The Week Ahead 📈 05nd – 9th July 2021

The Week Ahead

Hello and welcome to the Key To Markets preview of the Week Ahead.

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 | DAX
• Trading Signals

10 Big Stories Last Week

In case you missed it….

USD/JPY breakout. The dollar-yen forex pair rose above 111 in a breakout move to its highest in 15 months. The move came after strong June ADP private payrolls data.

Sydney lockdown. The Aussie dollar was worst-performing FX pair this week. Forex traders suspect the new lockdowns will tie the hands of the RBA at its meeting next week.

More record highs. The S&P 500 and Nasdaq indices hit multiple record highs last week with the S&P 500 having its second-best first half in 23 years.

Gold’s bad month. The price of gold had its biggest monthly drop since 2016 in June as investors sold metals and bought the dollar following the hawkish Fed meeting.

Hancock resigns. The UK Health Secretary resigned after admitting he broke his own COVID-19 rules by kissing his mistress, which had been caught on a CCTV camera. GBP fell but was likely unrelated.

No Fear. The VIX index, known as the market’s ‘fear gauge’ showed volatility has hit its lowest levels since the start of the pandemic. It shows increasing signs of investor complacency.

El-Erian is worried. Former PIMCO bond investing luminary Mohamed El-Erian said he sees increasing signs that inflation is not transitory and worries the Fed is falling behind.

Didi IPO. The Chinese ride-hailing giant saw shares end higher on the day of its NYSE IPO, bettering Uber and Lyft where shares dipped on the first day of trading.

Facebook worth $1 trillion. Facebook’s market cap rose over $1 trillion for the first time. Shares gained after the dismissal of an antitrust case brought against the social media giant by the FTC.

Cathie’s Bitcoin ETF. Cathie Wood of ARK Invest has filed to created her own Bitcoin ETF, hoping to do better than VanEck and Valkyrie after the SEC again delayed approving their ETFs this month.

Chart of the Week

It’s the end of the second quarter so this is one of the few occasions to look at quarterly candles! Interestingly, even as the dollar has been strengthening, silver ended the quarter modestly higher, consolidating in a tight range under a long-term down-trendline. A breakout above $30 per oz in silver this quarter looks could open up a test of resistance at $40/45.

5 Things to Watch This Week

1)    FOMC Minutes

This Wednesday, investors will get some more information about the June Federal Reserve meeting that helped the US dollar have its best month in nearly five years. The FOMC minutes will hopefully shed some light on what policy makers were thinking when they brought forward their forecasts for the first US rate hike into 2023. Presumably one of the biggest motivations for the hawkish shift was a reaction to higher inflation data. Minutes showing the Fed is just tinkering with the timing will be brushed off but if there is any sign of alarm over inflation, that would likely be bullish for the greenback.

2)    RBA Meeting

This is very unlikely to be the week when interest rates in Australia come off a record low of 0.1%. More likely the RBA will make some adjustments to which bonds it will buy as part of its yield curve control (YCC) program. Some scenarios are more hawkish than others but probably won’t change the overall sense that the RBA is taking things more cautiously than the Fed. The AUD/USD has been in what looks like a topping process for most of this year as Australia’s vaccination program lagged other developed nations. The recent lockdowns might be what sends the Aussie over the edge, depending on what the RBA decide this week.

3)    Oil Price

The price of oil was choppy at the end of last week after having touched a new 3-year high. Brent rose over $77 and WTI hit the $76 handle but gave back gains as OPEC delayed a decision on its output quota. OPEC aside, oil is testing major technical resistance from the peaks made in April 2019 and October 2018, respectively. After such a strong run-up in the price which has taken oil into overbought territory, there is a good chance the resistance holds and forces an oil price decline. Something that could weigh on wider sentiment.

4)    Earnings Jitters?

Second quarter earnings season will unofficially kick-off the week after next when US big banks like JP Morgan Chase and Bank of America will report results. That leaves this pre-earnings week open to jitters as investors adjust their portfolios ahead of time. The two biggest open questions are 1 whether tech / growth / stay-at-home companies saw earnings growth drop and 2. Whether cyclical stocks like banks saw business improve -as the US economy reopened.

5)    Travel with Delta

It seems countries in Europe, including the UK will push ahead with plans to ease travel restrictions this month to allow for summer holidays. But the same can’t be said for elsewhere in the world. One in two Australians are under lockdown again due to rising cases. However, in Europe, officials are resigned to the idea that the Delta variant will be the dominant strain by the end of August. German and British officials are now siding with Greece to say extra travel restrictions will not be necessary.

Technical Analysis

Here you can find analysis of the major asset classes including the major forex pairs, gold, oil, the S&P 500 and Germany’s DAX index.

EUR/USD (H4 Candlestick Chart)

EUR/USD is back testing the 1.1850 lows. Trading the breakdown under 1.1850 is an option for bears. Bulls wishing to play a double bottom could wait for a move beyond interim resistance at 1.880.

GBP/USD (H4 Candlestick Chart)

GBP/USD is breaking lower to new multi-month lows. Bears can trade the momentum lower or wait for a pop to an already used supply zone at 1.387.

USD/JPY (H4 Candlestick Chart)

USD/JPY has seen its uptrend accelerate substantially. Bears could try to fade 111 and channel resistance, while bulls could step in at the demand zone around 111.

AUD/USD (H4 Candlestick Chart)

AUD/USD has broken lower through the 0.75 level again. Bears could trade the break down to 0.74 or wait for a bounce back to 0.756.

USD/CAD (H4 Candlestick Chart)

USD/CAD is testing its supply zone formed by the June 21 peak. The trend remains up and bulls could expect support at 1.238 or lower at 1.234 on any pullback.

Gold (H4 Candlestick Chart)

XAU/USD has shown some strength by rising back over the support turned resistance at 1770. Bulls could buy above that level, while bears could wait for a re-test of the range high near 1790/5.

Brent Oil (H4 Candlestick Chart)

Brent crude has rallied above $75 and pulled back. $74.7 is the April 2019 peak. Bulls could wait for it to hold, while bears could wait for a move back under it to go short.

US 500 (H4 Candlestick Chart)

The US500 is at all-time highs and faces possible channel resistance around 4325. Bulls could look for shallow pullbacks towards 4305, while bears could wait for a reaction from the top of the channel.

Trade Alerts

You can set price alerts in the MT4 platform at the potential support and resistance areas shown in the charts above to let you know when there could be a potential trading opportunity.

See the table below for possible alerts to use this week.

From the MT4 platform you can enable push notifications to receive these alerts on your mobile phone.

Thank you very much for reading – and have a great week trading!

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