September 28, 2022
  • September 28, 2022

Pairs in Brief – AUD/USD, S&P 500 Index

By on August 14, 2022 0

Get Forex forecasts using fundamental, sentiment and technical position analysis for major pairs for the week of August 15, 2022 here.

The difference between success and failure in Forex/CFD trading is very likely to depend primarily on which assets you choose to trade each week and in which directionnot on the exact methods you might use to determine trade entries and exits.

So, at the start of the week, it’s a good idea to get an overview of what’s developing in the market as a whole, and how those developments are affected by macro fundamentals, technical factors and the market. market sentiment. Read on to get my weekly analysis below.

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Fundamental analysis and market sentiment

I wrote in my previous article on the 7e July that the best trades of the week were probably:

  • You are looking for short-term trades in the EUR/USD currency pair, which probably would not have worked out well if attempted.
  • Trying to exploit the pivot point of the S&P 500 index to 4172 if it has been reached. It could have worked well by going long on Wednesday’s open above this level, which would have yielded a profit of 2.10% over the rest of the week.

The news is currently dominated by the lower-than-expected US annualized inflation rate, which was released last Wednesday, showing there was no monthly inflation and the overall rate fell from 9.1% to 8.5%. This data suggests that US inflation may have peaked, reducing hawkish pressures on the Fed. While a 0.75% rate hike is still widely expected at the next Fed meeting, the lower CPI has had the effect of weakening the dollar and boosting riskier assets such as stocks and other currencies such as commodity currencies.

The risk rally that had already shown signs of emerging fully blossomed following the release of US CPI data, and the week ended with the S&P 500 index having recovered more than half of its losses incurred in calendar year 2022.

The outlook for risk appetite is obviously more optimistic now. The US stock market is still in a bear market, but rose again last week, although the US yield curve remains inverted. The United States has experienced two successive quarters of GDP contraction but is not officially in recession. If the United States is in a recession, the slowdown has been very uneven so far.

To recap, there were a few other important economic data releases in the past week. The results were as follows:

  1. US Purchasing Power Index Data – A monthly decline of 0.5% was recorded compared to an expected increase of 0.2%. This reinforced the claim that US inflation has already peaked.

  2. UK GDP data: A monthly contraction of only 0.6% was recorded while a much larger contraction of 1.2% was widely expected. That leaves the quarterly contraction at just 0.1% vs. 0.2% expected. However, the UK economic climate is expected to continue to deteriorate over the next few months, bolstered by recent downbeat forecasts from the Bank of England.

  3. UoM US Consumer Sentiment Data: Consumers were more bullish than expected.

The Forex market saw a drop in the US dollar last week. The decline was large but particularly strong against commodity currenciesespecially the Australian and New Zealand dollars.

Global coronavirus infection rates fell last week for the fourth week in a row. The largest increases in the number of new confirmed coronavirus cases are currently occurring in Barbados, Chile, Mongolia, Serbia, Tonga and Trinidad.

Next week: 15e August – 19e August 2022

The week ahead in the markets is likely to see a similar or lower level of volatility than last week as data releases due this week are light and unlikely to contain enough news to move the broader market strongly. . The releases due are, in likely order of importance:

  1. US FOMC Meeting Minutes

  2. UK CPI data

  3. Canadian CPI data

  4. Official Reserve Bank of New Zealand exchange rate, rate statement and monetary policy statement

  5. Australian Monetary Policy Meeting Minutes

  6. U.S. retail sales data

  7. Australian unemployment data

It is a public holiday in France and Italy on Monday 15e August.

Technical analysis

US dollar index

The weekly prize chart below shows the US dollar index printed a bearish candlestick that closed lower, against the long term orientwhat is bullish. The overall picture technically still looks quite bullish, as the key support level just below the 105.00 handle clearly holdswith the recent weekly candlestick showing a long lower wick.

It will probably be a good idea not to trade the US Dollar short over the coming week until we get a daily close below 104.92 here. This is a very powerful and long-term uptrend in the most important currency in the Forex market, and it is likely to reassert itself despite growing sentiment among some analysts that US inflation may have hit a low. Mountain peak.

US dollar index weekly chartUS dollar index weekly chart

AUD/USD

Last week, this currency pair printed a large bullish engulfing candlestick. The Aussie dollar was one of the big winners over the past week as we saw risk appetite rebound after the drop in the US CPI. For several years, the Aussie has acted as a key barometer of risk.

Despite the strength of last week’s bullish price movement, it’s far from clear what will happen next here, as the price sits in an area that has been quite congested recently. We also see a weak but long term downtrend in this currency pair which is still technically valid.

If the US Dollar Index breaks below key support this week, we could well see a further rise in price here.

AUD/USD weekly chart

AUD/USD weekly chart

S&P 500 Index

The S&P 500 is technically in a bear market, but rose last week for the fourth week in a row, by a fairly healthy amount. The price closed the week at the top of its range at a new 3-month high. The S&P 500 index has now recovered more than half of the total loss it has suffered in calendar year 2022 so far, surpassing the 50% Fibonacci retracement level.

Another bullish sign is that the resistance level that had been printed at 4172, was easily broken on the upside.

It’s also worth noting that while the NASDAQ 100 index has also risen firmly, the bullish momentum is greater in the broader market than in the tech market, making the S&P 500 index a superior vehicle for negotiate this advance.

Further upside is likely over the coming week barring any unexpectedly bad inflation news from the FOMC meeting minutes or CPI data from the UK or Canada.

S&P 500 weekly chart

S&P 500 weekly chart

Conclusion

I think the best opportunities in financial markets this week are likely to be looking for short-term trades on the S&P 500 Index whenever short-term momentum turns strongly bullish during normal market hours.

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