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Bitcoin and stocks rise at start of new week

Fawad Razaqzada Fawad Razaqzada 06/09/2021
Bitcoin and stocks rise at start of new week Bitcoin and stocks rise at start of new week
Bitcoin and stocks rise at start of new week Fawad Razaqzada
The big themes last week were weakness for the dollar, strength of precious metals and foreign currencies, as well as cryptos. Bitcoin managed to extend its gains over the weekend, finally clearing the $50K hurdle cleanly. There hasn’t been much in the way of any fresh news for crypto currencies. They are continuing to find support because of momentum buying - people buying because prices are rising, hoping to sell back at even higher prices. Not much has changed for other markets either, although global stocks have rallied sharply, with European indices being up around 0.5% to 1% this morning after being stuck in holding patterns last week. With the US markets closed in observance of Labor Day, there won’t be much to look forward to in the afternoon.

BitcoinSource: ThinkMarkets and TradingView.com
 
Will the dollar selling continue?

Last week saw the dollar drop sharply. This was in response to some soft US data and after Jerome Powell had watered down the Fed’s hawkish tone a little bit at the Jackson Hole Symposium. The major US data releases disappointed throughout the week, which culminated with the publication of a poor nonfarm payrolls report on Friday, triggering further weakness in the greenback and causing precious metals to rally.  The US economy only managed to add 235K jobs in August, when 720K was expected. While this is clearly a setback, I don’t think it is a game changer insofar as the Fed’s policy is concerned. Thanks to the past sharp improvement in US jobs data, I reckon the Fed is still on course to announce the timeline for tapering QE at the November or December meeting, but the poor data certainly boosts the narrative that the Fed is going to ease off the QE gas even more gently.
 
As we head deeper into the last month of the quarter and get nearer to the business end of the year, volatility should pick up after the quieter summer period.

November or December?

Investors will keep a close eye on the Fed’s policy response, which will depend on incoming data and the situation with the virus. Although many people expect the Fed to announce its tapering plans in November, it is important to note that the FOMC will only have one more NFP report to work with until then. The next policy meeting is on November 2, but the jobs report won’t be out until two days later, on 5th of the month. So, this may mean tapering could be delayed until the December meeting – especially if we see further weakness in incoming US data or if inflation pointers weaken. In other words, there is a risk the Fed’s ‘substantial further progress’ condition won’t be satisfied to justify tapering by the Fed’s November meeting.

Three major central bank meetings, but expect no policy changes

But in as far as the week ahead is concerned, well in light of the recent improvement in Eurozone data and some hawkish commentary from a couple of ECB officials, the EUR/USD could further extend its gains ahead of the ECB meeting later in the week, now that the US jobs report has disappointed expectations. It is also worth watching gold, now that it has cleared several resistance levels, including $1820. The weakness in the dollar could provide further fuel for the crypto rally.

The week ahead features three major central bank meetings. The RBA, BoC and ECB are all expected to keep their respective policy stances unchanged.

RBA: The Reserve Bank of Australia decision must decide whether or not to stick to its taper plan in light of ongoing lockdowns of nearly half of the Australian population in its two most populous cities.

BOC: In Canada, the upcoming federal election means the BoC won’t be making any changes, but the USD/CAD could decline further as the BoC is likely to remain comparatively hawkish, and in light of the renewed strength in crude oil prices.

ECB: As far as the ECB is concerned, well I can’t image President Christine Lagarde will have changed her dovish stance much, even as some ECB members have spoken in favour of ending PEPP in early 2022 amid the strength in Eurozone data. Still, any slightly change in her tone should keep the euro’s recent strength intact.
 
Macroeconomic highlights
 
Monday

On Monday, the North American markets will be closed in observance of Labor Day in the US and Canada. This should make for a quitter day, although we will have further data from the Eurozone to take into account with German factory orders and Sentix investor confidence data among the highlights.

Tuesday
  • China trade figures
  • RBA – no change expected
  • German industrial production and ZEW Economic Sentiment
Wednesday
  • BOC rate decision and press conference – no change expected
Thursday
  • ECB policy decision and press conference
  • US jobless claims, crude oil inventories
  • Central bank speech: FOMC Member Daly and Williams
Friday
  • UK data dump – monthly GDP, industrial production, manufacturing production and construction output numbers 
  • Canadian employment report
  • US PPI
 
 

 
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
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Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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