The most important corporate earnings week

Hi Everyone,

Nasdaq 100 Again at All-Time High

Strong corporate earnings have once again pushed U.S. equity indices to a record high. Nasdaq 100 closed the week at 15,111.79 points, jumping 2.9% compared to previous week. S&P 500 was up 1.9%, closing at 4,411.80 points.

Although economic data is still murky due to volatility and noise, Q2 will probably be historic in terms of earnings growth. About 86% of companies that have published their financial records so far have exceeded analysts’ expectations of revenue and profit across a number of sectors. On the back of stellar digital advertising revenues, technology companies such as Snapchat and Twitter increased their top line by 116% and 74%, respectively.

This upcoming week gives an even better glimpse into the recovery and expansion of corporate America as more technology, industrial, consumer discretionary and energy firms are revealing their results.

In particular, Nasdaq 100 is likely to push higher as companies such as Alphabet, Facebook, Apple, Microsoft, Visa and Amazon are disclosing their financial data. The index looks currently extended on both daily and weekly charts, while the price is touching upper Bollinger Band level. Also, the daily chart signals that the price is 2.5 standard deviations away from the mean, as measured by Keltner channels, and hence a pullback is likely. Strong resistance is probable near 15,170 and 15,280 points, while a pullback might take the index back to 14,850 or 14,660 points, closer to the 8 and 21-day exponential moving averages that have historically offered solid support in a bullish momentum.

U.S. GDP Reported This Week

U.S. equity markets might face headwind next week when U.S. second quarter GDP data gets published. The consensus is expecting a preliminary reading of 8.2% growth, up from 6.4% in Q1. The U.S economy has indeed shown remarkable resilience as witnessed by the labor market’s strong recovery, increased retail spending, and the expansion of the housing and industrial sectors during the first half of the year. Those numbers, however, are showing signs of rolling over. In fact, the Federal Reserve Bank of Atlanta has adjusted their expectations for Q2 expansion to 7.6%, down from 10.5% a mere month ago. Should the consensus be overly optimistic and actual print disappoint by a large margin, the equity markets are likely to be the victims. In particular, the Dow Jones Industrial Average and Russell 2000, which have a higher exposure to American markets, might slide in the event of lower than expected GDP print.

Less Stimulus, Weaker Growth

Although no one can debate that the U.S. has recovered quickly, this expansion has largely been supported by government stimulus and ultra-loose monetary policy. While monetary policy will remain unchanged for the foreseeable future, the fiscal taps have largely run dry with most of the stimulus cheques having been delivered by now. From a consumer balance sheet perspective, this extra money has probably been recorded as savings, loan repayments or consumption. Also, the latest infrastructure bill, which was expected to boost capital spending and investment, is facing a pushback in the Senate. A number of surveys published, such as that by University of Michigan Consumer survey, offer a glimpse into potential consumer behavior in the upcoming quarters. The latest Michigan University survey was a shock in many ways as consumers signaled a clear adversity towards spending money on houses, cars and big ticket durables. These sectors represent a significant chunk of the U.S. economy and, without the support from consumers and the government, the second half of 2021 is likely to be gloomier than currently priced in.

Equity markets benchmark index S&P 500 closed at 4,411.80 points, up 1.9%, while Nasdaq 100 gained 2.9% and settled at 15,111.79 points. Russell 2000, representing small-cap stocks, rose 2.1%. The U.S. dollar, represented by the DXY index, was largely flat, gaining 20 basis points to 92.9. Oil tested 21-week moving average support level but closed the week at $72.06, up 0.88%. Gold moved sideways, shedding 0.57% and closing near 1,801.98 points.

Have a great trading week ahead!

Trading on margin products involves a high level of risk

In The Spotlight

DayCurrencyEventPrevious Consensus 
TuesdayJPYBoJ’s Govemor kuroda speech
TuesdayUSDDurable Goods Orders-June2.3%2.1%
WednesdayAUDConumer Price Index(YoY)-Q20.6%0.7%
WednesdayCADBOC Consumer Price Index (YoY)-June2.8%2.4%
WednesdayUSDFed Interest Rate Decision and Monetary Policy Statement0.25%0.25%
ThursdayUSDPreliminary GDP (QoQ)-Q26.4%8.2%
FridayEURPreliminary German GDP(QoQ)-Q2-1.8%2.0%
FridayEURPreliminary Euro Area Core CPI (YoY)-July0.8%0.9%
FridayEURPreliminary Euro Area GDP (QoQ)Q2-0.3%1.5%

Australian, Canadian and Euro Area Consumer Price Index
CPI, or inflation, measures the rise in consumer prices in an economy over a certain period of time. Higher inflation means that consumer prices have grown compared to the previous period. A higher than expected rate may be both positive or negative for the currency as the market does not like inflation expectations too far off from consensus. Generally, both high and negative inflation are bearish for currency, while positive and low inflation, in line with expectations, is bullish.

U.S., German and Euro Area Gross Domestic Product
GDP data shows the monetary value of all the goods and services produced in a given economy. A negative number indicates a contraction of economic activity, while a positive number shows an expansion. A better than expected GDP growth is generally positive for currency, whilst a print below expectations tends to be negative.

Market Sentiment

EURUSD is largely moving sideways with the price finding resistance near the 8-day exponential moving average. Last week, a Death Cross formed on the daily chart as the 5-day moving average (MA) crossed above the 200-day MA. The momentum in the bearish trend is strong as evidenced by ADX of 40. Stochastic signals that price is near the lower end of its recent trading range but there is still downside potential. Support levels are near 1.17525 and 1.17020, while resistance is near 1.17900 and 1.18360.

Resistance: 1.17525
Support: 1.17900

GBPUSD pair is in a moderate bearish momentum with moving averages stacked to support further pressure to the downside. The price is currently attempting to pierce the 8-day MA resistance, while the 200-day MA is pointing higher and approaching the current price point. Downward trend is likely to continue with support levels near 1.36190 and 1.35730. Resistance levels are near 1.38015 and 1.38300.

Resistance: 1.36190
Support: 1.38015

NZDUSD is testing the 8-day EMA resistance level and attempting to break higher. Momentum indicators signal a moderate bearish trend with the 200-day moving average above the price and a Death Cross forming on the daily chart. A further downward move is likely with support levels near 0.69410 and 0.69165. Resistance levels are near 0.69750 and 0.69930.

Resistance: 0.69410
Support: 0.69750

The XAUUSD is consolidating around short-term moving averages, giving little guidance on its next potential move. Long-term MAs are bearish and above the price. There is little energy in the momentum, hence, a further downside move seems likely. Resistance levels have formed near 1,814.85 and 1,823.20 and support near 1,796.48 and 1,789.25.

Resistance: 1,814.85
Support: 1,796.48

Kaia Parv, CFA, is an experienced Portfolio and Investment Manager with exposure to both public and private markets. Before joining FXPRIMUS, Kaia was a Senior Investment Associate at EFA Group and a Vice President in Bank of America Merrill Lynch.

Any opinions, news, research, analyses, prices or other information contained here are provided as general market commentary and do not constitute investment advice. FXPRIMUS does not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.

Risk Warning: Trading on margin products involves a high level of risk , which may result in the loss of all invested capital. Show Less

risk Show More

Get Started

Risk Warning: Trading on margin products involves a high level of risk , which may result in the loss of all invested capital.

Get Started