Weekly market analysis for 21st October 2024

Traders should prepare for a volatile week ahead as several key economic data releases and central bank updates are set to unfold. With no significant releases scheduled for Monday, market participants can strategize for the rest of the week.

On Tuesday, the Bank of England (BOE) Governor Andrew Bailey is scheduled to speak, which could offer insights into the BOE’s current outlook on inflation and interest rates. Given the ongoing economic uncertainty, any hawkish or dovish tone from Bailey may influence GBP movements.

Wednesday will be a significant day for Canada, with the Bank of Canada (BOC) delivering its Monetary Policy Report, Rate Statement, and Press Conference. The BOC is expected to announce a reduction in the Overnight Rate from 4.25% to 3.75%. Analysts will be watching closely for clues on future policy actions, given the recent trends in inflation and economic growth. Any hints of policy shifts could have substantial implications for CAD.

On Thursday, key PMI data will take centre stage in Europe. The Flash Manufacturing and Services PMIs from France, Germany, and the UK are due for release. In France, the previous figures stood at 44.6 for Manufacturing and 49.6 for Services, and any improvement could signal a recovery. Germany’s Manufacturing PMI previously came in at 40.6, while its Services PMI was at 50.6 and the numbers are expected to remain stable at 40.7 and 50.6 respectively.

The UK’s Manufacturing PMI is forecasted at 51.5, consistent with the prior reading, while the Services PMI is expected at 52.3, down from the previous 52.4. A miss in these readings could heighten concerns about the health of the eurozone and UK economies.

In the US, Unemployment Claims are forecast to increase slightly to 243K from the previous 241K. A drop in claims could suggest sustained strength in the labour market, supporting the USD. Later in the day, the Flash Manufacturing and Services PMIs for the US are expected to show stability at 47.4 and 50.5, respectively. Any deviation from these forecasts may affect market sentiment.

On Friday, Canada’s Core Retail Sales m/m are expected to decrease to 0.3% from the previous 0.4%, while Retail Sales m/m are projected to slow down to 0.5% from 0.9%. Positive readings could boost CAD as it would reflect strengthening consumer demand.

With multiple high-impact events scheduled, market participants should be vigilant, as these data releases and speeches are likely to influence market sentiment and create trading opportunities.

Here are 3 markets to watch this week

GOLD

Gold continues in a strong uptrend. In the daily chart, both the 20 and 50 period moving averages point higher and the market trades well above both averages, indicating strong bullish sentiment in gold. Two weeks ago the market created a higher swing low at 2605 and proceeded to rally into new all-time high levels where it currently approaches the 61.8% Fibonacci extension level at 2733. This extension level together with the bull channel top (currently at 2755) forms a potential resistance area. The nearest key support level is at 2685. If there is a retracement back to this level we should look for signs of renewed buying before considering long trades. Alternatively, if the level doesn't hold a move down to the lower end of the bull channel could be likely.

GBPUSD

GBPUSD is struggling to turn higher from a key market structure area near a bullish trend channel low. Price action around this market structure area (1.3044 - 1.3002) could be decisive as continued weakness would reverse the uptrend and possibly send the GBPUSD pair down to the market could trade down to 1.2880. Note also that the market trades below the 50-period moving average and the 20-period SMA points lower indicating weakness. Alternatively, if GBPUSD can break above 1.3103, look for a move to 1.3232. The Bank of England (BOE) Governor Andrew Bailey is scheduled to speak on Tuesday so we might get some guidance on the BOE policy and possibly an impulse that moves the market.

USDCAD

USDCAD has been rallying strongly higher after breaking out of a bottoming formation two weeks ago. A week ago the first signs of weakness appeared though as USD bulls took some profits off the table. This resulted in a bearish rejection candle that was followed by another corrective day lower. Buyers, however, came in again near the 23.6% Fibonacci retracement level creating a higher swing low which now is the nearest key support level (1.3747). If the level breaks, a move down to 1.3678 could be likely while above 1.3747 the market could remain bullish and might be able to rally above last week's high (1.3838).

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.

Time (GMT +3)

Tuesday 22nd October

Wednesday 23rd October

Thursday 24th October

Friday 25th October

How will you trade the markets this week?

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Janne Muta

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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