Trading Week Ahead: 21st – 25th September 2020

กันยายน 20, 2020
by Joseph Jeffriess, Market Analyst

Article Recap

Key Events and Data Releases This Week

Bank Holiday Japan

Bank Holiday Japan
USD Fed Chair Powell Speaks
GBP BOE Gov Bailey Speaks

USD Fed Chair Powell Testifies
NZD Official Cash Rate, RBNZ Rate Statement
EUR French Flash Services PMI, German Flash Manufacturing PMI, German Flash Services PMI
USD Flash Manufacturing PMI

USD Fed Chair Powell Testifies
CHF SNB Monetary Policy Assessment

USD Fed Chair Powell Testifies, Treasury Secretary Munchin Speaks

(Times adapted to AEST timezone)

Last Week’s Wrap

It was a mixed week as risk struggled to hold onto gains to a stronger USD, and equities continued to move lower. Tech shares remain in focus as the declines continued, while Gold and oil finished the week stronger, and Bitcoin finally broke its losing streak.

On the FX front, the Japanese Yen was the clear winner with strong gains across the board. USDJPY was hit hard as worry around the US-China trade spat continued, and monetary policy and U.S. election uncertainty weighed. The USDJPY closed the week 1.45% lower, touching 104.27. Risk also felt the JPY comeback, with EUR losing around 1.49%, and AUD losing 1.39%, making it three straight weeks lower.

Trade worries perked up with the U.S. signaling a ban on the Chinese TikTok and WeChat apps. China has threatened retaliation if the ban goes through, and several U.S. tech companies could be exposed to Chinese retaliation. It has also been reported that TikTok is suing the Trump administration. This uncertainty did tech stocks no favors, as the Nasdaq finished Friday 1.07% lower. The NDX100 index lost 1.36% for the week, failing to hold a solid 3.85% fightback rally, and last week’s close lower makes it three in a row. Apple has given back 22% from its peak, that’s a 500 billion drop in its market cap! This issue looks like it’s only going to expand, traders. Are the Chinese banking on a Democratic win to cool the current US-China trade hostilities?

Gold added 0.54% closing higher for a second week in a row but failed to hold highs reached during the week. $1,930.50 is the level we’re watching to remain as support. Meanwhile, oil jumped back to life, adding 9.10% after OPEC member Saudi Arabia pressed members to stick to production quotas. Hurricane Sally was another factor, helping to cut U.S. production. EIA inventories were another surprise showing a drop in U.S. inventories. $37.50, for now, is holding at weekly support. While price can hold above this level, buyers could remain in short-term control. The weekly trend is up at the moment, but key resistance remains at $43.25.

The FOMC and BOE held rates as expected last week. The small surprise from the FMOC was no real solid details on the bond-buying. This gave the USD its jolt on Thursday morning, and it turned out to be a strange day, as risk saw heavy selling, which included currencies, shares, and share index futures.

Looking Ahead

This week, attention will remain on a few ongoing influences. Discussions around the Brexit withdrawal agreement continue. Will we see any further indication from Johnson he is going to push ahead? With regard the U.S.-China / Tech situation, this looks to be having an impact on tech stocks and with the market already sensitive further developments could continue to worry traders out.

EU flash PMI data is due this week, with services and manufacturing data to be released by key member states, France and Germany. Traders will be looking at this to gauge the continuing recoveries from the pandemic, a pandemic that is not over as Europe continues to see growing case numbers in several countries. U.S. Fed chair Jerome Powell testifies this week, and the session will have a Q&A. The questions are not scripted and it may lead to potential volatility.

This week’s chart is of the USDJPY. We can see clearly that price has returned to a long-standing support area. Will we see buyers come to the rescue once again?

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