This new trading week is already kicking off on an eventful note, with OPEC+ members sealing an agreement to continue gradually raising output. This helps pump out more oil into the recovering global economy that’s in great need of more barrels.
Such an equation helps ease the upward pressure on oil prices, with Brent oil now testing its 50-day simple moving average as the key support level.
As long as global demand for oil remains robust, that should help put a sturdy floor below oil prices, limiting its declines. Even with today’s drop, Brent futures have still gained well over 41% so far this year.
Now that the supply-demand uncertainty in oil markets has been alleviated, investors would be hoping for more clarity in the outlook for other asset classes with some rather telling events in store this week:
Monday, July 19
- UK “Freedom Day”
Tuesday, July 20
- Eurozone current account balance
- RBA minutes
- Germany PPI
- Netflix earnings
Wednesday, July 21
- EIA crude oil inventory report
- Japan external trade
Thursday, July 22
- ECB rate decision
- Eurozone consumer confidence
- US initial jobless claims, existing home sales
- Twitter, Snap Q2 earnings
Friday, July 23
- PMIs for Eurozone, UK, US
- UK consumer confidence, retail sales
ECB modifications: All talk, no action on 22 July
For the upcoming ECB policy meeting on 22 July, the central bank was initially expected to hold a run-of-the-mill meeting, where it keeps its policy settings untouched. And to be sure, that is still the base case, with interest rates still set to be left at minus 0.5% while the ECB’s asset purchases continue.
However, a week ago, ECB President Christine Lagarde informed markets to expect “some interesting variations and changes” to policymaker’s forward guidance this week.
It remains to be seen how “interesting” the ECB’s new choice of words would be this Thursday. For now, markets are expecting mere adjustment to its statement pertaining to its newfound inflation target, with no actual policy tweaks slated for this meeting.
That should explain the relatively subdued performance of EURUSD, not straying far from the 1.18 mark in recent sessions. Still, a decidedly dovish surprise out of the ECB this week, at a time when several of their G10 peers are already turning hawkish, could prompt more weakness in the euro.
Language that points to an extension of support measures for the Eurozone economy could set EURUSD well on its way to forming a death cross (when the 50-day SMA crosses below its 200-SMA).
Such a technical event could then herald further declines for the world’s most popular currency pair.
New record high for FXTM Social Media index?
Tech counters such as Netflix, Twitter and Snap are among the familiar names in the US earnings due this week. However, for the purposes of the Social Media index, the latter two stocks take on a lot more significance. After all, Twitter and Snap make up 50% of the Social Media index, with the other half of this evenly-weighted index comprising Facebook and Google stocks.
Twitter and Snap are due to release their respective Q2 earnings after markets close on Thursday, 22 July. Markets believe that the official figures would once again exceed forecasts, thanks to:
- solid double-digit growth in its active user base
- favourable comparisons from Q2 2020
- the increased spend on online advertising due to a rapidly reopening US economy
Markets are also pricing in the prospects that Twitter and Snap’s stocks would move by more than 10% either way, the day when trading resumes post-earnings (Friday, 23 July). Should those moves materialize to the upside, that could spell a fresh peak for the Social Media index.
From a technical perspective, such a feat is possible, considering that the declines at the tail end of this past week have cleared some of the froth in this index. Its 14-day relative strength index has pulled away from the 70 line while prices have also dipped away from its upper Bollinger band.
Depending on how Twitter and Snap’s actual Q2 results come off, it could add to this Social Media index’s 42% year-to-date gains, as long as the broader market conditions remain conducive as well.
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