Weekly Market Outlook: Central banks and PMI figures in focus
It's a big week for European economic data with France and Germany due to release Flash Manufacturing and Services PMI (Purchasing Managers Index) figures on Wednesday. There have been some red flags in recent weeks that the Eurozone recovery story is coming to an end. Most PMI figures are expected to slip and are barely holding above 50, which is a key level as it represents an expanding economy.
This week on Thursday, US Federal Reserve Chairman Jerome Powell is due to testify before the House Select Committee in Washington DC on the economic impacts of Covid-19. While the Fed has already stated it will keep rates at record lows at least until 2023, any changes regarding this will be of interest to traders.
Of course, traders will still be keeping an eye out on the major themes that are still gripping the financial markets. These include:
- The upcoming US presidential election
- Brexit talks
- The possibility of a second wave of the coronavirus.
Therefore, levels of volatility in the Forex market may still remain elevated so risk management should be the hallmark of any trading strategy this week.
Source: Forex Calendar provided by Admiral Markets UK Ltd.
Global stock indices continue to range trend as investors weigh up lofty stock valuations against the upcoming US presidential election and possibility of a second wave of the coronavirus. While European stock market indices have traded in a range for some time, US stock market indices continued to trend. However, investors are now being much more selective regarding the sectors they choose to invest in with many of them diverging in strength and weakness.
Did you know that with the MetaTrader 5 trading platform provided by Admiral Markets you can trade on more than 3,000+ financial instruments covering a wide range of asset classes? You can also trade directly from the charts and access a wide range of advanced trading tools. Download the platform for FREE by clicking the banner below:
Key economic reports and markets to watch
Eurozone Manufacturing and Services PMIs
This week is full of high impact economic news announcements for the Eurozone, which could cause some wild movements in both the Euro and European stock market indices. On Wednesday there are the following releases:
- 8.15 am BST - French Flash Services PMI
- 8.30 am BST - German Flash Manufacturing and Services PMI
In recent months, the euro has surged higher due to the Eurozone recovery story. However, recent indicators have suggested that the recovery is starting to slow. This month's figures are hugely important for analysts to ascertain whether a pattern is developing to the limit of economic activity that can take place during a pandemic and with lockdown limitations still in place.
Traders have already priced in a drop in some of the PMI figures but the world will be watching. The EURUSD currency pair has traded in a range since the end of July after a huge surge higher. Much of the Eurozone recovery story has already been traded and traders will be looking for hard data to support their views on whether the recovery is still in place or starting to wane.
Source: Admiral Markets MetaTrader 5, EURUSD, Daily - Data range: from January 6, 2020, to September 20, 2020, performed on September 20, 2020, at 6.00 pm BST. Please note: Past performance is not a reliable indicator of future results.
Past five-year performance: 2019 = -2.21%, 2018 = -4.47%, 2017 = +14.09%, 2016 = -3.21%, 2015 = -10.18%, 2014 = -12.23%.
In the daily chart of EURUSD shown above, it's clear to see the recent range that has developed since the end of July. This is after the strong rally higher which originated in March and which led EURUSD to surge roughly 12% higher until September 1. Traders will be looking for events which could help the currency pair break from this trading range and either continue to trend higher or reverse the recent trend up.
While much will depend on the state of the Eurozone, traders also need to look at the US. While the Fed has already stated that they will keep rates at record lows for quite some time, traders will be on edge to see whether the US or Europe will be dealing with a second wave first. The upcoming presidential debate on September 29, could also play a big part in the direction of the dollar.
Why not test your ideas and theories today? Click on the banner below to get started!
Corporate trading updates and stock indices
In recent months, US indices continued to trend higher while European indices continued to trade in a range. However, in the past few weeks and after key announcements from the European Central Bank and US Federal Reserve, most global stock indices have been trading in a range as the daily chart of the S&P 500 stock market indices shows below:
Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from January 3, 2020, to September 20, 2020, performed on September 20, 2020, at 7.30 pm BST. Please note: Past performance is not a reliable indicator of future results.
Last five-year performance: 2019 = +29.09%, 2018 = -5.96%, 2017 = +19.08%, 2016 = +8.80%, 2015 = -0.82%, 2014 = +12.32%
In the daily chart of the S&P 500 index shown above, it's clear to see the price range that has developed in the yellow box. This also happens to be at a multi-month ascending trend line as shown by the black line. Traders will be looking for a catalyst on whether the price will break this trend line for a long-awaited correction, or whether the price will bounce from this level and continue in the trend higher.
Interestingly, the price of the S&P 500 stock market index is trading around the same price level as the previous all-time high level reached in February 2020, just before the sell-off during the coronavirus pandemic. There is also a chance that the price may stabilise at this key level while traders digest the first US presidential debate on September 29, and the candidates' key policies.
Did you know that you can download the Trading Central Technical Ideas indicator completely FREE by upgrading your MetaTrader 5 trading platform provided by Admiral Markets UK Ltd to the exclusive Admiral Markets Supreme Edition?
This indicator provides you with actionable trading ideas and technical analysis on thousands of different instruments. To get it free, just click on the banner below and download it today:
INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:
1.This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
2.Any investment decision is made by each client alone whereas Admiral Markets UK Ltd (Admiral Markets) shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
3.With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
4.The Analysis is prepared by an independent analyst Jitan Solanki, Freelance Contributor (hereinafter "Author") based on personal estimations.
5.Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.
6.Any kind of past or modelled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
7.Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.