• Alphachain Team

Gold Slumps Over 4.5%

The greenback was the talk of the town last week after the DXY broke through the 94.00 handle for the first time in weeks. Second wave fears and tightening restrictions resulted in a sour mood all week where investors returned to the US Dollar and dumped riskier assets. Gold slumped over 4.5% on a firmer greenback to close the week below the $1,900/oz mark. This signifies the largest correction for the commodity since March of this year as risk flowed into the safe haven currency.


The Kiwi was amongst the worst performers during the week after tumbling from highs around 0.6800 to 0.6515 totalling just over 3%. This came after the RBNZ kept rates unchanged as expected at 0.25% and maintained the current LSAP at NZD 100bln.


The bank reiterated that progress is being made on utilising a variety of other tools which include Funding for lending programmes, negative OCR and purchases of foreign assets. Commodity currencies bore the brunt of last week’s sell off after USD/CAD traded to highs of 1.3400 for the first time in six weeks.


A gloomy oil story set the tone for further CAD selling after Libya outlined that output could be expected to reach 260K bpd following the lifting of its blockade. With a further flood of supply expected, the outlook for WTI Crude still remains uncertain as price currently holds around the $40/bbl level.

A flurry of speeches from FOMC members including FED Chair Powell took place last week as officials looked to share their opinions and views on the outlook for the US economy in light of the new Average Inflation Targeting framework. Diverging views were shared after both Boston Fed President Eric Rosengren and Chicago Fed President Charles Evans offered gloomy stances focusing on the fact that Congress need to enact more fiscal stimulus. On the other hand, St. Louis Fed President James Bullard offered a more optimistic view on the economic recovery.


Fed Chair Jerome Powell reaffirmed the need for further fiscal stimulus as households begin to spend the last of their checks. The Fed outlined that current rates will remain near zero until the economy is able to reach maximum employment and the level of inflation has hit the 2% target. The week ahead will see the latest employment figures released where a positive change of 900k is expected to be printed following last month’s release of around 1.37mln.


Sterling

Sterling came under further pressure last week though still managed to remain above the 1.2700 handle against the USD as PM Johnson outlined new restrictions for the nation that are set to remain in place for the next six months. This comes as Covid-19 cases within the nation resume on a rising trajectory. As the nation prepares for the curtains to be drawn on the furlough scheme, Chancellor Sunak attempted to offer some support by unveiling a plan set to protect jobs focusing on wage subsidies, VAT cuts and more loans for struggling businesses. The UK which is facing growing pains in a number of different areas printed a lower than expected PMI figure within the service sector illustrating the current view of purchasing managers within the nation. Going into the week, EUR/GBP remains sub 0.9150 as negotiations between the EU and UK are set to resume.


In the cryptocurrency space

Within the cryptocurrency space, LTCUSD continued its move to the downside after breaking the previous level of support at $45, price attempted to break lower into the $41.25 level before buyers gained control to settle prices around the $46 handle. The asset currently holds at a 50% correction from the previous swing high with the 127.7% extension level coinciding with major support at $39.20. Financiers and Crypto enthusiasts will continue to keep a close eye on ETHUSD which failed on its most recent attempt to break the $317 level. Price currently holds sub $365 after failing to close above the 50 and 21EMA.


Here is a breakdown of the high impact data releases this week.

Monday

14:45 ECB Lagarde President Lagarde speaks. Markets to watch: EUR Crosses

Wednesday

08:20 ECB Lagarde President Lagarde speaks. Markets to watch: EUR Crosses

Thursday

15:00 ISM Manufacturing PMI. Markets to watch: USD Crosses

Friday

13:30 Average Hourly Earnings m/m, NFP & Unemployment Rate. Markets to watch: USD Crosses

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