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Weekly outlook: US CPI stands ready to rock the markets

Alejandro Zambrano Alejandro Zambrano 13/05/2024
Weekly outlook: US CPI stands ready to rock the markets Weekly outlook: US CPI stands ready to rock the markets
Weekly outlook: US CPI stands ready to rock the markets Alejandro Zambrano

Traders are gearing up for an interesting week, particularly watching the US consumer price figures set to release on Wednesday at 13:30 PM London time.
 

Markets are currently projecting that headline inflation will drop from 3.5% to 3.4%, with the number hovering around the same figure since last summer. With core inflation at 3.8%, these high figures, coupled with little slack in the US labour market, have pushed expectations of a first rate cut back towards the September 18th meeting.
 

Recent data, including PMI figures and last week's initial jobless claims, have performed worse than anticipated, similar to slowdowns observed globally. If Wednesday's inflation figure comes out much lower, we could potentially see expectations for a rate cut being pushed forward.
 

Other data to focus on this week including Tuesday's UK unemployment figures and Thursday's Australian employment figures followed by the US jobless claims.
 

RBA
 

Last week, the Australian central bank was more hawkish than expected. AU inflation decreased from 3.8% to 3.7%, though the bank noted that inflation is taking longer than expected to reach its targets. They also highlighted that the labour market remains tighter than is consistent with sustained full employment and inflation at targets, indicating that it would need to soften significantly more before we can anticipate inflation returning to its targets. Overall, it looks like the Australian central bank, much like the Fed, will delay cutting interest rates, boosting the Australian dollar in the AUD/USD currency pair, making it one of the more interesting pairs on the market right now.
 

BoE
 

Last week, the Bank of England held rates unchanged at 5.25%, although two of its nine members opted for rate cuts, surprising the market and causing a slight dip in the GBP/USD. The central bank anticipates that slack in the economy could lower the CPI to 1.9% in two years.
 

Canadian employment figures
 

The Canadian dollar is also one to watch; the Canadian labour market report was positive last week, with employment increasing by 90.4k versus the 20.9k expected and higher than the negative 2.2k in the previous month. The unemployment rate remained at 6.1%, while economists anticipated a tick up to 6.2%.
 

Overall, last week's news warrants a bullish bias from a fundamental perspective on the Australian dollar and the Canadian dollar. At the same time, the outcome for the Bank of England was neutral to bearish.
 

Looking ahead to next week (London hours, BST):
 

Tuesday​: UK Unemployment rate, 07:00, US PPI, 13:30​, Fed Powell Speaks​, 15:00

Wednesday​: US CPI and US Retail sales​, 13:30

Thursday​: AU employment 02:30, US Jobless 13:30​
 

EUR/USD
 

Since both the ECB and the Fed are contemplating rate cuts, predicting the next move for this pair is challenging. From a technical standpoint, we are entrenched in this wedge pattern, which is notoriously difficult to trade. The pattern indicates that a break to 1.0815 could trigger a rally as high as 1.11. However, trading below this level and the downward slope could lead the price to plummet to the bottom of the wedge pattern around 1.06 in the coming weeks.
 


 

AUD/USD
 

For the AUD, the situation is more promising. Market sentiment is strongly bullish on the Australian Central Bank, and the AUD/USD has formed a promising inverse head and shoulders pattern. A potential break to 0.6650 could open the door for a rise towards 0.69, signalling potential gains for investors.
 


 

Brent crude oil (BRENT)
 

Brent crude oil (BRENT) prices are firmly bearish below $84.30, and we are still on a downward trajectory according to the head and shoulders pattern observed on the chart. The pattern has a target of $79.06. However, being bearish at current levels could be a challenge, given the substantial support of around $80.80 and $80.20.
 


 

XAUUSD
 

Gold prices are maintaining a long-term uptrend and will remain bullish as long as they remain above $2,271.
 


 

Nasdaq 100 (NAS100)
 

The NASDAQ 100 is also bullish, though slightly extended. We haven't seen a strong correction for some time, but we're in a short-term bullish uptrend above 17,892. The next resistance level is 18,353.
 


 

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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