Last week, the dollar index DXY took a new milestone, reaching a new local high in the immediate vicinity of the next nearest "round" resistance level of 112.00.
After the Federal Reserve's meeting last week, the dollar and its index remain positive. A breakdown of the resistance level of 112.00 will cause a further increase in DXY to the levels of 20 years ago, located above the 120.00 mark.
At the same time, the main US stock indexes are testing long-term key support levels expressed by 200-period moving averages on their weekly charts, the breakdown of which will significantly increase the risks of breaking the multi-year bullish trend of the US stock market.
As Fed Chairman Jerome Powell said last Wednesday at a press conference following the Fed meeting, where the interest rate was raised again by 0.75%, "our (at the Fed) attention is focused on reducing inflation. This will require a weakening of the labor market and economic growth below trend." A higher rate is good for the US dollar, but at the same time, the Fed sees a slowdown in the economy as a necessary part of its work. "We have just reached today the lowest levels of what we consider restrictive. We still have a lot of room to move in terms of rates," Powell said.
Thus, we should expect further strengthening of the dollar and cooling of the stock market.
And next week, market participants will pay attention to the release of important macro statistics on the US, Germany, the eurozone, Canada, Australia, Great Britain, China.
Monday, 26 September
No important macro statistics set for release.
Tuesday, 27 September
- US. Orders for durable goods. Orders for capital goods (excluding defense and aviation)
Durable goods are defined as solid products with an expected service life of more than 3 years, such as cars, computers, household appliances, airplanes and imply large investments in their production.
This leading indicator determines the change in the total cost of new orders for the supply of durable goods placed with manufacturers. Growing orders for the supply of this category of goods signal that manufacturers will increase their activity as orders are fulfilled.
Capital goods are durable goods used for the production of durable goods and services. Goods produced in the defense and aviation sectors of the American economy are not included in this indicator.
A high result strengthens the USD, a decrease in the indicator has a negative effect on the USD. Data worse than the previous value and/or forecast will also have a negative impact on dollar quotes, while data better than the forecast will have a positive impact on the dollar.
Previous values of the "durable goods orders" indicator: -0.1% in July, +2.2% (in June), +0.8% in May, +0.4% in April, +0.6% in March, -1.7% in February, +1.6% in January.
Previous values of the indicator "orders for capital goods excluding defense and aviation": +0.3% in July, +0.9% in June, +0.6% in May, +0.3% in April, +1.1% in March, -0.3% in February, +1.3% in January.
The level of influence on the markets is high.
- US. Index "consumer confidence level"
This document is a Conference Board report with the results of a survey of about 3,000 American households, during which respondents are asked to assess the level of current and future economic conditions and the overall economic situation in the United States. The confidence of American consumers in the economic development of the country and in the stability of their economic situation is the leading indicator of consumer spending, which accounts for most of the total economic activity. A high level of consumer confidence indicates economic growth, while a low level indicates stagnation. The previous value of the indicator is 103.2. An increase in the indicator will strengthen the USD, and a decrease in the value will weaken the dollar.
The level of influence on the markets is from medium to high.
- Japan. Minutes of the meeting of the Monetary Policy Committee of the Bank of Japan
This document, which is a detailed report on the last meeting of the management of the BOJ, gives an idea of the economic conditions that influenced its decision on the parameters of the current monetary policy.
If the BOJ positively assesses the state of the labor market in the country, the GDP growth rate, and also shows a hawkish attitude towards the inflation forecast in the economy, the markets regard this as the likelihood of a rate hike at the next meeting, which is a positive factor for the JPY. The soft rhetoric of the statements of the bank's managers regarding, first of all, inflation will put pressure on the Japanese yen.
The BOJ continues to adhere to its ultra-soft monetary policy. As BOJ Governor Haruhiko Kuroda has stated many times before, "it is appropriate for Japan to patiently continue the current soft monetary policy."
If the published minutes contains unexpected or additional information concerning the monetary policy of the BOJ, the volatility in the quotes of the JPY will increase.
The level of influence on the markets is from low to high.
Wednesday, 28 September
- Australia. Retail sales level
The retail sales index is the main indicator of consumer spending, which accounts for most of the total economic activity. It is also considered an indicator of consumer confidence and reflects the state of the retail sector in the near future.
An increase in the index is usually a positive factor for AUD; a decrease in the indicator and data worse than the forecast is negative.
Previous index values: +1,3%, +0,2%, +0,9%, +0,9%, +1,6%, +1,8%, +1,8% ( in January 2022).
The level of influence on the markets is average.
- US. Unfinished transactions for the sale of housing
The National Association of Realtors of the US will publish a report with data on pending transactions in the housing market. This indicator shows the change in the number of houses prepared for sale, but still waiting for the closing of the transaction on contracts. This is one of the most important indicators for the US real estate market, which also characterizes activity in the construction sector of the economy, and the sale of a house causes a large-scale related effect: repairs, mortgages, brokerage and banking services, transport, etc.
A high result has a positive effect on the USD, a low result and a relative decrease have a negative effect.
Previous values of the indicator: -1,0%, -8,9%, +0,4%, -4,0%, -1,6%, -4,0%, -5,8% ( January 2022).
The level of influence on the markets is average.
Thursday 29 September
- Germany. Harmonized Consumer Price Index HICP (preliminary release)
Consumer prices account for most of the overall inflation. In normal economic conditions, rising prices force the country's central bank to raise interest rates to avoid excessive inflation (above the target level of the central bank). One of the dangerous periods of the economy is stagflation. This is rising inflation with a slowing economy. In this situation, the central bank should act very carefully so as not to harm the recovery of economic growth.
The index (CPI) is published by the EU statistics office, is an indicator for assessing inflation and is used by the European Central Bank Governing Council to assess the level of price stability. Usually, a positive result strengthens the EUR, a negative one weakens it.
The growth of the indicator is a positive factor for the national currency (under normal conditions). Data worse than the previous value and/or forecast will have a negative impact on the euro.
Previous indicator values: +8.8% in August, +8.5% in July, +8.2% in June, +8.7% in May, +7.8% in April, +7.6% in March, +5.5% in February, +5.1% in January 2022 (in annual terms).
- US. Annual GDP for the 2nd quarter (final estimate). The main index of personal consumption expenditures (PCE price index). Applications for unemployment benefits
This indicator (GDP) is the main indicator of the state of the American economy, and along with data on the labor market and inflation, GDP data are key for the central bank of the country in determining the parameters of its monetary policy.
A strong result strengthens the US dollar; a weak GDP report negatively affects the US dollar.
There are 3 versions of GDP released at monthly intervals - Preliminary, Updated and Final. The pre-release is the earliest and has the greatest impact on the market. The final release has less impact, especially if it coincides with the forecast.
Previous values of the indicator (in annual terms): -1,6%, +6,9%, +2,3%, +6,7%, +6,3% ( in the 1st quarter of 2021).
The preliminary estimate was -0.6%, and the forecast was +0.9%.
The level of influence on the markets is high.
The PCE price index is the main indicator of inflation that Fed FOMC officials use as the main indicator of inflation.
The level of inflation (in addition to the state of the labor market and GDP) is important for the Fed in determining the parameters of its monetary policy. Rising prices put pressure on the central bank to tighten its policy and raise interest rates.
The values of the price index (PCE) exceeding the forecast may push the US dollar up, as this will hint at a possible hawkish shift in the Fed's forecasts, and vice versa.
Previous values: +5.2% (in the 1st quarter of 2022), 5.0% (in the 4th quarter of 2021), +4.6% (in the 3rd quarter), +6.1% (in the 2nd quarter), +2.7% (in the 1st quarter of 2021 year).
The preliminary estimate for the 2nd quarter of 2022 was +4.4%.
The level of influence on the markets is from medium to high.
At the same time, the US Department of Labor will publish a weekly report on the state of the American labor market with data on the number of primary and secondary applications for unemployment benefits. The state of the labor market (together with data on GDP and inflation) is a key indicator for the Fed in determining the parameters of its monetary policy.
The result is higher than expected and the growth of the indicator indicates the weakness of the labor market, which negatively affects the US dollar. The drop in the indicator and its low value is a sign of the recovery of the labor market and may have a short-term positive impact on the USD.
It is expected that the number of initial and repeated applications for unemployment benefits will remain at lows corresponding to the lows of the period before the coronavirus pandemic, and this is also a positive factor for the dollar, indicating the stability of the American labor market.
Previous (weekly) values according to data on initial applications for unemployment benefits: 213,000, 218,000, 228,000, 237,000, 245,000, 252,000, 248,000, 254,000, 261,000, 244,000, 235,000, 231,000, 232,000, 202,000, 21,000
Previous (weekly) values according to data on repeated applications for unemployment benefits:
1,403,000, 1,401,000, 1,437,000, 1,412,000, 1,434,000, 1,430,000, 1,420,000, 1,368,000, 1,384,000, 1,333,000, 1,372,000, 1,324,000, 1,331,000, 1,309,000, 1,309,000
The level of influence on the markets is average.
- Canada. GDP
Statistics Canada will publish a monthly report on GDP, which is the broadest indicator of economic activity and the main indicator of the state of the economy. High GDP figures will have a positive impact on CAD quotes, and, conversely, a weak GDP report will have a negative impact on CAD.
Despite the possible relative decline, the data indicate the continued recovery of the Canadian economy after its severe decline in early 2020 due to the coronavirus pandemic (in the 1st quarter of 2020, Canada's GDP decreased by -8.6%, and in the 2nd - by -44.2%). Better than forecast data will also have a positive impact on CAD.
Previous values: 0,1%, 0%, +0,3%, +0,7%, +0,9%, +0,2% ( in January 2022).
The level of influence on the markets is from low to medium.
Friday, 30 September
- China. Business Activity PMI indices from the Chinese Federation of Logistics and Purchasing (CFLP) in the manufacturing and services sectors of the Chinese economy
This report is an analysis of a survey of 3,000 purchasing managers, during which respondents are asked to assess the relative level of business conditions, including employment, production, new orders, prices, supplier deliveries and inventories. Purchasing managers have, perhaps, the most up-to-date information about the situation in the company, so this indicator is an important indicator of the state of the Chinese economy as a whole.
Since the Chinese economy is, according to various estimates, the first in the world (at the moment), Chinese macro data can have a big impact on the financial market and investor sentiment, especially on the markets of the Asia-Pacific region.
Data above the value of 50 indicates an increase in activity. The relative growth of the index and values above 50 should have a positive impact on CNY.
Previous values: 49,4, 49,0, 50,2, 49,6, 47,4, 49,5, 50,2, 50,1 ( in January 2022) – for PMI in the manufacturing sector, and 52,6, 53,8, 54,7, 47,8, 41,9, 48,4, 51,6, 51,1 ( in January 2022) for PMI in the services sector.
The level of influence on the markets is from medium to high.
- United Kingdom. GDP for the 2nd quarter (final estimate)
The Office for National Statistics of Great Britain will publish the final release of the report with data on the country's GDP for the 2nd quarter. There are 2 versions of the quarterly GDP published with an interval of about 45 days, Preliminary and Final (final release). The pre-release is the earliest and therefore tends to have the greatest impact on the markets. This report reflects the overall economic indicators and has a significant impact on the decision of the Bank of England on monetary policy issues.
GDP growth means an improvement in economic conditions, which makes it possible (with a corresponding increase in inflation) to tighten monetary policy, which, in turn, usually has a positive effect on the quotes of the national currency.
The release of this report usually causes an increase in volatility in GBP quotes. It is likely that the UK GDP report for the 2nd quarter will come out, nevertheless, with positive indicators. Data worse than the forecast/previous values will negatively affect the GBP quotes.
Previous values: +0,8%, +1,3%, +1,0%, +5,5%, -1,6% ( in the 1st quarter of 2021).
The preliminary estimate was: -0.1%.
The level of influence on the markets is from medium to high.
- Germany. Retail sales
The German Statistical Office will publish a report with data on retail sales. The change in the indicators of the retail sales report affects the indicator of consumer spending, indirectly indicating also the state of the German economy and the level of income of citizens.
The German economy is the locomotive of the entire European economy. Therefore, euro quotes are very sensitive to the release of important macro statistics on Germany.
A high result usually strengthens the euro, and vice versa, a low result weakens it. The data is better than the forecast and/or the previous value is likely to have a positive impact on the euro, but in the short term.
Previous values: +1.9% (-2.6% YoY), -1.6% (-8.8% YoY), +0.6% (-3.6% YoY), -5.4% (-0.4% YoY), -0.1% (-2.7% YoY), +0.3% (+7.0% in annual terms), +2.0% (+10.3% in annual terms) in January 2022.
The level of influence on the markets is from medium to high.
- Eurozone. Consumer price indices in the eurozone (preliminary release)
The consumer price index (CPI) determines the change in prices in a certain basket of goods and services for a given period, being a key indicator for assessing inflation and changes in consumer preferences.
In the Core Consumer Price Index (Core CPI), food and energy are excluded in the calculation for a more accurate assessment.
The assessment of the inflation rate is important for the management of the central bank when determining the parameters of the current monetary policy. The indicator below the forecast/previous value may provoke a weakening of the euro, as low inflation will force the ECB to adhere to a soft monetary policy. Conversely, the growth of inflation and its high level will put pressure on the ECB to tighten its monetary policy, which in normal economic conditions is assessed as a positive factor for the national currency.
Previous CPI values (in annual terms): +9,1%, +8,9%, +8,6%, +8,1%, +7,4%, +7,4%, +5,9%, +5,1% ( in January 2022).
Previous values of the Core CPI indicator (in annual terms): +4,3%, +4,0%, +3,7%, +3,8%, +3,5%, +3,0%, +2,7%, +2,3% ( in January 2022).
CPI forecast for September 2022: +9.1% (in annual terms).
The level of influence on the markets is from medium to high.
- US. Personal consumption expenditures (Basic PCE Price Index)
The annual core PCE price Index (excluding volatile food and energy prices) is the main inflation indicator that Fed FOMC officials use as the main inflation indicator.
The level of inflation (in addition to the state of the labor market and GDP) is important for the Fed in determining the parameters of its monetary policy. Rising prices put pressure on the central bank to tighten its policy and raise interest rates.
The values of the base price index (PCE) exceeding the forecast may push the US dollar up, as this will hint at a possible hawkish shift in the Fed's forecasts, and vice versa.
Previous values: +4.6% (in annual terms), +4,8%, +4,7%, +4,9%, +5,2%, +5,3%, +5,2% ( in January 2022).
The level of influence on the markets is from medium to high.
- US. University of Michigan Consumer Confidence Index (final release)
This index is a leading indicator of consumer spending, which accounts for most of the total economic activity. It also reflects the confidence of American consumers in the economic development of the country. A high level indicates economic growth, while a low level indicates stagnation. Data worse than the previous values and/or forecast may negatively affect the dollar in the short term. The growth of the indicator will strengthen the USD.
Previous values of the indicator: 58,2, 51,5, 50,0, 58,4, 65,2, 59,4, 62,8, 67,2 in January 2022.
The preliminary estimate was: 59.5.
The level of influence on the markets is from medium to high.
