Oil rejected at key resistance ahead of the OPEC meeting next week, precious metals remain bid, and investors eye next week’s Fed meeting now that the BOC and ECB updates are behind us.
The trading week started with extreme weakness in the cryptocurrency market. The main coins lost over 15% of their value last Saturday, and the weakness quickly affected all the altcoins. By the time the FX market opened on Monday, the volatility from the crypto market had caused many fiat currency pairs to open with a gap.
Traders should remember that more and more institutional investors have exposure to the crypto market; not just Bitcoin, but also Dogecoin, Ethereum, and Ripple. As more funds pour into the crypto space, more volatility will spill over to other markets.
The US dollar lost ground across the board during the first two days of the trading week. This was particularly apparent in the EUR/USD, AUD/USD, and GBP/USD pairs. The latter moved back to 1.40 on strong employment data.
The Bank of Canada delivered the surprise of the trading week by signalling it would slow asset purchases sooner than the market expected, thus triggering a sharp move higher in the Canadian dollar. The EUR/CAD dropped from 1.52 to 1.50 in the aftermath of the announcement despite the euro being one of the strongest currencies on the FX dashboard.
Commodities had a strange week. On the one hand, gold’s strength dominated, pushing higher as digital assets consolidated at lower levels. On the other hand, oil found strong resistance above the $64 level and declined to the pivotal $60 area ahead of the OPEC meeting next week.
Equity markets remained bid, trading close to all-time highs, fueled by strong earnings in the first quarter of the year. The earnings season is in full swing, with major financial corporations already posting their results and the tech sector set to follow.
This week was all about the ECB and the Bank of Canada, but traders’ attention has now turned to next week’s event: the Federal Open Market Committee (FOMC) statement and press conference on Wednesday. As such, most of the positions taken in the aftermath of the ECB and the BOC were probably opened with the Fed’s decision in mind.
Today it is all about the Purchasing Managers’ Index (PMI) releases in Europe. The data should exceed expectations as vaccination efforts gain ground.
Markets to Watch
The S&P 500, AUD/USD, and XAU/USD markets are in focus today.
The weekly S&P 500 chart shows the bullish trend that has been in place for several weeks.
Fighting against such a trend comes at a cost, and even contrarian traders have no arguments at this point. While the market appears stretched, the basic conditions for a rising market — higher highs and higher lows — are still valid.
The closing of the current candle is important for the end of the week. If the market closes the week above the previous week’s highs, the bullish trend is set to continue, and only a close below the rising trendline will put pressure on bulls.
The weekly perspective on the AUD/USD pair is interesting. The pair bounced from the 0.76, where it found support given by a hammer pattern. The long lower shadows (i.e., the lower tails below the candlesticks’ real bodies) show the buying pressure in the 0.76, so that is a key level to watch for the weekly close. On the upside, a close above 0.7850 opens the gates to a new attempt to round the 0.80 level.
Gold’s weekly analysis reveals a strong comeback from below $1,700. The technical picture shows a double bottom and a hammer that triggered the current bullish run. We should keep in mind that these are the first bullish signs on the gold market since last year’s all-time high in August. A weekly close above $1,820 is key for the bullish trend to continue.
Winners and Losers
Gold, the US stock market, and the Canadian dollar are the main winners. Oil is the loser.