1. Trump Turns to North Korea Again?
After the recent test of an alleged ICBM (Inter-Continental Ballistic Missile), and more verbal attacks from both sides, the US-North Korean stand-off could take another turn next week. Mr. Trump will return from a crucial G-20 meeting, and given his track record of “at least one outrageous tweet a week” the North Korean threat will likely take center stage again. As we already stated, the current status quo is fragile and there is no easy solution to the situation, so we expect tensions to rise further before anything substantial happens. That said, a perceived escalation could fuel another leg lower in the NASDAQ-DAX led correction, while a bounce in the Dollar and gold is in the cards next week.
2. Bank of Canada Joins the Tightening Party?
With the Canadian economy showing promising signs across the board, the BIC is widely expected to raise its benchmark rate on Wednesday. This Friday, the very good Employment Report all but assured the rate hike with the Ivey PMI also posting a blowout reading. The Canadian Dollar already rallied substantially before the decision, and any hint of caution from the BOC could trigger a “Sell-The-News” event, especially against the oversold USD.
USD/CAD 4-Hour Chart Analysis
3. Was this the final leg of the Crypto-Correction?
This weekend, the cryptocurrency market was once again headed south, with small cap coins being hit especially hard. The relatively strong major held up well once again, with Litecoin and Dash keeping their short-term uptrends intact. Bitcoin is also acting stronger than the majority of the market as it remained above the crucial $2450 support and bounced back towards $2600 today in early trading. The smaller coins are still not out of the woods yet, as they are only slightly off their lows. Ethereum is seemingly the biggest drag on the market, it ii still relatively weak, lagging BTC for almost two weeks now. The current leg of the ongoing long-term correction shows considerable divergences and that could lead to a broader rally in the segment as soon as next week.
ETH/USD 4-Hour Chart Analysis
4. The Euro or European Stocks Rise?
European equities are under pressure ever since Mario Draghi’s speech two weeks ago, which sparked a rise in yields globally. As the Euro rallied strongly against its major peers, investors dumped stocks in as the period of easy money seems to be ending (Spoiler Alert: it won’t). As central banks are likely to face renewed pressure to boost the less than stellar economic growth, any tightening move will possibly be temporary, as it was the case in 2008 and 2011 with the ECB. That said the current trends could last for longer, as the major European indices look technically wounded and the Euro is just a hair off its 12-month high compared to the Dollar.
DAX, 4-Hour Chart Analysis
5. Retail Sales and Inflation Terrible Again?
The last few months saw a clear downtick in the consumer economy of the US, showing signs of a cyclical downturn, as well as the effects of a seven-year high in the savings rate. That data point might be one of the “secret” factors behind the Federal Reserve’s confident tightening plans. As the almost decade-long extreme low interest rates finally reached a limit where consumers are worried about their retirement savings, they slowly started to get ready for more anemic returns, simply by saving more.
We suspect that with the rate hike cycle fully underway, bad news will be bad news again, meaning that stocks will take a nosedive on a weak report— or two weak reports for that matter. The CPI and Retail Sales numbers could turn the Friday’s session into the most active one of the week.
Key Economic Releases of Next Week
|Tuesday||AUSTRALIA||NAB Business Confidence||–||7|
|Wednesday||CANADA||BOC Rate Decision||0.75%||0.5%|
|Wednesday||UK||Janet Yellen Testifies||–||–|
|Wednesday||US||Crude Oil Inventories||–||-6.3 mill|
|Thursday||CHINA||Trade Balance||273 bill||282 bill|
|Thursday||US||Initial Jobless Claims||244,000||248,000|
|Friday||UK||Prelim UOM Sentiment||95.2||95.1|
|Friday||US||FED Monetary Policy Report||–||–|