Financial markets were volatile last week, as stock markets, led by technology shares, posted big losses across the board.
US equities dropped sharply as earnings season kicked off and investors grew nervous that the current quarter’s earnings would not be able to meet expectations. They therefore sold some of the stock markets most expensive companies and moved to safe havens such as gold and the Japanese yen. Gold moved back above the $1300 mark with conviction and continued a run of 9 successive higher opens for the precious metal.
Meanwhile, EUR/USD bounced back, posting 4 solid up days and finishing the week just shy of 1.39, around 200 pips higher than at the beginning of the week. GBP/USD was also a strong performer while USD/JPY sank to the 101.5 mark.
Week Ahead
As a new week begins on Wall Street, investors and traders will be nervous of more volatility in the markets. All the talk will be about tech, earnings and we will also see plenty of data out of China.
First-quarter GDP, Chinese retail sales and industrial output figures will all be released on Wednesday and analysts are expecting the slowest pace of Chinese growth since 2009 (at 7.3%).
The rest of the week will see retail sales out of the US (Monday), UK and US CPI (Tuesday) as well as German ZEW (also Tuesday). As well as Chinese GDP on Wednesday, we will also see an interest rate decision from the Bank of Canada.
FXeeda results
Our forex signals hit some good trends last week, particularly in GBP/USD, where we were able to capture a total of 594.8 pips from 32 trades, an average of 18 pips per trade.
We also made good profits on EUR/AUD (155.7 pips from just one trade) and Ger30 where we took a combined total of 1580 points. Our weakest pair was EUR/USD where we dropped -425.2 pips from 33 trades.
EUR/USD Outlook
EUR/USD had a solid week last week as traders downplayed the chance of significant monetary stimulus from the ECB, and stock market volatility saw traders move out of the greenback.
This caused a decent sized rally in EUR/USD which finished the week higher by around 200 pips, and saw the currency touch 1.39 for the first time in about three weeks.
All things being equal, this level is likely to provide much resistance for EUR/USD traders as it has done in the past, and there will be plenty of shorts willing to enter the market at these prices.
Indeed, this was made apparent on Friday as the currency consolidated below 1.39, and this morning EUR/USD has started the week sharply lower on the open.
The problem that shorts have this week, however, is that there may lack a potential catalyst to take the currency lower. With no ECB meeting scheduled, there is limited opportunity for a stimulus-led decline and the biggest euro item on the agenda will be the German ZEW number on Tuesday.
With this in mind, the main market mover will likely be US corporate earnings. If US earnings start to come in weak, then we could see another period of strength for the euro.