Hello and welcome to the Key To Markets preview of the Week Ahead.
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5-day performance as of October 14th, 2021. 20:00 GMT
                          Source: finviz.com
In case you missed it….
Inflation back up: The annual inflation rate in the US returned to a 13-year high of 5.4% in September from 5.3% prior.
China factories: Chinese producer price index (PPI) sees highest annual growth since 1995
PPI reverses: US monthly producer inflation told a different story, falling to a 9-month low
USD speculation: Bullish bets on the dollar reached a two-year high according to the CFTC
Yen drops: USD/JPY struck a 3-year high amid a rally in US Treasury yields
Goodbye TRY: The Turkish lira slid to a record low amid the new offensive in Syria and after two central bankers got the sack.
Gold is back: Precious metals had a strong week as investors looked for an inflation hedge.
Global tax: The push for a global 15% minimum corporation tax got closer as holdouts Ireland and Estonia signed on
NFP miss: US job growth slowed to the lowest this year in September, adding 194,000 jobs
Bank earnings: Mixed results as Bank of America shows solid loan growth but Wells Fargo disappointed expectations.
                             Source: Bloomberg
Looking for a high growth foreign stock market to make some investments? Based on the above chart, that place might be India (and not the UK). The market cap for booming Indian stocks is about to overtake the stagnant UK equity market.
                              Source: FX Street
Economists expect 5.2% annual growth in China for Q3, down from 7.9% in Q2. That’s already quite a deceleration so if it comes in much weaker that will be a blow for global growth expectations. That could cause some jitters in equity markets and a flight out of CNY into USD. The People’s Bank of China rate decision comes two days later Wednesday, offering a chance for Chinese authorities to act if needed.
With US consumer price inflation back up at a 13-year high and not looking too ‘transitory’ while prices at the factory gate in China are the highest since 1995, more global inflation data is out this week from the UK, the Eurozone and Canada. As a reminder, weaker growth and high inflation is stagflation.
Tesla stock has rallied back over $800 in recent weeks amid renewed optimism over EV deliveries despite the global chip shortage that has hampered other carmakers. The stock is at its highest since February and solid earnings could help achieve a re-test of the record high near $900.
Netflix shares are at a record high, reaching $640 heading into Q3 results. The stock has broken above a trading range capped at $570 and is embarking on a new bull run. The post-pandemic decline in subscriber growth is perhaps already priced in.
USD/JPY soared to a 3 year high last week in line with a jump in US Treasury yields. The 4% drop in the yen in three weeks happened while the yield on 10-year Treasuries rose to 1.6% for the first time since May. Diverging policy between the developed central banks and the BOJ is pushing up the yield spread and hampering JPY.
Here you can find analysis of the major asset classes including the major forex pairs, gold, oil, and the S&P 500.
EUR/USD broken the downtrend line and could be set for a te-test of 1.17 as mentioned last week. Near term resistance is at 1.164, the October peak.
GBP/USD saw gains continue above 1.37 before stalling at the supply area around the Sept 23 peak. There is no clear directional trend.
USD/JPY took off through 112 resistance and rose all the way to 113.80, which has capped the incline so far. Another drop to 113 or 112.5 could offer buying opportunities.
AUD/USD put in the bottom we suggested last week and has now erased the bulk of its September decline. The supply area near the double top around 0.745-8 is major resistance.
USD/CAD did see the break below 1.25 mentioned last week and went on to fall below 1.24 too in what looks to be a new downtrend. 1.244 then 1.25 are resistance.
XAU/USD saw another leg higher above 1780 resistance to test the 1800 round number, which stands as resistance before 1825.
BRENT has steadied around 3-year highs of 84. The uptrend is supported by a rising trendline.
US500 rallied before a third test of 4300. The stock index lacks direction but a break above a short term downtrend line implies the correction may be over.
Thank you very much for reading – and have a great week trading!
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