This week saw an injection of worry over rising energy prices. Natural gas soared to parabolic levels and the oil complex broke above key resistance levels with some analysts calling for US oil at $100. The fear is that rising energy prices will trigger a further spike in inflation that will force central banks to raise interest rates too quickly. If we see further risk-off trading on this narrative expect to see JPY, CHF, & USD strength alongside equity selling. However, if energy markets calm, then watch for recovery in risk sentiment. These are hard markets right now.

Other key events from the past week

  • AUD: Interest rate meeting, Oct 05: The RBA sounded as though the worst was behind Australia as they focused on a recovering economy for 2022 on a strong vaccination programme. Is this time for some AUD shorts to reverse?
  • NZD: Interest rate meeting, Oct 06: The RBNZ interest rate decision saw a typical buy the rumour sell the fact response. Although the RBNZ were tentative about the pace of future rate hikes, many traders still expect NZDJPY dip buyers as long as the policy divergence remains between the BoJ and the RBNZ.
  • US oil: OPEC boosts oil prices, Oct 07: This week OPEC+ managed to boost prices by only agreeing to add an extra 400K bpd into the market. Some analysts had thought a 800K bpd production hike was coming. The more conservative decision enabled oil prices to keep rising. Will oil now reach $90?

Key events for the coming week

  • USD: US Inflation, Oct 13: One area many analysts are focusing on is that of high inflation. If inflation is seen as rising too fast, it can mean the Fed raise interest rates sooner and that would boost the USD. Watch out for this!
  • Seasonal trades: FTSE 100, Oct 16: The FTSE 100 could offer better value than some of the other world indices, particularly on any deeper pullbacks. Is this one pattern to take note of? Check out the strong seasonal pattern here.
  • USD: US Retail Sales, Oct 15: The US consumer is in focus. Remember that the US consumer is a major driver of the US economy and a strong print here will be taken as a positive sign for the US economic recovery which should boost the USD.

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