Weekly Market Analysis — Aug 30: Has the Market lost confidence in a USD rebound?
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Highlights
- Bitcoin keeps 11,200 as a solid floor. Bulls return to altcoins
- Gold taking advantage of dollar weakness; Another test at 2,000 expected
- US Dollar on the defensive; market loses confidence in a DXY rebound
- Experts anticipate EUR/USD at 1.2000 in a volatile week
- The RBA to leave doors open for additional easing; AUD/USD bullish
- Nonfarm payrolls and the US employment report to provide much volatility on Friday
- Stocks keep ignoring bad news due Fed’s liquidity; further highs expected
- Be aware of profit-taking ahead of the start of September
The week ahead: The story of a weak dollar
Over the next week, the US dollar will be the key player as traders are still digesting the effects of the decision taken by the Federal Reserve (Fed) related to interest rates.
Most experts think that the new average inflation standard will place the United States in a long period of low-interest rates, which is dovish for the US Dollar.
In that framework, gold, stocks, and other riskier assets such as the EUR/USD and the AUD/USD are ready to reach fresh highs. In the crypto world, government recovery packages and central bank money are fueling altcoins across the board. Bitcoin, on the other hand, seems limited between 11,200 and 12,000.
Finally, the economic calendar brings the RBA interest rate decision, inflation in the eurozone, and the US employment report. These numbers will ensure there is much more volatility to come in the global markets.
Forex: EUR/USD ready to test the 1.2000 area
After a week of testing the 1.1800 area, EUR/USD finally recovered ground on Friday and closed the week above 1.1900. It was its ninth positive week in the last ten. The move confirmed that the euro seems ready to test the 1.2000 important level.
AUD/USD broke above 0.7300 last week, and it is now trading at highs since December 2018 around 0.7365. The Australian dollar is trading higher against the USD as the Fed is retaining its injection of money into the American economy.
GBP/USD also took advantage of USD weakness and rose to 1.3350, highs since December 2019. Traders are now expecting a correction or at least a period of sideways movement.
Stocks: New highs ahead as the summer ends?
Stocks have performed incredibly well in the last few months and despite experts anticipating a complicated summer, it didn’t eventuate. in contrast, major indices such as the NASDAQ, S&P, and the Dow Jones actually rose to all-time highs.
But why does it seem that the market is ignoring bad news? Well, it’s because the Federal Reserve keeps pumping money into the economy; Another reason is that people believe that a vaccine will be available soon putting an end to the devastating global pandemic that is sweeping the world.
In the meantime, keep an eye on Apple and Tesla shares, as these shares will experience a split at the end of the month. The split is expected to add further volatility to these particular stocks and possibly push them even higher.
Commodities: Gold to attack the 2,000 area
Almost all experts in the market expect Gold to test the 2,000 area against the US dollar this week. The reason will be the dollar weakness but also the financial injection from the Fed.
Silver has been contained by the 28.00 level almost all of August, but now it looks ready to break above. Palladium is also on the upside with XPD/USD having a consolidated floor at 2,145.
As sentiment improves, so does the industrial need for commodities.
Crypto: Tokens on fire; Bitcoin takes a breath
Following the Fed’s decision to adopt average inflation, Ripple Labs CEO, Brad Garlinghouse, said it was good for the crypto market and then we started to see a recovery for altcoins. More dollars, even at a lower price, would mean a steady demand for digital coins plus an increase in crypto prices.
Ethereum (ETH) is currently going up with ETH/USD trading at highs since August 19 at $423.26. The chart is also suggesting further gains. Ripple is also recovering from recent declines. The same story with Litecoin, as LTC/USD rallied on Sunday and it looks as though it is ready to add gains in the week.
Bitcoin, on the other hand, looks trapped between 11,200 and 12,000 as the unit is taking a break before deciding which way to move next. At this stage, most of the attention is going to altcoins so BTC/USD can wait… for now.
Summary: Further highs expected, but be aware of profit-taking
As mentioned above, the Fed’s decision would mean a lower dollar, which is like ammunition for current upside movements across the markets. However, be aware of potential profit-taking movements ahead of the end of the month.
Also, remember that summer is finished and most investors are returning to work this week. It would mean higher volatility and great rebalancing, which is when money changes from one market to another.
Our weekly market analysis is a community contribution and is provided for information and educational purposes only. This content should not be considered a recommendation of investment or trading advice and past performance is not indicative of future outcomes. Know the risks involved when trading.
