5 Things to Watch Next Week: The Fed, Bitcoin, the Euro, Key Earnings, and Gold

1.            A Fed Meeting Without Expectations

After last month’s rate hike by the Federal Reserve, the markets widely expect the FOMC to leave the benchmark rate unchanged, while signaling caution regarding the economic situation. Janet Yellen already voiced her concerns regarding inflation and growth last week, and that caused a significant sell-off in the Dollar and Treasury yields. Exactly because of this, a hawkish surprise is definitely in the cards, as the Fed has been looking to gain some legroom for easing with further rate hikes, as the current near-zero levels leave virtually no firepower for a possible economic downturn. In that case, a short-covering rally in the Dollar is likely.

2.           Bitcoin at $3000 again after miner consensus?

The cryptocurrency segment experienced a strong bullish reversal after last weekend’s panic selling in Ethereum that most likely marked the end of the one-month long correction for most of the major and smaller coins. Besides the oversold technical situation, BTC has been also boosted by the slightly surprising consensus on the BIP 91 protocol that looked distant even a few days before the agreement. With those tailwinds still fully behind the most valuable coin, a test of the prior all-time high near $3000 is likely sooner rather than later, and a new high might already happen this week. Ethereum’s relative weakness is a concern here, but the strength in small cap coins is a definite plus.

Bitcoin 4-Hour Chart Analysis

3.           EUR/USD Still in the Driving Seat

Global stocks, especially European equities have followed the moves in the most traded currency pair very closely. While the major US indices were hitting all-time highs throughout the week, European stocks extended their correction under the pressure of the rising Euro. With the looming Fed meeting and the data heavy economic calendar, we expect volatile trading both in currencies and equities, especially in the second half of the week. Friday will be the strongest in economic releases, with the US, the Canadian, and several European GDP numbers coming out, together with the German CPI reading.

4.           US Earnings Season Heats Up

Alphabet (GOOG), Amazon (AMZN) Facebook (FB), Exxon Mobil (XOM), Chevron CVX), Coca-Cola (KO)… and these are only the biggest names that will report next week, and overall, more than 3 trillion of market capitalization will be assessed by the market. These periods are known for choppiness, and together with the Fed-day and the economic releases, a busy trading week is baked in the cake. The US markets showed resilience following the NASDAQ flash-crash in June, and if the Dollar remains weak, more new highs are expected, despite the historically extreme valuations across the board.

S&P 500, 4-Hour Chart Analysis

5.           Commodities Stuck Between Opposing Forces

Gold has been shining for more than a week now, as the dovish change in the Fed’s rhetoric propelled precious metals higher. Oil and industrial commodities also rallied together with US stocks, but finished on a negative note, as growth concerns remain a huge question mark for the segment. The string of positive Chinese releases helped the sector this week as well, but still they are far off the levels of equity markets regarding the long-term picture. Given the current economic trends, and with investors still mostly focusing on central bank policies, gold could be the biggest beneficiary on the long run, and it still looks attractive at the current levels.

Gold, 4-Hour Chart Analysis

Key Economic Releases of Next Week

Day Country Release Expected Previous
Monday JAPAN Manufacturing PMI 52.3 52.4
Monday GERMANY Manufacturing PMI 59.1 59.6
Monday GERMANY Services PMI 54.4 54.0
Monday EUROZONE Manufacturing PMI 57.3 57.4
Monday EUROZONE Services PMI 55.5 55.4
Monday CANADA Wholesale Sales 0.5% 1.0%
Monday US Existing Home Sales 5.59 mill 5.62 mill
Tuesday GERMANY IFO Business Climate Index 114.9 115.1
Tuesday US CB Consumer Confidence 116.2 118.9
Tuesday US Richmond Manufacturing Index 7 7
Wednesday AUSTRALIA CPI Index 0.4% 0.5%
Wednesday UK Nationwide HPI 2.7%
Wednesday UK GDP 0.3% 0.2%
Wednesday US New Home Sales 615,000 610,000
Wednesday US Crude Oil Inventories -4.7 mill
Wednesday US FOMC Rate Decision 1.25% 1.25%
Wednesday US Fed Monetary Statement
Thursday EUROZONE M3 Money Supply 5.0% 5.0%
Thursday US Core Durable Goods Orders 0.4% 0.3%
Thursday US Initial Jobless Claims 242,000 233,000
Friday JAPAN Core CPI Index 0.4% 0.4%
Friday JAPAN Unemployment Rate 3.0% 3.1%
Friday JAPAN Household Spending 0.6% -0.1%
Friday JAPAN Retail Sales 2.3% 2.15
Friday GERMANY Prelim CPI 0.2% 0.2%
Friday SPAIN GDP 0.9% 0.8%
Friday US Advance GDP 2.5% 1.4%
Friday CANADA Monthly GDP 0.2% 0.2%
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.