High impact of the week: inflation and interest rates

The opening of Monday 25/10 awaits us with expectations given the macro information of the week. We started with Australian inflation on Monday night. The week will also end with inflation data but from the United States. The numbers are expected to remain unchanged in Australia, however gas and coal prices have reached record highs last week and this may be reflected in final consumer prices.

Shortages and price increases are occurring this way. Consumer prices in the United States are rising faster than in ten years and Australians may have to get used to something similar. As gasoline shortages hit Britain and China blackouts, the price of oil has nearly tripled to more than $ 80 a barrel. Gas prices have hit record levels in Asia and coal is skyrocketing, causing consumer prices to rise to a level that makes policy experts very uncomfortable.

The AUDUSD cross remains in the sell zone (below 0.75). However, the crossing entered the buyer area during the second half of October. It is not by chance that it remains in a current transition between the buying and sell zone. The inflation data will be the catalyst for decisions of the central bank next month. The preference is sell if the cross manages to trade below 0.7450 during the coming week. On the contrary, the buyer may be tempted to stay in the rising market. However, transition areas are typical in these uncertain times. The important thing is to stay cautious between 0.7550 and 0.7450.

Canada is the next in the impact triad of the week. On Wednesday 11:00 am ET they will review their interest rate decision again. They are expected without changes. Gasoline prices were the biggest driver of inflation last month, and pump prices were up 32.8% compared to September 2020. Food prices also increased 3.9% in the last year, and the price of meat rose 9.5%. Meanwhile, the cost of housing rose 4.8%. Last week, the governor of the Bank of Canada said that supply chain bottlenecks meant that inflation would take longer to drop than expected.

The USDCAD cross remains in its sell zone below 1.24. Again the transition to enter the buying zone is within reach this week. Cases and new infections have increased last week in Canada and the country adds to supply problems. The preference at the crossing remains mixed. Buyers are not tempted to stay on the side of the dollar just yet. Below 1.2350 we prefer to sell up to 1.2330. While if it exceeds 1.2370 it is possible that we prepare to enter the buy zone from Wednesday.

On Thursday 8:45 am EST we will have updated information on interest rates in Europe. This will be a crucial moment for the entire market including the European indices. For central bankers wrestling with the question of whether inflationary pressures are transitory, industry bosses around the world have a clear message: Prices are only going up. Shortages of workers, fuel, cargo ships, semiconductors and building materials as the global economy recovers after pandemic closures have companies scrambling to control costs. Some of the world’s biggest brands are now passing on higher prices to consumers and warning legislators sitting on the inflation fence that things are going to get worse.

The EURUSD cross has remained in the sell zone since the middle of the year. It didn’t make it through his annual transition to shopping. Below 1.17 we prefer to keep short strategies. The second half of October gained momentum with highs at 1.1660. This momentum was sustained and originated by Lagarde’s optimism. We must remain cautious in the euro given the highs in the area. Once coming out of 1.1630 and 1.1620 we could increase the risk in the euro sell. Meanwhile, the passage to the buy zone is latent, already above 1.1670. This Thursday we will see how true Lagarde’s statements were or else it was just a matter of bringing relief to investors.

Commodities remain with buy preferences. Oro lost power at the last minute from 1800.0 however it didn’t lose status over 1790.0 and 1780. We will see how it performs in the week. Whether or not it is able to defend itself up to 1800.0 again. USDJPY finally presents liquidation below 114.0 and we are back to sell this week. USDCHF remains in transition from seller to buyer. Below 0.92 the cross made the market lose interest. We will have to wait a bit to go back to buy. Meanwhile the sellers are on the run. It is possible more fall of the crossing taking as reference the month of August.