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  • Weekly Focus: Inflation, FOMC Minutes, Earnings Report Season and Much More

Weekly Focus: Inflation, FOMC Minutes, Earnings Report Season and Much More

This week markets are entering an extreme turbulent period that may last until the end of the year. This week the most important highlights include September inflation in the United States, Federal Reserve’s (Fed) Federal Open Market Committee Minutes (FOMC) from the last meeting, the beginning of the Q3 2022 corporate earnings report season and other macroeconomic events that may shape markets’ configuration for the rest of the year.

China’s Communist Party Congress, that will start on October 16, will choose the new leadership  party that will define the future course of the second largest economy in the world. Escalation of the Taiwan situation may also be expected during this period. The Parliamentary elections in the United States will start on November 8 followed by the G20 Summit in Bali on November 15-16. Overall, these events may lead to a kind of a global consensus or to a new level of confrontation.

Just before the start of this series of events the market may perform anything from high volatility to a bitter stability with the following insane volatility. So, investors should be attentive to the incoming macroeconomic data while keeping an eye on the turbulent political environment.

This week in particular consumer prices in the U.S. will be in focus together with FOMC Minutes and banks’ earnings reports. All these events are expected to add negative notes to the market. Core inflation is expected to rise, the minutes are likely to provide more signs of the Fed’s hawkishness with a possible interest rate hike by 75 basis points in November, while corporates earnings are likely to slow down in the banking sector, and may become negative in other sectors outside fuel and energy.

The unemployment level in the U.S. alarmingly declined to 3.5% in September compared to 3.7% in the previous month and this added to the argument that the Fed may continue to aggressively raise interest rates. The S&P 500 broad market index is highly likely to aggressively go down towards 3300-3400 points if it fails to recover to 3700 points by end of the day. Long-term targets are seen to go down to 2000-2200 points.

Crude prices are on the sunny side after the Organisation of Petroleum Exporters and its allies led by Russia known as OPEC+ unexpectedly cut oil production by 2.0 million barrels per day. Brent crude prices jumped over $97 per barrel but are unlikely to breakthrough a strong resistance at $100 per barrel. So an aggressive downside scenario with targets at $50-65 per barrel by November is intact.

Gold prices are sitting at the lower margin the resistance area at $1680-1700 per troy ounce. Once broken prices may fall dramatically this week. Nevertheless, it is very risky right now to add new short positions amid strong geopolitical uncertainties that may push gold prices up.

The money market is seen less volatile now than what it previously was a few weeks ago. The EURUSD is seen to be going towards another decline amid an aggressive downside formation with a primary target at 0.95000-0.96000. This area may be reached during the second half of this week. So interesting short positions could be considered at the end of this week.

GBPUSD is also trapped inside an aggressive downside formation but with it has already met the   1.09500-1.10500 target area. If the Cable continues in this downside formation before October 13 it may crash to new lows of the week. Long term indicators signal that the Pound may recover to 1.17000 and go further up by the end of October. But EURUSD is still under strong pressure. So aggressive long positions on GBPUSD within the 1.11500-1.12000 area with targets above 1.17000 are seen to be justified. However, traders must remember that these trades are valid until the end of October and should be executed at low volumes.