I hope you are excited about starting a new week of productive trading for Monday, November 1, 2021 to Friday, November 5, 2021.
The first week of trading in November will be an eventful week, with the pending Taper Announcement from the Federal Reserve Bank on Wednesday, and the October US Labor Market data that is scheduled to be released on Friday. Both headlines should support the USD, but this will depend on market conditions leading up to the statements.
The US Dollar index ($DXY) closed last week on a solid footing, as month-end portfolio rebalancing, in addition to technical cues from the chart, favored a rise in the greenback for the close of October. Demand is still present for the at the start of the month, with the buck moving higher, as Fed tapering & rate hike expectations increase due to solid economic data prints, as well as solid earnings data from US-based companies. Since there was a positive handover of sentiment into the greenback at Monday’s Open, scan the market for opportunities to buy the greenback against another funding or high-yielding currency.
As US markets closed higher last week, will we see a prolonging of dollar gains as inflation concerns gain traction?
At today’s FX open, the greenback (USD) decoupled from its traditional safe haven status, and moved in anticipation of the Federal Reserve’s expected policy change, which is to announce the start of their tapering process at this weeks FOMC meeting. According to the chart above, the US 10-YR Treasury yield is softening at the moment and has stabilized around 1.557%. Could this softening of rates at this week’s open suggest that investor’s inflation fears and expectations of a Fed taper may be dwindling. Only time will tell! But, at the moment, this lack of “follow-through” in rates could also mean that the US Dollar will eventually rotate lower as soon as liquidity picks up ahead of the European trading session.
Although the Fed Announcement and the US Non-Farm Payrolls Report will have a strong grip on dollar movement for the week, there will still be a slew of other important “market-moving” data, that may garner more sympathy & attention from market participants. The Bank of England will also be meeting this week, on Thursday, and traders will be cautiously observing headlines for sentiment on the GBP (British Pound) as discussions continue on whether the central bank should hike rates early to fight burgeoning inflation. Several BOE policymakers, including the leadership, have been surprisingly hawkish in their recent rhetoric, yet still suggesting that inflation seen in energy prices is still “transitory” and are mostly related to the re-opening from lockdowns and constraints within the supply chain. The RBA (Reserve Bank of Australia) has a scheduled meeting on Tuesday, and we’re expecting no policy changes from them.
There will also be a meeting of OPEC+ as leaders discuss global oil supply and the current price of oil. In addition to that, Canadian Employment Data & New Zealand Employment Data will also be on the docket. At the moment, there appears to be a pre-market preference in favor of the US Dollar. So, we’re expecting the dollar to strengthen at this week’s open. But, this sentiment could change as the session progresses.
However, since this is the Asian Trading Session, with lower volumes, we can not assume this sentiment will be maintained throughout the trading session. As more trading bourses open around the world, we may gain further intel on how risk assets will be traded for the first day of this new month. Seasonally, the month of November has maintained a solid performance in US Stocks, especially the S&P 500 ($SPX). Hopefully, the bid we’re witnessing in global equity future indices will continue as more earnings data comes through for the week. My hope is that we will see a resumption of the stock market rally across global indices as policymakers “downplay” inflation concerns and we witness encouraging economic data through the week.
Forex Current Open Levels For New Week (November 1, 2021):
EUR/USD – 1.1558 (-4 pips lower)
USD/JPY – 114.07 (+10 pips higher)
GBP/USD – 1.3683 (no change)
USD/CHF – 0.9162 (+3 pips higher)
USD/CAD – 1.2389 (+1 pip higher)
AUD/USD – 0.7517 (no change)
NZD/USD – 0.7172 (+2 pips higher)
Bitcoin is still consolidating under the recent record high of $66,982 and below the $61,000 price handle. It is currently trading off the highs and lower for today at $60,809 at the time of writing. It looks poised to weaken as US Dollar strength becomes the currency play at the week’s open.
As for this week’s FX Market Open, on Monday, November 1, 2021, the Sydney(Australia) & New Zealand exchanges will remain thin in liquidity until more Asian centers open for the day. Current Open Levels in today’s forex market, indicate that pre-market bias is leaning towards buying the USD at today’s open. However, this dollar sentiment may change as more trading houses open up for the week, and as liquidity grows throughout the session.
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Marvin Perry has been an active trader within the Forex market since 2010. He attended the University of Illinois in Urbana/Champaign, and graduated in 2002 with a double major in Cell and Structural Biology and Chemistry. He currently serves as an FX instructor & Quantitative Analyst for the Forex Anatomy Private Trading Community called "The Lab", where he conducts live weekly trading webinars & instruction on Fundamental Analysis & Inter-Market Interpretations of dynamic asset classes and their influence on currencies.