The good news is that headline figure inflation is starting to moderate, while the not-so-good news is that sticky core inflation remains a thorn in the Federal Reserve’s side. In this week, the interest rate pause was also echoed by the Bank of Canada, which kept rates at 4.5%.
All in all, it was an eventful week on the fundamental side, setting up some great technical opportunities for this week.
It feels like a pivotal moment for the markets. Although the initial banking shock now feels very distant, inflation is moderating but still hot. Can there really be a soft landing? Our research suggests this is only a 10% probability. With the markets showing signs of stress from yearly highs, is it now sink or swim?
Key Economic Events
Monday: Empire State Manufacturing Index
Monday will focus mainly on the US manufacturing sector represented by the Empire State Manufacturing Index. This index surprised last time, showing minus 24.6 and contraction. One recent trend is that the stock market does not take worsening economic data very well.
Now, let’s take a look at the NASDAQ chart:
Daily Chart: NASDAQ showed a MA crossover and retested the 200-DMA and rallied. RSI showed that the momentum is now lost, and a correction could be in the offing. Resistance levels can be expected at 13,370–13,380.
Tuesday: China GDP Figures
Tuesday will be all about China, where the Q1 GDP growth estimates stand at around 4% YoY. Despite upbeat economic indicators, the CHN50 has remained below the 200-day moving average and painted lower lows with a bearish trend. The market may need a significant upside surprise in the GDP figures to break resistances.
Wednesday: UK CPI Data
Wednesday will be focused on the UK, which is still battling double-digit inflation. The pound has recently found some ground in the more stable outlook, though the direction remains uncertain.
In particular:
Sterling vs Swiss Franc – The daily chart presents a bearish bias, with the RSI suggesting a possible reversal. Supports are around key lows from previous structures that may define future movement.
Thursday: US Economic Indicators
The US will be the main driver of Thursday’s volatility, with key data including:
Unemployment Claims: 233,000 expected, which might show eventual economic weakness.
Market reaction – A meaningfully stronger-than-expected jobless claims could precipitate a meaningful sell-off in AED/USD.
Big picture: The daily chart suggests the dollar may push higher still – a new low and possible support on the 100-day moving average.
Friday: European PMI Data
The week will wrap up with European PMI releases on Friday, with manufacturing and services from France, Germany, and the UK. While services PMI appear stable, manufacturing PMIs are worrying.
Euro vs Japanese Yen Analysis:
Daily Chart: This gives an indication of a potential breakout, which could be doing a resistance test at 148.347. Pullback at around 145.5 can be expected; in an overall view, it still seems to maintain its bullish trend. Key levels include a swing high in October and probable divergence on the RSI.
Conclusion
Given the change in sentiment, this week’s market data could prove quite pivotal. The big questions are: will the manufacturing data improve, and will the UK finally manage to get a reading under 10% in their CPI? Either way, our team of analysts here at Forex Signals and HowToTrade.com will take you through each opportunity within our trading room and on our live streams.f
