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
Last week saw a sharp shift in risk appetite, driven primarily by the FOMC statement effectively ruling out further rate hikes in 2023. The fact that the war in the Middle East has not expanded has also contributed to risk appetite. The US dollar fell heavily against all major currencies following Wednesday's Fed statement and stock markets rose sharply, with some major US indices hitting new 2-year highs. US Treasury yields also fell sharply, with the 2-year yield also ending the week well below the 5%, leading to speculation that we may have just witnessed a major turning point in the market. The Fed left the rate unchanged at 5.50%, which was not a surprise, given that markets had priced in a 97% chance of this happening.
Last week was a busy one in terms of major data releases, with US nonfarm payrolls weaker than expected, the unemployment rate rising slightly contrary to expectations, and average hourly wages rising more slowly than expected. This adds more weight to the Fed's rate hike pause and, paradoxically, likely helps revive US stock markets.
The other major events last week were policy meetings at the Bank of Japan and the Bank of England. There were no major surprises at the Bank of England, but the Bank of Japan made a smaller-than-expected change to yield curve control, which sent the yen tumbling for about a day.
Other key data released last week were:
- JOLTS Job Openings in the United States: Came in a little stronger than expected.
- Preliminary German CPI (inflation) data came in at zero, lower than expected, lending further credence to the idea that inflationary pressures are easing in major economies.
- Swiss CPI (inflation): As expected, the rate was very low.
- Spanish Flash CPI (inflation): This came in significantly lower than expected, lending further credence to the idea that inflationary pressures are easing in major economies.
- Chinese manufacturing PMI: slightly lower than expected.
- Canadian GDP – slightly lower than expected, at zero.
- US ISM Services PMI – lower than expected, giving more weight to the fact that the US economy is cooling.
- US Employment Cost Index – more or less as expected.
- US CB Consumer Confidence – slightly higher than expected.
- US ISM Manufacturing PMI – lower than expected.
- US unemployment claims – more or less as expected.
- Canadian unemployment: was worse than expected, with the rate rising to 5.7%.
- New Zealand unemployment rate – as expected.
The week ahead: November 6 – November 10
It is likely that next week in the markets will see a similar or lower level of volatility than last week, as there will be a much smaller amount of major economic data releases, with the main event being the policy meeting (Cash Rate and Rate Statement ) at the Reserve Bank of Australia. The key data released this week are, in order of importance:
- RBA cash rate and rate statement
- UK GDP
- Press conference by the governor of the Bank of Japan
- Inflation expectations in New Zealand
- Chinese CPI (inflation) data.
- Preliminary UoM consumer sentiment in the US
- Unemployment claims in the United States
Credit by DailyForex.com
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