Markets were rather uneventful last week with volatility cooling off as we head into the lull of summer. The ‘sell in May and go away’ anomaly held true for the first couple weeks of the month, but lack of follow-through has since led to a recovery in market sentiment and rebound by risk assets over the last few trading sessions. Perhaps this corresponds with simmering inflation fears and lower bond yields.
Major stock indices ticked higher with the DAX 30, CAC 40, and Stoxx 50 rising to fresh records. The Dow Jones advanced 1% on the week, but lagged the Nasdaq and Russell 2000. The ASX 200 shined most bright thanks to its 2.6% weekly gain. Relatively more speculative assets like major cryptocurrencies did not fare as well, however, with Bitcoin and Ethereum whipsawing back toward recent swing lows.
NZD / USD price action saw an influx of buying pressure as the Kiwi strengthened broadly due to a less-dovish shift in policy guidance by the RBNZ. The US Dollar caught a bid late last week and helped the DXY Index ricochet off year-to-date lows, but the move was quickly faded. Euro bulls struggled to push the bloc currency higher amid increasing expectations for the ECB to prolong its asset purchase programs. The Pound firmed up a bit following somewhat hawkish comments from the BoE.
US DOLLAR WEEKLY PERFORMANCE AGAINST MAJOR CURRENCIES AND GOLD
Gold price action climbed for the fourth week straight while the most active front-month silver futures contract just notched its highest weekly close since March 2013. Crude oil prices gained ground with the commodity jumping over 4% to trade back above $66.00/bbl. There could be potential for oil volatility to accelerate further next week in light of the scheduled OPEC+ meeting on output. The DailyFX Economic Calendar outlines additional event risk and data releases on deck for the week ahead.
Traders might want to keep an eye on the Australian Dollar in light of the upcoming RBA decision. EUR/USD could come into focus as well due to high-impact event risk posed by the release of Eurozone inflation and US nonfarm payrolls data. Not to mention, ECB President Christine Lagarde and Fed Chair Jerome Powell are expected to speak next week. USD / CAD also has potential for heightened volatility too with Canadian jobs data due for release alongside NFPs. What else has potential to drive markets in the week ahead?
Gold price action advanced for its fourth-week straight as silver soared to multi-year highs thanks to a stubbornly weak US Dollar. Will gold and silver prices rise further or will Fed hawks stymie upside?
The 24/7 cryptocurrency market needs to monitored closely over the coming long weekend with volatility levels still high.
EUR/USD remains in an uptrend and is in a good position to reach the 1.23 level and then new highs for the year to date as the Eurozone economy improves and coronavirus cases drop.
Seasonality may work to slow stock market price action as a drawdown in volume and volatility seep into the market. The major indices have already begun to show symptoms of range-bound price action.
The ongoing erosion of US real yields, thanks to rising inflation expectations and stagnant US Treasury yields, proved to be a negative influence on US Dollar price action – like it was for much of 2020.
GBPUSD has shifted into neutral and is building pressure just below a technical resistance that holds the keys to the next leg of a major bull trend or the beginning of a reversal. Will the market resolve this impasse in the week ahead?
The Nasdaq 100 index formed a “Double Bottom” chart pattern, which is commonly viewed as a bullish trend-reversal signal. The Hang Seng Index (HSI) aims to breach a key chart resistance.
A Dollar reversal off was halted by Friday’s inflation release as the index straddles yearly open support. The technical levels that matter on the DXY chart into June.
Gold may run higher if it clears the psychologically imposing 1900 level, but several other technical considerations are in play for the yellow metal. Where could XAU/USD head next?
Thanks to shifting fundamental forces – weaker commodity prices and a relatively less hawkish RBA – Aussie bears more control over price action across a number of AUD-crosses.