This article was submitted by Michael Stark, market analyst at Exness.
The first trading of 2021 started without many serious surprises as most active trends from the end of last year continued. Chinese manufacturing PMI continued to indicate expansion this morning though not as much as expected. Traders’ key focus this week is on Friday’s NFP: this preview of weekly forex data looks at XAUUSD, UKOIL and EURUSD ahead of the big event.
Central banks were understandably inactive in most cases over the holiday. The only change was the Central Bank of the Republic of Turkey which hiked its one-week repo rate to 17% on Christmas eve. No significant central bank is due to meet until the Bank of Canada on 20 January, so we can expect more focus on regular data this fortnight.
Apart from Friday’s non-farm payrolls, the main events this week include balance of trade from Australia, Canada, the USA and Germany from late on Wednesday night to Friday morning. The usual range of Canadian and American employment data on Friday afternoon including the NFP means that symbols with the loonie and greenback are likely to be highly active then, especially USDCAD itself.
Gold-dollar, four-hour
Gold is up about 2% so far today as the dollar continues to weaken and expectations of rising inflation remain. Large deficits in national budgets and current accounts in many countries are likely to keep the yellow metal in focus as a hedge against inflation this quarter in the absence of significant new fundamental drivers. Rollout of vaccines around the world is currently tempered by more restrictive measures in many countries.
From a technical point of view, the key resistance around $1,900 has now clearly been broken. Moving averages also flipped back to a strong buy signal in the week before Christmas, with both the 50 and 100 SMAs golden crossing the 200. Buying in now looks like a significant risk, though, given clear overbought conditions from both Bollinger Bands (50, 0, 2) and the slow stochastic (15, 5, 5).
The NFP is the key release this week for gold as many other instruments. However, some volatility also looks likely around American balance of trade at 13.30 GMT on Thursday.
Key data this week
Bold indicates the most important releases for this symbol.
Oil is also up so far today, with a key factor here being again the weaker dollar. Traders of Brent and American light oil are now focussing on OPEC’s upcoming video conference on production in February, with expectations of no change remaining high. If supply remains broadly stable, the outlook for marginally but steadily increasing demand in the first quarter of this new year is a positive fundamental for crude.
Turning to the chart, we can see a strong upward movement over the last few periods although there is currently no clear sign of buying saturation. $50 is likely to remain a strong support even over higher timeframes unless there’s a sudden change in sentiment, but how price interacts with $52 over the next few days could also be key for more immediate direction. The usual releases this week might drive some short-term movements for Brent, but we can reasonably expect a fairly thin week of trading and possible consolidation.
Key data this week
Bold indicates the most important release for this symbol.
Tuesday 5 January
30 GMT: API crude oil stock change (1 January) – previous -4.79 million
The last-minute agreement of a trade deal between the UK and EU gave the common currency a boost in many of its pairs, including against the dollar. The American currency has also struggled against the EU since earlier in 2020 amid the EU’s notably better handling of covid-19 and general agreement in the bloc on extensive fiscal stimulus, something which was much more of a challenge in the USA. President Trump’s ongoing attempts to find more votes are generally being discounted.
$1.20 is traditionally the area for euro-dollar where the ECB starts to become concerned about the rate, but so far there is no indication of a large retracement of the main upward trend. The fundamentals of EURUSD have remained fairly consistently positive for some weeks now, and volume has generally confirmed the uptrend. With a small retracement having recently completed and no signs of saturation at the moment, the stage might be set for another new high later in the week depending on the results of key data, most critically the NFP.
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.
