Action saved for commodities

A quiet start to the week

Equity markets in Europe are a little flat at the start of the week and US futures are eyeing a similar open on Wall Street.

The action has been saved for the commodities corner of the markets in early trade, with gold and silver seeing a meltdown early in Asia before recouping the bulk of the losses in the following hours as bargain hunters seized on the opportunity to get the week off to a good start.

Meanwhile, oil prices have tumbled again as the spread of delta and restrictions that come with it, particularly in China, is causing real concern. We’re seeing surges in a variety of countries which will likely weigh on the recovery in the coming months, just as it was starting to gather pace.

Yet equity markets are very stable, with focus here remaining on the events of the last couple of weeks. The US jobs report on Friday has solidified expectations for a taper announcement this year, most likely September if the August report is another knockout, so now it’s all about gathering clues as to when it will start and at what pace.

The Jackson Hole event later this month is the one we’ve all got circled in the calendar, with numerous Fed speakers appearing, including Chairman Jerome Powell. This is when we could get the strongest hints to date on the timing and pace. Before that, every data point will be scrutinized, starting with the CPI inflation releases on Wednesday.

Today we’ll hear from Fed voters Raphael Bostic and Thomas Barkin. Commentary from policy makers is getting increasing amounts of attention and I expect that to be the case on a quiet day like today.

Barkin has previously appeared cautious on the labour market with regards to tapering, so his views on Friday’s data will naturally be very interesting given his position as a centrist on the committee. Bostic has previously suggested it’s “getting close to a time” when tapering will be appropriate so we could see him push more in that direction today.

Momentum on bitcoins side

Bitcoin has found its groove once more over the last week, rallying strongly since last Wednesday after it saw plenty of support around $37,500 – the 38.2% retracement of the July lows to highs. Now very much back into bullish territory, the question is how far it can go this time around.

In the near-term, getting back above $50,000 will be the next test, although it could see some resistance around $47,000 – 50% retracement of April highs to June lows. Another interesting level in the March to May period was $51,000 and this time around it’s also the 61.8% retracement of the earlier move. It’s worth saying though that these may only be temporary stumbling blocks as cryptos very much appear to have momentum on their side once more.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.