Weekly Market Outlook: US FOMC in focus
After last week’s impressive rally in the US dollar all eyes will now turn to this week’s US retail sales figures on Tuesday and the US FOMC press conference on Wednesday. Traders will be focused on whether the data supports a further rally in the dollar.
The moves in the US dollar this week are likely to have an impact on US stock indices too. Nearly all major stock indices closed higher last week and traders will be looking for signs of the rally to continue.
You can learn more about some of the global themes affecting the markets in this selection of new education articles:
Weekly Forex Calendar
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Trader’s Radar – FOMC Press Conference
At 7.30 pm BST on Wednesday 16 June, traders will be glued to the US FOMC Press Conference to gain insights on the next policy move from the US Federal Reserve. Analysts and traders have been forecasting that the Fed will need to raise rates sooner than they say, due to higher inflation. So far, the Fed have so far remained firm on their timeline.
It’s one reason why the majority of the US dollar currency pairs have traded in tight consolidations in recent months. The interest rate differential play is being muted by the central bank.
Most market participants are expecting the Fed to remain firm on their timeline so no changes are expected. However, if there is even a slight change in tone the volatility in the US dollar could start to pick up so it’s one to watch.
Source: Admirals MetaTrader 5, USDX, Monthly - Data range: from Nov 1, 2005, to Jun 13, 2021. Performed on Jun 13, 2021, at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.
In the long-term, monthly price chart of the US dollar index shown above, it’s clear to see the range that has developed between ~$102.00 and ~$88.00 (the two black horizontal lines).
The price has air-kissed the lower level of intermediate support around ~$89.00 but has not yet come down to test the ~$88.00 price level. However, any positive news could see the bulls try to build around these zones.
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Corporate Trading Updates and Stock Indices
Currently, stock market investors are focused on the ‘reopening’ trade. As economies reopen, business activity has started to pick up as well. However, it’s hard to know how much of this bullishness is already priced into the market.
Most stock market indices are trading at record highs. If central banks continue to stick to their narrative on keeping rates lower for longer than this may continue to fuel the stock market rally.
Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from Sep 21, 2020, to Jun 13, 2021, performed on Jun 13, 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 S&P 500 stock market index continues to trend higher, as shown in the daily chart above. Regardless of fundamentals, price momentum is still strong as shown by the correct bullish order of moving averages.
However, volatility has weakened recently but is set to rise after this week’s FOMC press conference. Algo buying has been the common theme in recent weeks but a break to new record highs could attract even more momentum.
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