Weekly Market Outlook: RBNZ, FOMC & PMIs Take Centre Stage
It’s a big week for the euro with the release of the Eurozone manufacturing and services PMI (Purchasing Managers Index) figures on Tuesday. The currency has been one of the weakest performers in recent weeks on fears that new lockdown restrictions will hurt economic growth.
On Wednesday, investors are expecting the Reserve Bank of New Zealand (RBNZ) to increase interest rates from 0.50%. The question is whether it will be a regular 25 basis point hike or a 50 basis point hike - the uncertainty is likely to cause some big moves in the New Zealand dollar.
Other key items to focus on for this week include the FOMC meeting minutes release on Wednesday, as well as the US public holiday on Thursday.
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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 – European PMIs
On Tuesday 23 November, Markit will release the latest PMI figures for France, Germany and the Eurozone. Both manufacturing and services figures are set for declines across all three calculated regions.
Understandably, the euro has been one of the worst-performing currencies in recent weeks. A rise in coronavirus infections and new lockdown restrictions in Austria and the Netherlands is likely to hurt economic growth – even more so if Germany follows suit.
Europe’s biggest trading partner, China, is also experiencing a slowdown in economic growth. The combination of these factors doesn’t bode well for the long-term prospects of the currency, especially as the US economy continues to grow.
Source: Admirals MetaTrader 5, EURUSD, Monthly - Data range: from 1 May 2005 to 21 Nov 2021, performed on 21 Nov 2021 at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.
For intra-day trend-based traders, the EURUSD currency pair will be on their watchlists. With the Fed thinking of increasing interest rates and the ECB knowing the economy can’t handle any increase, a classic strength vs weakness trend is developing.
The long-term descending trend line from the highs of 2008, 2011, 2014 and 2018 was broken in 2020. This was an opportunity for buyers to take control of the market. After a brief push higher, the price failed to continue and has now created lower low and lower high cycles.
If the price can get back below the long-trend line, many traders will start to focus on the lows reached just before the pandemic. It’s a long way off these levels but it is certainly a trend to watch.
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Corporate Trading Updates and Stock Indices
Global stock market indices continued towards record highs last week before pulling back slightly on Friday. European indices still ended the week higher, even with the negative sentiment around the European economy due to new lockdown restrictions.
The Nasdaq 100 has been the strongest stock market index as investors continue to build positions in tech. Fund managers are perplexed at the elevated levels in stock indices but currently, the market is focused on the TINA trade – There Is No Alternative.
Source: Admirals MetaTrader 5, SP500, Daily - Data range: from 16 Feb 2021 to 21 Nov 2021, performed on 21 Nov 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
While the S&P 500 stock market index created new all-time high price levels last week, the price settled back below 4710. This has proven to be a key resistance area where buyers cannot close above – even though they have tried multiple times.
A break and close above this price level will show a strong level of commitment from buyers to keep building positions at these elevated levels. However, if the price can break through last week’s low then we could see a further correction to the downside back to the 50-day exponential moving average (red line on the chart above).
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