It’s a new trading week when the market participants will like to see whether the fresh dollar resurgent will gain more momentum or 95 will resist further rally for the index. Also, it seems US equities would recover from last week’s inflation-induced dips. The Aussie monetary policy, US retail sales data, GBP CPI and CAD monthly CPI will be keenly watched.
Last Week Recap
Last week was another volatile one as risk assets plundered further while major safe-havens gained massively. In a very long time, we saw the dollar and Gold rallied together as the two dominated. The yellow metal closed the first two weeks of November very positive – gaining nearly 5%. That was its biggest 2-weeks gain since July 2020 thus raising hopes that the commodity might fly out of the current bearish correction which has been consistent since August 2020. Also, the dollar traded above 95 for the first time since July 2020 after last week’s US Inflation reports. The greenback has now recovered over 6% since the turn of the year, taking it closer to 50% retracement of the March-December 2020 massive fall. The Yen and Swissy are other strong save-havens but laid beneath the USD and XAU.
On the other hand, risk assets are plundered. Equities took a break from the gradual rally since October. The S&P 500 closed with a red weekly candle for the first time since the last week of September. However, much of the dip was recovered decorating the ground for more gains this week. Meanwhile, the oil market closed the week on the downside, leading to a three-week losing streak, after the WTI hit $85.35 in October. Risk FX like AUD, CAD and NZD also fell especially against the safe-haven peers especially the dollar which dominated over all the major FX. It’s then safe to say that risk appetite reduced last week.
The Week Ahead
The risk-on sentiment might continue this week. That means we might see significant losses on the dollar and a Gold bearish correction. The dollar rally since the turn of the year looks correction with a reversal chart pattern off 95. If 95 proves as the ceiling this week, then a dip is very much likely. Equities, on the other hand, might gain the advantage as investors’ confidence might return stronger. Oil prices could be fueled by better market sentiment. A quick shoot above $82.5 for WTI is the required price action for further rallies.
While USD and Yen might be among the biggest FX losers this week, we could see significant gains on NZD, AUD and CAD. The Sterling, on the other hand, might plummet further together with the Euro.
There are some strong macro data this week. Although Monday is very light, Tuesday will be dominated by highlights from the RBA Monetary Policy Minutes and Retail Sales data from the US. On Tuesday, inflation reports from the UK and Canada could add massive momentum to Sterling and Loonie respectively. On Friday, the US Treasury Currency Report will be the focus again after soft macros on Thursday.