobs Market May Give USD Bears Room to Breathe

Here are the events that could move global financial markets this week:

Monday, August 30

  • JPY: Japan July retail sales
  • EUR: Eurozone August economic/consumer confidence

Tuesday, August 31

  • JPY: Japan July industrial production and unemployment
  • CNH: China August manufacturing and composite PMIs
  • NZD: ANZ August business confidence
  • EUR: Eurozone August CPI
  • CAD: Canada GDP (June, 2Q)
  • USD: US August consumer confidence

Wednesday, September 1

  • CNH: China August Caixin manufacturing PMI
  • Japan, Eurozone, UK, US manufacturing August PMIs
  • EUR: Eurozone unemployment
  • Brent Oil: OPEC+ decision on production
  • US Crude: EIA crude oil inventory report

Thursday, September 2

  • EUR: Eurozone July PPI
  • USD: US weekly jobless claims

Friday, September 3

  • CNH: China Caixin August services and composite PMIs
  • JPY: Japan August services and composite PMIs
  • GBP: UK August services and composite PMIs
  • EUR: Eurozone July retail sales, August services and composite PMIs
  • USD: August US nonfarm payrolls, services and composite PMIs, ISM services index

Tapering now less-feared?

Despite saying he is open to pulling back on the central bank’s asset purchases this year, Powell sought to divorce the idea of tapering as an immediate precursor to a US interest rate hike.

In other words, although the Fed’s tapering may indeed start this year, the rate hike may not follow soon after the tapering ends.

This is because the Fed Chair once again said he wants to see sustained above-target inflation and a broad-based recovery in the jobs market. At Jackson Hole, he sent out a reminder about the 6 million jobs that are still lost since the pandemic, as well as reiterating his belief that the inflation surges may be “transitory”.

That message was heeded by the markets. After Powell’s speech, markets lowered their expectations for a November 2022 US rate hike from 53% to 40.5%. However, they still are forecasting a greater-than-even chance (76.5%) of a pre-Christmas rate hike in December 2022.

And this is where Friday’s jobs report comes in.

Markets are currently expected a figure of 750,000 jobs added last month, which is lower than the June and July figures that were above 900k.

USD bears could breathe a sigh of relief on signs of moderating jobs growth and a stagnant unemployment rate, as those should mean a longer runway before the US interest rate hike. And given the persistent threat of the Delta variant’s spread through the world’s largest economy, that could delay workers’ return to jobs. If this Friday’s jobs data indeed prove to be subdued, that might lower the chances of a sooner-than-later Fed rate hike, while preventing the greenback from surging higher in the interim.

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Oil markets await OPEC+ decision

Recall that back in July, OPEC+ agreed to raise output by 400k barrels per day (bpd) starting in August, accompanied by subsequent 400k bpd hikes each ensuing month.

However, since that July decision, the Delta variant’s resurgence in major economies has forced lockdowns once more in countries such as China, Australia, and New Zealand. Hence, it remains to be seen how OPEC+ takes into account these demand-side risks, while ensuring members can claim enough market share to keep them satisfied.

Although oil markets are still expected to tighten through year-end, one doesn’t need to be reminded about how swiftly the Delta variant can alter that outlook.

Should OPEC+ press ahead with its intended supply hikes, that could signal confidence that global demand is robust enough to absorb that incoming supply. Still, if traders and investors don’t share that same optimism, should OPEC+ leave its supply hike plans unchanged, that could prompt Brent oil to unwind recent gains and falter back into the sub-$70/bbl region once more.

Oil markets will also be closely monitoring the impact of Hurricane Ida on US oil supply infrastructure. Signs of tightening supplies, depending on the duration, could spur oil prices higher despite Brent being resisted at its 50-day simple moving average at the time of writing.

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For a look at all of today’s economic events, check out our economic calendar.

Written by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Key Events This Week: Will Jackson Hole Deliver on The Hype?

Besides the comments by Fed officials at the symposium, here’s a list of notable market-related events for the week:

Monday, August 23

EUR: Eurozone August manufacturing, services and composite PMIs
GBP: UK August manufacturing, services and composite PMIs
USD: US August manufacturing, services and composite PMIs

Tuesday, August 24

EUR: Germany 2Q GDP (final)
USD: US July new home sales

Wednesday, August 25

EUR: Germany August IFO business climate
EIA crude oil inventory report

Thursday, August 26

USD: US weekly jobless claims and 2Q GDP (second estimate)

Friday, August 27

CNH: China July industrial profits
USD: US July personal income and spending
USD: US July PCE price index
USD: US August consumer sentiment (final)
USD: Fed Chair Jerome Powell delivers speech virtually at Jackson Hole Symposium

Market participants will be clinging on to every word uttered by Fed Chair Jerome Powell, and those of the other Fed officials who might be commenting as part of the yet-to-be-unveiled full agenda (to be released on 26 August).

US policymakers are seemingly on the cusp of easing up on their asset purchases that have shored up global financial markets since the pandemic. The FOMC July meeting minutes that was just released last week suggested that the tapering could even begin before 2021 is over.

Experienced market observers know that the symposium, where policymakers traditionally engage in open discussion, could produce the slightest hint about the Fed’s next policy move and such hints, if they happen, could jolt multiple asset classes.

Dollar poised to climb another leg up on more tapering talk

Some market participants think this will be a non-event, given how much various Fed officials have already telegraphed their tapering intentions over recent months. Others however are bracing for heightened volatility on potential cues out of Fed officials, judging by positioning in the options markets for various asset classes.

Should Fed officials on Friday point to an even more bullish case for tapering, that might push the US dollar even higher while prompting the likes of gold and US stocks to unwind more of their recent gains.

However, should Fed Chair Jerome Powell, in his virtual speech on Friday, pour cold water on the thought of announcing the Fed’s tapering plans anytime soon, that could prompt the greenback to unwind recent gains while potentially evoking a cheer out of gold and stock market bulls.

Friday data could overshadow Powell’s speech

Investors and traders worldwide will also be assessing whether the views espoused by Powell, a notable dove, would be in line with the latest US economic data. Before the Fed chair even utters a single word on Friday, investors will be poring over the trove of figures on US personal income and spending, as well as the Fed’s preferred inflation gauge, the PCE price index.

If the data suggests that the US economic recovery is roaring ahead and that the Fed has to taper sooner rather than later, market participants might pay less heed to Powell’s potentially dovish coos and instead race ahead of the world’s most influential central bank that markets think might be at risk of falling behind the inflation curve.

USD Index forms a golden cross

Note that the equally-weighted US dollar index is now pulling away from technically overbought territory, as it moderates back to within its Bollinger band and its 14-day relative strength index returns below the 70 line which typically denotes overbought conditions. Yet, it has the potential to set a new 9-month high if dollar bulls are emboldened by heightened prospects of a Fed’s tapering announcement that’s looming closer.

And having formed a golden cross (where its 50-day simple moving average crosses above its 200-day counterpart), such a technical event also typically paves the way for more upside.

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For a look at all of today’s economic events, check out our economic calendar.

Written by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Sea of Red as Dollar Hits New Highs

US equities extended losses for a second day with the major indices down 1%. In turn, Wall Street’s fear gauge, the VIX, has spiked higher above its 200-day moving average and is trading beyond 21. This tells us how worried institutional investors are in the current bull market.

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Risk sentiment dour

There aren’t many buyers or bulls out there this morning. While equities are being shunned, commodities are being sold with oil down for a sixth consecutive session and at three-month lows. Gold is pausing after its stupendous climb off the ropes after last week’s flash crash while growth bellwether copper has fallen to a two-month trough.

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The broadest measure of Asian shares is currently trading at its lowest level since December with the Hang Seng leading the way down. European markets are catching up with those across the pond while US futures are firmly in the red.

USD on the rise after Fed taper steps

We wrote yesterday about how the FOMC Minutes would offer clues on when the bank might start tapering its bond purchases.

Well, officials confirmed that inflation was now comfortably above their average 2% target and one or two more strong job reports will now be required for “substantial progress” to be made in the economy.

The Fed is still split on timing, but most members judged tapering could start this year. The minutes do not seem to set up a taper as early as next month. But the timetable is well within the consensus on Wall Street. This means with the bumper July payrolls already working their magic (and notably after these minutes), a solid August report could see a taper pathway announced at the September meeting.

Markets reacted quite modestly to the minutes initially. But this morning, dollar bulls are emboldened and have pushed to new long-term highs. The DXY breached the March top at 93.43 so a strong weekly close is probably needed to really rubber stamp the next leg higher for the greenback. Bulls will aim for last year’s November peak at 94.28, while long-term buyers may have the September high at 94.74. in their sights.

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Oil sinking on the broader market selloff

Commodities and oil have come under more pressure this morning with Brent off nearly 1% today and below $67. The spread of the Delta variant is clouding the demand picture. Output data from China also showed the least crude is being processed by Chinese refiners in 14 months. No doubt OPEC+ will be keeping its eye on prices and the demand side. The group recently left its forecasts unchanged and any rollback in the easing of production cuts could spark ire from the US.

Regarding technicals, May lows look like next major support at $64.60 with the 200-day moving average just below $64.

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Written on 19/08/2021 by Lukman Otunuga, Senior Research Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Dollar Picks Up Bullish Momentum, FOMC Minutes on The Radar

The increasingly fragile market sentiment has steadied but the persistence of the virus continues to weigh on the global growth outlook. In this context, king dollar is asserting its reign once again and is outperforming most major currencies today.

Investors are trying to balance up the reopening of economies as vaccination rates go up, but are also seeing the spreading delta variant being reflected in slowing economic data which has been surprising to the downside in recent weeks. The impact of the Chinese regulatory crackdown and geopolitical instability in the Middle East is also helping boost safe haven currencies and hurt high-yielding commodity currencies.

We get the July FOMC Minutes later today which should offer clues on when the bank might start tapering its bond purchases.

With inflation comfortably above the average 2% target, one or two more strong job reports are required for “substantial progress” made in the economy.

Of course, we have had much Fed chatter already from officials so choppy trading should be expected this evening. A hawkish tilt towards taper by the end of the year may embolden dollar bulls and confirm current market timing.

RBNZ hawkish hold on lockdown

The RBNZ meeting already had a spotlight on it after the Ardern government were forced into a three-day national lockdown after finding a new Covid case yesterday. There have been many surprise reactions to this abrupt action, but it’s worthwhile understanding that the country operates a “zero Covid” strategy.

This means politicians go hard and early instead of long and light, and over the course of the pandemic, this has been proven correct, for New Zealand at least. The economic impact is far less and a large proportion of spending ends up being delayed rather than lost altogether. Longer-term economic scarring is less with the cost of early action paling in comparison toa slow response. Time will tell of course on how long the lockdown needs to be with a handful of other cases now detected.

The RBNZ therefore kept rates on hold, but policymakers were confident in signalling this was merely a delay to the rate hike cycle. Projections by the bank were also more hawkish than expected with more than one 25bp hike by year end, followed by four more by the end of 2022.

While initially spiking to a new low at 0.6868, NZD retraced a fair chunk of this move. We are currently trading on the 20 July low at 0.6880 so a weak close below here does open up fresh downside towards 0.6797.

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Written on 18/08/2021 by Lukman Otunuga, Senior Research Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Virus Caution Dents Risk Appetite

European stocks have opened slightly lower this morning amid the Delta fears and geopolitical tensions in Afghanistan. Despite closing at record highs overnight, US stocks could come under pressure today if the risk-off mood accelerates the flight to safety.

All in all, the next few hours promise to be eventful for financial markets as investors juggle key economic data from major economies, the continued rise of the Delta variant and a speech by Federal Reserve Chairman Jerome Powell.

US Retail Sales & Powell in focus

The dollar continues to nurse the deep wounds inflicted by last Friday’s dismal consumer sentiment report. It has kicked off Tuesday on a firm note, appreciating against all G10 currencies this morning ahead of the retail sales data and Jerome Powell’s speech.

US retail sales for July are expected to drop -0.3% month-over-month compared to the 0.6% gain witnessed in June. Given how consumer spending accounts for a handsome chunk of the US economy, the data is significant and could influence Fed taper expectations. In regards to Powell’s speech, any fresh insight offered on the Fed’s future course of action or hints about tapering could result in dollar volatility. Nevertheless, investors will continue to look towards the Jackson Hole symposium in late August for clues to the central bank’s next move.

Currency spotlight – GBPUSD

The British Pound has woken up on the wrong side of the bed this morning despite the better-than-expected UK jobs data.

According to the Office of National Statistics (ONS), the unemployment rate in the UK fell to 4.7% in June beating market expectations of 4.8%. The number of people in work rose by 95,000 in the three months to June, stronger than the 75,000 market forecast. Average wages also beat expectations, rising 7.4% compared with the 6.6% in the previous month while wages including bonuses hit 8.8%, above the 8.6% estimate and higher than the upward revised figure of 7.4% in May.

Despite this strong report, the GBPUSD is under pressure on the daily charts with prices approaching the 200-day Simple Moving Average.

As the broader risk-off mood encourages investors to seek safety in destinations like the dollar, this could drag GBPUSD lower. A daily close below 1.3750 could signal a decline towards 1.3640 and lower.

Commodity spotlight – Gold

Gold staged a stunning rebound last week as the combination of dollar weakness and Delta variant fears injected gold bugs with a renewed sense of confidence. The precious metal has entered the week with a spring in its step amid the risk-off mood with prices trading back above $1792 as of writing. A strong daily close above this point could open the doors towards $1800 and $1830. Alternatively, should $1792 prove to be reliable resistance, a decline back towards $1760 could be on the cards.

Written on 17/08/2021 by Lukman Otunuga, Senior Research Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Week In Review: More Record Highs, Gold Rebounds, US Inflation Steadies

Last Friday’s blockbuster US nonfarm report certainly lingered in the mind of many investors as the week commenced with the dollar and treasury yields pushing higher. Just looking at the economic calendar, one could see that this would be another eventful week packed with speeches from US central bank officials and key economic data from major economies.

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Commodities stole the spotlight at the start of the week with oil extending losses as the Delta Covid-19 variant spread across Asia. In regards to gold, the precious tumbled to levels not seen in five months, cutting through multiple support levels like a hot knife through butter.

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A sense of caution enveloped markets on Tuesday as persistent concerns over the spread of the Delta variant drained risk sentiment.

On the data front, the German ZEW Economic Sentiment dropped more than expected to 40.4 in August, down from 63.3 previous. Interestingly, the Euro weakened against almost every single G10 currency on Tuesday excluding the Swiss franc and Japanese Yen.

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Our trade of the week was Brent oil which has shed over 7% this month. We discussed the possibility of increased oil price volatility amid Delta fears and other key risk events. On Thursday, OPEC’s monthly report revealed that the cartel stuck to its prediction of a strong recovery in global oil demand in 2021 despite concerns over the Delta variant of Covid-19. However, the International Energy Agency (IEA) adopted a gloomy outlook, warning that demand growth would slow sharply due to the spread of the variants. Brent remains under pressure on the daily charts, ending the week below $70.

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Mid-week it was all about the US inflation report which seemingly peaked in July. Consumer prices printed at 5.4% which was the same reading as the prior month. The report cooled Fed taper bets, sending the dollar lower while propelling the S&P 500 and Dow Jones to record highs.

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In fact, the precious metal concluded the week almost 1% higher despite the gut-wrenching selloff on Monday.

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In other news, the UK economy grew by 4.8% during the second quarter of 2021. The growth rate was in line with market expectations but slightly below the Bank of England’s 5% forecast. Sterling depreciated against every single G10 currency this week excluding the Swiss franc.

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Stocks across the globe hit record highs on Friday as equity bulls drew more strength from the US inflation data and robust corporate earnings.

King dollar found itself under pressure with the DXY tumbling towards 92.50 after consumer sentiment in the US plunged to its lowest since 2011.

This unexpected reading is likely to complicate things for the Federal Reserve as the taper debate rages on.

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Written on 14/08/2021 by Lukman Otunuga, Senior Research Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Market Calm Post-US CPI

The dollar is consolidating yesterday’s selloff while stock markets and bond markets have breathed a collective sigh of relief that inflation didn’t accelerate even further. Value-sensitive sectors like materials, industrials and financials outperformed on the day pushing the Dow and S&P500 to fresh record high closes. European bourses had hit multi-year highs yesterday but have opened up mixed so far.

stox50daily_7

Oil rebounds

It was a volatile day in oil markets with prices moving down towards $69 and then up above $71 on various headlines. The US administration heaped pressure on OPEC and its allies to boost supply to tackle rising gasoline prices. The Biden Presidency wants to see Americans “have access to affordable and reliable energy…at the pump”. Of course interestingly, concerns over rising commodity prices are also being voiced by the Chinese authorities.

The current increase by OPEC+ agreed recently of 400k barrels per day is seemingly not enough. But given the uncertainty around the spread of the Delta variant, it seems unlikely that the Saudis and the oil-producing group will want to increase production just yet. The contradictory nature of Biden policies is also being questioned as it urges greener energy while asking foreign producers to open the taps to lower pump prices.

brentdaily_68

UK Q2 GDP in line

Hot off the press, second-quarter UK GDP has just been released in line with the consensus at 4.8% q/q. Growth is expected to slow again this quarter due to the Delta variant putting the brakes on the economy. But economists hope that the UK should still return to pre-pandemic levels by the end of this year.

With the hawkish noises from the Bank of England last week contrasting heavily with the continued dovish stance of the ECB, EUR/GBP has pushed to new 18-month lows. Prices are now consolidating just below the 0.8471 level and bears expect to see more downside, especially as the ECB engineers a weaker currency. A soft weekly close may start to challenge the 2019 and 2020 lows at 0.8281 and below.

eurgbpdaily_120

Written by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Markets Remain Cautious Amid Delta Fears

The negative developments revolving around Covid-19 have certainly left investors on edge with caution likely to remain the name of the game over the next few days.

Nevertheless, the week ahead promises to be eventful and potentially volatile thanks to key economic data including the US CPI report and speeches from numerous Fed members.

Speaking of central bank officials, Federal Reserve Bank of Atlanta President Raphael Bostic said on Monday that the Fed could start tapering in the final quarter of 2021 amid strong job gains. Although Richmond Fed Thomas Barkin said that the economy has made progress, he believed that there was still some room for improvement in the labor market. Both Bostic and Barkin are voters this year on the Federal Open Market Committee (FOMC).

Dollar King of the castle?

The dollar remained firm on Tuesday morning after last Friday’s blockbuster US jobs report boosted expectations over the Federal Reserve tapering sooner than expected. Rising bond yields and hawkish comments from Atlanta Fed’s Bostic have supported the upside, with the Dollar Index (DXY) trading around 93.00 as of writing.

The next few days could see increased volatility thanks to the numerous speeches from Federal Reserve officials and the widely anticipated US inflation report.

Headline CPI is expected to print at 5.3% year-over-year while core CPI is forecast to come in at 4.3%. The monthly reading is expected to drop to 0.5% in July from the 0.9% seen in June and core CPI is projected to print 0.4%, down from the 0.9% in the previous month. Further signs of rising inflationary pressures could instil dollar bulls with a renewed sense of confidence as expectations intensify over the Federal Reserve shifting its policy outlook. On the flip side, if inflation cools this may reduce some pressure on the Fed to act, potentially sending the dollar lower.

There are also a couple of Fed members scheduled to speak this week which could spark more dollar volatility. Cleveland Fed President Loretta Mester will steal the show today while Atlanta Fed President Bostic and Kansas City Fed President Esther George are due to speak on Wednesday.

Taking a look at the technical picture, the Dollar Index is turning bullish on the daily charts with the first key level of interest at 93.19. A breakout above this point may open the doors to 93.44 – its highest level in 2021.

Commodity spotlight – Gold

What a terrible way to kick off the trading week!

Gold collapsed like a house of cards yesterday, cutting through multiple support levels like a hot knife through butter thanks to last Friday’s strong US jobs data.

As expectations grow over the Federal Reserve tightening monetary policy sooner than anticipated, investors offloaded the precious metal, sending prices to levels not seen in five months.

Although the precious metal has edged higher today as bulls desperately struggle to nurse the deep wounds inflicted from the brutal selloff, gold remains heavily bearish on the daily charts. It will be interesting to see how the pending US inflation data influences prices. Looking at the technical picture, sustained weakness below $1760 may result in a decline back towards $1700 and below. Alternatively, a breakout above $1760 could trigger a move towards $1792 and $1800.

Written on 10/08/2021 by Lukman Otunuga, Senior Research Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Trade of The Week: Can GBP/USD Breach 1.40 Again?

At the time of writing, the cable is now relying on its 50-day simple moving average (SMA) as a key support level, as traders await some major events later this week.

gbpusddaily_825

To be clear, the Pound has fared remarkably well of late, erasing much of its losses against the greenback since the hawkish surprise at the June FOMC meeting which sent the US dollar soaring.

In fact, the Pound is the best performing G10 currency against the US Dollar so far this year.

Also of note, the pound has strengthened against all of its G10 peers on a year-to-date basis.

3_aug_wcrs_2

The question facing GBPUSD traders is whether cable can stay on its perch for the immediate term?

More clues to that question could potentially be found in two major events this week:

  • Thursday, 5 August: BOE policy meeting
  • Friday, 6 August: US nonfarm payrolls (NFP)

Let’s start by casting our attentions to the other side of the pond.

How would the US nonfarm payrolls impact GBPUSD?

Markets are forecasting that 875,000 jobs were added in the US last month. While higher than June’s reading of 850,000, a mere 25k increase might not be the kind of “substantial further progress” that the Fed demands before it can start to taper (ease up on its bond purchases that have supported financial markets since the pandemic).

However, should the NFP surprise to the upside (think closer to the one million mark), that could reinvigorate dollar bulls and send the buck higher.

This is because a better-than-expected jobs report could mean that the Fed’s tapering may have to happen sooner rather than later, which then brings forward the eventual interest rate hike. Higher US rates relative to its G10 peers point to more USD gains.

A robust NFP print this Friday could buttress the “tapering sooner” narrative, which could then come at the expense of the pound with GBPUSD being dragged below its 50-day and 100-day SMAs. On the other hand, should the latest jobs data disappoint (think sub-800k), that should keep cable above its 50-SMA.

How might the BOE influence the pound this week?

The Bank of England is widely expected to leave its policy settings untouched this week, with policymakers having enough reasons to mute their hawkish tendencies for the time being.

This is because, despite signs of inflation building up (the UK’s headline CPI for June was at its highest since 2018 and well above the BOE’s 2% target), policymakers are set to remain cognizant of the downside risks to the UK economy, including:

about 1.9 million people who are still on furlough, with the scheme set to be withdrawn next month. This casts some dark clouds over the UK employment outlook in the coming months.

the delta variant still poses some uncertainties for the UK economic recovery, even though the IMF recently forecasted that the UK is set to post the fastest recovery among G7 economies this year (joint top with the US).

But we could still be in for a BOE shocker if it decides this week to adjust the threshold for winding down the quantitative easing measures.

For context, quantitative easing (QE) is, to quote the BOE, when the central bank “buys bonds to lower interest rates on savings and loans” and support the economy. Having built up a debt pile of 895 billion pounds and with inflation picking up, market participants are pondering what conditions might trigger the BOE’s unwinding of its stimulus.

As things stand, the BOE says that it won’t reduce its stock of government debt until the bank rate hits 1.5% (it’s currently at 0.1%).

“If that threshold is lowered this week, say to 1%, that could send gilt yields moving higher, bring Sterling along with it.”

Expect more pound volatility ahead

On the balance of these two major events that could impact GBPUSD this week (BOE decision and US NFP), the latter appears to harbour more potential to sway cable, especially considering that the whisper number for Friday’s job report currently stands at 920k, which is higher than the median estimate in Bloomberg’s survey (875k).

“Still, both events could surprise either way. And with such tentative outcomes looming large, markets have over the past month priced in higher implied volatility for G10 currencies versus the pound over a one-week period.”

As a potential scenario, if the BOE remains decidedly dovish while a stellar NFP print forces the Fed to become more hawkish, such a combo should prompt GBPUSD to unwind recent gains.

Alternatively, if the BOE lowers its threshold for paring down its debt pile, and the US jobs report disappoints, that could push GBPUSD back above the psychologically-important 1.40 mark.

Written by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Key Events This Week: US Jobs Report Front and Centre

Monday, August 2

Tuesday, August 3

Wednesday, August 4

Thursday, August 5

Friday, August 6

For the US nonfarm payrolls print that’s due on 6 August, markets are forecasting that 900,000 jobs were added last month. Anything higher than 850,000 would be the highest NFP print since August 2020 and would score a third consecutive month of faster jobs growth.

A larger-than-expected July jobs increase (think closer to one million jobs added) could translate into more upside for the equally-weighted US dollar index, and put it on a path back towards its year-to-date high.

Otherwise, a lacklustre print this Friday could ensure that this dollar index remains below its 200-day simple moving average for a while longer and pare more of its gains since the hawkish surprise at the June FOMC meeting.

Markets still guided by Fed’s tapering predictions

Arguably, the biggest theme in play across global financial markets right now is the predictions over the Fed’s tapering.

Considering the robust US economic recovery, the US central bank is expected to ease up on its bond purchases that have supported financial markets since the pandemic. Exactly when the Fed will embark on such a process, at what pace (how quickly it will unwind its bond purchases), and under what economic conditions – all those remain vague at this point in time.

What we do know is that, following last week’s July FOMC meeting, the Fed reiterated that it wants to see “substantial further progress” in the ongoing US economic recovery before it will taper. However, it remains unknown exactly what constitutes “substantial” enough for the Fed.

Conflicting tapering cues within FOMC and markets

This past Friday (30 July), Fed Governor Lael Brainard reminded global investors that the US jobs market is still a long way off from pre-pandemic levels. She highlighted the “shortfall of 6.8 million jobs” that needs to be restored before the Fed tapers.

On the other hand, there was the famed hawk, Federal Reserve Bank of St. Louis President James Bullard, who also on Friday expressed his desire for the tapering to begin this fall and wrapped up by March 2022. Most economists expect the tapering to only commence next year.

Amidst all these conflicting views, it remains to be seen how the forthcoming economic data guides, not just the consensus within the FOMC, but also investors’ predictions for when the tapering will actually commence.

More gains for stocks likely until tapering draws closer

As long as the Fed’s ultra-accommodative stance remains intact, that should allow for more upside for US equities in the interim. The S&P 500 is striving to carve out a sustainable presence above the psychologically-important 4400 mark, a feat made more achievable considering that bond yields have been relatively subdued of late.

However, a stellar US jobs report this Friday would shorten the runway for equity bulls, as an NFP print that far exceeds the media forecast (900k) would ramp up markets expectations that the Fed would have to ditch its dovish stance sooner rather than later.

Written by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Week In Review: Market Caution, China Crackdown, Dovish Fed

On Tuesday, market sentiment remained shaky as investors kept a close eye on China following the multiple crackdowns. It was a big day for big tech as Apple, Microsoft and Alphabet released their quarterly earnings. Earnings and revenues from the tech titans crushed market expectations.

In the currency space, we set our sights on the dollar ahead of the Federal Reserve policy meeting. There were other key data points such as second-quarter GDP and core PCE inflation that were likely to influence the currency’s performance.

Our trade of the week for the Social media index which tracks the overall performance of social media companies via Twitter, Facebook, Snap, and Alphabet all in equal weights.

It was all about the Federal Reserve policy meeting on Wednesday. As widely expected, the central bank left monetary policy unchanged and maintained a dovish stance. Anyone who was expecting a hawkish surprise was left empty-handed after Chair Powell stated that rate increases were “a ways away”. A cautious Fed dealt a heavy blow to the dollar while injecting equity bulls with a renewed sense of confidence.

In fact, stocks across the continent were painted green on Thursday thanks to the Fed’s dovish message overnight. The US Senate voting to move ahead on the $1.2 trillion infrastructure plan and robust earnings in Europe also supported the risk-on mood.

One of the major talking points near the end of the week for the US GDP report for Q2. The largest economy in the world grew at a 6.5% annualised rate in the second quarter of 2021. Although this was below the 8.5% expectations, it was still the biggest increase in growth seen since the third quarter of 2020.

Caution was the name of the game on Friday as China’s regulatory crackdown continued to spook investors. U.S stocks fell, registering losses for the week after e-commerce giant Amazon late Thursday reported disappointing quarterly results. Nevertheless, the S&P 500 has ended July with another month of gains.

In other news, the core PCE which is the Fed’s favoured measure of inflation edged higher to 3.5% in June from 3.4% in May – its biggest increase since July 1991.

Looking at commodities, gold found itself under pressure at the end of the week thanks to a strengthening dollar. However, the precious metal was able to end July with a monthly gain. Renewed signs that the Federal Reserve may not taper anytime soon may sweeten appetite for the precious metal in the new month. With prices back below the 200-day Simple Moving Average, bears could steal return to the scene.

By Lukman Otunuga, FXTM Senior Research Analyst

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Cautious Fed Hurting The Buck

FOMC wait-and-see mode remains

Chair Powell and his fellow policymakers acknowledged that economic activity indicators have continued to strengthen and the economy has made progress towards its goals of price stability and maximum employment. But especially on employment, there is still some way to go for the recovery to be substantial enough to start tapering asset purchases. Inflation is still seen as transitory but is not broadly based and Chair Powell specified that one-off price rises, even if they are not reversed, are no sustained inflation.

Many in the markets are touting the Jackson Hole symposium at the end of next month as the big date for more taper detail. But, with only one NFP jobs report next week to be released before then, is that enough information for the Fed to shift their bias? There are then three FOMC meetings left in the year in September, November and December.

China soothes equity jitters

Equities finished mixed in the US with tech outperforming. Facebook beat earnings expectations but warned of a significant growth slowdown and the stock fell as much as 5% in extended trading. European bourses have started the morning in the green after China took steps to calm recent investor fears which helped the Hong Kong market gain over 3%.

Gold enjoying dollar woes

With the hawks disappointed after the FOMC meeting, dollar selling is helping to push gold out of its recent range. The bullish break is now within touching distance of the widely watched 200-day moving average at $1,822. A strong close above here should see the July highs at $1,829/34 come into view fairly quickly. Solid support sits at $1,789.

Gold chart

By Lukman Otunuga, FXTM Senior Research Analyst

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Vol Picks Up Heading Into Summer

Yields collapsing

The real action is taking place in the bond market where recent moves have been pretty extraordinary even by the standards of the recent past. The benchmark US 10-year treasury note yielded 1.25% on Thursday morning, plunging 20 basis points in three days. This “flattening” of the yield curve, where short term rates fall faster than interest rates further out, has dominated bond markets since the US payrolls numbers last Friday. 

The reflation tale has lost momentum in double-quick time with position adjustments being pared back at the worst of times – that is, when macro expectations are being reined in and when market liquidity is drying up ahead of the summer.  Essentially, we are seeing a recalibration of inflation expectations in the wake of the supposed Fed’s hawkish pivot at its June meeting. 

Risky currencies hammered

With concerns over the major increase in infection cases in the Delta variant, this general environment is helping safe haven JPY and CHF while the mighty dollar is taking a breather, having recently made fresh three-month highs.  The yen is on track to post one of its biggest daily increases this year as investors dump risky positions in currency markets. 

The rollback in the reflation trade is bad news for commodity-dollar currencies with AUD hitting levels last seen in early December. The Australian dollar is widely viewed as a proxy for risk appetite and has also not been helped by RBA Governor Lowe reiterating that inflation may only rise when the unemployment rate falls further and holds in the low 4% area, an outcome not expected until 2024. Of course, this comes after the bank took its first step towards QE tapering by announcing a smaller, third round of bond buying. 

OPEC+ disarray

Added to this summer cocktail for commodity currencies is an oil market which has dropped over 7% in the last few days, since the OPEC+ meeting failed to agree on production output levels for the next few months. With the rapid rising virus count in numerous countries around the world, an extended period without a deal could spur an increased amount of noncompliance. The early summer months are certainly alive with action in both financial markets and in several sporting arenas.

For more information, please visit: FXTM


Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Calm Before The Storm in Oil Markets?

OPEC+ abandons meeting, what next?

Brent crude oil prices punched above $77.50 this morning to the highest levels in three years after yesterday’s talks between OPEC and its allies were postponed indefinitely amid rising tensions between the UAE and Saudi Arabia.

The key question is whether such a move will result in higher or lower oil prices in the medium to long term. If things are left in limbo with no deal reached, this may result in the group keeping output unchanged in August and the rest of 2021. Such a scenario could see higher oil prices.

However, if the infighting means no OPEC+ deal by April 2022, this could result in a “free-for-all” as major oil producing nations pump at will. If this is anything like what we witnessed in the 2020 price war with Saudi Arabia and Russia, oil prices would experience a steep selloff.

Dollar under pressure

King dollar has stumbled into Tuesday’s session under pressure, weakening against every single G10 currency. It seems Friday’s mixed US jobs report has triggered some profit taking around the greenback with the DXY hovering above the 92.00 level as of writing.

Although the US economy created 850,000 jobs in June which was above market expectations, the unemployment rate edged up to 5.9%. These diverging labour market gauges are key elements in the Fed’s assessment and point to a Fed standing on the sidelines and not under pressure to change policy.

While the jobs data has eased rate hike worries, the recent jump in oil prices could revive these concerns. Higher energy costs may fuel inflationary pressures, strengthening the argument for the Federal Reserve to tighten monetary policy down the road – something that could provide a tailwind to the dollar.

On the data front, investors will direct their attention towards the ISM Non-Manufacturing PMI for June which is due later in the day. All eyes will also be on the latest FOMC minutes on Wednesday which could provide clues about the central bank’s hawkish shift at its June meeting.

Looking at the technical picture, the Dollar Index remains bullish on the daily charts despite the recent declines. A pullback could be on the cards with 92.00 and 91.70 acting as levels of interest before prices potentially rebound back above 92.50.

Commodity spotlight – Gold

Gold appreciated above $1800 this morning thanks to the weaker dollar. Easing concerns over the Federal Reserve raising interest rates sooner than expected have also helped gold bugs ahead of the meeting minutes on Wednesday.

Looking at the technical picture, the precious metal has the potential to test $1825 and $1842 if a daily close above $1800 is achieved. Alternatively, a move back below $1800 could result in a decline back towards $1760.

Written on 06/09/2021 by Lukman Otunuga, Senior Research Analyst at FXTM

For more information, please visit: FXTM


Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Key Events This Week: OPEC+ Dispute Rolls Along

Monday, July 5

  • OPEC+ talks to resume?
  • Composite/services PMIs for China, Eurozone, UK
  • US markets closed

Tuesday, July 6

Wednesday, July 7

Thursday, July 8

Friday, July 9

Oil markets left in limbo

Recall that, on 1 July, OPEC+ had been due to announce its decision over output levels for August. The alliance of 23-nations is now embroiled in a spat over the duration of its existing production plans. This leaves global markets unsure over how much oil it will get next month and beyond.

According to media reports, Saudi Arabia and most of OPEC+ have an agreement until the end of 2022. The UAE however is reportedly holding out, only agreeing to a supply increase over the next few months but demanding better terms for next year.

To be clear, such delays and differences within OPEC+ are not new, and at least markets are cognizant that there are a few more weeks to settle this dispute. That’s why Brent prices appear unfazed by the heightened OPEC+ uncertainty during the Asian morning session.

If this impasse extends without a deal to gradually raise output (said to be anther 400k bpd next month), OPEC+ is bound to keep its output levels at current levels.

This means the world cannot get the oil it’s craving for, which could send oil prices skyrocketing even higher!

However, there is a bigger threat that could play out when the current deal ends in April 2022. If the OPEC+ alliance breaks down, that could threaten a repeat of the 2020 price war that saw every major oil-producing nation fending for itself and pumping at will.

Thanks to the global economic recovery, the world needs more oil now – that much is clear.

But consider this worst-case scenario: OPEC+ unravels at a time when more Iranian oil supplies come back to the market, pending a US-Iran nuclear deal, while the delta variant of the coronavirus reinforces lockdowns in major economies. If this trifecta of negative risks become reality, that could trigger another capitulation in oil prices, undoing much of the tremendous gains it has achieved (293.4%) since recovering from the depths of April 2020.

Need a recap on all things OPEC? Check out our ‘Markets Extra’ podcast:

(28 June 2021) OPEC Preview: Could a cautious cartel pave the way for $100 Brent?

(25 Feb 2021) What do OPEC+ and “Guardians of the Galaxy” have in common?

Written by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Dollar Makes a Move

The Chinese composite PMI unexpectedly fell from 54.2 to 52.9 earlier this morning with details showing a stabilisation of the manufacturing gauge but a setback in the non-manufacturing reading. New restrictive measures in Gaundong to contain a regional Covid outbreak are mainly responsible for this with waning external demand contrasting with rising domestic orders.

Risk mood improved

Markets took comfort in Moderna saying that its vaccine is effective against the Delta variant of the virus with the S&P500 marginally higher and closing at all-time highs. The tech-laden Nasdaq also notched another record peak rising for a sixth day in seven with Facebook pulling back after hitting the magical $1 trillion market cap level. Also adding to more positive sentiment was the US Consumer confidence which jumped with a bounce both in expectations and the current situation.

The dollar went bid breaking out of its recent range and is heading towards the post-Fed highs.

In EUR/USD, this means we are trading below 1.19 again with eyes on the recent cycle lows at 1.1847.

With the monthly US labour market report out on Friday, focus will be on US ADP data today which will be monitored for any signs that private sector hiring has quickened. Although not a great predictor of the NFP headline number, a big beat or miss today can cause near-term volatility. Expectations are for a punchy 600k reading with many analysts hopeful that jobs data comes in strong going forward.

Eurozone inflation subdued

Consensus expects headline and core Eurozone inflation prints to remain relatively subdued at 1.9% y/y and 0.9% y/y respectively when the data is released this morning. Country figures already pointed to a slowdown and these are fairly tame readings compared to those elsewhere. With the outlook remaining muted, the ECB will continue to be one of the last remaining dovish central banks on the block.

Written on 30/06/2021 by Lukman Otunuga, Senior Research Analyst at FXTM

For more information, please visit: FXTM


Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Key Events This Week: Brent Oil Awaits Opec+ Decision, NFP May Dictate Usd’s Next Move

Monday, June 28

  • Fed speak: New York Fed President John Williams
  • European Commission’s summer economic forecasts

Tuesday, June 29

  • Fed speak: Richmond Fed President Thomas Barkin
  • ECB President Christine Lagarde speech
  • Germany CPI
  • Eurozone economic confidence
  • US consumer confidence

Wednesday, June 30

Thursday, July 1

Friday, July 2

  • ECB President Christine Lagarde speech
  • Eurozone PPI
  • US nonfarm payrolls

Commodities spotlight: Brent oil

OPEC+ is set to make another key decision on 1 July: whether or not to pump out more oil in August.

Analysts surveyed by Bloomberg expect the cartel to raise their collective output levels by another 550,000 barrels per day (bpd) in August. However, even such a hike is expected to leave global markets in a deficit, which could translate into more upside for oil prices.

As things stand, Brent prices are trading at their highest levels since October 2018. However, judging by its relative strength index, which has crossed the 70 mark to indicate overbought levels, Brent appears ripe for an adjustment in the near-term. Such a pullback would then clear some of the froth to pave the way higher for Brent oil.

However, the uncertainty over the US-Iran nuclear talks still looms over Thursday’s meeting. A US-Iran nuclear deal could see Iran resuming oil exports and upsetting the cartel’s supply plans. It remains to be seen how OPEC+ continues restoring its supplies into the world while taking into account this wildcard.

Still, come Thursday, a smaller-than-expected output hike of fewer than 550,000 barrels per day in August could send Brent prices even higher and closer to the psychologically-important $80/bbl mark.

Strike three for US nonfarm payrolls?

The US nonfarm payrolls has disappointed markets for the past two straight months. As things stand, economists are forecasting 700,000 jobs were added in the US labour market this month. If so, that would the highest NFP print in three months, since the March figures.

In the leadup to that tier-1 economic release, this USD index, which is an equally-weighted index comprising 6 major currency pairs, has settled into a more “normal” conditions since pulling back from overbought levels.

However, another lackluster NFP print could give the Fed more runway before having to ease up on its asset purchases, which could prompt the greenback to unwind more of its recent gains and test its 100-day simple moving average (SMA) as the next support level.

Still, the greenback could be jolted by another US jobs shocker this Friday.

A June hiring surge in the US could ramp up expectations for the Fed’s tapering once more. Such a narrative could call upon this USD index’s 200-day SMA as a key resistance level once more.

Written by Han Tan, Market Analyst at FXTM

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