Errante's The Week Ahead: 21st to 25th October 2024

Errante’s The Week Ahead: 21st to 25th October 2024

Highlights of the Week:

Bank of Canada (BoC) Monetary Policy Meeting: Key focus on the rate decision and subsequent press conference. The outcome will provide critical insights into the central bank’s stance given weakening oil prices and the Canadian dollar’s performance.

Eurozone Flash PMIs: Flash manufacturing and services PMIs for France, Germany, and the Eurozone as a whole will reveal the economic health of the region.

US Flash PMIs and Canada Retail Sales Data: These releases will shed light on the strength of the US and Canada economies, particularly in the context of ongoing central banks’ policy shifts.

What Now?

Errante’s The Week Ahead: 21st to 25th October 2024: The Bank of Canada (BoC) is expected to announce a significant interest rate cut during its October 23, meeting. Following a steep drop in inflation, with the Consumer Price Index (CPI) falling to 1.6% in September, economists now widely predict a 50-basis point (bps) cut. Many experts believe this cut is driven by the easing inflationary pressures, particularly in fuel prices, and the ongoing slack in Canada’s economy. Some forecasts even suggest a follow-up cut in December.

Market participants are also keenly watching for Eurozone PMI figures to gauge the region’s economic health amidst slowing growth. For the eurozone, the manufacturing sector has been contracting for several months, and this trend is likely to continue, reflecting weak demand and falling order books. Services are also under pressure, though the decline is expected to moderate slightly compared to previous months.

The ECB’s recent rate cut may give some lift to the euro after last week’s drop by signaling a commitment to economic support. However, the UK and Eurozone PMIs will provide a real-time snapshot of business activity, which will help traders gauge the likelihood of further monetary easing.

In the US, focus will be on unemployment claims and flash PMIs to understand the state of the labor market and overall economic strength.

Market Events and Announcements:

Times below are GMT +3.

Monday, October 21, 2024:

No high-impact data releases.

Tuesday, October 22, 2024:

4:25 PM – GBP – BOE Gov Bailey Speaks: Bailey’s speech will be monitored for hints of future interest rate adjustments or monetary policy outlook.

Wednesday, October 23, 2024:

4:45 PM – CAD – BoC Monetary Policy Report, Rate Statement, and Overnight Rate: Key BoC announcements, with the rate expected to cut by 25 to 50 basis points.

5:30 PM – CAD – BoC Press Conference: Market participants will closely follow the tone of the press conference for any guidance on future rate decisions.

11:30 PM – GBP – BOE Gov Bailey Speaks: Additional commentary from Bailey that could impact GBP pairs.

Thursday, October 24, 2024:

10:15 AM – EUR – French Flash Manufacturing PMI: Indicates business conditions in France.

10:15 AM – EUR – French Flash Services PMI: Gauges service sector health, a critical component of the economy.

10:30 AM – EUR – German Flash Manufacturing PMI: Important for understanding the health of Germany’s key industrial sector.

10:30 AM – EUR – German Flash Services PMI: Offers insights into Germany’s services industry performance.

11:30 AM – GBP – Flash Manufacturing PMI and Services PMI: These provide real-time insights into business activity in the UK.

3:30 PM – USD – Unemployment Claims: Weekly data on unemployment claims, providing insights into the US labor market.

4:45 PM – USD – Flash Manufacturing PMI and Services PMI: Key metrics to assess current economic conditions in the US.

Friday, October 25, 2024:

3:30 PM – USD – Core Retail Sales m/m: Indicates changes in consumer spending, excluding the most volatile components.

3:30 PM – CAD – Retail Sales m/m: Provides insight into consumer spending and economic health in Canada.

Chart Insights: Key Charts to Watch

Chart 1: EUR/AUD (Daily Chart)

The EUR/AUD pair is trending within a descending channel, reflecting ongoing bearish momentum. Last week, the pair reversed from the upper boundary of this channel, indicating that sellers remain in control. A break below recent lows could trigger a more pronounced decline, potentially targeting the 1.60999 and 1.60462 support levels.

The pair is testing the key support at 1.61867. A sustained break below this level could open the door for further downside toward 1.59594, with the longer-term target being the bottom of the descending channel.

Impactful Events:

The ECB’s rate cut has pressured the euro, which may further weaken against the Australian dollar. Conversely, the AUD has found support from solid domestic employment data, though the rally has been tempered by softening global demand for iron ore, Australia’s top export.

Alternative Scenario:

If EUR/AUD breaks above the resistance at 1.63272, this bearish scenario could be invalidated, signaling the possibility of a bullish reversal.

Key Levels:

Resistance: 1.63272 (critical level for a trend reversal)

Support: 1.61867, 1.60999, 1.60462, 1.59594, 1.59057

Chart 2: USD/CAD (Weekly Chart)

The USD/CAD pair has been trading within a triangle pattern, recently bouncing off the lower boundary of this formation. The pair is eyeing key resistance levels at 1.37881 and 1.38752, with a potential extension to 1.40162 if the bullish momentum continues.

Impactful Events:

The outcome of the BoC meeting will be critical for USD/CAD. With markets pricing in a possible 25-bps rate cut, coupled with weakening oil prices, the Canadian dollar is likely to face additional downside pressure. Both Brent and WTI crude prices have declined sharply, intensifying the bearish outlook for the CAD. Moreover, last week’s unexpected drop in US oil inventories has supported USD, reinforcing the bullish outlook for this pair.

Alternative Scenario:

Should the bears regain control and push the price below the critical support at 1.34190, the bullish outlook would be invalidated, potentially signaling renewed weakness for the pair.

Key Levels:

Resistance: 1.37881, 1.38752, 1.40162

Support: 1.34190 (key level to watch for bearish breakout)

Errante’s Weekly Newsletter helps you navigate the market events ahead. Stay informed and make strategic trading decisions with the latest insights from Errante.

If you have any questions or require any assistance, please contact one of our support team members via our Live Chat or email [email protected].

We are Errante. Trading made personal.

Errante is regulated by the Seychelles Financial Services Authority (FSA) under license number [SD038].

To find out more about Errante, visit https://errante.com/.