Weekly outlook: Expect volatility as ECB rate cuts in focus, followed by US NFP

Last week was marked by significant market volatility, with stock indices experiencing sharp declines, only to partially recover as we approached the weekend. Key economic indicators highlighted notable changes:
 

• Euro Area Inflation: Inflation rose to 2.6% from 2.4%, exceeding the expected 2.5%. Core inflation also increased to 2.9% from 2.7%.
• Unemployment: The Euro area unemployment rate fell to a record low of 6.4% in April.
• ECB Outlook: Despite these strong inflation figures, the European Central Bank (ECB) is anticipated to cut rates this Thursday, likely pausing afterward to observe if inflation trends downward.

In the United States, Federal Reserve's Kashkari, typically a dovish FOMC member, indicated that no members have ruled out a rate hike, a stance that has unsettled the markets.
 

Upcoming Data:
 

• Monday: ISM Manufacturing data at 15:00 London time.
• Wednesday: ADP 13:15, Bank of Canada rate meeting 14:45, and ISM Services report 15:00.
• Thursday: ECB rate meeting at 13:15, with an expected rate cut from 4.5% to 4.25%. The ECB press conference will follow at 13:45 PM. Additionally, jobless claims data will be released at 13:30.
• Friday: Canadian unemployment rate figures and the US Non-Farm Payrolls (NFP) report at 13:30. Markets anticipate an NFP increase of 185,000 new jobs, up from the previous 175,000, with the unemployment rate expected to remain steady at 3.9%.

EUR/USD

The EUR/USD pair is currently fluctuating between 1.0782 and 1.0896. Since April, the price has developed a cup and handle pattern, suggesting that a breakout above 1.0896 could propel the pair upward by nearly 300 pips to 1.12. Conversely, a drop below 1.0782 could see the price falling first to 1.0700, and potentially further to 1.0650.

USD/CHF

The USD/CHF is trapped in a rectangle pattern with the 0.8994 level being crucial. If it stays above this level, prices might climb to 0.91 and then to 0.9157. However, a break below 0.8994 could lead the price to decline to 0.8888.

Brent Crude oil

Crude oil prices are continuing their downtrend below $84.82 and are trading above the $80.20 support level.

Gold (XAUUSD) prices

Gold prices are maintaining a long-term bullish trend as they remain above $2265. Currently, the price is nearing this critical low, which increases the likelihood that long-term buyers step in and provide support, reinforcing the upward trend. Yet breach $2265, and gold prices would have probably formed a multi-week high.

Dow Jones (US30)

The Dow Jones Industrial Average (US30 )recently rebounded as it approached its May lows near 37,595. If it revisits these levels this week, bullish traders might re-enter the market. Yet, if it falls below 37,595, their confidence would be tested, possibly reversing the current bullish trend and leading the Dow Jones lower.

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