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EUROPEAN EQUITIES RETRACE FROM YESTERDAY’S HIGHS; INVESTORS REMAIN CAUTIOUS AHEAD OF TONIGHT ‘S FED MEETING; UK INFLATION RATE BELOW FORECAST.

Major European equities remain down ahead of the opening of the US stock market, with the Dax currently down 0.75%, the Cac40 0.68% and the Eurostoxx 0.60%.

Investors, therefore, remain cautious about a definitive direction to take, especially as they await the outcome of tonight’s FOMC meeting and Powell’s subsequent press conference, which will also update economic forecasts. Although yesterday’s US CPI figure showed falling inflation, traders will look for insight into the FOMC members’ projections for the coming months via the famous dot plot chart. At the moment, there does not seem to be a basis for a decisive change in monetary policy. Still, if many FOMC members expect rates higher than 5% at the end of 2023 (as opposed to the result in September), the market might react negatively.

Meanwhile, good news also came this morning regarding inflation in the UK. Specifically, the annual figure came in at 10.7% against the expected 10.9%, while the monthly figure was 0.4% against the expected 0.6%. The Core figure also surprised positively. In this sense, it seems that the forecast reflects the view of the BOE, which had predicted at its last meeting that inflation would peak at around 11% in October.

As for the macroeconomic calendar, today, investors will mainly focus on crude oil inventories and the Fed meeting mentioned above.

EURUSD, M15

The EURUSD posted a double-top pattern around one of the most significant long-term resistance, the yearly LVN. At the moment is trading below it. As for today, the most considerable intraday resistance area is the yearly LVN. In contrast, the most critical intraday support is the 1.0607 mark. From a technical standpoint, as long as prices remain below the resistance, the most likely scenario is a drop toward the support. If prices break the support downward, they could quickly move toward the W-1 VAH. On the flip side, if prices break yesterday’s highs upward, an extension of the movement to the yearly HVN is expected.

Main intraday support areas where to look for long trades in case of a bullish candlestick pattern or short trades in case of a bearish candlestick pattern: 1.0607, 1.0557, 1.0515.

Main intraday resistances areas where to look for short trades in case of a bearish candlestick pattern or long trades in case of a bullish candlestick pattern: 1.0651-1.0673, 1.0730.

S&P500, M30

The S&P 500 posted a huge spike yesterday after the CPI release, reaching a yearly HVN around the 4100 mark. At the moment, it trades below the most significant intraday resistance area between the daily LVN and the W-2 VAH. On the other hand, the most important intraday support is the W-3 VAH. From a technical point of view, as long as prices remain below the resistance, the most likely scenario is a drop toward the support and the W-3 POC in extension. On the other hand, an upward breakout of the resistance could lead prices toward the daily LVN around the 4063 mark.

Main intraday support areas where to look for long trades in case of a bullish candlestick pattern or short trades in case of a bearish candlestick pattern: 4010, 3996, 3955.

Main intraday resistances areas where to look for short trades in case of a bearish candlestick pattern or long trades in case of a bullish candlestick pattern: 4029-4036, 4063, 4100.

Key:

POC= Point of Control

VAH= Value Area High

VAL= Value Area Low

LVN= Low Volume Node

HVN= High Volume Node

W-1= last week

W-2= two weeks ago

W-3= three weeks ago

D-1= yesterday

D-2= two days ago

D-3= three days ago

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