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EUROPEAN EQUITIES CONTINUED TO SLIDE AFTER THE CENTRAL BANKS MEETING; THE BOE RAISED INTEREST RATES AS EXPECTED BY 50 BP, BUT MPC MEMBERS SHOWED UNCERTAINTY; THE ECB DID THE SAME, SIGNALLING HIGHER RATES TO BRING INFLATIONARY PRESSURES DOWN.

The vast majority of European stocks trade below parity this Thursday, packed with news on the macroeconomic front. Currently, the Dax is down 2.88%, the Cac40 2.90% and the Eurostoxx 3.21%.

Last night, the market digested Powell’s words and the Fed’s new economic projections. In particular, the FOMC raised interest rates (as widely expected by the market) by 50 bp. At the same time, however, the Chairman reiterated his mantra that rates will have to stay high for longer for inflationary pressures to slow. The new dot plots show that 17 out of 19 FOMC members now expect rates to be above 5% in 2023 (as opposed to the September forecast, where none had gone that high) and that a rate cut might not happen until 2024. At the same time, GDP estimates were revised down, and inflation estimates were revised up, but in detail, few expect an actual recession in the US next year.

In the morning came the decisions of the SNB, BOE and ECB, with all central banks raising interest rates by 50bp. In particular, among the MPC members, there was a wary indecision, with six votes in favour of 50bp, 2 in favour of unchanged rates and one in favour of a more substantial 75bp rise. On the other hand, the ECB signalled the need to continue to raise rates at a sustained pace in the future, as inflationary pressures will remain strong until 2025.

Strong movements were recorded in the FX market, as well as in the equity and bond segments.

As far as the macroeconomic calendar is concerned, after today’s numerous data and events, investors are now focused on tomorrow’s technical expiries, which are likely to bring high volatility.

EURUSD, M15

The EURUSD rose strongly after the Lagarde press conference and reached the yearly HVN around 1.0730 before returning to the current weekly POC. As for today, the most significant intraday support is the 1.0607 mark. In contrast, the most considerable intraday resistance is the yearly HVN. From a technical point of view, if prices break the support downward, the most likely scenario is a drop toward the W-1 VAH. On the flip side, if prices remain above the current weekly POC, they could try to stretch up to the resistance again. A breakout of the resistance could lead the pair to the following long-term resistance area, around the 1.0810 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: 1.0653, 1.0607, 1.0557.

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: 1.0730.

S&P500, M30

The S&P 500 fell strongly after the numerous central banks’ meetings and broke all the most critical support. Currently, it is trading around the most valuable intraday support area, between the W-2 VAL and the W-1 POC. In contrast, the most significant intraday resistance area is the W-1 VAH. From a technical point of view, as long as prices remain above the support, the most likely scenario is a pullback toward the resistance. On the other hand, if the index breaks the support below, a drop to the W-1 VAL is expected. Finally, a downward breakout of the 3889 mark could lead prices toward the 3835 area.

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: 3909-3905, 3889, 3835.

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: 3955, 3996.

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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