The Swing Overview - Week 46
Last week was marked by important data from the US labor market and data on US inflation, which continues to accelerate. After that, the US dollar strengthened and the US stock indices made a slight correction. Gold, which some investors consider as a hedge against rising inflation, was also strengthened. The EURUSD currency pair broke below the key support at 1.15 for the first time since July 2020.
The US economic data
Friday's NFP data beat analysts' expectations and pointed to a strongly improving US labor market. In October, the US economy created 531k new jobs and the unemployment rate fell to 4.6%. The number of initial jobless claims also continued to fall, with 267k claims filed last week.
At the same time, inflation was reported in the US and it continues to accelerate. The CPI for October came in at 6.2% year-on-year. This is the highest value of inflation since 1991.
While the Fed said at its last meeting that it had not been considering raising the key interest rates yet, this figure on higher inflation could persuade central bankers to reconsider their stance. The U.S. dollar index responded to higher inflation with a strong strengthening, and rates on the U.S. 10-year Treasury note also rose.
The US stocks have made a correction
Higher inflation also sent US stock indices down. However, they are still in an uptrend, so the current decline can be considered as a mild correction. In uptrends, the corrections are opportunities to buy.
The SP 500 index has reached a new all-time high, which is at 4,718. For possible downside speculation, in such strong uptrends, we need to wait for some resistance to form. On the SP 500, such resistance is the upper boundary of the rising channel on the daily chart. We can see that price reacted here last week.
Supports, on the other hand, can be found on the H4 and daily charts. The closest support then remains the consolidation at around 4,630, which the price already reached last week. Very strong support is then around 4,550, which has formed on the daily chart.
German DAX index
The DAX is also in an uptrend and is currently above support at 16,030, which was formed by breaking the previous peak. The new all-time-high for the DAX index that formed last week is 16,124. This gives the index room to rise further. The good mood among investors was supported by the ZEW index, which reached 31.7, which is the highest since August 2021.
The closest support, apart from 16,030, is at the consolidation around 15,950. The next significant support is at the area around 15,800 where the previous resistance has become the current support.
The euro is at its lowest value since July 2020
The downtrend on EURUSD was manifested by the break of the strong support at 1.15. On the daily chart, we can see trend lines that point to a descending wedge formation. The price is approaching the lower trend line, which can be taken as support.