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The volatility in the markets started with the weak US Non-Farm Payroll report for April 2021 and continued with the US inflation reports on Wednesdays, the 12th of May 2021. The spike in the US inflation, Core US Inflation Rate YoY APR came at 3% vs. an expectation for 2.3%, and the US Inflation Rate YoY APR came at 4.2% vs. an expectation for 3.8%, triggered volatility in all markets.
Volatility creates opportunities, and that is why one must know in detail the instruments that one trades or invest in, and one must acknowledge the levels of support/resistance and pay attention to the details in the price action and the picture they paint. Having a detailed game plan is a must, it doesn’t need to be complicated, but it needs to stand on the fundamental principle that will guide you. For example, a simple plan like, if the price does this, it will be a bullish sign, on the other hand, if the price break this level, it will be a bearish sign, and anything in between is a neutral sign.
Knowing what events are on schedule for the days and the weeks ahead and which ones can impact the markets is necessary and helpful. This past week offered a lesson in that regard, and as we mentioned in our previous weekly notes, in which we stated that the coming US inflation reports might derail the bearish USD breakout, was information that one should have factored in its game plan.
Despite the volatility that the US inflation report caused, most instruments eventually, continued to move in the direction of the main trend. After the initial knee-jerk reaction and the volatilities, ultimately EUR/USD, GPB/USD, Gold, NASDAQ, S&P 500, Dow Jones Industrial, resumed the move in the direction of the main trend. Even after the sharp declines in the NZD/USD and the AUD/USD, the pairs were not able to break below the previous daily lows. The EUR/USD bounced from ascending trend line 0.618 FIB and support zone, GBP/USD retest the break and continued to the upside. NASDAQ, S&P 500, and the Dow Jones Industrial all bounced from ascending trend line.
Another important aspect of the past week’s US inflation report is that it emphasizes the ongoing theme, the tightening of the Central Banks. In the past month, we witnessed that first, the Bank of Canada and then the Bank of England reduced their bond purchasing programs. Now, the focus is on the ECB June interest rate decision, there are expectations that the ECB will reduce their bond purchasing under the PEPP program. A week after the ECB interest rate announcement, we will have the FOMC Statement and FOMC Press Conference, will the FED blink and start addressing and signal a potential change in their monetary policy.
The Biden Administration, continuing the negotiations with Republicans for an agreement on a potential Infrastructure bill. The Democrats are aiming to vote on Infrastructure bills in July 2021.
The focus for the week ahead is on the following events:
Monday, May 17, 2021
- New Zealand Services NZ PSI APR
- New Zealand Visitor Arrivals YoY MAR
- Australia Consumer Inflation Expectations MAY
- China House Price Index YoY APR
- China NBS Press Conference
- China Fixed Asset Investment (YTD) YoY APR
- China Industrial Production YoY APR
- China Retail Sales YoY APR
- China Unemployment Rate APR
- Switzerland Producer & Import Prices YoY APR
- Switzerland Producer & Import Prices MoM APR
- Italy Inflation Rate YoY Final APR
- Italy Inflation Rate MoM Final APR
- Spain Balance of Trade MAR
- UK BoE Tenreyro Speech
- Canada Housing Starts APR
- Canada Foreign Securities Purchases by Canadians MAR
- US NY Empire State Manufacturing Index MAY
- US NAHB Housing Market Index MAY
- US Fed Clarida Speech
- US Fed Bostic Speech
- US Foreign Bond Investment MAR
- US Overall Net Capital Flows MAR
- US Net Long-Term Tic Flows MAR
Tuesday, May 18, 2021
- Japan GDP Growth Rate QoQ Prel Q1
- Japan GDP Private Consumption QoQ Prel Q1
- Japan GDP Price Index YoY Prel Q1
- Australia RBA Meeting Minutes
- UK Claimant Count Change APR
- UK Employment Change FEB
- UK Average Earnings incl. Bonus MAR
- UK Unemployment Rate MAR
- UK Average Earnings excl. Bonus MAR
- UK Labour Productivity QoQ Prel Q1
- Italy Balance of Trade MAR
- Euro Area Balance of Trade MAR
- Euro Area Employment Change QoQ Prel Q1
- Euro Area Employment Change YoY Prel Q1
- Euro Area GDP Growth Rate QoQ 2nd Est Q1
- Euro Area GDP Growth Rate YoY 2nd Est Q1
- US Building Permits MoM APR
- US Housing Starts MoM APR
- US Redbook YoY 15/MAY
- US API Crude Oil Stock Change 14/MAY
Wednesday, May 19, 2021
- New Zealand PPI Input QoQ Q1
- Australia Westpac Consumer Confidence Index MAY
- Australia Westpac Consumer Confidence Change MAY
- Australia Wage Price Index QoQ Q1
- Japan Industrial Production MoM Final MAR
- Japan Capacity Utilization MoM MAR
- UK Inflation Rate YoY APR
- UK Inflation Rate MoM APR
- UK Core Inflation Rate YoY APR
- UK PPI Core Output YoY APR
- UK PPI Core Output MoM APR
- UK Retail Price Index YoY APR
- UK Retail Price Index MoM APR
- UK Core Inflation Rate MoM APR
- UK PPI Output YoY APR
- UK PPI Input YoY APR
- UK PPI Input MoM APR
- UK PPI Output MoM APR
- Euro Area New Car Registrations YoY APR
- Euro Area ECB Financial Stability Review
- Euro Area Core Inflation Rate YoY Final APR
- Euro Area Inflation Rate YoY Final APR
- Euro Area Inflation Rate MoM Final APR
- US MBA Mortgage Applications 14/MAY
- US MBA 30-Year Mortgage Rate 14/MAY
- US FOMC Minutes
- US Fed Bostic Speech
- Canada Inflation Rate YoY APR
- Canada Inflation Rate MoM APR
- Canada Core Inflation Rate YoY APR
Thursday, May 20, 2021
- Japan Reuters Tankan Index MAY
- Japan Balance of Trade APR
- Japan Exports YoY APR
- Japan Imports YoY APR
- Japan Machinery Orders YoY MAR
- Japan Machinery Orders MoM MAR
- Japan Foreign Bond Investment 15/MAY
- Japan Stock Investment by Foreigners 15/MAY
- Australia Employment Change APR
- Australia Full Time Employment Chg APR
- Australia Part-Time Employment Chg APR
- Australia Unemployment Rate APR
- Australia Participation Rate APR
- China Loan Prime Rate 1Y
- China Loan Prime Rate 5Y MAY
- New Zealand Annual Budget Release
- Indonesia Balance of Trade APR
- Indonesia Exports YoY APR
- Indonesia Imports YoY APR
- Germany PPI MoM APR
- Germany PPI YoY APR
- Euro Area Current Account MAR
- Euro Area Construction Output YoY MAR
- Italy Construction Output YoY MAR
- UK BoE Cunliffe Speech
- UK CBI Industrial Trends Orders MAY
- Canada ADP Employment Change APR
- Canada New Housing Price Index YoY APR
- Canada New Housing Price Index MoM APR
- US Philadelphia Fed Manufacturing Index MAY
- US Jobless Claims 4-week Average MAY/15
- US Initial Jobless Claims 15/MAY
- US Continuing Jobless Claims 08/MAY
- US CB Leading Index MoM APR
Friday, May 21, 2021
- South Korea PPI MoM APR
- South Korea PPI YoY APR
- Australia Markit Manufacturing PMI Flash MAY
- Australia Markit Services PMI Flash MAY
- Australia Markit Composite PMI Flash MAY
- Japan Inflation Rate YoY APR
- Japan Core Inflation Rate YoY APR
- Japan Inflation Rate Ex-Food and Energy YoY APR
- Japan Inflation Rate MoM APR
- Japan Jibun Bank Manufacturing PMI Flash MAY
- Japan Jibun Bank Services PMI Flash MAY
- Japan Jibun Bank Composite PMI Flash MAY
- New Zealand Credit Card Spending YoY APR
- New Zealand Retail Sales MoM Prel APR
- UK Gfk Consumer Confidence MAY
- UK Retail Sales YoY APR
- UK Retail Sales MoM APR
- UK Retail Sales ex Fuel MoM APR
- UK Retail Sales ex Fuel YoY APR
- Switzerland Industrial Production YoY Q1
- France Markit Manufacturing PMI Flash MAY
- France Markit Services PMI Flash MAY
- France Markit Composite PMI Flash MAY
- Germany Markit Manufacturing PMI Flash MAY
- Germany Markit Services PMI Flash MAY
- Germany Markit Composite PMI Flash MAY
- Euro Area Markit Manufacturing PMI Flash MAY
- Euro Area Markit Services PMI Flash MAY
- Euro Area Markit Composite PMI Flash MAY
- Euro Area Consumer Confidence Flash MAY
- Italy Industrial Sales YoY MAR
- Italy Industrial Sales MoM MAR
- EU ECB President Lagarde Speech
- Canada Retail Sales MoM MAR
- Canada Retail Sales YoY MAR
- Canada Retail Sales Ex Autos MoM MAR
- Canada Wholesale Sales MoM Prel APR
- Canada Manufacturing Sales MoM Prel APR
- US Markit Services PMI Flash MAY
- US Markit Composite PMI Flash MAY
- US Markit Manufacturing PMI Flash MAY
- US Existing Home Sales MoM APR
- US Existing Home Sales APR
