This article was submitted by Michael Stark, market analyst at Exness.
Most major stock markets have recovered modestly since Friday’s selloff, which was driven by a negative reaction to Jerome Powell’s comments at Jackson Hole. The main event on the economic calendar this week is the monthly job report from the USA. This midweek preview of data looks at USDCAD and EURZAR ahead of the NFP and other releases.
There were no significant decisions in monetary policy last week, but markets generally interpreted Jerome Powell’s remarks as doubling down in the fight against inflation. Dr Powell warned that the Fed’s current trajectory of strong hawkishness to try to maintain stability of prices would be difficult for many households and likely result in weakening of the economy and job market.
This Friday’s non-farm payrolls and American unemployment rate aren’t necessarily crucial for determining the Fed’s next move, since a triple hike seems to be priced in for 21 September, but a significant surprise either way might drive a fresh movement by the dollar, gold and American indices.
US dollar-Canadian dollar, daily
The dollar index remains close to a 20-year high in the aftermath of Jerome Powell’s comments late last week, with most participants now expecting another triple hike by the Fed on 21 September. However, the Canadian dollar has received some positive sentiment from rising prices of oil in the last few days, and the Bank of Canada has also been one of the faster hikers of rates this year, calling for a full 1% increase at last month’s meeting against expectations of 0.75%. The target overnight rate in Canada is now at its highest since 2008.
With the NFP approaching, rangebound action seems likely. 11 August’s low around $1.276 could continue to be an important support, especially considering the presence of the 200 SMA. To the upside, $1.305 has been tested several times without success over the last few months. In this situation, saturation can be helpful to find entries in combination with the position of the price itself within a range.
12:30 GMT: American annual average hourly earnings (August) – consensus 5.3%, previous 5.2%
12:30 GMT: American monthly average hourly earnings (August) – consensus 0.4%, previous 0.5%
Euro-rand, daily
Sentiment on the euro has improved somewhat so far this week as markets are now certain of at least a two-step hike by the ECB next week. Some participants are starting to expect a triple hike. There is some sign of respite for inflation in the eurozone, with prices of fuel at the pumps dropping significantly over the last several weeks, by nearly 20% on average in some countries like Italy. However, Wednesday’s annual inflation showed that food inflation in particular continues to accelerate.
The South African Reserve Bank is expected to continue tightening policy next month. The differential in rates between the ECB and SARB is now 5%, but this comes with the unique situation of annual inflation being higher in the eurozone at 8.9% than in South Africa.
With the price currently inside two value areas between the 200 SMA below and the 50 and 100 above and the slow stochastic very close to neutral, a large movement ahead of European inflation data looks unlikely. A low reading from ATR and close bunching of moving averages would usually suggest a new direction to come within the next few periods.
Key data this week
Bold indicates the most important releases for this symbol.
Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.
