An action-packed, data-filled week ahead

Financial markets may be exposed to extreme levels of volatility during trading this week if the explosive mixture of crucial economic reports and critical central bank speeches keep investors on edge.

The impacts of Janet Yellen’s comments from Friday lingers across the board with Asian stocks on a back foot as market players weigh on the likelihood of a US rate rise this year. European markets warmly welcomed losses after being infected by the cautious tone set in Asia with the FTSE100 trading -0.87% as of writing. Although Wall Street received a welcome boost last week following the impressive corporate earnings, stocks could be vulnerable to losses as the persistent concerns over slowing global growth, Brexit anxieties, and uncertainty ahead of the US presidential election sours risk appetite.

Dollar bulls relentless

Janet Yellen rattled the global markets on Friday after she stated that the Federal Reserve may need to run a “high-pressure” economy in a bid to reverse the damages of the 2008 recession. Markets digested the comments as slightly dovish with discussions of the central bank potentially adopting an accommodative policy for longer periods triggering some Dollar weakness. Yellen’s speech failed to provide additional clarity on US rate hike timings this year consequently forcing investors to refocus on September’s firm retail sales figure of 0.6%. It seems that bulls exploited the instance of weakness in the Greenback to send prices higher after the retail sales reinforced expectations over the Federal Reserve raising US rates in December. Investors may direct their attention towards Tuesday’s inflation report which if beats could be a critical chess piece that provides the Fed a justifiable reason to pull the trigger in December.

Draghi enters the scene

Taper talk rumours originating from unofficial reports have spread across the financial markets like wildfire consequently leaving investors quite anxious. Market participants need answers from the European Central Bank concerning these Chinese whispers and this is where Mario Draghi enters the scene. With Eurozone inflation static and growth subdued, these may not be the right conditions to start tapering but investors need to hear this from the horse’s mouth. With the Eurozone still in a delicate position, it seems likely that that European Central bank keeps monetary policy unchanged on Thursday with an extension to the QE program till March 2017 in an effort to maintaining some economic stability.

The EURUSD continues to be pressured by a resurgent Dollar with prices currently finding comfort below 1.1000. This pair is technically bearish on the daily timeframe as there have been consistently lower lows and lower highs. Previous support at 1.1000 could transform into a dynamic resistance which encourages a further decline lower towards 1.0900.

Sterling bears on a tea break

In the months of October, the Sterling has become a seller’s best friend with the currency on a slippery decline as the mounting hard Brexit fears haunt investor attraction. The poisonous combination of uncertainty and political risk have made the Sterling the worst performer this year among its major peers with further declines still expected. With major political heavyweights having a battle of words on the current hard Brexit scenario, Pound sensitivity could be the new theme in the markets moving forward. Although sentiment towards the UK has been uplifted from the string of positive data releases, the hard Brexit fears have a firm grip on the Sterling consequently obstructing upside gains. While the parity dream on the GBPUSD is still some distance away, a US rate hike in December could be the trigger which opens a path to fresh 31 year lows below 1.180.

WTI balances above $50

WTI Crude was pressured on Monday as the combination of rising rig counts in the United States and a resurgent Dollar encouraged bears to install rounds of selling. This commodity remains dogged by the persistent oversupply concerns while fears over slowing global growth have sparked talks of a potential decline in demand. Although there is optimism over a freeze deal in November, OPEC and Russia continue to pump at record output which questions the effectiveness of the pending deal. Although major oil producers may be commended on their ability to exploit oils sensitivity to create sharp boosts in prices, this could come at a heavy price if investors are left empty handed. From a technical standpoint, WTI bears could make an appearance if sellers can conquer the $49.50 support.

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Otunuga is research analyst at FXTM