Stock markets fell last week as traders booked profits on a number of big performers and tensions in Ukraine continued to cause concern.
Technology and biotechs were the week’s poorest performers as the Nasdaq dropped 2.8%, the most since 2012. Facebook fell at least 11% after the company said it would pay $2 billion for virtual reality headset maker Oculus, while Citigroup sank over 5% after failing a Fed stress test.
In FX, the US dollar moved lower on Friday and the euro climbed as European inflation concerns wilted following positive inflation data out of the area’s biggest member, Germany.
German inflation came in at 0.9%, below the ECB target but only a tiny 0.01% drop from last month. With the ECB set to meet next week, the data will have slightly reduced calls for more policy action.
So far, traders have been bearish on the euro and have been expecting stronger policy moves from the ECB, but ECB Chief Mario Draghi has failed to bring anything to the table as yet. Because of this, traders will likely forecast no change again at next week’s meeting.
The US dollar was also not helped by words out of China and this saw most commodity linked currencies advance across the board. Chinese Premier Li Keqlang spoke of Chinese reform bills and dismissed fears of an economic slowdown saying that officials would step in if needed, although there is speculation as to what intervention could actually be proposed.
Week Ahead
Traders will have plenty to analyse this week including Eurozone CPI and Canadian GDP numbers on Monday before a rate decision from the Reserve Bank of Australia and German unemployment on Tuesday. Later on Tuesday, traders will see the first of two US ISM manufacturing reports before US factory orders on Wednesday.
Thursday will see this month’s ECB meeting before the second ISM manufacturing report out of the States. Euro analysts currently see no change to the underlying 0.25% benchmark Eurozone rate so more significant could be the proceeding press conference.
On Friday, traders will watch US non-farm payrolls which could end up being the key event of the week. Analysts are currently expecting a monthly advance of 200k compared to the previous month’s 175k number.
FXeeda results
Our forex signals continued last week’s good run of form, taking pips from the AUD/USD, EUR/AUD and USD/CAD. However, our biggest profits came from the EUR/USD (411.8 pips from 37 trades) and the GBP/USD (528 pips from 19 trades) as we correctly predicted a number of moves versus the greenback.
It was not all green though and our signals gave back around 680 pips in the USD/JPY. Meanwhile, we captured 1300 points profit in Ger30.
EUR/USD
As mentioned above, the ECB meet this week to discuss interest rates and whether to use any of the policy tools that officials have at their disposal. Currently, the EUR/USD is reeling after a week of heavy losses, although the currency did manage to eke out a gain on Friday.
In fact, the EUR/USD bounced sharply off the first support in response to German inflation and ended the week around 1.375.
Even so, the majority of traders are preparing for more losses this week as we run up to the ECB meeting. The currency has dropped for four out of the last 5 days and traders have no reason to bet against the trend with the ECB coming up.