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Andreas Zanin
Analysis, Weekly Market Updates | November 24, 2023

The Week Ahead 27th – 01 December: Significant macro data ahead after Thanksgiving

Welcome to Key To Markets preview of the Week Ahead

Currency Pair Performance

5-day performance as of November 23, 2023. 12:00 GMT

Source: finviz.com

10 Big Stories Last Week

In case you missed it…

FOMC minutes show Fed will proceed carefully. The minutes gave no indication of possible interest rate cuts at the last meeting. The market still sees the Fed’s next move as a rate cut.

Nvidia smashed earnings and revenue forecasts. However, the chip maker at the center of the AI story warned that US export restrictions to China could hurt sales.

Eurozone PMIs inch higher. Business activity contracted at a slower pace in November, a sign that weakness has bottomed out as interest rates are left on hold.

OPEC+ delayed its next meeting. The oil cartel pushed back the date of the November meeting, sending oil prices sharply lower as doubts rose over how much more the group would cut supply.

Sam Altman returned to OpenAI. The CEO was ousted from OpenAI and took a job at Microsoft before being reinstated as CEO of OpenAI with a new board after employees threatened to leave.

Microsoft hit an all-time high. News that Sam Altman was taking a job heading up an AI research department at Microsoft boosted the share price to a record level. It fell on the news that he was back at Open AI.

Binance CEO pleads guilty to money laundering charges. Changpeng Zhao has been fined $50 million and Binance $4.3 billion. The company will be allowed to continue functioning.

US retailers Kohl’s and Nordstrom saw sales decline. In a similar story, both retailers’ earnings looked good, but sales fell compared to a year earlier.

Nasdaq rose to a 2023 high. The tech-heavy stock rose above 16000 to a new 2023 high, boosted by Microsoft and Nvidia hitting record highs.

Hamas and Israel agreed a 4-day cease-fire. After 7-weeks of war, the two sides are set to take part in a ceasefire and hostage for prisoner swap. This has been delayed until Friday.

Chart of the Week

Source: Conference Board

While the market is increasingly confident that a hard landing for the US economy will be avoided, data shows that a US recession is still a probability. The Conference Board’s index of US leading economic indicators (LEI) declined for the 19th straight month, a losing streak that has only been exceeded in the 2008 recession and 1974.

The LEI declined 0.8% in October, remaining in a downward trend. Deteriorating consumer expectations about business conditions, weaker ISM new orders, and tighter credit conditions drove the most recent decline.

This signals that economic data weakening further, and a short recession is expected. But this may not necessarily be bad news for stocks, with the Nasdaq reaching a 2023 high this week, Bank of America forecasting the S&P 500 will reach 5000 in 2024, and SocGen expecting the index to hit a record high next year.

5 Things to Watch This Week

1. OPEC+ meeting
OPEC+ is now set to meet on November 30th after pushing back the meeting from November 25th-26th. The delay in the meeting has raised concerns over how much further OPEC+ is willing to cut oil production. With oil prices hitting a four-month low earlier in November, big players such as Saudi Arabia and Russia may be keen to extend the supply cuts. They have already said they will continue voluntary cuts until the end of this year.

2. Eurozone CPI
Eurozone inflation data is due to be released on Thursday, November 30th. Consumer prices cooled to the lowest level in two years in October, easing to 2.9% YoY, down from 4.3% in September. The markets will be watching closely to see whether the trend continues. With inflation easing and growth slowing, the market is pricing in a rate cut in Q2 next year. ECB president Christine Lagarde said that it’s too early to declare victory in the fight against inflation. Cooling inflation data will support the view that the ECB is at the end of its rate-hiking cycle.

3. US Core PCE
The Federal Reserve’s preferred gauge for inflation, the core PCE index, is due to be released on Thursday, November 30th. Core CPE has been steadily easing lower, falling to 3.7% YoY in September. Given that CPI cooled by more than expected in the previous month, investors will be watching to see if a similar trend appears in the core PCE figures Personal spending is also proving to be resilient, rising 0.7% in September. Cooling inflation and resilient consumer spending could add to evidence that the US economy is heading for a soft landing.

4. Canada data
Next week sees the release of both Canadian GDP figures as well as the manufacturing PMI and labour market data. Expectations are for growth to remain stagnant in September and the manufacturing sector to remain in contraction. Meanwhile, the labour market in Canada Is starting to show signs of weakness after the unemployment rate jumped last month to a 21-month high of 5.7%. The BoC governor, Tiff Macklem, recently said that interest rates may now be restrictive enough. Expectations are growing that the BoC could start cutting rates in the Spring.

5. Salesforce Earnings
Salesforce will report earnings after the close on Thursday, November 30, when the firm is expected to beat earnings forecast as it has for the past four quarters. Expectations are for EPS of $2.06 on revenue of $8.72 billion. Investors will be watching for any updates on Salesforce’s integration of Slack following its acquisition.

Economic Calendar Highlights

Source: FXStreet.com

Technical Analysis:

TA of the major asset classes (Forex – Commodities – Indices…).

EUR/USD (D1)

EUR/USD maintains its uptrend, staying above the 50-day SMA with higher highs and lows. The RSI reads 66, hinting at potential overbuying, but the trend remains strong. The pair has breached previous resistance, now support at 1.075, with eyes on resistance near 1.085. The bullish outlook persists, though a brief consolidation could follow the recent rally.

GBP/USD (D1)

The GBP/USD pair is showing signs of an uptrend, bouncing off support at 1.227 and rising above the 50-day SMA. The RSI stands at 64.1, suggesting bullish momentum without being overbought. The immediate resistance is found at 1.256, with a break above potentially paving the way for further gains.

USD/JPY (D1)

USD/JPY is trading within a range, with clear support at 147.481 and resistance around 151.360. The RSI at 46.2 indicates a lack of momentum, hinting at possible consolidation. A break on either side of the range could dictate the direction of the next significant move.

XAU/USD (Gold vs. US Dollar) (D1)

Gold is maintaining its uptrend, with the RSI at 60.6, suggesting healthy bullish momentum. It’s currently challenging resistance at 2042.97. A conclusive push above this level could confirm a continuation of the uptrend, while failure to break could lead to support retests at 1901.26.

Brent Crude Oil Futures (D1)

Brent Crude is hovering below the 50-day SMA, indicative of bearish sentiment. The RSI at 43.4 remains neutral. Resistance is situated at 89.27, and a breakout above could signal a shift to bullish conditions; conversely, a drop could see a retest of the support at 78.16.

S&P 500 Index (D1)

The S&P 500 is exhibiting bullish behaviour, consistently trading above the 50-day SMA. With the RSI at 71.2, the market may be overbought, which could lead to a pullback. Resistance lies at 4654.51, with substantial support at 4361.99.

Thank you very much for reading – and have a great week trading!

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