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The Week Ahead 10th – 14th October: the largest oil output cut since the start of the pandemic

Started by PocketOption, Oct 07, 2022, 07:12 pm

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PocketOption

The Week Ahead 10th - 14th October: the largest oil output cut since the start of the pandemic

Welcome to the Key to Markets preview of the Week Ahead.


Currency Pair Performance


5-day performance as of October 6th, 2022. 10:30 GMT.



Source: finviz.com



10 Big Stories Last Week


In case you missed it...


The RBA slowed the pace of hikes. The RBA hiked rates by 25 basis points, less than the 50 basis points expected, and raised hopes that global central banks could adopt a less hawkish stance.


OPEC+ cut output. The oil cartel slashed production by 2 million barrels, the largest cut since the pandemic. Oil prices jumped 10% across the week.


RBNZ raised rates by 50 basis points. The New Zealand central bank raised rates in line with forecasts, dampening hopes of a dovish pivot.


Tesla deliveries disappoint. The EV maker reported a record 343,830 deliveries, but this was below the 358,000 forecast citing logistic issues for the miss.


UK Chancellor U-turns. Kwasi Kwarteng abolishes the higher rate tax cut helping the pound extend its rebound from record lows against the USD, rising to a three-week high above 1.14.


Gold shines. The precious metal is set to book its most significant weekly gain since February as investors grow optimistic that rate hikes could start slowing sooner rather than later.


Elon Musk Twitter deal is back on. Elon Musk surprised the market and has said he wants to proceed with the Twitter deal. The Twitter share price jumped 22%


Credit Suisse battles rumours of a Lehman-style crash. The Swiss bank saw its share price drop to a record low on fears of imminent collapse.


The UK's credit rating was downgraded. Rating agency Fitch downgrades the UK credit outlook to negative from stable following the Chancellor's mini-budget.


Eurozone PPI surged past 40%. PPI in the eurozone rose to 43.3% YoY ahead of forecasts. Given that it is a lead indicator for CPI, consumer prices could keep rising.



Chart of the Week



Source: DailyShot


US JOLTS job openings surprised to the downside and fell by over 1 million to 10 million, the lowest level since June 2021. There are now 1.7 vacancies per unemployed person.


The significant drop in vacancies suggests that the labour market could finally be starting to loosen and that demand is starting to cool. Usually, such a significant drop would imply a recession, boosting the case for the Fed to at least consider slowing the pace of rate hikes.


Whilst it is still too early to confirm a dovish pivot from the Fed, markets are already starting to price it in, given that a few months of declines of this size and we will be there.



5 Things to Watch This Week

1. US bank earnings

Q3 earnings season will kick off this week, the banks. Citigroup, JP Morgan, and Wells Fargo will report on Friday, followed by more financials the week after. Q3 has seen a steep rise in interest rates which is beneficial for net interest income. However, concerns over the outlook for the US economy mean that IPOs and mergers are down.


2. FOMC minutes

The minutes come from the September FOMC meeting, where the Federal Reserve raised interest rates by 75 basis points to 3-3.25% and signalled that more large rate hikes would come. The meeting was more hawkish than expected and showed the policy rate rising to 4.4% by the end of the year. Investors will scrutinise the minutes for signs that the Fed could be starting to soften its stance.


3. US CPI inflation

In August, the headline CPI was 8.3% YoY, down slightly from 8.5% in July to 9.1% in June. However, core inflation, which strips out the more volatile items such as food and fuel, rose to 6.3% YoY and 0.4% MoM showing that the rise in inflation was broad-based. In September, core inflation is expected to rise 0.3% MoM, which could fuel bets that the Fed will need to keep hiking rates aggressively.


4. UK jobs data

The UK jobs market has shown resilience even as the cost of living crisis deepens and the economic outlook deteriorates. Expectations are for 128k new jobs in the three months to August, up from 40k in July, which is still strong. Meanwhile, the unemployment rate is expected to rise to 3.8%, up from 3.6%. The cost of living crisis could mean more people returning to the labour market, increasing the rate.


5. Chinese inflation

Chinese inflation came in at 2.5% YoY in August, slowing by more than expected as the COVID lockdown hit. Inflation is expected to keep rising to 2.8% in September. However, this will not likely impact the central bank's scope to cut interest rates. The data could highlight the difference between the US and China's economies.


Economic Calendar Highlights



Source: FXStreet.com



Technical Analysis:

TA of the major asset classes (Forex – Commodities – Indices...).


EUR/USD (Daily Candlestick Chart)




While trading inside a bearish channel, EUR/USD is still in a clear downward movement. The market rebounded then stalled near the area of confluence made of the 61.8% Fibonacci retracement and the strong resistance near 0.996. More sellers could rejoin the downtrend near this zone and push the price to the 0.955 mark. A move above 0.996 and outside the channel would indicate a bullish reversal.


GBP/USD (Daily Candlestick Chart)




The British Pound failed to continue its move higher, where it faced strong resistance from sellers near the 1.142 level. While below the downtrend line, the price should continue its move lower in the direction of the primary trend to test the next support level around 1.054. However, if the price breaks above 1.142 and the trendline, we could see a reversal and a move higher toward 1.174.


USD/JPY (Daily Candlestick Chart)




USD/JPY is testing resistance formed by the top of the range at 144.8. Since the dollar-yen is still in an upward movement on the weekly time frame, the channel is more likely to be broken to the upside. If this scenario occurs, the price might reach the 147.4 mark. Failing to break the 144.8 mark could lead to a move lower to the bottom of the channel (141.3) and increase the chance of a breakdown into a more significant correction.


AUD/USD (Daily Candlestick Chart)




The Aussie found sellers near 0.654 after a modest corrective move higher. Further movement to the downside could see the YTD low tested at 0.637. However, if the price moves back above 0.653, it could prompt a move higher toward 0.659.


USD/CAD (Daily Candlestick Chart)




Loonie is trending higher but could still retrace to the 50% Fibonacci retracement level, coinciding with strong resistance around 1.339. More sellers might extend the correction with a break below this level and push back the price to the downside to the previous low at the 1.295 mark. A move and close above 1.339 would indicate a continuation of the uptrend and a re-test of the high at 1.384.


Gold (Daily Candlestick Chart)




Although Gold has posted a significant bullish correction, the price is still in a downtrend. The market is testing an area of confluence made of the 61.8% Fibonacci retracement level and a strong resistance near the 1,734 mark. Bears might rejoin the downtrend near this zone and reverse the price to the 1,681 mark. However, a close above 1,734 could cause a move higher toward 1,800.


Brent Oil (Daily Candlestick Chart)




UKBRENTOIL also posted a big bullish correction similar to GOLD. However, the market is still overall in a downtrend. There is a good chance that the price could be halted near the 61.8% Fibonacci retracement level and be pushed lower to the 86 level. If the price breaks and closes above 95, this could lead to a reversal and a move higher to 103.


US500 (Daily Candlestick Chart)




US500 has paused after a bullish engulfing candlestick pattern and a solid rebound for the 61.8% Fibonacci retracement. Sellers are taking back control of the market around this zone and could push the price down to 3,663. Closing above 3,812 would imply a move back up to 3,939.


Thank you very much for reading - and have a great week trading!


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