What does the market expect this week???

18 thg 9, 2023

After last week's ECB (European Central Bank) interest rate decision, there were declines in the Euro (EUR). EUR/USD retraced back to the classic pivot level of 1.0630. The key support level, the Fibonacci 38.2% level, has not been tested yet. We expect this important support level, located in the range of 1.0610-15, to be tested in the short term, with the price expected to receive an upward reaction.

You can consider placing a buy order with a waiting limit at the 1.0615 level, for a short stop loss level buy attempt.

Whether the price will break the 1.0610 support to the downside will become clear after the announcement following Wednesday's FED interest rate decision.

In the event that the 1.0610 support is broken, we may see a rapid decline towards the 1.0404 level.

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WHAT CAN WE EXPECT IN THE MARKETS THIS WEEK?

A very busy week awaits us in terms of data releases and market decisions.

Before summarizing the week, it's important to issue a warning: Traders who prefer not to take excessive risks should consider refraining from entering new trades this week and instead wait for the market to make decisions based on incoming data. We recommend that they start taking positions in the market based on the macroeconomic outlook that will be clarified next week.

Key data releases this week:

**TUESDAY:**

- RBA (Reserve Bank of Australia) Monetary Policy Meeting Minutes:
We will see signals in these minutes regarding whether they will continue tightening. It will be crucial, especially after the FED decision on Wednesday, to see if the RBA is likely to continue its rate hikes, which it has paused in the last 2 months.

- Euro Area CPI (Consumer Price Index):
It will be important to see the first concrete data on whether the ECB's recent tightening announcement is slowing down. We will delve into this topic in more detail later in the article.

- U.S. Building Permits (August):
Despite the Federal Reserve's tightening policy, housing prices and rents are still rising in the U.S. This is mainly due to citizens who invested in homes with low mortgage interest rates before the inflation increase and are now trying to protect themselves from inflation by increasing the prices of their homes. Additionally, rising mortgage interest rates are increasing the cost of buying a home, and those who want to sell their homes for cash are trying to profit from these high credit costs as well. Changes in building permits can increase supply and potentially balance housing prices and rents.

**WEDNESDAY:**

- UK CPI (Consumer Price Index):
It will play a decisive role for the Bank of England (BoE) interest rate decision to be announced the next day (Thursday).

- U.S. Crude Oil Inventories:
Despite a recent decline in demand for oil, the data is crucial for predicting the future due to OPEC's coordinated reduction in production and the resulting increase in oil prices. If there is a significant increase in oil inventories, we can infer that production cuts have been reduced, potentially leading to a decrease in oil prices.

- U.S. Interest Rate Forecasts:
Forecasts for interest rates for this year and the next 3 years will be published based on discussions with fund managers and investment banks. While these forecasts are constantly changing depending on the economic situation, at least learning short-term expectations and predicting the market's reaction if the future interest rate decision does not meet expectations will be important for us. This data will be announced simultaneously with the FED interest rate decision, and although we cannot anticipate it in advance, at least we can determine our direction based on the interest rate decision and expectations.

- FED Interest Rate Decision and Meeting:
The most important data of recent months. The market's consensus expectation is that interest rates will remain unchanged at this meeting. Any decision other than keeping rates stable could lead to sharp market movements. However, the real unknown is the statements made by FED officials in the meeting minutes and during the meeting itself. A statement indicating the end of interest rate cuts or increases could cause significant market turbulence. The general expectation is that there may be one more rate hike by the end of the year. We will provide a detailed explanation after the meeting.

- FOMC Press Conference:
After the FED monetary policy minutes and interest rate decision, the press conference will be held where journalists will ask FED questions about the policy signals in the minutes and additional questions. There may be instant market fluctuations based on the questions and answers during this conference.

**THURSDAY:**

- New Zealand Gross Domestic Product (GDP):
This data will give us an idea of how effective the tightening has been and can be a market determinant for both NZD and AUD, which have a high correlation.

- Swiss Libor Rate and Central Bank Press Release:
Short-term interest rates determined by the Swiss central bank every 3 months will be announced, followed by long-term expectations of the Swiss central bank.

- Bank of England (BoE) Interest Rate Decision:
The consensus in the market is a 0.25-point rate increase from the Bank of England. Most likely, this expectation will be met, but the most important thing is the signals for the future in the meeting after the interest rate decision and in the monetary policy minutes. Whether the language resembles the dovish and easing tone of the ECB or signals for continued tight monetary policy will be decisive for the pound.

- BoE Inflation Report:
It is an important document prepared and published by the BoE only when CPI exceeds 3%. After the interest rate decision and monetary policy minutes, this decision will be an important data that will tell us why this decision was made and what is expected in the future.

- U.S. Existing Home Sales:
In addition to the housing permits data to be announced on Tuesday, tracking inventory of existing home sales will allow us to understand housing inflation and demand.

**FRIDAY:**

- U.S. Services Purchasing Managers' Index (PMI):
This monthly survey of purchasing managers at important companies in the service sector will be released, showing their expectations for the future. This data is important for indicating how the service sector evaluates future market conditions and whether companies expect tightening or growth. It can have a significant impact on both stock indices and stocks.

At the end of this intensive week, the market will mostly have found its direction. We can enter the next week with clearer market conditions and more consistent analyses.

Now, let's briefly explain the decline in the EUR following the ECB interest rate decision mentioned at the beginning of the article:

Last week, the ECB raised interest rates by 0.25 points. This increase was already expected and largely priced into the market. However, what really weighed on the EUR was the press conference and minutes following the interest rate decision. When we look at the summary and main point of President Lagarde's statement, it becomes clear that the ECB raised interest rates quite reluctantly and has no plans for further rate increases in the near future. The market's expectation for the FED is more hawkish compared to the ECB, and while there is an expectation that the FED may make one more rate hike by the end of the year, the ECB gave the impression that there would be no further intervention in interest rates in the already-priced market. This led to a retreat in the EUR as a new expectation in a market where the 0.25-point increase expectation was already priced.

Central bank announcements this week will also have a significant impact on the EUR. While there is no longer an expectation of a rate increase by the end of the year from the ECB, if other central banks make more hawkish and tightening-related data and announcements, we may see more significant declines in the EUR.