Weekly Market Outlook: FOMC, PMI figures and earnings have the market’s attention
This week all eyes turn to the commodity markets as investment banks from JP Morgan and Goldman Sachs state that commodities may have begun a new supercycle. Oil prices are likely to be the key focus as prices have surged nearly 80% from November lows.
Key economic data points will also be widely watched by currency traders this week with US retail sales figures and the latest FOMC meeting minutes released on Wednesday. This is followed by Australian employment figures on Wednesday and European Services and Manufacturing PMI numbers on Friday.
There is also a range of different earnings announcements due from European and US companies, from the likes of Glencore, Twilio, Shopify, Rio Tinto, Baidu, Nestle, Dropbox, Wal-Market, Airbus and Barclays, among others.
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Weekly Forex Calendar
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Trader’s Radar - The Commodity Supercycle
The commodity market has experienced some huge moves in recent months with agriculture, metal and energy prices rallying higher. This has led many investment banks such as Goldman Sachs, JP Morgan and Bank of America to call for a new commodity supercycle.
Analysts believe that Wall Street is likely to bet on a strong economic recovery from the coronavirus pandemic while using the commodity market has a hedge against inflation. One of the reasons for this is the fact government stimulus measures are likely to fuel aggressive growth over the coming years.
According to research from JP Morgan, commodities have seen four supercycles in the last 100 years. The last commodity supercycle peaked in 2008 after lasting for 12 years. However, while the last supercycle was fuelled by economic growth from China, this supercycle will most likely be attributed to ultra-loose fiscal and monetary policies.
Source: Admiral Markets MetaTrader 5, CRUDOIL, Monthly - Data range: from Jan 1, 2007, to Feb 12, 2021. Performed on Feb 12, 2021, at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.
In the long-term, monthly price chart of West Texas Intermediate (WTI) Crude Oil above, it is clear to see the descending triangle pattern that has formed between a horizontal support level and a descending trend line resistance.
The horizontal support level at ~$38.00 has acted as support in early 2009 and early in 2016 before breaking lower in early 2020. However, towards the end of 2020, price came back above the ~$38.00 price level and bounced off once again.
Historically, there have been some long term trends that have developed from this price level. While there is overhead resistance, traders may look for price to break through and run higher in what could be the beginning of a new commodity supercycle.
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Corporate trading updates and stock indices
Global stock market indices have remained positive and have, so far, held on to their gains from rallies earlier in the month. For much of last week, however, gains were muted as momentum dried up.
While some investment banks are sounding the alarm bell for a correction, buyers have been eager to buy the dips. With interest rates at historic lows, cheap credit is still moving its way into the stock market in the search for yield.
However, divergences still remain across geographical indices with US indices leading the way, followed by Asia indices and lastly European indices which have been rising but not at the same degree and pace with the other regions.
Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from May 19, 2020, to Feb 12, 2021, performed on Feb 12, 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 circa: 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 clear to see the uptrend is still intact. The 50-period (red), 100-period (green) exponential moving average sare still moving higher confirming the upward bias. While the price is overextended from these moving averages and trend line, buyers may look for dip-buying levels.
Sentiment in global stock markets may also be impacted by the range of earnings announcements due this week from European and US companies. Some of these include:
- Wednesday 17 February - Shopify, Rio Tinto, Baidu
- Thursday 18 February - Nestle, Dropbox, Wal-Mart, Airbus, Barclays
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