Errante's The Week Ahead: 23rd - 27th September 2024

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

Highlights of the Week:

European PMIs (Monday): The week’s start sees crucial PMI data from France, Germany, and the Eurozone. These will offer key insights into the health of the manufacturing and services sectors in Europe, with potential to influence the euro, especially given recent weakness in some sectors.

RBA Cash Rate Decision (Tuesday): As inflation in Australia has remained within target and the labor market is holding steady, the Reserve Bank of Australia (RBA) is expected to leave interest rates unchanged. This decision will impact AUD/USD movements, particularly if there’s a surprise hawkish or dovish shift in tone.

SNB Rate Decision (Thursday): The Swiss National Bank (SNB) is expected to cut rates from 1.25% to 1.00% as inflation pressures ease and the economy weakens. This rate cut would mark a shift in monetary policy, directly influencing the Swiss franc and broader currency markets.

US GDP and Powell’s Speech (Thursday): The U.S. releases its Final GDP data for Q2 and Jerome Powell speaks at a major event. Both will set the stage for investor sentiment regarding the Fed’s future monetary policy direction.

Core PCE Price Index (Friday): This is the Fed’s preferred measure of inflation, and any surprises in this release will shape expectations around future rate decisions.

What Now:

The upcoming week’s focus will be on the latest round of central bank decisions and inflation data, particularly from Europe, Australia, and the U.S.

European PMIs

Manufacturing and Services PMIs for France, Germany, and the Eurozone will provide critical insights into the region’s economic trajectory. Markets will be scrutinizing these figures as the services sector has shown resilience, but manufacturing has been struggling. If the data disappoints, the euro may face downward pressure as traders adjust to lower growth expectations. However, a better-than-expected performance could signal that the European economy is stabilizing, providing a floor for the euro.

RBA Cash Rate Decision

As the RBA is expected to hold its cash rate steady at 4.35%, investors will closely monitor the accompanying statement for clues on future rate hikes or cuts. The Australian economy has shown resilience, but the RBA may highlight downside risks from global demand and recent inflation figures. A surprise hawkish tone could push AUD higher, but a dovish outlook could weaken it.

SNB Rate Cut

The SNB is likely to cut rates as inflation cools and economic growth falters. This move would likely weaken the Swiss franc, as rate differentials with other major currencies widen. However, if the SNB holds rates steady or signals that future cuts are less likely, the franc could find support against major pairs like EUR/CHF and USD/CHF.

US GDP & Powell Speech

U.S. final GDP data and Fed Chair Jerome Powell’s comments are pivotal. Investors will be parsing Powell’s words for hints on the Federal Reserve’s next steps, especially following the recent rate cut. If Powell signals further rate cuts are unlikely, the dollar could strengthen. However, dovish comments combined with softer GDP growth may weaken the USD as traders anticipate more aggressive easing.

Core PCE Price Index

A key inflation gauge for the Fed, any surprises here will likely move markets. A higher-than-expected reading would bolster the case for keeping rates higher for longer, while a softer print could reignite speculation around rate cuts.

Market Events and Announcements:

Times below are GMT +3.

Monday, September 23:

10:15 AM – EUR French Flash Manufacturing PMI: Measures activity in the French manufacturing sector.

10:15 AM – EUR French Flash Services PMI: A gauge of services sector performance in France.

10:30 AM – EUR German Flash Manufacturing PMI: A key indicator of the strength of German manufacturing.

10:30 AM – EUR German Flash Services PMI: An early estimate of the services sector in Germany.

11:30 AM – GBP Flash Manufacturing PMI: A gauge of manufacturing activity in the UK.

11:30 AM – GBP Flash Services PMI: Measures the services sector’s health in the UK.

4:45 PM – USD Flash Manufacturing PMI: Key data point for U.S. manufacturing.

4:45 PM – USD Flash Services PMI: A measure of U.S. service sector growth.

Tuesday, September 24:

7:30 AM – AUD Cash Rate: The interest rate set by the RBA, expected to remain steady.

7:30 AM – AUD RBA Rate Statement: Accompanies the rate decision, offering forward guidance.

5:00 PM – USD CB Consumer Confidence: An indicator of U.S. consumer sentiment.

8:10 PM – CAD BOC Gov Macklem Speaks: His speech will offer insights into future monetary policy decisions.

Wednesday, September 25:

4:30 AM – AUD CPI y/y: Australia’s inflation rate, a key determinant for monetary policy.

Thursday, September 26:

10:30 AM – CHF SNB Monetary Policy Assessment: Insights into the Swiss National Bank’s monetary stance.

10:30 AM – CHF SNB Policy Rate: Expected to be cut from 1.25% to 1.00%.

11:00 AM – CHF SNB Press Conference: An opportunity for the SNB to elaborate on its policy decision.

3:30 PM – USD Final GDP q/q: The final measure of Q2 U.S. economic growth.

3:30 PM – USD Unemployment Claims: A key weekly figure for labor market health.

4:20 PM – USD Fed Chair Powell Speaks: Powell’s speech could provide clues about future monetary policy.

Friday, September 27:

3:30 PM – CAD GDP m/m: A key measure of Canadian economic growth.

3:30 PM – USD Core PCE Price Index m/m: The Fed’s preferred inflation measure, crucial for policy direction.

Chart Insights: Key Charts to Watch

Chart 1: EUR/USD (Daily Chart)

EUR/USD has broken above a triangle pattern, signaling bullish potential. The breakout is reinforced by stronger-than-expected PMI data from Europe, which could continue to support the euro. If this momentum continues, key resistance levels to watch include:

1.11923 (short-term resistance)

1.12757 (potential target)

These levels mark crucial barriers that the euro could challenge if economic data continues to surprise to the upside, particularly with the release of French and German PMI figures. Strong PMI numbers could fuel further upward movement, confirming the bullish breakout.

Alternative Scenario:

If the PMI data disappoints or if U.S. Core PCE Price Index surprises with a stronger-than-expected inflation reading, this could pressure EUR/USD lower. In this scenario, broken resistance at 1.10942 will act as immediate support, followed by key levels:

1.10678 (support from prior low)

1.10051 (a critical level that, if broken, could trigger a deeper pullback)

The FOMC’s Powell Speech on Thursday will also play a pivotal role, with any hints at a dovish outlook potentially fueling the euro, while hawkish comments could challenge the pair’s recent gains.

Chart 2: AUD/USD (Daily Chart)

AUD/USD remains within a symmetrical triangle pattern, and the RBA Cash Rate Decision will be the key event to watch this week. The RBA is expected to leave rates unchanged, which could still allow the pair to break higher if the central bank delivers a slightly hawkish tone. The triangle’s upper boundary near 0.68386 serves as immediate resistance. with further resistance levels at:

0.69072 (first major target if a breakout occurs)

0.69484 (secondary target)

If the RBA highlights persistent labor market strength and keeps an optimistic tone on inflation, this could drive AUD/USD toward these upper targets.

Alternative Scenario:

If the RBA maintains a dovish tone or U.S. CB Consumer Confidence and Core PCE Price Index show stronger-than-expected data, AUD/USD could move lower. Key support levels within the triangle pattern include:

0.66779 (near-term support)

0.66217 (next level of support)

Breaking below 0.65356 would invalidate the bullish scenario, signaling further downside momentum. The Australian CPI release on Wednesday will also be crucial in shaping the next leg for the pair, with higher-than-expected inflation supporting the Aussie, while a miss could increase downside risk.

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.

If you have any questions or require any assistance, please contact one of our support team members via our Live Chat or email [email protected].

We are Errante. Trading made personal.