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• Errante’s The Week Ahead: 23rd – 27th December 2024

Errante’s The Week Ahead: 23rd – 27th December 2024

Errante’s The Week Ahead: 23rd – 27th December 2024

Highlights of the Week:

• Thin Liquidity Amid Holidays: The final trading week of the year is marked by Christmas holidays, with markets expected to see reduced liquidity and higher volatility due to thinner participation.
• US Consumer Confidence and Durable Goods Orders: Key indicators will provide a glimpse into consumer sentiment and manufacturing health in the US.
• Technical Focus on GBP/USD and Silver: Critical levels are being tested on GBP/USD and Silver amidst significant fundamental and technical developments.

What Now?

The markets are wrapping up a tumultuous week marked by heightened volatility, tightening liquidity, and renewed political uncertainty. US equities struggled as the outlook for rate cuts softened and fears of a government shutdown loomed large. Technology-heavy Nasdaq 100 futures slid 1.2%, while the S&P 500 futures lost 0.7%, reflecting investor caution amid year-end adjustments. In Europe, the Stoxx 600 plunged 1.8%, with Novo Nordisk’s sharp decline leading losses. Asian equities also faced their sixth consecutive day of declines, reflecting global risk aversion.

Treasury yields climbed, with the 10-year yield reaching 4.57%, its highest since May, as the Fed’s hawkish stance dampened rate-cut expectations for 2025. The dollar, meanwhile, ended its best week in a month, further weighing on risk assets. Crude oil prices retreated, with Brent futures dipping toward $72 a barrel, pressured by a stronger dollar, the prospect of slower easing by the Fed, and escalating trade tensions fueled by President-elect Trump’s tariff threats on the European Union.

As we head into the holiday-shortened final week of 2024, liquidity concerns will likely exacerbate market volatility. Key economic data, including US durable goods orders and Tokyo Core CPI, will offer important insights into global inflationary trends, while geopolitical risks and fiscal policy developments in the US could keep investors on edge.

The final week of 2024 brings a mix of reduced activity and crucial data releases, which could set the tone for early 2025. Key themes include lingering concerns over a potential US government shutdown, ongoing Fed policy discussions, and shifting global economic conditions.

US Consumer Confidence (Tuesday): Consumer sentiment is expected to remain stable, with forecasts pointing out 111.7. Any deviations could influence expectations for the Fed’s next moves in early 2025. A stronger-than-expected reading could support the dollar, while weakness may weigh on broader market sentiment.

US Durable Goods Orders (Tuesday): Manufacturing activity is in focus with core durable goods expected at 0.2% m/m. A slowdown in orders would amplify concerns about the resilience of US industrial activity heading into 2025.

Crude Oil Inventories (Thursday): Inventories are projected to remain under pressure due to weaker global demand. Markets are watching for further signals on OPEC+ strategies and US production levels as the Biden-Trump transition unfolds.

Tokyo Core CPI (Friday): Japan’s inflation gauge will be pivotal for assessing the BoJ’s policy trajectory. With the BoJ maintaining ultra-loose policies, any inflationary surprises could push markets to reprice.

Market Events and Announcements:

Times are in GMT+2.

Monday, December 23, 2024:

• 3:30 PM – CAD: GDP m/m: A key indicator for Canadian economic activity. The previous reading of 0.1% leaves room for speculation on whether growth can maintain momentum.
• 5:00 PM – USD: CB Consumer Confidence: Markets are looking for insights into US consumer sentiment heading into 2025.

Tuesday, December 24, 2024:

• 2:30 AM – AUD: Monetary Policy Meeting Minutes: Important for gauging the Reserve Bank of Australia’s outlook.
• 3:30 PM – USD: Core Durable Goods Orders m/m, Durable Goods Orders m/m: Manufacturing health in focus with forecasts at 0.2% and 0.3%, respectively.
• 5:00 PM – USD: New Home Sales and Richmond Manufacturing Index: Housing and regional manufacturing data to close US trading.

Wednesday, December 25, 2024:

• Tentative – JPY: BOJ Gov Ueda Speaks: Potentially significant comments from the Bank of Japan amid continued yen weakness.

Thursday, December 26, 2024:

• 3:30 PM – USD: Unemployment Claims: Labor market data remains critical amidst discussions of Fed policy.
• 6:00 PM – USD: Crude Oil Inventories: Focus remains on production levels and demand dynamics.

Friday, December 27, 2024:

• 1:30 AM – JPY: Tokyo Core CPI y/y: A leading indicator for inflation trends in Japan. The prior reading of 2.2% sets the stage for market reaction.

Market Insights: Key Charts to Watch

Chart 1: GBP/USD – Daily Chart

The pair is under significant pressure, testing a 2-year uptrend line at 1.25034 following weak retail sales and manufacturing PMI data in the UK.

Main Scenario:

A decisive break below the 2-year trendline could see GBP/USD targeting 1.23987 and beyond, with bearish momentum extending towards 1.22868. The broader downtrend remains intact, particularly with recent data undermining the pound.

Alternative Scenario:

However, thin liquidity and year-end adjustments could trigger a short-term rebound, particularly if US data disappoints. A recovery above 1.26103 (61.80% Fibonacci retracement) would shift the focus to 1.28102, signaling a potential reversal.

Key Levels:

• Support: 1.25034, 1.23987, 1.22868
• Resistance: 1.26103, 1.28102

Chart 2: Silver – Daily Chart

Silver is under heavy selling pressure, breaking below its short-term trendline while approaching the longer 2-year trendline. The formation of a head-and-shoulders pattern adds to the bearish outlook.

Main Scenario:

The break below $28.90 aligns with the bearish head-and-shoulders pattern, setting targets at $27.98 and $26.95 (127.20% and 161.80% Fibonacci levels). A strengthening dollar and weak global growth outlook further weigh on prices.

Alternative Scenario:

Should year-end volatility favor risk assets, silver could recover above $30.65, invalidating the bearish structure and shifting the focus back to $32.31.

Key Levels:

• Support: $28.90, $27.98, $26.95
• Resistance: $30.65, $32.31

Errante’s Weekly Newsletter brings you critical market insights to keep you ahead in the financial world. Stay informed and make strategic decisions with Errante.

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