Weekly Market Outlook: RBNZ and FOMC in focus
Key economic news announcements this week start on Tuesday with the release of US retail figures, followed by the FOMC meeting minutes release on Wednesday. US data has not been that good in recent weeks and may cause the Fed to take their time in tapering back the COVID stimulus programme.
While the US dollar is likely to be a market mover this week, all eyes will also be on the Reserve Bank of New Zealand rate statement and press conference on Wednesday. The market is widely expecting the bank to increase interest rates. As NZD has been held in ranges it could be due a huge increase in volatility.
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Weekly Forex Calendar
Source: Forex Calendar from the MetaTrader 5 trading platform provided by Admirals.
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Trader’s Radar – RBNZ Rate Statement
On Wednesday 17 August the Reserve Bank of New Zealand (RBNZ) releases its latest monetary policy statement and interest rate decision at 03:00 am BST. This will be followed by a press conference at 04:00 am BST.
It’s widely expected the central bank will increase interest rates due to an overheating economy. Unemployment levels are where they were before the pandemic and economic growth has been good.
However, the size of the interest rate hike is likely to cause an increase in volatility of the New Zealand dollar (NZD). Some analysts are pricing in a double rate hike while some are pricing in a quarter basis point hike.
Source: Admirals MetaTrader 5, NZDUSD, Monthly - Data range: from Jun 1, 2005, to Aug 15, 2021. Performed on Aug 15, 2021, at 7:00 am GMT. Please note: Past performance is not a reliable indicator of future results.
The long-term, monthly price chart of NZDUSD shows that price has recently broken through a descending resistance line from 2014 to 2020 (black line). Currently, the price is now retesting the same level as a support zone.
If the RBNZ surprises the market with an even bigger interest rate hike price could try to bounce from this support level and make its way towards 0.8000.
However, the RBNZ disappoint the market, traders may look for false breakout patterns if the price comes back below this major support zone.
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Corporate Trading Updates and Stock Indices
The TINA trade remains alive in global stock market indices. The ‘There Is No Alternative’ continues to remain the narrative as interest rates remain low. While the US indices have been leading the way it’s now the European indices which have shown the stronger moves. This bodes well for global risk sentiment in dealing with the threat of the Delta variant.
Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from Nov 17, 2020, to Aug 15, 2021, performed on Aug 15, 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
The moving averages which are shown on the daily chart of the S&P 500 above still confirm an overall up-trending market. So far, they have acted as interesting support levels for buyers and continue to remain in focus.
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