Weekly Market Outlook: RBNZ and US GDP figures in focus
All eyes turn to the Reserve Bank of New Zealand Rate Statement and Press Conference in the early hours of Wednesday morning. The pressure is on for the central bank to taper back on its large-scale asset purchase programme (LSAP), as the country is likely to be one of the first to have a full economic rebound.
Thursday’s U.S. Gross Domestic Product (GDP) figures will also be widely watched. Investors have been forecasting that the positive recent data will lead the Fed to increase interest rates sooner rather than later but so far the central bank has stayed firm.
Corporate earnings are still in focus with a variety of companies reporting, including NVIDIA and Salesforce, among others.
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Weekly Forex Calendar
Source: MetaTrader 5 trading platform provided by Admirals
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Trader’s Radar - RBNZ Rate Statement
On Wednesday 26 May at 03:00 am the Reserve Bank of New Zealand (RBNZ) releases its latest interest rate decision and monetary policy statement, accompanied by a press conference an hour later.
The New Zealand economic recovery is well underway and analysts are forecasting a full rebound for the country - the first of the developed nations. So far, investors are forecasting the central bank will start raising interest rates in the second half of 2022.
But, while investors may be turning more bullish on the long-term prospects of the economy, the central bank is unlikely to make any changes so early on. It’s one reason the New Zealand dollar has remained range based against most other currencies.
Source: Admirals MetaTrader 5, NZDUSD, Monthly - Data range: from Sep 1, 2005, to May 21, 2021. Performed on May 21, 2021, at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The monthly chart of NZDUSD above shows an impressive rally since the lows of the pandemic in 2020. Recently, the price just missed the long-term horizontal resistance price level around 0.7514.
Source: Admirals MetaTrader 5, NZDUSD, Daily - Data range: from Aug 28, 2020, to May 21, 2021. Performed on May 21, 2021, at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The daily chart above shows the recent range that has developed in the currency pair. While traders may embark upon reversion to the mean trading strategies while inside the range, many will be looking towards the central bank to help price breakthrough.
If the price can break through either of these levels the next major swing high in February or major swing low in March could be potential price targets.
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Corporate Trading Updates and Stock Indices
Global stock market indices have increased in volatility in recent weeks as traders and investors position themselves for upcoming tax changes in the U.S. and the potential for the Federal Reserve to change positions.
However, overall the long-term trend is still up, if not a bit over extended. Sector rotation has been a big part of the story in recent weeks. Investors have been exiting the tech sector which has performed the best during the pandemic and are reinvesting profits into stocks related to the reopening of the economy.
Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from Sep 28, 2020, to May 21, 2021, performed on May 21, 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%
In the daily chart of the S&P 500 stock market index above, it’s still clear to see the long term uptrend. Interestingly, the price has been repeatedly bouncing and turning off the 20-period (blue), 50-period (red) and 100-period (green) exponential moving averages.
The most recent rejection has been of the 50-period moving average. If the price can turn from here, traders may look to the lower timeframes (4-hour, 1-hour chart, etc) for further confirmations of buying such as higher high and higher low cycle formations.
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