Indices Step into a Busy Week on the Front Foot

Stock traders took a wild ride on the market last week. We started off with a pretty standard drop and finished with a bullish bounce, which can actually start a proper reversal and a mid-term up trend. The Macro calendar was very helpful with that as Friday brought us two positive surprises. Retail Sales and UoM Consumer Sentiment in US happened to be higher than expectations. The Retail Sales print was 1% and we also got a positive revision of data from the previous month. The UoM Consumer Sentiment came at 51.1, as opposed to expectations of 49. No wonder Friday’s candle was a bullish one with a fairly high closing.

Last week was pretty busy for commodity currencies. The Australian Dollar was on Thursday was supported by the data from the job market, where Unemployment rate dropped to 3.5% and 88400 more jobs were created. The Canadian Dollar was influences on Wednesday, when the Bank of Canada (BOC) decided to raise interest rates to 2.5%, which came as a surprise and more of a hawkish stance as the rise to 2.25% was expected and priced in. 2.5% was also a decision from the Reserve Bank of New Zealand although here there was no shock as the rise of 50bp was generally anticipated by market participants.

On Wednesday traders’ attention was focused on inflation from the US, which came in hot, exceeding expectations (1,3% vs 1.1%). Interestingly, that did not cause the USD to strengthen. We saw a rather whipsaw kind of movement with no clear winner hours after the publication.

The new week will mostly focus on inflation. We already received data from New Zealand, where CPI came at 1.7% vs the expected 1.5%. Initially, that supported the NZD but by the end of the Asian session it caused it to decline. Tuesday will bring us the Final CPI print from the Eurozone although final prints do not posses such power as the early ones. Wednesday will bring us CPI prints from the UK and Canada and that will for sure be something to look at.

Thursday, will be central bank day with the Bank of Japan and the European Central Bank in focus. If you have any trades or plan to have any trades involving the Euro or Yen, on Thursday you should be extra cautious and for sure you will experience high volatility and momentum – a blessing for day traders and nightmare for long-term position investors.

Lastly, Friday, will be PMI day, where we will see PMIs from literally across the globe, from Australia to the United States. In general, numbers above 50 are expected, so apparently the mood is not that bad as many think.

Setups for This Week:

DAX

Primary View:

Seems that the 12450 support was defended once again

The price bounced creating the double bottom formation

On Friday, the DAX broke the mid-term down trendline, which triggers a buy signal

Alternative View:

The price coming back below the blue line, will cancel the positive sentiment

Brent Oil

Primary View:

Oil started the new week higher after US President Joe Biden’s meeting with MBS.

The price bounced off the 100 USD/bbl support, indicating that the meeting was a failure at least if we consider the topic of raising the supply

Potentially, the next move can be an upswing towards the resistance level at 106 USD/bbl and the mid-term down trendline (black)

Alternative View:

If the price breaks the red support at 100 USD/bbl, a major sell signal will be triggered

USDCAD

Primary View:

The USDCAD is still trading around the 38,2% Fibonacci.

The buying pressure last week was really high but buyers were unable to secure a breakout of that resistance along with an escape from the wedge pattern

That leaves the doors open for the sellers as resistance in this bearish formation is still alive

Alternative View:

The price closing the week above the upper line of the wedge (black lines) will be a strong buy signal.