Forex Trading Library

The Week Ahead: the Pandemic No Longer Drives Markets

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EURUSD falls as Fed pressed to act

EURUSD

The US dollar climbs as appetite for riskier assets fades. Surging energy prices have flamed up fears of rampant inflation, making the greenback the refuge of choice for hot money.

While the Federal Reserve has announced that it would unwind its stimulus as soon as November, the market is wondering if they could be forced to move sooner than expected.

More than ever, the answer may lie in the labour market, the Fed’s other main focus. Despite fewer jobs added in September, upbeat average earnings and a sub 5% jobless rate cannot be ignored.

The euro is sliding towards 1.1400. A rebound is likely to be capped by 1.1700.

AUDUSD recovers as major cities to reopen

AUDUSD

The Australian dollar finds respite from the end of a four-month lockdown in Sydney.

Following widespread vaccination, the grand reopening of New South Wales and that of Victoria later in the month set hope for an economic rebound by the end of year. The major shift in the pandemic management is that authorities have ditched attempts to eradicate the virus at all cost.

Vaccination is the key to a return to normal. Markets would expect the central bank to follow suit with policy normalisation, especially after its neighbour the RBNZ fired the first shot. 0.7500 is a key resistance and 0.7120 a support to keep the pair afloat.

UKOIL retraces with US to sell reserves

UKOIL

Oil prices dipped after the US said it would consider selling from its strategic crude reserves. The move comes in as an attempt to cool surging energy prices, at a time when stagflation could threaten economic growth.

Recent buildups in US inventories have weighed on the short-term price action as Brent crude approaches its three-year high.

However, OPEC’s tight lid on global supply would continue to support the bull run. The organisation has ignored calls from major importers to open the tap, but would stick to a planned increase in output instead. 86.70 would be the next hurdle with 76.00 as support.

US 30 climbs as jobs improve

The Dow Jones recovers as the US unemployment rate falls below 5%. Investors have seemingly shrugged off Chinese property developers’s predicaments and focused on US issues.

The debt crisis has been averted after the Senate approved to temporarily raise the debt ceiling, easing fears of a much more impactful Treasury default.

With that out of mind, the market can price in an improved labour market. A ninth consecutive month of net payroll gains is an indication of a robust recovery, which would benefit traditional industries from the index.

A break above 35000 may resume the uptrend and 33700 is a key support.

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