Introduction
This week gave us a relatively calm macro-economic calendar, but there was no shortage of price action. We’re going to get into it and bring you completely up to speed so you’re prepared for the next week of action-packed trading.
Global Macro
This week we saw three market moving events:
- Australian Unemployment Rate: Data came in at 4.5%, worse than the expected 4.3%, further tightening the Reserve Bank of Australia’s rate options
- Canadian Consumer Price Index (Inflation): Very surprisingly was below expectations, whereas other countries are having the energy prices now ripple through the data, Canadian CPI was at 0.4% month-over-month, compared to last month’s 0.9% MoM.
- FOMC Meeting Minutes: The True Market mover
Let’s dive a bit deeper into these meeting minutes. As always, the Fed’s monetary policy is the most crucial to understand, as the biggest stock indices are American, and most Forex pairs, Stocks and Commodities are all dollar denominated. Furthermore, this last meeting came at a point where the Fed has been shifting from possible rate cuts later this year, to now possible rate hikes later this year, with the former option completely priced out.
The most crucial part of the minutes we can find highlighted in the above screenshot. The median voter in the Fed is sitting closer to the hawkish side than the press conference suggested. These notes are what made futures now price in a 75% chance of a 25bps rate hike by the December meeting.
Equities
Stock indices had a solid, but relatively calm week, as they are now yet again just a couple of points shy of printing new All-Time Highs. The Euro Stoxx was the big outperformer however, rounding off Friday’s trading session with a bullish engulfing.
Euro Stoxx 50 on the Daily Timeframe
Because of that, the index now only has one more resistance area left before it too can surge to new ATHs, assuming that the break of the €6,020-6,038 level holds. That level is the open gap which has been left ever since the February top, with a full close at €6,103.
Forex
It was a remarkably calm week in FX, as most currencies were stuck in a contracting environment, with a very tight weekly range. To see any real movement, we need to switch to the crosses, more specifically to the EUR/GBP.
EUR/GBP on the Weekly Timeframe
For several months now, the pair has been stuck inside a tight range, where every attempt at breaking out eventually resolved in mean-reversion. However, if the weekly candle manages to close as a true bearish engulfing (closes below last week’s low), then that gives us a hint of price wanting to break this range to the downside.
In this case, the low of the week prior at 0.86296 becomes the key point of reference. It’s around this area where a reaction would be likely. In this scenario, a run of the range lows at 0.85964 becomes the next downside target. This pattern is invalidated however if price manages to break back above 0.86296.
Translating that hypothesis visually, it could look somewhat like the following:
EUR/GBP on the 4-hour Timeframe
Commodities
As both Gold and Oil had a very calm week price action wise, it’s time to shift our sights to the often overlooked soft commodities class. Wheat here caught our attention, as the asset has quietly returned 28% Year-to-Date, without any true media coverage.
Wheat on the Daily Timeframe
Looking at this chart, the further direction seems up. We see clear Higher Highs and Higher Lows, where the market structure continues to be respected, all the while our momentum indicator is consistently sloping up. Furthermore, there are no true overhead levels to be spotted in recent history, with the path to new highs seemingly wide open.
On the downside there is a major support level at $616-625, as well as a smaller level up higher at $643, which price is currently bouncing from.
Conclusion
One-sentence summary of the week:
Indices just a Sigh Away from ATHs