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Weekly Market Analysis | 10th June 2024
BY Janne Muta
|June 10, 2024This week promises to be another eventful one for traders, with several significant economic events and data releases expected to heighten market volatility. Intraday and swing traders should be ready to take advantage of the trading opportunities ahead!
On Tuesday, 11th June, the focus will be on the Claimant Count Change data from the UK. Forecasts indicate an increase to 10.2K from the previous 8.9K and a higher-than-expected figure might motivate Sterling bears to sell GBP.
Wednesday will be a busy day, starting with the UK's GDP month-over-month data, which is expected to remain flat at 0.0%, down from the previous 0.4%. Later in the day the US will release its inflation data. The Core CPI month-over-month data is forecasted at 0.3%, slightly up from the previous 0.1% while the CPI month-over-month and year-over-year figures are expected to come in at 0.1% and 3.4%, respectively. Any deviations could significantly impact the GBPUSD.
These inflation indicators will be closely monitored together with the Federal Reserve’s press conference due later in the evening. After the Federal Reserve’s Federal Funds Rate announcement (anticipated to remain steady at 5.50%) the FOMC Economic Projections, Statement, and Press Conference will be followed closely for insights into the Fed's future monetary policy.
So what can we expect from the Fed? Given the somewhat strong recent US data and the no-change expectation with the rates the market focus will be on Fed’s dot-plot predictions. The expectation is that the median dot-plot prediction might decrease by 25 bps to 50 bps as the Fed sees inflation rather sticky and the US economy relatively strong.
Over the last eight months the actual Non-Farm payroll numbers have failed to beat expectations only once. At the same time, steady consumer spending together with somewhat sticky inflation has caused the market pricing for the next rate cut to moderate. This is reflected in the strong rally in the dollar on Friday and the current Fed Funds Futures pricing that indicates there will be only one 25 bps rate cut in 2024.
Rosenberg Research has pointed out though that the US CPI remains high due to insurance and rent components both of which are non-responsive to the Fed policy. According to Rosenberg Research the US CPI would be approximately 1.9% should the US inflation gauge be constructed similar to the EU or Canada. In other words, on a harmonised basis the US inflation is already below the Fed target rate and there is less pressure to keep the rates high.
Thursday's spotlight will be on Australia’s Employment Change and Unemployment Rate data. Employment is expected to change by 30.0K, down from the previous 38.5K, and the unemployment rate is forecasted at 4.0%, slightly down from 4.1%. Stronger-than-expected employment data could bolster the AUD. Later in the day, the US will release Core PPI month-over-month data, forecasted at 0.3%, and PPI month-over-month data, expected at 0.1%. These figures can influence inflation expectations and consequently, future Fed actions. Additionally, the US Unemployment Claims data is expected, with a forecast of 222K, slightly down from the previous 229K.
Friday will see tentative releases from Japan, including the BOJ Policy Rate, Monetary Policy Statement, and Press Conference. The policy rate is expected to remain unchanged at <0.10%. The BOJ’s statement and press conference will be key for JPY traders, as they can potentially reveal the central bank’s stance on monetary policy.
Finally, the US Preliminary University of Michigan Consumer Sentiment is anticipated to rise to 73.0 from the previous 69.1. An increase in consumer sentiment can signal economic optimism, which could potentially support the USD.
Here are 3 markets to watch this week
GBPUSD
GBPUSD continues to trade sideways in the weekly timeframe chart after the market failed to maintain levels above 1.2800. While the weekly timeframe chart indicates potential market reversal, the daily timeframe chart shows the market trading relatively close to the rising trend channel low. The channel low together with the 23.6% retracement level at 1.2694 could in theory tempt the GBP bulls to buy the market. How likely this is remains to be seen but, the weekly resistance level (last week’s high) at 1.2817 means the profit margin might be limited for the bulls.
Therefore, it could well be that the market continues to range between last week’s high and the key support level at 1.2675 until the UK GDP, the US CPI and the Fed press conference give us more guidance on the fundamental drivers for both currencies. After the data releases we need to re-evaluate the chart.
If the reversal process continues (see the weekly chart) and the 1.2675 support level is violated, there is likely to be a breakout from the rising trend channel. This is when we could see a move down to the 1.2560 - 1.2600 range. Alternatively, above the 1.2675 level, a move to 1.2760 – 1.2813 could be likely.
S&P 500
S&P 500 rallied strongly last week with the help from the technology sector. Our readers might remember how we pointed out last week that the Nasdaq correction could be over and the technology index might be ready to rally. Sector level analysis shows clearly how technology stocks are driving the S&P 500 rally. Out of 11 sectors in the index only technology and communications technology sectors have outperformed the index.
However, now both S&P 500 and Nasdaq have traded into new ATH levels and intraday charts point to a potential retracement in the S&P 500. The Stochastics (5.3.3.) indicator is pointing to a momentum loss while the recent spikey 8h candle suggests the same. Another important momentum indicator, the Russell 2000 index, is trading lower confirming the bearish indications in the S&P 500. The nearest technical confluence area is at 5298 – 5311. This area might be tested soon based on the current price action. If the level doesn’t attract buyers but the index trades lower, look for a move to 5277 and then perhaps to 5250. Alternatively, a retest of Friday’s high 5375 could be possible.
USDJPY
USD has been once again strong against the JPY. The USDJPY pair rallied over 1% after Friday’s strong NFP numbers. With the US economy remaining strong we could see the market continuing to trend higher. This, however, depends entirely on the Fed dot-plot and signalling in the press conference on Wednesday. Technically, the market is trading above a key support level (156.48) and remains bullish above this level. If the 156.48 level (or levels above it) are defended by the USD bulls we could see a rally to 157.60 or so. Alternatively, below 156.48 a move down to 155.80 could be likely.
This weeks high impact market events
The following economic events and data releases have the potential to cause considerable price movements, thereby offering you both opportunities and risks. Stay informed and leverage our economic calendar to access real-time data and analysis as these key events unfold.
All times are GMT + 3
Tuesday 11th June
Wednesday 12th June
Thursday 13th June
Friday 14th June
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Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.
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