Weekly Market Outlook: US data and earnings in focus
All eyes will be firmly fixed on US economic data and the US dollar this week after a huge miss in last week’s employment figures. Economists and analysts forecasted more than 990,000 jobs would be added to the economy but figures came in at just 266,000 jobs.
The US dollar sank on the news, making this week’s data important for the long-term trend of the greenback. This includes Wednesday’s Consumer Price Inflation (CPI) report and Friday’s Retail Sales number.
Corporate earnings are also in focus with a variety of companies reporting, including Cisco Systems, ABN Amro, Walt Disney and others.
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Weekly Forex Calendar
Source: MetaTrader 5 trading platform provided by Admirals
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Trader’s Radar - US Consumer Price Inflation (CPI)
On Wednesday afternoon, all eyes will be on the US Bureau of Labor Statistics’ release of Consumer Price Inflation. It’s an important number as most central banks adjust their monetary policy stance based on whether inflation is rising or falling.
Economists are forecasting a rise in inflation as economies open up and people buy more, causing prices to increase. To avoid prices rising too far, central banks tend to increase interest rates to avoid overheating.
If inflation does rise, analysts will start to question whether the Federal Reserve’s $120 billion bond purchase program can still be justified. With huge moves in the US dollar last week from the employment report, the currency could be volatile this week too.
Source: Admirals MetaTrader 5 Web, USDX, Monthly - Data range: from Jan 1, 2005, to May 8, 2021. Performed on May 8, 2021, at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The chart above shows the long-term price of the US dollar index. Currently, the price is trading in a long-term trading range between horizontal resistance and horizontal support as shown from the two red lines.
Interestingly, the price has yet to test the lower support level just below ~$90.00. With a negative close last month, sellers seem to be in control and could be eyeing a test of this long-term level.
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Corporate Trading Updates and Stock Indices
Global stock markets continued to rally higher last week with the Dow Jones 30 surging to record highs. While investors continue to be cautious regarding rising inflation, central banks have so far yet to budge from the ultra-loose monetary policy measures initiated during the pandemic.
One sector that has struggled has been technology. The Nasdaq 100 index failed to surge to record highs last week, unlike the Dow Jones 30. As investors remain cautious, the undervalued stocks that have been unloved over the pandemic have gained most of the attention in what has been a huge sector rotation.
Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from Nov 26, 2020, to May 8, 2021, performed on May 8, 2021, at 6:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
Past five-year performance of the S&P 500:
- 2020 = +16.17%
- 2019 = +29.09%
- 2018 = -5.96%
- 2017 = +19.08%
- 2016 = +8.80%
- 2015 = -0.82%
The daily chart above shows the price development of the S&P 500 stock market index. The price shows a series of higher lows, as depicted by the red boxes. This is a sign that buyers have been turning up on the dips in price which is seen as a bullish sign.
The index managed to record a new all-time price level at the end of the last week as investors remain bullish on global stock markets. Traders could further refine the trend analysis and look for turning points by adding on technical indicators like moving averages, oscillators and so on.
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