Hello and welcome to the Key To Markets preview of the Week Ahead.
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5-day performance as of September 30th, 2021. 20:00 GMT
Source: finviz.com
In case you missed it….
King dollar: The USD gained across the FX board in the last week, with the biggest gains versus the NZD and GBP.
EUR/USD H&S: A big bearish reversal pattern on the weekly candlestick chart has completed.
GBP/USD fresh low: The cable rate has dropped under 1.35 to its lowest level in 2021.
Yields rising: Investors are selling government bonds ahead of expected Federal Reserve tapering.
Brent hits $80: Brent crude oil hit a 3-year high of $80 per barrel.
Dirty Coal: The price of coal and NatGas are up approx. 190% each since Jan 2020.
Energy crunch: The shortage of natural gas and heating oil has spread to China, forcing a rethink on coal.
UK Fuel crisis: The British military was called into support the delivery of fuel amid a shortage of lorry drivers.
Debt Ceiling: Republicans voted against a bill that would raise the debt ceiling, risking a US government shutdown by mid-November.
Japan’s new PM: Fumio Kishida will be Japan’s next prime minister after winning the Liberal Democratic Party leadership race.
Source: Trevor Neil / Refinitiv
A tussle at the neckline of the Head and shoulders top in the EUR/USD has resolved to the downside. The implied minimum price objective from the pattern is 1.11.
Source: FXStreet
Friday sees the September non-farm payrolls report released. Expectations are for an improvement from the shock miss in August. Perhaps counter-intuitively the dollar has been rising since that report, so will another miss be good for the USD rally? If the Fed stays on track for a November taper, any weakness after a miss on NFP should be short-lived. If the weak NFP causes the Fed to delay tapering, that would probably reverse the recent dollar strength.
On Monday it’s the ‘21st OPEC and non-OPEC Ministerial Meeting’. Oil has been strong since the last decision to gradually lift quotas with Brent crude just touching a 3-year high at $80 per barrel.  The high oil price gives OPEC & Russia the option to raise output even faster to meet the demand. That extra supply could put a ceiling on the oil price rally.
Ongoing lockdowns in Australia will have stalled the economic recovery so the future of Reserve Bank of Australia QE tapering is in doubt. In September the RBA tapered from $5 billion to $4 billion per week in bond purchases. A further taper to $3 billion would be a hawkish surprise and could support the Aussie dollar.
The kiwi dollar was the biggest decliner versus the greenback over the last week. That’s largely because the Reserve Bank of New Zealand have backtracked from a consensus view that it would hike New Zealand interest rates at this meeting. They now reportedly prefer ‘a more cautious approach’ but remain one of the more hawkish central banks overall.
A spike in bond yields has put markets on the defensive – the US dollar rallied, gold held its own as a haven and stock market volatility increased. The furious rally in bond yields earlier in the year ended up completely reversing. Higher inflation expectations as well as bond traders front-running Fed tapering might mean this one is a bit more durable and that’s a headwind to risky assts including equities.
Here you can find analysis of the major asset classes including the major forex pairs, gold, oil, and the S&P 500.
EUR/USD crashed through the August 20 low, in a breakdown that suggests a new long term downtrend and near term test of 1.15.
GBP/USD rolled over before reaching 1.38 and collapsed under 1.36 support, which is now major resistance.
USD/JPY broke through the top of its trading range and rallied all the way to 112, where it has since pulled back. The former range high around 110.7 is major support.
AUD/USD stalled twice at the previously highlighted supply area despite breaking the downtrend line and went on to break 0.72 support, opening up a new downtrend.
USD/CAD remains in a choppy sideways range with 1.26 currently acting as support and 1.29 as resistance
XAU/USD did break below 1750 as expected, finding support at 1720. 1700 then the flash crash low around 1690 are next levels of support.
BRENT broke above multi-year highs at 77 and reached 80, a big psychological resistance. A deeper pullback towards 75.50 is possible but the uptrend remains intact.
US500 reversed lower right from the area under the broken rising trendline we highlighted last week. Another leg lower would naturally target the 200 DMA near 4150.
Thank you very much for reading – and have a great week trading!
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