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Contents
- Currency Pair Performance
- 10 Big Stories Last Week
- Chart of the Week
- Economic Calendar Highlights
- 5 Things to Watch this Week
- Technical Analysis: EUR/USD | GBP/USD | USD/JPY | AUD/USD | Gold | Oil | S&P 500
Currency Pair Performance
5-day performance as of October 28th, 2021. 17:00 GMT
10 Big Stories Last Week
In case you missed it….
Record highs – The pullback only amounted to 5% before the Dow and S&P 500 rallied back to a record high.
Canada QE surprise – The Bank of Canada unexpectedly fast-forwarded tapering by bringing QE to a complete holt.
Commodity FX – The Aussie dollar gained alongside the Kiwi and Loonie thanks to the massive commodity rally.
Yen relief – The relentless drop in the Japanese yen found some relief for a 2nd week. USD/JPY has stalled under 115.
ECB Chilin’ – The European Central Bank left policy unchanged last week and will keep buying bonds until March 2022.
Trillion-dollar Tesla – Tesla stock reached a $1 trillion market cap for the first time.
GDP miss – US GDP grew 2% in the third quarter, well down from 6.2% in Q2 and below the 2.7% expected.
Oil Spoiled – WTI crude oil futures topped $86 per barrel before rolling over for the first weekly drop in 9 weeks.
DAX rising – Germany’s DAX 40 index just reached a 6-week high on the back of well-received corporate earnings.
Fintech VCs – A record total of $39 billion in venture capital has been invested this year in financial start-ups like Chime, Carta and Varo.
Chart of the Week
The Turkish lira continues to plummet new depths in 2021. The latest decline happened after Turkish President Erdogan threatened to expel ambassadors of 10 Western countries. The last leg lower (which carried USD/TRY above 9.0) came after a surprise change in leadership at the Turkish central bank and a rate cut despite high inflation.
Economic Calendar Highlights
5 Things to Watch This Week
1) Record highs
The S&P 500, Dow Jones and Nasdaq Composite indices all hit record highs last week. Fears of a new bear market were short-lived. The major indices dropped 5% before rebounding. It looks like a classic case of stocks climbing a wall of worry. Fed tapering, rising inflation, China economic uncertainty all pose downside risks, but none have brought about any significant concern among investors.
2) Federal Reserve
Tapering looks like a given this week. Any delay of the reduction of Treasury purchases from the Fed this week would be a dovish surprise. Fed Chair Jerome Powell said last week that it’s time for tapering but too soon for rate hikes. Less government bond purchases are dollar-positive but if the Fed reigns things in slower than other central banks then the dollar can decline.
3) NFP
The US jobs report comes after the Fed decision so the impact on the USD should be limited. Rather than jobs growth being a factor that will influence tapering – it’s something to think about for a Fed policy mistake. If the Fed begins tapering while the economy rolls over it will affect company earnings growth as well as demand for high risk vs haven currencies.
4) BOE
A rate hike has been penned in by markets – which is clear by the rise in GBP/USD. If the BOE delay, then we can expect a drop in GBP and other UK assets. The Bank of England is opting to hike rates while still buying bonds – something that other central banks have avoided. It remains to be seen whether this is ultimately better for GBP.
5) RBA
The Aussie dollar has been rallying but it has little relation to the expected moves by the Reserve Bank of Australia- and is more related to rising commodity prices. In October the RBA reduced asset purchases but extended the length of the program, so it was seen as a ‘dovish taper’. The RBA isn’t looking to hike rates until “actual inflation is sustainably within the 2 to 3% target range”, a condition unlikely to be met before 2024.
Technical Analysis
Here you can find analysis of the major asset classes including the major forex pairs, gold, oil, and the S&P 500.
EUR/USD (H4 Candlestick Chart)
EUR/USD held the 1.158 demand area and went on to break above the October 19-25 peaks at 1.166. A move over 1.17 opens up further upside towards 1.174 then 1.178.
GBP/USD (H4 Candlestick Chart)
GBP/USD has consolidated since touching 1.38 in what looks like a flag pattern. A move over 1.385 opens up 1.39.
USD/JPY (H4 Candlestick Chart)
USD/JPY has so far held support at 113.2, which now looks to be a head and shoulders neckline. A break of the neckline could see a drop back 10 112.
AUD/USD (H4 Candlestick Chart)
AUD/USD continues to trend higher with a break above 0.753 suggesting a move up to 0.76.
USD/CAD (H4 Candlestick Chart)
USD/CAD dropped sharply from a supply area above 1.24 back to support at 1.23. A breakdown could test the June low at 1.225.
Gold (H4 Candlestick Chart)
XAU/USD is still struggling at 1800 but is supported by a rising trendline. A break above 1810 could see a move up to 1830 resistance.
Brent Oil (H4 Candlestick Chart)
BRENT has tripled-topped at 85 with a drop under 82, which found support at a demand area created by the October 8 low. The trend has slowed but remains up.
US 500 (D1 Candlestick Chart)
US500 has continued to push higher with a test of 4600. The old record high at 4550 is support.
Thank you very much for reading – and have a great week trading!
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