Errante’s The Week Ahead: 14th to 18th October 2024

Highlights of the Week:

ECB Meeting and Press Conference: All eyes are on the European Central Bank’s (ECB) rate decision and the subsequent press conference, which will provide clues on the ECB’s future monetary stance.
US and UK Retail Sales Data: This will offer insights into consumer spending trends, a key component of economic growth in the US and UK.
Canada and UK CPI Figures: The upcoming release of Canadian CPI data and UK inflation figures will play a key role in shaping market expectations for the future monetary policies of the Bank of Canada and the Bank of England.

What Now?

This week is crucial for market participants focusing on monetary policy clues from the ECB and the US, alongside inflation readings from the UK and Canada.

The ECB’s press conference will be a critical point of interest for traders, as it may reveal any shifts in the policy outlook. Given the current market environment, if the ECB hints at a more dovish stance, we could see further weakening of the euro. Also, investors will focus on UK CPI figures. If inflation prints higher than expected, it could reinforce a hawkish stance from the Bank of England, pushing the GBP higher against peers.

Other side of the ocean, the US Retail Sales data will be an important gauge of the strength of the consumer sector, with any negative surprise potentially putting pressure on the USD. Meanwhile, the Canadian CPI readings will be pivotal in assessing inflation trends in Canada, influencing the CAD’s performance accordingly. Lower-than-expected CPI could strengthen expectations for a dovish policy stance from the Bank of Canada, weakening the CAD.

Market Events and Announcements:

Times below are GMT +3.

Monday, October 14, 2024:

10:00 PM – USD – FOMC Member Waller Speaks: Waller’s comments could provide insight into the Federal Reserve’s stance on future rate changes.

Tuesday, October 15, 2024:

9:00 AM – GBP – Claimant Count Change: Measures the change in the number of people claiming unemployment benefits in the UK.
9:00 AM – GBP – Average Earnings Index 3m/y: Tracks changes in the earnings of workers, which impacts consumer spending power.
12:00 PM – EUR – German ZEW Economic Sentiment: Indicates the mood of institutional investors regarding Germany’s economy.
3:30 PM – CAD – CPI m/m: Expected to decline, which could impact the CAD.
3:30 PM – CAD – Median CPI y/y, Trimmed CPI y/y, Common CPI y/y: Measures the underlying inflation trend, helping to gauge the trajectory of inflation.

Wednesday, October 16, 2024:

12:45 AM – NZD – CPI q/q: New Zealand’s inflation figure for the quarter.
9:00 AM – GBP – CPI y/y: Annual consumer price inflation in the UK, a key indicator of economic pressure.

Thursday, October 17, 2024:

3:30 AM – AUD – Employment Change and Unemployment Rate: A key indicator of labor market health in Australia.
3:15 PM – EUR – Main Refinancing Rate & Monetary Policy Statement: ECB is expected to release its policy decision and outlook.
3:30 PM – USD – Core Retail Sales m/m and Retail Sales m/m: Key figures indicating consumer spending trends.
3:30 PM – USD – Unemployment Claims: Weekly claims data providing insights into the labor market.
3:30 PM – USD – Philly Fed Manufacturing Index: Business conditions in the Philadelphia region.

3:45 PM – EUR – ECB Press Conference: Key insights into the ECB’s future monetary direction.
6:00 PM – USD – Crude Oil Inventories: Impactful on energy-related currencies and sectors.

Friday, October 18, 2024:

5:00 AM – CNY – GDP q/q and Industrial Production y/y: Key indicators of economic health in China.
9:00 AM – GBP – Retail Sales m/m: Provides insights into the UK’s consumer spending habits.
3:30 PM – USD – Building Permits: Insight into the health of the housing market in the US.

Chart Insights: Key Charts to Watch

Chart 1: EUR/USD (Daily Chart)

Main Scenario:

The EUR/USD has formed a double top pattern, a bearish reversal signal. The neckline of this pattern is around 1.10016, which has been breached, suggesting further downside pressure. Currently, the pair is finding support around 1.09440 – 1.09139. A continuation of the bearish trend could push the pair towards 1.08706, with an ultimate target projection at 1.07897.

Impactful Events:

This week’s German ZEW Sentiment and ECB meeting and press conference will be pivotal for EUR/USD. Any dovish signals from the ECB could lead to increased downside momentum. The US Retail Sales data might also have a considerable impact, with stronger numbers supporting a stronger USD.

Alternative Scenario:

If the EUR/USD holds above 1.09139, we may see a retracement towards the neckline at 1.10016. A break above this level could lead to a retest of Resistance Level 1 at 1.11076.

Key Levels:

Resistance: 1.10016, 1.11076, 1.12135
Support: 1.09440, 1.08706, 1.07897

Chart 2: CHF/JPY (Daily Chart)

Main Scenario:

The CHF/JPY has formed an inverse head and shoulders pattern, which typically signals a bullish reversal. The neckline breakout at 172.524 was successfully completed, and the pair is now trading attacking Current Resistance Level of 173.673. If this bullish momentum persists, the next upside targets will be 174.273, 175.134 and eventually Resistance Level 4 at 176.748.

Impactful Events:

Risk sentiment will play a critical role in CHF/JPY’s movements, along with developments in ECB policy and any notable geopolitical events that could drive safe-haven demand for the CHF or JPY.

Alternative Scenario:

Should CHF/JPY fail to sustain above 173.673, we might witness a pullback towards the Neckline at 172.524. A break below this level could lead to a retest of Support Level 2 at 170.412.

Key Levels:

Resistance: 173.673, 174.273, 175.134, 176.748
Support: 172.524, 170.412, 168.300

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