Weekly Market Outlook: RBNZ, UK & US data take centre stage
Just as traders and investors digest the aftermath of Joe Biden becoming the 46th President of the United States, another week of economic data and earnings announcements starts up. While the week is relatively light compared to the last few months it could be market moving nonetheless.
You can learn more about how markets move after the election in this special dedicated section: Trading the 2020 US Presidential Election.
This week, however, all eyes will be on the Reserve Bank of New Zealand Monetary Policy Statement and Press Conference on Wednesday 11 November, starting from 1 am GMT. While no changes are expected in the central bank's 0.25% interest rate, the market is pricing in a potential cut to 0% by April 2021.
On Thursday, all eyes will be on the UK's preliminary Gross Domestic Product (GDP) figure which is expected to rise by more than 15% for the third quarter. While that is a record rise, it was also followed by a record fall in the second quarter. However, much of the action in the British pound may depend on Brexit talks as the self-imposed trade deal deadline by mid-November fast approaches.
There is also a raft of different earnings announcements from companies this week. Market participants will be looking for the 'election rally' to continue after five days of consecutive buying in stock indices last week. If a second wave of the coronavirus and a US presidential election can't bring the stock market down - can anything?
Weekly News
- Reserve Bank of Australia cut interest rates from 0.25% to 0.10%.
- Bank of England expands its bond-buying scheme more than expected.
- LVMH renegotiates with Tiffany at a lower deal price.
- Shell increases dividend payouts even as earnings drop.
- The US dollar ends the week as the worst-performing currency.
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Trader's Radar - RBNZ Rate Statement
On Wednesday, the Reserve Bank of New Zealand is due to release its Official Cash Rate and Monetary Policy Statement while giving a press conference at 2 am GMT. So far this year, the central bank has been quite active by cutting interest rates early on in the year by a much larger amount than expected by the market and launching a huge quantitative easing program.
The market is expecting the bank to keep interest rates on hold at 0.25% at this week's meeting. However, an interest rate cut to 0% is being priced in by April 2021. What will be of most interest to traders this week is the recent comments from the central bank regarding negative interest rates. While the bank is far away from this, the market is pricing this in by October 2021.
The bank's messaging is likely to be soft and warning of risks to the downside but investors may use the currency as a place for yield relative to other currencies which have a much lower interest rate. Analysing price action will be key during this event for a potential multi-month move.
The weekly chart of NZDUSD above shows that price has most recently broken through a long-term resistance level, as shown by the descending trend line in black. This could prove to be quite significant if buyers can maintain this ground after this week's RBNZ risk event.
If NZDUSD can break through the intermediate resistance level around 0.7000, then it is a clear path higher towards the 0.7500 price level. In this instance, traders may drop down to the lower time frames to confirm any bullish biases by identifying bullish cycle formations and the correct moving average alignment.
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Corporate trading updates and stock indices
Global stock markets recorded an impressive rally last week and almost dismissed the election volatility. In a world of low interest rates and negative-yielding bonds, where else do investors have to put their capital? Both traders and investors will be looking for clues on whether or not last week's rally can continue this week.
Many global stock indices have moved into technical areas of resistance with only Japan's Nikkei 225 breaking higher to a 29-year high. If price can break through these levels of resistance the Santa Claus rally may just come earlier this year. However, investors are still most likely to focus on growth stocks right now rather than value due to the economic impact of the second wave.
There are also some key earnings announcements from different companies this week which could add to some increased volatility. Here are just a few that are reporting this week:
- Monday - McDonald's
- Tuesday - Lyft
- Wednesday - E.ON, ABN Ambro
- Thursday - Walt Disney, Cisco Systems
Last five-year performance of the S&P 500 circa: 2019 = +29.09%, 2018 = -5.96%, 2017 = +19.08%, 2016 = +8.80%, 2015 = -0.82%, 2014 = +12.32%
In the above chart of the S&P 500 stock market index, price is currently being held in a tight trading range known as a wedge, or symmetrical triangle formation. While the price may continue to trade in-between this range, traders and investors will be looking for signs that price may break out and continue in the uptrend that has developed since the middle of March.
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This indicator provides you with actionable trading ideas and technical analysis on thousands of different instruments across a wide variety of asset classes including global stock indices and individual stocks, currencies, commodities and more! Just simply type in the market you want to trade on in the search box, as shown below!
For example, the below screenshot shows all the technical events that have developed on the NZD/USD currency pair which is likely to be in focus this week due to the RBNZ press conference and interest rate decision:
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