Weekly Market Analysis 19th August 2024

The week starts with no major economic events scheduled for Monday. However, there are several significant events later in the week that could offer trading opportunities for traders that are prepared. Continue reading to learn more and to get insights into 3 markets you should be paying attention to.

Canadian Inflation

On Tuesday, Canada releases its inflation figures, with the CPI month-over-month expected to rise to 0.4% from the previous -0.1%. The Median CPI year-over-year is forecasted at 2.5%, slightly down from the previous 2.6%, and the Trimmed CPI year-over-year is also anticipated to decrease marginally to 2.8% from 2.9%. Any surprises here could influence expectations around the Bank of Canada's policy direction, particularly if inflation deviates from forecasts.

FOMC Minutes

Wednesday’s highlight is the release of the US FOMC Meeting Minutes. Given the ongoing market speculation about future rate hikes, traders will scrutinise these minutes for insights into the Fed's thinking, especially in light of recent economic data.

EU & UK PMI, US Employment Data

Thursday is a busy day for PMI releases across Europe and the UK. The French Flash Manufacturing PMI is forecasted to remain stable at 44.2, while the Flash Services PMI is expected to tick up slightly to 50.2 from 50.1. In Germany, the Flash Manufacturing PMI is forecasted to hold at 43.4, with the Flash Services PMI anticipated to dip slightly to 52.3 from 52.5. In the UK, both the Flash Manufacturing PMI and Flash Services PMI are expected to remain stable, with minimal changes. These PMIs will provide insights into the health of the Eurozone and UK economies, with any significant deviations likely impacting the EUR and GBP.

In the US, weekly Unemployment Claims are expected to increase to 233K from the previous 227K, signalling a slight softening in the labour market. The US Flash Manufacturing PMI is forecasted to remain steady at 49.8, with the Flash Services PMI expected to decline to 54.0 from 55.0. Any unexpected results could affect market sentiment and influence the dollar.

Canadian Retail Sales

Friday brings the focus back to Canada, with Core Retail Sales forecasted to contract by -0.4%, improving from the previous -1.3%, and Retail Sales expected to decline by -0.3%, a slight improvement from the prior -0.8%. These figures will be key for assessing consumer demand in Canada. Later, the Jackson Hole Symposium will take centre stage, with Fed Chair Powell's speech eagerly awaited for hints on future US monetary policy. BOE Governor Bailey’s speech later in the day could also provide direction for GBP traders.

Here are 3 markets to watch this week:

EURUSD

The EURUSD has been bullish and pushed above the March peak at 1.0980, attracting some buyers above this level. However, the US Dollar Index has reached a significant weekly support level, which could potentially slow the EURUSD rally. The market has established a higher swing low at 1.0949, and to remain bullish, it needs to create a new high well above the recent reactionary high at 1.1048. If it fails to do so, the risk of the reactionary low at 1.0949 not holding increases. Should this happen, the market may trade down to 1.0916. However, if the uptrend continues, we could see the market testing the December 2023 high at 1.1139.

USDCAD

The market has traded down quite significantly over the past two weeks and is now approaching levels where the downside could become limited. Examining the daily and 8-hour charts, we can see that the 1.3653 level acted as resistance to price advances in early July until it was eventually breached, triggering a rally. The market is now trading close to this level, which could prompt some traders to unwind their short positions.

This may lead to traders engaging in short-term trades until there is clarity on whether the market will continue the current downtrend observed in the 8-hour chart or reverse and start moving higher. Such choppy price action could occur between key support and resistance levels, making it essential to identify these areas. Based on the daily and 8-hour charts, the nearest support levels are at 1.3606 and the two-level cluster at 1.3648 and 1.3656, while the nearest key resistance levels are at 1.3689 and 1.3786.

Note that the Canada CPI releases tomorrow could move the market significantly if the actual inflation numbers deviate strongly from analyst predictions.

S&P 500

The S&P 500 rallied to a major resistance level in Friday’s trading, reaching 5564.89, which had previously caused a sharp market decline at the beginning of August. This has led to some softness in bids during the Asian session today. Overall, the market remains in an uptrend, with the moving averages pointing higher and the 20-period SMA well above the 50-period SMA. The nearest 4-hour timeframe support level coincides with the 23.6% Fibonacci retracement level at 5512.80. Above the current market price, the bulls face potential resistance between Friday’s high of 5570.79 and the 5587 level. Alternatively, the market could move lower and test the 5512.80 level. If the market attracts buyers at or above the level, look for a continuation of the current uptrend. If 5512.80 doesn’t hold, a move down to 5470.84 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.

Time (GMT +3)

Tuesday August 20th

Wednesday August 21st

Thursday August 22nd

Friday August 23rd

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DISCLAIMER: TIO Markets offers an exclusively execution-only service. The views expressed are for information purposes only. None of the content provided constitutes any form of investment advice. The comments are made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances, or needs. The content has not been prepared in accordance with any legal requirements for financial analysis and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval.

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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