The U.S. GDP last week came in shy of expectations, and the PCE inflation number was flat at 0.3%. Developments like these have traders second-guessing what the Federal Reserve may do with interest rates next.
The first signs of economic slowdown have started to appear: Are we going to see a soft landing, or no landing at all?
Hello, I’m Nick Quinn, trading coach here at How to Trade and ForexSignals.com. This is your weekly preview for Monday.
The first full month of summer starts off busy in terms of the economic calendar, providing a number of opportunities for traders.
Of interest are rate decisions from three major central banks: the Reserve Bank of Australia (RBA) on Tuesday, the Federal Reserve on Wednesday, and the European Central Bank (ECB) on Thursday.
Trade data, PMIs, and the U.S. Non-Farm Payrolls report round out the action on Friday.
Now, let’s dive into the week’s highlights and where trading opportunities set in.
Monday: Japanese Yen in Focus, U.S. Manufacturing Data
Economic Events
- ISM Manufacturing PMI from the U.S.
- No rate change from BoJ.
Market Insights
- The Japanese Yen was weaker, as the BoJ left its dovish stance unchanged under Governor Kazuo Ueda.
Technically:
- This might complete a bullish harmonic pattern, targeting 140–142 in the USD/JPY pair.
- The chart structure does hint at one big bear flag, which could result in a downside move if prices fall below 130, opening up a path to 124.
Tuesday: Reserve Bank of Australia (RBA) Decision
Economic Events
- RBA rate decision.
- Australian Trade Balance data.
Market Insights
- The RBA is expected to keep rates unchanged at 3.6% as Australia’s inflation data continues to cool.
- This may keep the outlook for further Australian dollar weakness:
Technically:
- AUD/NZD has pierced key support levels and is likely to move further south towards 1.0650.
Wednesday: Federal Reserve Rate Decision
Economic Events
- Interest Rate Decision by the Federal Reserve: Expected to rise by +25 bps to 5.25%.
Market Insights
- The Federal Reserve’s decision will be the focus of the markets midweek.
Key Considerations:
- Potential clarity from Chair Jerome Powell on rate hikes and possible cuts later in the year.
- S&P 500: Selling on rallies is advised in case the resistance levels are traced around 4,200–4,250 on the back of sustained economic uncertainties.
Thursday: ECB Rate Decision, Euro in Highlights
Economic Events
- European Central Bank (ECB) interest rate decision: Expected to increase by +25 bps to 3.75%.
Market Insights
- The euro remains resilient as hawkish expectations are well in place:
Technically:
- EUR/USD: If the price continues to convincingly break above 1.10, then we may see 1.1250–1.14 within weeks.
- Hawkish comments from Christine Lagarde may add more upward momentum.
Friday: U.S. Non-Farm Payrolls (NFP)
Economic Events
- U.S. Non-Farm Payrolls report.
- Unemployment rate: The number is expected to tick up from 3.5% to 3.6%.
Market Insights
- Labor markets are still the most critical indicator.
- Estimates are for a deceleration in job creation to 181,000 from 236,000 last month.
Technically:
- A weaker-than-expected report may provoke USD weakness and support equities.
- Kodal Level Set by U.S. Dollar Index (DXY): Its close below 101.09 may target 99.50 in the near terms.
Key Themes to Watch
Central Bank Activities
- Rate hikes by the Fed and ECB will set sentiment across equity and currency markets.
Economic Data
- Trade data, PMIs, and the NFP will provide more color on the state of the global economy.
Currency Volatility
- Expect sharp moves in the Yen, Euro, and Dollar with pivotal rate decisions.
Opportunities for the Week Ahead
Indices
- Short-term trading in the S&P 500 and other indices around resistance zones.
Forex Pairs
- The USD/JPY and EUR/USD have clear technical setups based on guidance from central banks.
Commodities
- Any further possible bearish moves in Gold and Oil will be influenced by USD strength and the inflation data.
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