The Week Ahead – Global pause – Orbex Forex Trading Blog

EURUSD bounces as ECB may not push further

The euro struggles as economic data across the euro zone remain gloomy. Both GDP and manufacturing activity showed a contraction in the third quarter, but the good news is that inflation is also falling fast, suggesting that the ECB’s hard pill of 10 consecutive hikes is working its magic. The single currency may benefit from this balancing factor, meaning that the central bank would not risk pushing into a recession. However, a larger bounce may depend on the dollar effect after the Fed left rates on hold. As traders expect no more US hikes into next year, the pair could climb above 1.0820 with 1.0450 as a close support.

AUDUSD rebounds on hike speculation

The Australian dollar steadies as the RBA may restart its monetary tightening. Australia’s economy has so far shown resilience at a time when the RBA would rather see a bit more weakness. Inflation has remained stubbornly high and a recent flare-up in property prices led traders to dial up the odds of another rate hike at the November meeting. Even the IMF has weighed in by suggesting that more tightening could be done to effectively curb inflation. However, a lack of overall risk appetite and weak Chinese economic data may keep the aussie in check in case of a rebound. 0.6280 is a critical floor and 0.6650 a key resistance.

UKOIL steadies as demand worries ease

Oil prices consolidate gains as the global monetary tightening hits pause. There are certainly some valid arguments for the bears such as a contraction in China’s manufacturing activity in October and overall cautious business sentiment about the world’s top crude importer. However, as major central banks have been keeping their interest rates on hold lately, the bulls may be relieved that a prolonged recession could be avoided. On the supply side, Saudi Arabia’s extension of its production cut and geopolitical concerns from the war in Gaza may keep the crude price above 82.00. 99.00 is the next stop in case of a bounce.

SPX 500 rallies on optimism of peak rate

The S&P 500 regained lost ground fueled by investors’ optimism that rate hikes were over. Fed Chair Jerome Powell struck a balanced tone at the November meeting with a remark that the central bank would proceed carefully, a comment dovish enough for market participants to believe that the peak rate has been reached. Even though Powell insisted on keeping options open for a hike, it rather sounded like a formality to not allow the market overshoot than a firm commitment. Despite a mixed bag of corporate earnings, falling bond yields may boost demand for riskier equities. 4400 is the first hurdle to clear and 4100 a key support.

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