U.S. Treasury yields plummeted this past week after Fed Chair Powell failed to redirect investors toward pricing further monetary tightening and U.S. employment data revealed a sharp slowdown in hiring activity. The large retreat in yields sent the broader U.S. dollar reeling, paving the way for a furious rally in major currency pairs such as EUR/USD , GBP/USD and AUD/USD heading into the weekend.
Bond market dynamics also benefited risk assets, boosting both the S&P 500 and Nasdaq 100, which had their best week since November 2022. With sentiment clearly recovering and signs that a recession is not yet imminent , stocks may have room to run higher in the near term, with seasonality possibly providing an additional source of strength.
Focusing on gold , bullion was subdued, unable to take advantage of the weaker U.S. dollar and falling government rates. This is probably because the geopolitical premium built up in the precious metal following the terrorist attacks in Israel has started to unwind, as the war against Hamas has not escalated into a wider regional conflict in the Middle East.
Looking ahead, there are no major economic reports in the U.S in the coming week., but several Federal Reserve members, including Powell, will speak publicly. Retail traders should closely follow these events and scrutinize official statements for insights into the central bank's thinking and the likely path of monetary policy .
Any indication that the policymakers will tread carefully and refrain from hiking rates again could weigh on Treasury yields and the U.S. dollar, but support stocks and precious metals. Hawkish commentary could have the opposite effect on these assets. For a deeper dive into the catalysts that could guide markets and create volatility, be sure to check out selected forecasts put together by the DailyFX team.
US ECONOMIC CALENDAR
Source: DailyFX Economic Calendar
FUNDAMENTAL AND TECHNICAL FORECASTS
The US bond market is sending out a clear signal: interest rates have peaked and they are going down next year. This US dollar weakness is helping GBP / USD reverse its recent slump.
The Australian Dollar found some traction ahead of the RBA monetary policy decision in the aftermath of accelerating inflation . Will a rate hike further boost AUD/USD and AUD/JPY ?
The BoJ delivered a minimal tweak to policy this week with markets still betting on rate hikes in April 2024. USDJPY benefitted from a weaker US Dollar which should it continue could negate the need for full-blown BoJ FX intervention.
EUR/USD was the main beneficiary of the dollar’s massive slide late on Friday after markets reduced the likelihood of another US hike amid slowing jobs data.
In this article, we analyze EUR/USD, USD/ JPY , GBP/USD, and AUD/USD from a technical standpoint, highlighting crucial price levels that may act as support or resistance in the upcoming week.
Gold & silver prices rallied last week leaving technical signals in favor of additional upside as markets prepare for several Fed speakers throughout the week.