Weekly Market Analysis for 23rd September 2024

This week began with some key releases from the Eurozone and the UK. The data indicates ongoing challenges for European economies, especially in the manufacturing sectors, and mixed performance in the services sectors.

France’s Flash Manufacturing PMI came in at 44.0, missing the forecast of 44.3, but slightly better than the previous 43.9. This indicates continued contraction in the manufacturing sector, although the small improvement offers a glimmer of hope. The Flash Services PMI, however, disappointed at 48.3, well below the forecasted 53.0 and the previous 55.0, signalling weakness in the services sector, which could weigh on overall economic growth.

Germany’s Flash Manufacturing PMI plunged further to 40.3, below both the forecast of 42.4 and the previous 42.4. This marks a deeper contraction in the sector, with German industry struggling more than anticipated. On a brighter note, the Flash Services PMI slightly outperformed expectations, registering 50.6 against the forecast of 51.1, but still down from the previous 51.2. This suggests the services sector is stabilising but not yet showing strong growth.

The UK’s numbers painted a more positive picture. The Flash Manufacturing PMI printed 51.5, slightly lower than the forecast of 52.3. Meanwhile, the Flash Services PMI came in at 52.8, missing the forecast of 53.5 and down from the previous 53.7. Both numbers indicate that the UK’s economy is growing, albeit at a slower pace than expected, particularly in the services sector.

Later on Monday the Flash Manufacturing PMI is expected to come in at 48.6, a slight improvement from the previous 47.9. A reading below 50 still indicates contraction, but the marginal improvement could suggest a stabilising trend in the US manufacturing sector.

The Flash Services PMI is forecast at 55.3, slightly lower than the previous 55.7. Despite the drop, a number above 50 still signals expansion in the services sector, which may support positive sentiment around the US economy.

On Tuesday, the spotlight will be on Canada with the release of key inflation data. The CPI month-over-month is expected to show a slight decrease to 0.1% from the previous 0.4%. Similarly, the Median CPI year-over-year is forecasted to dip to 2.3% from 2.4%. Any deviations from these expectations could lead to notable movements in the CAD, particularly if the data suggests a shift in inflationary pressures. Later in the day, the US will release Core Retail Sales and Retail Sales figures, both anticipated to come in lower than their previous readings, which might put pressure on the USD.

Wednesday will be dominated by the UK and US. The UK will release its CPI year-over-year data, expected to remain steady at 2.2%. Traders should watch for any surprises that could influence GBP movements. The US will later announce the Federal Funds Rate, with expectations that it will be cut by 25 basis points to 5.25%. The FOMC's economic projections, statement, and press conference will be critical as market participants seek clues about future monetary policy direction. Given the steady rate expectations, the focus will likely shift to the Fed's outlook on inflation and growth.

Thursday’s attention will turn to New Zealand, where the GDP quarter-over-quarter is forecasted to decline by 0.4%, a sharp drop from the previous 0.2% increase. This could weigh heavily on the NZD if realised. Australia will also release its Employment Change and Unemployment Rate figures. The Employment Change is expected to rise by 25.8K, slightly down from the previous 58.2K, with the Unemployment Rate forecasted to stay at 4.2%. Stronger-than-expected employment data could provide support for the AUD.

On Friday, Japan will take centre stage with tentative releases of the BOJ Policy Rate, Monetary Policy Statement, and Press Conference. The policy rate is expected to remain at <0.25%. Traders should monitor the BOJ's statement closely for any indications of changes in monetary policy, which could influence JPY movements. The UK and Canada will also release Retail Sales data, with the UK expecting a slight decrease to 0.4% from 0.5% month-over-month, and Canada forecasted to see mixed results in its Core Retail Sales figures.

Here are 3 markets to watch this week

NASDAQ

Three weeks ago, the market formed a higher swing low at 18,296. From this level, it rallied strongly, suggesting the uptrend may continue, potentially taking the market near the recent all-time high of 20,771. The weekly chart shows both the 20 and 50-period moving averages pointing upwards, with the market trading well above the slower 50-period average. Last Thursday, the market reached a key daily resistance level at 19,939 and lost some momentum. While the market could theoretically reverse from this level, the two higher reactionary lows at 18,296 and 19,322 suggest that buyers have been willing to step in at higher prices. Therefore, we might see the market break through the resistance level and move higher. If the NASDAQ attracts buyers above 19,939, it could first rise to 20,600 and then possibly to levels near the latest ATH (20,771). Alternatively, a retracement back to the nearest key support level at 19,391 is also possible.

USOIL

Two weeks ago, the price of oil began rallying from 64.68, marking the seventh instance since May 2021 that buyers have been drawn to the 62-68 dollar range. This suggests that market participants view this range as a key value area for oil.

The rally over the past two weeks has created a reversal signal: Last week, the market rallied strongly and closed above the reversal candle's high.

In addition to trading near a so-called value area, the Fed's decision to cut rates by 0.5% and its more dovish stance support oil prices. Technically, the close above the weekly reversal candle high at 69.40 is bullish, but the market now needs to break above a key daily resistance level at 71.40. If bullish momentum continues, the market could reach 73.80, and potentially 76. Alternatively, if the rally fails to push decisively above 71.40, a retracement down to 69.40 is likely.

GBPJPY

On the 8-hour chart, GBPJPY is trending higher after forming a double bottom at 183.77. On the weekly chart, this level is a higher reactionary low, which explains the current upward trend in the 8-hour dollar chart. The nearest key support levels are at 190.39 and 188.70, and if the market tests 188.70 level, we should monitor price action to see if there are signs of renewed buying around 188.70. This could indicate that the GBP bulls might still be willing to bid the market higher. If the market attracts buyers at or above this level, it could trade up to 192.80. Alternatively, if the level breaks, a move down to 187.45 could be likely. The third possible scenario is that the market continues trending higher from the nearest support level (190.39) it has reacted to in today’s trading. In this case we could see GBPJPY trading to 192.80 level relatively soon. It is important to follow price action to see which scenario is most likely to play out.

This weeks high impact market events

The following economic events and data releases have the potential to cause considerable price movements, thereby offering you both opportunities and risks.

Stay informed and leverage our economic calendar to access real-time data and analysis as these key events unfold.

Time (GMT +3)

Monday 23rd September

Tuesday 24th September

Wednesday 25th September

Thursday 26th September

Friday 27th September

How will you trade the markets this week?

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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