Weekly Market Outlook: FOMC and European PMIs in focus
Wednesday’s FOMC meeting minutes release takes centre stage this week after last week’s surge higher in the US inflation figures. More and more investors are leaning towards the Fed having to increase interest rates sooner rather than later but the central bank has so far stood firm.
While the US dollar is likely to be in focus this week, traders will also be digesting the Australian employment report and European PMI figures from Germany and France. The euro has had good volatility over the past few weeks but is still directionless in the long term.
Corporate earnings are still in focus with a variety of companies reporting, including Alibaba and EasyJet, among others.
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Weekly Forex Calendar
Source: MetaTrader 5 trading platform provided by Admirals
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Trader’s Radar - European PMIs
On Friday, there is a range of different PMI (Purchasing Managers Index) figures released between 8.15 am and 9.30 am BST. This includes both France and Germany Flash Manufacturing and Services PMI figures, as well as figures for the overall Eurozone.
As Europe has finally got to grips with the coronavirus vaccine rollout, economists are bullish on the output of the service and are forecasting a rise in the PMI number. However, some analysts remain concerned about how much of that optimism has already been priced into the recent rally higher in the euro.
Nonetheless, it could be an interesting time for the currency which has put in an impressive rally against the US dollar over the last month, shown by the weekly chart below.
Source: Admirals MetaTrader 5, EURUSD, Weekly - Data range: from Jul 30, 2017, to May 14, 2021. Performed on May 14, 2021, at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The recent rally higher in EURUSD, recorded another swing higher low, keeping the long-term uptrend intact. If the price can continue higher, traders will be eyeing the 1.2453 price level which is a multi-year high and long-term resistance.
However, traders will be keen to see if price can first breakthrough horizontal resistance on the daily chart around the 1.2173 price level, shown by the upper horizontal resistance line on the daily chart below.
Source: Admirals MetaTrader 5, EURUSD, Daily - Data range: from Aug 10, 2017, to May 14, 2021. Performed on May 14, 2021, at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results.
If the price fails to break higher at the upper resistance, traders may look towards the lower historical horizontal support level around 1.1982.
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Corporate Trading Updates and Stock Indices
After the recent sell-off in global stock indices, many of them have retraced to significant areas of support. At the end of last week, downside momentum waned with an impressive rally higher. However, most still ended the week lower.
The direction of global stock markets may well rest on central banks once again. Only this time, it will be when they decided to start increasing interest rates again. This was one of the causes of the recent sell-off, a concern that the Fed would have to increase rates sooner rather than later because of inflation.
Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from Aug 10, 2020, to May 14, 2021, performed on May 14, 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 clear to see that the uptrend is still intact. The price is still trading above the 50-period (red) exponential moving average and the 100-period (green) exponential moving average. These are also still pointing upwards.
Historically, the price has turned around at these moving averages. As we already turned higher from the 50-period moving average at the end of last week, traders may now look towards lower timeframes for more clues on the strength of buyers.
This could involve looking at price action trading entry levels and technical trading indicators.
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