It is very likely that the difference between success and failure in Forex/CFD trading depends primarily on which assets you choose to trade each week and in which direction, and not on the exact methods you might use to determine trade entries and exits.
Therefore, at the beginning of the week, it is a good idea to look at the big picture of what is developing in the market as a whole and how such developments are influenced by macro fundamentals, technical factors and market sentiment.
Fundamental analysis and market sentiment
Over the last week, risk appetite has tightened quite strongly, and the main reason for this is last Wednesday's Fed policy meeting, which produced “hawkish holding”. Although the Fed left rates unchanged as expected, it now plans to raise rates again by 0.25% later in 2023 , meaning that the terminal rate of the current tightening cycle has not yet been reached. While the Fed still plans to cut rates in 2024, it now plans to make only 2 cuts of 0.25%. This aggressive surprise triggered a further rise in the US dollar and US Treasury yields (the 2-year yield reached a new 15-year high above 5%), while equity markets saw a sharp sell-off. Riskier currencies and commodities suffered much less, if at all.
The other major event last week was the Bank of England's narrow vote to leave its interest rate unchanged, with 5 members at 5. The Bank was expected to agree to raise rates, even though the British inflation had just shown a surprisingly low annualized rate. , of 6.7% when 7.0% was expected, so it was a dovish surprise from the Bank of England right after the previous day's aggressive surprise from the Fed. This triggered weakness in the British pound, which was the weakest major currency last week, and has come into focus the GBP/USD currency pair.
The Swiss National Bank decided to maintain the surprise rate last week, after many expected an interest rate increase from 0.25% to 2.00%.
Markets will likely see a quieter schedule over the next week with relatively few high-impact data releases on the way, so it's difficult to see what might trigger a change in risk-off sentiment, at least until Wednesday's release of US GDP data. United States which could produce a change in perception regarding the likely future course of the Fed in the near term.
Other key data released last week were:
- Canadian CPI (inflation): Slightly higher than expected.
- Bank of Japan monetary policy statement: no surprises.
- US unemployment claims met expectations.
- RBA monetary policy meeting minutes: met expectations.
- New Zealand GDP – better than expected, with a quarterly increase of 0.9% with only 0.4% expected.
- Flash manufacturing and services PMIs for US, Germany, UK and France: mixed results, but overall slightly worse than expected.
The week ahead: 25 – September 29th
Next week the markets will probably see a level of volatility lower than last week, as far fewer high-impact data releases are expected. The key data released this week are, in order of importance:
- Core PCE price index in the United States
- Final GDP of the United States
- US CB Consumer Confidence
- Australian CPI (inflation)
- Unemployment claims in the United States
- Canadian GDP
- US consumer sentiment revised
- IFO data on the German economic climate
- Chinese manufacturing PMI
Credit by DailyForex.com
