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The Week Ahead 7th – 11th November: eyes on US mid-term elections.

Started by PocketOption, Nov 05, 2022, 03:11 am

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PocketOption

The Week Ahead 7th - 11th November: eyes on US mid-term elections.

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


Currency Pair Performance


5-day performance as of November 3rd, 2022. 09:30 GMT.



Source: finviz.com



10 Big Stories Last Week


In case you missed it...


Fed hiked rates by 75 basis points again. The US central bank raised rates by 0.75% for a fourth straight meeting. Fed Powell was more hawkish than expected, with the terminal rate now expected at 5%.


BP reported profits of $8.2 billion. The energy giant smashed forecasts and posted profits double that of the same period last year thanks to high oil & gas prices.


OPEC+ sees demand rising over the medium term. The oil cartel upwardly revised oil demand over the medium to longer term and said a $12.1 trillion investment was needed.


BoE agrees to the largest hike in 33 years. The UK central bank raised interest rates by 75 basis points to tame 40-year high inflation of 10.1%


Amazon falls to a 52-week low. The e-commerce giant continues to struggle after warning of a weak holiday period in its Q3 earnings release.


Hang Seng sees the strongest one-day gain in 13 years. Unconfirmed rumours that China could be forming a committee to look at exiting the zero-COVID strategy boosted the Hang Seng by 5% on Monday.


Musk appoints himself CEO of Twitter. Elon Musk dissolved the board and is considering a change of $8 a month for a Twitter blue tick verified account. He also plans to slash headcount by 50% to cut costs.


RBA hikes rates by 25bps. The Australian central bank raised rates by 25 basis points for a second straight meeting and said that more rate increases were likely.


Windfall tax calls grow louder. As oil majors in the UK & US post-eye-watering profits, calls for windfall taxes are rising. The UK could see a significant windfall tax applied, and President Biden floats the idea ahead of the midterm elections.


Tesla falls as China sales drop. The EV maker fell 5% across the week after the hawkish Fed and as China deliveries fell from the record high. The data explains Tesla’s recent price cut as it attempts to boost sales.



Chart of the Week



Source: TruistAdvisoryServices


The Fed hiked rates by a further 75 basis points in November. Federal Reserve Chair Powell warned that rates would likely rise higher than previously projected, although the pace of hikes could be smaller along the path.


Expectations are now for a 50 basis point hike in December, making this hiking cycle, so far, the fastest pace of rate increases since the early 1980s.


Fed Powell said, "it's premature to be thinking about pausing".


2-year treasury yields trade at 4.62%, a cycle high. The USD index has risen over 113.00 to a 2-week high.



5 Things to Watch This Week


1. US midterm elections

On November 8,th US citizens will hit the polls to vote for a new Congress; they do so at a time when inflation remains persistently high and household incomes are squeezed. The latest opinion polls suggest that the Republicans could win back the House, which could set the scene for two years of political deadlock. Historically equity markets like a divided house, although that is not to say that history will repeat itself.


2. Disney Q4 earnings

Disney will report as the share price trades 35% lower this year. Wall Street expects Disney to report a 15% YoY rise in revenue to $21.3 billion, and adjusted EPS is forecast to rise 38% to $0.51. The strong rise in revenue is expected to be driven by the theme parks and experiences business which is set to see revenue jump 39% as demand has held up despite economic concerns and the strong USD. Meanwhile, the streaming business has enjoyed huge success, and subscribers have been added at a rapid rate. Disney could once again overtake Netflix with subscriber numbers, as it briefly did earlier in the year.


3. UK Q3 GDP

As the cost-of-living crisis intensified, consumer confidence plunged, and shoppers rein in their spending, a recession appears impossible to avoid. In the first look at how the UK economy performed in the July - September quarter, expectations are for a contraction of -0.1% QoQ after recording a growth of 0.2% in Q2. Despite weak economic growth, the BoE hiked rates by 75 basis points as the central bank battles with persistently high inflation.


4. US CPI

US headline CPI unexpectedly ticked higher in September to 8.2% from 8.1%. Inflation is expected to cool very slightly to 8.1% YoY in October. Whilst headline inflation is cooling, core inflation, which is considered more stable, continues to rise up from 6.6% YoY in September to 6.9% forecast in October. Hotter core inflation supports the Fed's belief that interest rates may need to rise higher than initially projected.


5. Eurozone retail sales

Eurozone retail sales fell 0.3% MoM in August and are expected to fall a further 0.4% MoM in September. Falling sales point to a weakness in consumer demand as the economy heads toward recession. Despite a positive surprise for eurozone GDP in Q3, with inflation at 10% and proving to be stickier than expected, cracks in the eurozone economy are showing, and consumer confidence is near historical lows.


Economic Calendar Highlights



Source: FXStreet.com



Technical Analysis:


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


EUR/USD (Daily Candlestick Chart)




EUR/USD failed to break the 0.996 level to the upside, leading to a lower reversal. The market succeeded in breaking a major key support level around the 0.984 mark. The Euro is still losing ground to the US Dollar and is about to test the 0.970 mark. A move and close above 0.984 would indicate a bullish bias.


GBP/USD (Daily Candlestick Chart)




The British Pound successfully broke the triangle to the downside with strong negative momentum after failing to close above 1.145. The price is expected to move furthermore to the downside toward the 1.107 mark. If the price breaks and closes above 1.145, we could see a reversal and a move higher toward 1.165.


USD/JPY (Daily Candlestick Chart)




USD/JPY found buyers near the 61.80 % Fibonacci retracement level after a deep correction to this zone. Buyers now control the market and are about to push the price in the same direction as the main trend to the 151.8 mark. However, if the market succeeded in closing and breaking below the 147.8 level, this would negate our bullish bias.


AUD/USD (Daily Candlestick Chart)




The Aussie is still trending to the downside on the weekly time frame, indicating that the sellers are still in control of the market. The price successfully broke the triangle formation to the downside. This could lead to a further downward movement toward the next key support level, around 0.620. However, if the price breaks and closes above the 0.635 mark, this would negate our bearish bias.


USD/CAD (Daily Candlestick Chart)




Loonie is still bouncing inside a parallel channel formation. The market tested the lower end of the channel and reversed higher. The price is heading all the way up to the top of the channel to test the 1.384 mark. If the market fails to move upward, then there is a chance to see the price testing again the lower end of the channel (1.350).


Gold (Daily Candlestick Chart)




Gold found sellers near the 50% Fibonacci retracement level and moved lower. The market is about to test a critical support level near 1,620. If the price succeeds in breaking and closing below this level, the price of Gold could reach the 1,566 mark. However, failing to break the 1,620 mark could cause a move higher to the 1,674 mark.


Brent Oil (Daily Candlestick Chart)




UKBRENTOIL broke above the trend line after retracing to the 61.80% Fibonacci retracement. Buyers joined the move near this zone and pushed the price higher. If the buyers maintain their dominance over the market, we could see the price of this asset reaching the 97.75 mark. However, if the price breaks and closes below 92.08, this could lead to a reversal and a move lower to 88.01.


US500 (Daily Candlestick Chart)




US500 found sellers near the 61.80 % Fibonacci retracement level, which led to a breakout of the bearish flag formation to the downside. The market is moving lower and heading down toward the next support level of 3,582. If the market moves back higher and closes above 3,911, the 4,160 could be tested.


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


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