If one word could be used to describe this week, the best fit would be intense.
There was so much going. We had key economic data released by major economies to updated company earnings and speeches from numerous Federal Reserve officials. On top of this, currency and commodity markets were volatile thanks to fundamental forces with the euro and oil snatching our attention.
On Monday, I was prepared for anything after reviewing the economic calendar. The mood across markets improved following strong economic data from China with Asian and European markets ending in gains. However, lingering concerns about global growth amid signs of rising inflation weighed on US markets, resulting in a lacklustre session.
Our trade of the week was oil as we questioned whether US President Joe Biden would unleash some of the Strategic Petroleum Reserve (SPR). This move would help lower how much Americans are spending on petrol. On the charts, WTI Crude was under pressure with bulls losing momentum. The breakdown below $78 on Friday triggered a decline towards $75.
President Joe Biden and China’s Xi Jinping’s first virtual face-to-face summit hijacked the headlines on Tuesday morning. Both leaders held talks on Monday evening which raised hopes over relations improving between the two largest economies in the world. On the data front, the UK employment figures were encouraging despite the end of the furlough scheme. In the United States, retail sales surged in October as Americans started their holiday shopping early to avoid empty shelves. Sales rose 1.7% in October, topping expectations of 1.4%. While this data signalled strength in the US recovery it also fanned concerns about inflation, fuelling speculation around the Fed acting sooner than expected.
Mid-week, inflation concerns continued to weigh on the mind of investors especially after consumer prices in the UK climbed 4.2% compared to October 2020. This was the steepest year-on-year jump for inflation in nearly a decade. The pound jumped as high as 1.3472 during the session, before peaking to 1.3513 on Thursday.
In Europe, the annual inflation rate was 4.1% in October, up from 3.4% in September. Interestingly, the Euro tumbled to a 16-month low on Wednesday amid rising concerns over Covid-19 outbreaks in Europe and the ECB signalling that it would not raise interest rates next year. An appreciating dollar enforced further pressure on the euro this week with the EURUSD hitting a fresh 16 month low on Friday.
Our mid-week technical outlook focused on G10 currencies. We used technical analysis to uncover potential setups on various currency pairs. One of the setups covered was the GBPUSD which found resistance around 1.3500. Sustained weakness below this may encourage a decline back towards 1.3410 and 1.3352.
It was another day but the same old story for markets on Thursday as inflation concerns weighed on sentiment. With markets mixed and currencies on standby, we used this opportunity to re-evaluate market trends. Our weapon of choice was multiple timeframe analysis (MTFA). This is a method of analysing long-term, medium-term, and short-term timeframes to achieve an accurate entry or exit when trading the markets. Global stocks were mixed on Friday as fresh Covid-19 restrictions in Europe fuelled fears around the global economic recovery. U.S stocks concluded the session mixed with the S&P500 gaining 0.32% this week.
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