Weekly Market Outlook: RBNZ, Commodities and earnings in focus
In the last full trading week of February, all eyes turn to the Reserve Bank of New Zealand interest rate decision and press conference on Wednesday, with UK employment and comments from Federal Reserve Chairman Jerome Powell on Tuesday.
The currency markets are likely to dominate flows this week, as the US dollar gains most of the attention from the prospects of US President Joe Biden’s stimulus plan.
Company earnings announcements start to wind down with only a few companies left to report including HSBC, NVIDIA, Lloyds Banking Group, AirBnB and many others.
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Weekly Forex Calendar
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Trader’s Radar - RBNZ Rate Statement
On Wednesday 24 February, the Reserve Bank of New Zealand (RBNZ) will release its latest Monetary Policy Statement and interest rate decision, alongside a press conference from Governor Adrian Orr.
Most analysts are forecasting that the central bank will leave its monetary policy settings unchanged while striking a more constructive tone on the economy. Currently, the overnight rate is 0.25% and the Large Scale Asset Purchase programme (LSAP) is capped at 100 billion NZD.
While less stimulus has been used from the bank than originally forecasted, it is also because less stimulus has been needed due to the economic situation. The market had been forecasting interest rate cuts, but analysts believe the bank is likely to say it won’t be needed.
In the long-term, monthly price chart of NZDUSD above its’ clear to see the break from the descending trend line in the middle of last year. With positive tones expected from the Reserve Bank of New Zealand, many analysts are more optimistic about further strength in the New Zealand dollar.
This means that the NZDUSD exchange rate could be making its way towards the next long-term major resistance level, shown by the horizontal line around the 0.7513 price level. This is, of course, barring any surprises from the central bank so risk management will be key in navigating the high impact news announcement on Wednesday.
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Corporate Trading Updates and Stock Indices
Global stock market indices took a breather last week after some huge advances in recent weeks. However, the moves to the downside have been mere pullbacks in an uptrend and traders may well look for continuation patterns this week.
Much may depend on any news from US President Joe Biden’s stimulus plan. Comments from US Federal Reserve Chairman Jerome Powell may also be widely watched as most of the move to the upside has been helped by the Fed keeping interest rates low and commenting that they will do so for quite some time.
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 above of the S&P 500 stock market index, the uptrend still remains intact with the 20-period (blue), 50-period (red) and 100-period (green) exponential moving average still moving higher.
Last week prices dipped back towards the 20-period moving average as the momentum to the upside faded. Historically, buyers have turned before at these moving averages and traders will be looking to lean against them again if the market dips further.
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:
- Monday 22 February - HSBC
- Tuesday 23 February - Covestro
- Wednesday 24 February - Lloyds Banking Group, NVIDIA Corp
- Thursday 25 February - BAE Systems, Salesforce, AirBnB
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