Errante’s The Week Ahead: 20th – 24th January 2025
Errante’s The Week Ahead: 20th – 24th January 2025
Errante’s The Week Ahead: 20th – 24th January 2025
Highlights of the Week:
Focus on BOJ Policy Decisions: Markets are closely watching the Bank of Japan’s monetary policy statement and outlook report amidst rising inflation and economic uncertainty.
Critical CPI Data from Canada and New Zealand: Inflation figures from Canada and New Zealand will provide significant direction for CAD and NZD pairs.
GBP, USD and EUR PMI Releases: Preliminary Manufacturing and Services PMI data from the UK, US and Eurozone are expected to gauge economic momentum.
What Now?
The upcoming week presents a critical juncture for global financial markets, with significant data releases and central bank decisions set to guide sentiment. The economic calendar is densely packed, and the convergence of inflation figures, labor market updates, and PMI data will shape expectations for growth, monetary policy, and market trends across major economies.
Global Markets Face Crosswinds
The latest economic data suggests that the global economy is navigating a fine line between stabilization and lingering uncertainty. In the U.S., optimism persists as markets adjust to the potential for softer inflation and moderating Federal Reserve policy. However, upcoming unemployment claims and flash PMI data will be pivotal in confirming whether economic momentum can sustain the current narrative of resilience. Strong labor market data could bolster expectations for continued growth, while any weakness might introduce concerns about deceleration.
Meanwhile, Canada’s inflation and retail sales data will shed light on the domestic consumer’s strength and inform the Bank of Canada’s next steps. With core retail sales expected to show muted growth, traders will be keen to see whether this reflects seasonal adjustments or deeper economic challenges. A softer outlook could weigh on the Canadian dollar and reinforce dovish expectations.
Across Europe, the focus is squarely on flash PMIs from Germany and France. While recent months have hinted at stabilization in services activity, manufacturing remains a pain point. The eurozone’s ability to chart a path forward amid weak demand and geopolitical uncertainty remains in question. A rebound in PMIs could reinvigorate euro bulls and European equities, while further deterioration would reinforce concerns about stagnation in the bloc’s industrial heartland.
Central Banks in the Spotlight
The Bank of Japan’s (BOJ) monetary policy meeting will be a marquee event for the week. While markets expect no change to the negative interest rate policy, the accompanying outlook report and press conference will be scrutinized for any shifts in tone. With inflationary pressures remaining subdued, any dovish hints could pressure the yen and fuel speculation about further easing measures later in the year.
In New Zealand, the Reserve Bank of New Zealand will watch CPI data closely as it evaluates its inflation-fighting efforts. A weaker-than-expected print could increase the likelihood of further accommodation, putting downward pressure on the kiwi.
Shifting Momentum in the UK
For the UK, claimant count data and flash PMIs are front and centre. While the labor market has demonstrated resilience, cracks in business activity could emerge if PMIs signal a slowdown in services and manufacturing. Given the Bank of England’s delicate balancing act, these data points will influence the pound’s trajectory and the outlook for monetary easing. Stronger PMIs could reinforce the pound’s recovery, while weak figures may reignite discussions about rate cuts.
Upcoming Data and Events:
Times are in GMT+2
Monday, January 20, 2025:
No high impact event.
Tuesday, January 21, 2025:
9:00 AM – GBP – Claimant Count Change:, Reflecting UK labor market conditions.
The pair has been in a steady uptrend since September 2024. However, a bearish correction is underway after breaking below the previous support at 156.015. The pair is now trading at 155.67, approaching key supports near the trendline. Indicators suggest continued bearish pressure with potential for further declines.
Main Scenario:
If the pair breaks below 155.238 (127.20% Fibonacci level), it could target 154.250 and 153.159 (161.80% and 200% Fibonacci levels).
Alternative Scenario:
A reversal above 157.106 (61.80% Fibonacci level) could signal a return to bullish momentum.
Key Levels:
Support: 155.238, 154.250, 153.159
Resistance: 157.106, 158.871
GBP/CAD – Daily Chart:
The pair has broken its two-year upward channel, finding support at the last bottom of 1.74789. A break below this level could confirm a continuation of the downward trend towards lower targets. Momentum indicators remain bearish, highlighting risks of further declines.
Main Scenario:
A decisive move below 1.74789 could target 1.72740 and 1.70134 (127.20% and 161.80% Fibonacci levels).
Alternative Scenario:
A recovery above 1.77667 (61.80% Fibonacci level) may signal a return to bullish sentiment.
Key Levels:
Support: 1.74789, 1.72740, 1.70134
Resistance: 1.77667, 1.82322
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