Errante’s The Week Ahead: 25th – 29th November 2024

Highlights of the Week:

New Zealand RBNZ Rate Decision: On Wednesday, the RBNZ will announce its rate decision, expected to provide insights into their monetary policy outlook, which could drive significant moves in NZD pairs.

US Core PCE Index: The core PCE price index, due on Wednesday, will offer important data on inflation and influence market expectations regarding future Fed actions.

Eurozone Prelim CPI Data: Thursday’s preliminary inflation data for Germany and Spain will provide key indicators of inflation trends in the Eurozone, impacting EUR sentiment.

What Now?

This week, the market’s focus will be on multiple key economic releases, ranging from central bank decisions to critical inflation data. The RBNZ rate decision on Wednesday will take center stage, with growing expectations that the central bank could deliver a super-sized rate cut of 75 basis points (bps), following the New Zealand dollar hitting a one-year low. Currently, a 50-bps cut is fully priced in, with a 30% chance of a 75-bps cut. The NZD/USD pair fell as low as $0.5829 last week, breaking key support at $0.5850, reflecting the dovish market sentiment. While a 50-bps cut is the likely outcome, a 75-bps cut could be triggered due to the RBNZ’s confidence on the inflation front and the long gap until the next meeting. This dovish outlook stands in contrast with the Reserve Bank of Australia’s more cautious stance, which has delayed rate cut expectations. Markets will closely scrutinize the RBNZ statement for further guidance on future monetary actions.

In the US, the release of the Core PCE Price Index, the Federal Reserve’s preferred inflation gauge, will be a pivotal moment on Wednesday. Following recent hawkish comments from Fed Chair Powell, where he hinted at a cautious approach to rate cuts despite broader expectations, market participants will be keenly watching the data for indications of easing inflationary pressures. Traders have scaled back their expectations for a December rate cut, with the odds currently at 55%, down from 80% previously. This evolving sentiment is likely to influence both bond yields and USD pairs. The S&P 500 continues to show signs of fatigue after the initial election rally, with market participants increasingly cautious about how long the so-called “Trump trade” can persist, especially given the divergent economic outlooks between the US and Europe.

Adding to the mix, Eurozone inflation data will be released on Thursday, offering preliminary insights into inflation dynamics across the continent. The euro recently fell to its lowest level in two years as traders bet the European Central Bank may need to cut rates aggressively to support the region’s economy. The single currency dropped over 1% to $1.0335, driven by weaker-than-expected PMI data from the region’s largest economies, increasing the odds of a rate cut next month. The euro is under significant pressure, reflecting concerns about the cyclical outlook for the eurozone, which stands in stark contrast to the US, where expectations for growth have been bolstered by recent policy promises.

Market Events and Announcements:

Times below are GMT +2.

Monday, 25^th November, 2024:

11:00 AM – EUR: German Ifo Business Climate: Key indicator for German business sentiment and economic health.

Tuesday, 26^th November, 2024:

4:00 PM – USD: S&P/CS Composite-20 HPI y/y: Indicator of house prices in the US, providing insights into housing market trends.

5:00 PM – USD: CB Consumer Confidence & New Home Sales: Consumer sentiment and new home sales, giving a pulse on the US economic outlook.

5:00 PM – USD: Richmond Manufacturing Index: An indicator of manufacturing conditions in the Richmond area.

Wednesday, 27^th November, 2024:

2:30 AM – AUD: CPI y/y: Australian inflation data to gauge economic conditions and RBA future policies.

3:00 AM – NZD: Official Cash Rate & RBNZ Monetary Policy Statement: RBNZ rate decision and statement will shape NZD sentiment.

4:00 AM – NZD: RBNZ Press Conference: RBNZ Governor will provide additional insights on economic outlook.

3:30 PM – USD: Preliminary GDP q/q & Unemployment Claims: US GDP and weekly labor data are key indicators for economic activity.

5:00 PM – USD: Core PCE Price Index m/m, Pending Home Sales m/m: The core PCE index is the Fed’s preferred inflation measure, while pending home sales provide insight into real estate activity.

5:30 PM – USD: Crude Oil Inventories: Data on oil stockpiles, which impacts energy markets.

9:00 PM – USD: FOMC Meeting Minutes: Detailed notes on the latest FOMC meeting, providing insight into policy discussions.

Thursday, 28^th November, 2024:

10:00 AM – EUR: Spanish Flash CPI y/y: Key preliminary inflation data for Spain, providing insights into Eurozone price stability.

10:55 AM – AUD: RBA Governor Bullock Speaks: Governor Bullock’s remarks could provide important insights into the RBA’s future monetary policy.

All Day – EUR: German Preliminary CPI: Key indicator for inflation trends in Germany.

Friday, 29^th November, 2024:

1:30 AM – JPY: Tokyo Core CPI y/y: Inflation measure for Tokyo, an indicator of broader inflation trends in Japan.

10:00 AM – CHF: GDP q/q: Swiss GDP growth figures, providing insights into economic performance.

12:00 PM – EUR: Core CPI Flash Estimate y/y: Inflation data from the Eurozone to assess price stability.

3:30 PM – CAD: GDP m/m: Canadian monthly GDP figure for insight into economic growth.

4:45 PM – USD: Chicago PMI: Manufacturing data to gauge business conditions in the Chicago area.

Market Insights: Key Charts to Watch

Chart 1: GBP/USD – Weekly Chart

GBP/USD has broken below the 100% Fibonacci retracement level of the latest upswing. The bearish move has gained momentum, pushing the pair into lower territory within a descending channel.

If bearish sentiment continues, GBP/USD may decline further towards the 127.20% Fibonacci extension at 1.24553. A break below this key level could extend the bearish move, with potential targets at 1.23461 (141.40% Fibonacci extension) and ultimately 1.21891 (161.80% Fibonacci extension). The strength of this downtrend will largely depend on the upcoming UK economic data, particularly the CPI and GDP releases, and US economic sentiment following the Core PCE release.

Alternative Scenario:

In the case of a rebound, the pair could recover towards 1.26645, which marks the 100% Fibonacci retracement level. A push above this level would target the resistance at 1.28291 (78.60% Fibonacci retracement) and 1.29583 (61.80% Fibonacci retracement), signaling a potential trend reversal. However, such a scenario is contingent upon a dovish US inflation report or better-than-expected UK economic data.

Impactful Events:

Key drivers for GBP/USD this week include US GDP and the Core PCE Price Index, which could either reinforce the prevailing bearish trend or spark a corrective move.

Key Levels:

Support: 1.24553, 1.23461, 1.21891

Resistance: 1.26645, 1.28291, 1.29583

Chart 2: Gold (XAU/USD) – Daily Chart

Gold has found support at its two-month low of $2,536.75 and is currently attempting a recovery, trading at $2,705.77. The price has broken through the 50% Fibonacci retracement level of the recent downtrend and was challenging the 61.80% retracement level at $2,692.62 on Friday.

Should bullish sentiment continue, Gold is likely to advance further towards the 78.60% Fibonacci retracement at $2,734.99, with further gains potentially pushing the price towards $2,857.56 (127.20% Fibonacci extension) and beyond. The RSI is climbing out of the oversold territory, supporting a continued recovery. This move will largely depend on market reactions to the US Core PCE Price Index and any dovish signals from the Federal Reserve.

Alternative Scenario:

If the metal fails to maintain above the 61.80% Fibonacci level, a retracement back to the 50% level at $2,662.86 is possible, with the potential to revisit the two-month low of $2,536.75 if bearish pressure intensifies.

Impactful Events:

Gold’s direction will be influenced by US inflation data and FOMC minutes. A stronger-than-expected inflation reading could weaken gold’s appeal, while dovish FOMC minutes could bolster its recovery.

Key Levels:

Support: $2,662.86, $2,536.75

Resistance: $2,734.99, $2788.96, $2,857.56

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