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Trading Week Ahead: 29th November– 3rd December

November 28, 2021
by Joseph Jeffriess, Market Analyst

Article Recap

Important Data Releases & Events

Monday
USD Fed Chair Powell Speaks

Tuesday
CAD GDP – USD Fed Chair Powell Testifies

Wednesday
AUD GDP – USD ADP Non-Farm Employment Change – GBP BOE Gov Bailey Speaks – USD Fed Chair Powell Testifies – USD SM Manufacturing PMI

Thursday
OIL OPEC-JMMC Meetings

Friday
CAD Employment Change, Unemployment Rate – USD Average Hourly Earnings, Non-Farm Employment Change, Unemployment Rate – USD ISM Services PMI

What happened last week?

Last week, the markets took a dramatic shift. In a way, their dynamic resembled what we saw last year – a shift back to the Covid fear. Is this the start of a new sell-off? We don’t know yet, but it was enough of a shock to sink global risk markets. The USD didn’t act as expected, but there are other reasons there.

The Covid fear spreads fast

B.1.1.529 variant was first discovered in Botswana earlier this month, around the 11th of November as reported. The variant is of concern due to the number of mutations it has. Up to thirty-five, and these mutations are what have epidemiologists so concerned – they could prove resistant to current vaccines. This is not confirmed yet, but markets rarely wait for the details to act. The variant, for now, is seen as potentially more infectious than the Delta strain and has already spread to South Africa and Hong Kong. European cities are already dealing with massive Covid outbreaks, so this news couldn’t have come at a worse time – the worries around current recoveries in European economies are already there.

The variant is thought to have developed in an autoimmune compromised person, someone who has untreated HIV. The worry and fear that have hit the markets on Friday are that a new super variant could replace the current Delta strain that is far from under control and plunge us back into times not seen since 2020. I’m being a bit dramatic here, and we will need to wait for more data before jumping to conclusions.

A black Friday, indeed

The effect, on Friday we saw solid selling as this hit the news. European and Asian stock indexes have been hit hard, and US futures dropped heavily pre-open. Dow futures trading as much as 800 points lower. The DAX lost over 5% at stages last week, and the FTSE shed over 2%. Currencies weren’t spared, as traders rushed back into the JPY to cover risk. The AUD, EUR and GBP all tracked sharply lower to the JPY to end the week. This to the USD was not that clear as the USD fell from weekly highs after the Fed adjusted its tapering plan. Despite the Covid scare, the EURUSD traded higher last Friday.

Oil took a battering to end the week, tanking below $75. Gold decoupled from the USD and saw strong selling before seeing some demand last Friday as it became a flight to safety.

Crypto markets showed some signs in the top ten before Friday’s negativity killed demand. BTC, ETH, SOL, etc all dumped as traders looked for safe-havens.

The effect, Friday we saw solid selling as the new variant hit the news. European and Asian stock indexes have been hit hard, and US futures dropped heavily pre-open. Dow futures trading as much as 800 points lower. The DAX lost over 5% at stages last week, and the FTSE shed over 2%. Currencies weren’t spared as traders rushed back into the JPY to cover risk. The AUD, EUR, and GBP all tracked sharply lower to the JPY to end the week. This to the USD was not that clear as the USD fell from weekly highs after the Fed adjusted its tapering plan. Despite the covid scare, the EURUSD traded higher last Friday.

Oil took a battering to end the week, tanking below $75. Gold decoupled from the USD and saw strong selling before seeing some demand last Friday as it became a flight to safety. Crypto markets showed some signs in the top ten before Friday’s negativity killed demand. BTC, ETH, SOL ect all dumped as traders looked for safe-havens.

What’s coming this week?

This week, we have a solid week in news coming up. Fed Chair Powell testifies and Friday’s employment data are the highlights. While these could add to or take away from current worries, I feel markets are now going to be well and truly glued to developing news surrounding the latest COVID variant. We have seen some very over-invested markets lately (stocks). If this continues to become the monster is thought to be, could this be the straw that breaks the camel’s back?

OPEC meets this week and with pressure from the US, and now, new pressure going into the heart of future demand, could that justify further cuts from the group? Bitcoin closed its second weekly close lower. Could this new variant tip the scales for the crypto setting up a new move lower? This new variant hopefully isn’t what it’s feared to be, or it could really start cracking recent recovery efforts.

All times are AEDT.