Weekly Market Outlook US Inflation & Earnings in focus

August 09, 2021 09:45

It’s a relatively quiet week ahead on the economic calendar. Nonetheless, it could still be quite volatile as US inflation figures will be released on Wednesday. After the stellar jobs report on Friday a turn in US economic data could help develop a strong trend in the dollar and stock indices.

German ZEW numbers on Tuesday and UK GDP numbers on Thursday could also create some volatility in the euro and British pound and will be releases to focus on.

There are also some big corporate earnings announcements that will keep stock market indices moving. This includes reports from NIO, Lyft, Baidu and Disney.

You can learn more about some of the global themes affecting the markets in this selection of new education articles.

Weekly Forex Calendar

Source: Forex Calendar from the MetaTrader 5 trading platform provided by Admirals.

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Trader’s Radar – Wednesday’s US CPI Figures

At 1.30 pm BST on Wednesday 11 August, the Bureau of Labor Statistics will release the latest US Consumer Price Inflation (CPI) report. Since the Fed announced plans to start tapering there has been an increased interest in US economic releases.

Last Friday, the US Non-Farm Payroll figures beat market expectations causing the US dollar to surge higher. Federal Reserve members have been increasingly bullish about bringing an end to stimulus.

If inflation figures continue to rise, it’s likely to cause the Fed to act much sooner than anticipated. This could add even more fuel to the rise in the US dollar so it’s a trend to keep an eye on.

Source: Admirals MetaTrader 5, USDX, Monthly - Data range: from Jul 1, 2005, to Aug 6, 2021. Performed on Aug 6, 2021, at 7:00 am GMT. Please note: Past performance is not a reliable indicator of future results.

The long-term, monthly price chart of the US dollar index shown above, highlights the recent technical support that has helped to lift the US dollar. The combination of the horizontal support line and ascending trend line has helped buyers to build positions around these levels.

If the price can break through the recent high of around 93.70, then it could confirm a higher high and higher low cycle formation which could drive the dollar even higher. However, the price has not broken through this price level yet which will cause some traders to remain cautious.

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Corporate Trading Updates and Stock Indices

Global stock market indices have been a buoyant mood with European indices such as the CAC 40 and US indices such as the S&P 500 recording all-time highs last week. While the US dollar has remained weak, US stock indices have surged higher. This may change if the dollar starts to turn and trade higher.

Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from Nov 10, 2020, to Aug 6, 2021, performed on Aug 6, 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

The chart of the S&P 500 shows that buyers didn’t drive the market higher on the much better than expected US employment report. In fact, good economic news brings forward the potential for an interest rate hike which stock markets do not favour in the short term.

However, trends are still up and so far the dip buying around moving averages and technical support as helped to keep the trend up.

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Jitanchandra Solanki
Jitanchandra Solanki Financial Markets Author, Admirals London

Jitanchandra is a financial markets author with more than 15 years experience trading currencies, indices and US equities. He is an accredited Market Technician with a BA Hons degree.