Wall Street dropped the most in a month last week as trouble in Ukraine cast a shadow over markets and consumer confidence numbers came in lower than expected.
Friday’s University of Michigan consumer confidence figure came in at just 79.9, sharply down from last month’s 81.6, and managed to throw some traders off guard. However, it was the uncertainty stemming from Crimea that really affected markets.
With the weekend referendum between Ukraine and Russia looming, traders did not want to take any chances and that saw a flight into safe haven assets such as treasuries and the Japanese yen.
As the weekend comes to a close, early results indicate a 95% majority in favor of handing Crimea to Russia, although Ukraine will likely question the legitimacy of the ballot. On the face of it, the news should be welcomed as it lessens the likelihood of potential conflict.
There is still a long way to go, however, and traders will be forgiven for remaining cautious, at least until the referendum has been completely resolved. The potential for diplomatic turmoil is still there, particularly if Western nations look to sanction Russia and Russia responds by cutting some energy exports to the rest of the world.
Elsewhere last week, the Reserve Bank of New Zealand became one of the first Western economies to raise rates since the 2008 financial crisis. The bank increased the target rate by 0.25% to 2.75% sending the kiwi dollar higher against almost all of its trading peers.
This week, traders will continue to watch the Ukraine situation as well as keeping an eye on a number of economic releases.
US CPI comes out on Tuesday at 12:30 GMT whilst Canadian CPI will be released on Friday.
The big event of the week, however, will be the latest FOMC meeting, the first with Janet Yellen at the helm. Analysts are expecting another monthly taper of $10bn, while interest rates are expected to be held steady at 0.25%. Then on Thursday, we will see a rate decision from the Swiss central bank.
FXeeda Results
Our forex signals performed well in dollar yen this week and our trades benefitted from the flight to safety caused by unrest in Eastern Europe. USDJPY was also our most frequently traded pair and we took 521.5 pips from a total of 48 trades. We also made money in EURUSD (100.5 pips from 39 trades) but unfortunately gave a chunk back in GBPUSD (-648.7 pips).
Ger 30: Outlook
Stocks fell across the board last week and that saw Germany’s DAX index fall back below the 9000 level by the close of Friday. Drawing from the weekly chart, we can see that the loss was enough to wipe out almost 20 weeks of gains, suggesting that the index may be oversold on more short term horizons.
The daily chart looks particularly oversold and now that the index has touched the strong support of 9000, there is good potential for a sharp bounce.
The referendum in Crimea looks like ending in a clear Russian win, and that should see the potential for conflict in the area reduced. It will likely have a positive effect on markets when they open on Monday. Meetings will be ongoing but the resolution of the ballot should be of relief to traders.
As we approach the middle of the week, Janet Yellen’s first FOMC meeting as head of the Federal Reserve should also reassure markets. Yellen has already shown the ability to soothe markets and that should give stock traders plenty to cheer next week.