After two shocking hikes by the Bank of Canada and the Reserve Bank of Australia last week, a reminder of the unpredictable nature of trading has hit traders. What should have passed as a relatively tranquil period in trading turned around instantly, confirming the truism that in finance, assumptions can lead to shock surprises.
As we come into another important week of markets, all eyes look to the Federal Reserve as it is not expected to hike interest rates, despite recent events proving that, from the most unbelievable place, surprises pop up everywhere.
We’re going to take you through some of the intricacies surrounding the week ahead into the most important data points in the economic side of things, central bank decisions, and market sentiment data as we prepare traders for what’s to come.
Fed’s Return and Market Expectations
Traders must prepare for a highly volatile market as the Federal Reserve is back in focus this week. The central bank is not expected to increase interest rates, but the return of the central bank will dramatically change market psychology. A reminder that informed preparedness for the unexpected must be done when traversing the financial landscape, as central banks did last week with surprise actions.
Monday: The Economic Indicators
With the start of the new week, economic data today in Europe and the US is pretty weak. Interesting data for the start of the week would come from India, mainly inflation as well as industrial production with an expected 4.7% for Indian inflation to be tamed into 4.6% levels.
- As we see, the price is falling steadily, with the latest technical analysis showing breakout possibility from an Ascending Triangle pattern.
- Hence, a breakout above the upper side resistance level of 82.82 may prompt and give a chance to keep the doors open above as a trend.
- Traders can monitor this closely now and take a view above on this breakout, setting the tone for the rest of the week for the INR.
Tuesday: US Inflation Data
This will be the inflation data in the United States on this day. It’s before the Federal Reserve will determine its interest rate. This is the last time before the Fed makes a judgment that market participants will make their judgments on the data.
- It seems that on the one-hour US Dollar Index, there is a developing rounding top formation, so the weakening might be developing in this currency.
- If the inflation indicators happen to come in bearish fashion, lots of positions are going to change really fast.
- Being considered from the point of view of the rounding pattern per se, from the peak height of it, there should stay quite alert trade view in the significant dollar market action for taking a position in such kind of market flow.
Wednesday: The Fed Decision
Wednesday is what everyone looks out for on the week because of the scheduled interest rate decision from FOMC. There might not be a hike in interest rates, but ripples could hit the market from this Fed decision.
- While the S&P 500 is going higher, a theme of this market so far—hawkish and dovish sentiments—are starting to pop up and question how relevant they remain.
- A shocking rate hike by the Fed will shock the price market, causing rapid readjustments on the S&P 500 stock side of things.
- The double top formation hints that we’re at the top; so, are we getting into a decisive juncture?
Thursday: ECB Focus
Thursday should witness a 25-basis point rate hike by the European Central Bank (ECB). One has to pay close attention to the euro, which can be very sensitive to the ECB announcement. The market structure is forming a well-defined channel. That might prove pivotal in terms of preparing for future price action.
- As the ECB manages the land of falling inflation and concerns over economic growth, traders should be taking into consideration what these mean for the euro.
- Failing to stand firm enough on a hawkish path may see a weakening euro, while staying strong on its hawkish way might be the one which opens up some room to the upside.
Consumer Sentiment. Market Reaction. End
The trading week might feel drained by Friday. Other highlights of the week will be the release of the Michigan consumer sentiment report that will give a crucial feeling on how the consumer views the U.S. economy and stability in it.
- It makes sense to pay close attention to the Dow since current price action remains compressed under a massive trend line that has formed since November last year.
- Since the market is running in a narrow range, the results from earlier this week will determine whether the Dow breaks out higher or lower from this key resistance level.
Conclusion
From this week’s economic perspective, we can clearly understand that the return of the Federal Reserve will command all the attention and perhaps cause some disturbance in the dynamics of the market. This week, several critical economic indicators and decisions from central banks are at the doorstep, so traders must remain vigilant and flexible.
Trends in inflation, responses of the central bank, and consumer mood will shape your journey navigating an always evolving economic scene. From the information here and above, you shall be best set to pounce at each and every market action into place irrespective of whatever this next period brings for markets.
Be with us in the trading room daily throughout the week to come and to see and report how the moves, changes take and continue in this evolving, making a highly dynamic environment, which you should keep riding into.
The article attempts to synthesize the main themes and market dynamics for the following week, thus making traders well-prepared for trading.
