Overall, it was another good week for equities. The Dow Jones Industrial Average finished higher by around 1.4%, and the S&P 500 finished at another record close. Stocks responded to comments from Federal Reserve Head Janet Yellen that implied Fed tapering could be halted if necessary, and US GDP numbers failed to derail stock market momentum.
The US GDP figure on Friday was poor, coming in at 2.4% and below the 2.5% expected figure. It was also significantly down from last month’s print of 3.2% and stocks did sink as the announcement was released. However, the main indexes manage to recoup most of the drop before the close. After all, many traders will see the poor figure as more reason to suspend Fed tapering.
Week Ahead
There is plenty on the agenda this week and traders will be acutely aware of the political turmoil developing in Ukraine as Russia deploys troops in Crimea. Emergency meetings are currently underway in the Ukrainian parliament and NATO talks are also scheduled. Meanwhile, President Obama has urged Russian Prime Minister Putin to withdraw from military action.
The turmoil may not necessarily have a huge effect on markets straight away but it could see some traders move to safer havens such as gold, bonds and the US dollar. We may also see some support for oil. Stocks may falter if the situation deteriorates.
As well as watching the political situation, traders will be waiting for rate decisions from the Australian, Canadian, European and English central banks next week. Then on Friday, the all important non-farm payrolls number will be released.
FXeeda results
As you can see from the table, our forex signals experienced mixed results last week. Our best performer was GBP/USD, where we took 245 pips from a total of 36 trades. That was closely followed by EUR/AUD (227 pips from 3 trades) and USD/CHF (147 pips from 11 trades). Our signals performed less well on EUR/USD (-289 pips) and we were also unable to profit in GER 30 and gold. Overall, our signals were slightly in the red for the month of February.
EUR/USD Outlook
The euro bounced last week after European unemployment remained static at 12% and inflation came out very slightly higher than expected at 0.8%. In the short term, these numbers release the pressure on the ECB to drop interest rates and this helped EUR/USD rally past the 1.38 level by the close of Friday.
However, the economic outlook in Europe is still fragile and if we were to see unemployment tick higher, or if inflation fails to rise any more, more monetary loosening will surely be just a matter of time.
Previously, EUR/USD has failed to gain traction above the 1.38 level, having reversed from this level on a number of occasions already and there is every chance that the market could fall back from here to 1.36.
This morning, EUR/USD has already opened lower by around 40 pips. It seems that the situation in the Ukraine is leading traders into safer havens such as the US dollar. Because of this instability, traders should prepare for a bumpy ride and position themselves short EUR/USD.
