WEEK AHEAD: AUG 09

Short Description

On my radar- Has oil price has topped, a so-called bearish death cross pattern in the EUR/USD forex pair and fresh 2021 lows in the EUR/CHF exchange rate. Thanks! Rich

Video Script

Hi everyone, thanks for tuning in! So the things I have on my radar this week include whether the oil price has topped, a so-called bearish death cross pattern in the euro-dollar forex pair and fresh 2021 lows in the euro-Swissie exchange rate. I’ll of course also give a quick preview of the economic calendar this week including US CPI and UK GDP data. Stay right there.

 

Now let’s talk oil. It seems to me that the price of oil looks closer to forming a top than it has for a while. I say that because last week both Brent and WTI crude oil futures failed to take out previous highs and started rolling over. A top would make sense in this area because it’s happened at the old highs from late 2018 and early 2019. What’s caused it fundamentally? Most of the credit I think goes to the Delta variant and what it could mean for demand. Leaders from Israel just hinted at another lockdown in September despite a high vaccination rate and it seems likely oil could drop further if other nations follow suit.

 

Talking of tops, we could have one in the euro too. That’s if the ‘death cross’ that just formed on daily candle charts is anything to go by. The 50-day moving average has crossed below the 200-day moving average on the EUR/USD pair. That’s generally taken to mean price has switched into a downtrend. This information, taken together with data from the CFTC that speculators have turned net long the US dollar for the first time in 16 months suggests hedge funds think more downside could be on its way in the euro.

 

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OK so one place the euro has already been sliding heavily is against a rapidly rising Swiss franc. Again, we can probably pin the explanation for this one on the rising covid cases globally because the franc gets used as a haven when traders feel uncertain. Last week the Euro-Swissie pair broke down to fresh 2021 lows, erasing the entire rally from under 1.08 to over 1.11 that took place this year. So far the Swiss National Bank have not intervened in the FX market but when they do, it could be a big short squeeze.

 

And before we finish, let’s have a look at the economic calendar highlights. The two data points to look out for me are US consumer price inflation and UK Gross Domestic Product. Markets will want to see what happened after the shock 5.4% print in US CPI for July. Another high number just makes Fed tapering more likely and should be dollar positive. UK GDP looks like it probably contracted on a quarterly basis with the UK delaying its economic reopening from covid-19 restrictions. Cases have been coming down in the UK in Q3 so the number for Q2 which is now in the rear-view mirror might not necessarily cause big issues for the British pound.

 

Right thanks everyone, good luck trading this week and make sure to click on subscribe so you don’t miss the next episode of the week ahead.