Weekly Financial Market Summary

An Unforgettable Event Elevating Trading Education 

Stock Markets: This week, stock markets exhibited mixed movements. The S&P 500 temporarily reached new highs, driven by a strong start from Nvidia, which briefly surpassed Microsoft’s market capitalisation. However, the week ended with a correction due to weaker-than-expected economic data, particularly in employment and building permits.

Technology Sector: The technology sector, led by companies involved in artificial intelligence (AI), continued to be a significant driver of market growth. Despite a midweek correction, Nvidia and other AI companies have shown solid performance year-to-date.

Other Sectors: Performance in other sectors was varied. Sectors such as real estate, communication services, and consumer discretionary showed positive performance, while cyclical sectors like financials and industrials displayed weakness.

Inflation and Monetary Policy: Inflation remains a central concern. The Consumer Price Index (CPI) showed signs of moderation, but inflation in services remains a challenge. This has led to speculation about future rate cuts by the Federal Reserve, although recent data suggests that any changes will be cautious.

Analysis of the Three Most Important Currencies

  1. British Pound (GBP): The British pound has experienced volatility due to a combination of internal and external factors. The Bank of England’s (BoE) monetary policy has been influenced by UK economic data, particularly inflation and economic growth. Although the BoE has adopted a more hawkish stance compared to the ECB, economic challenges such as post-Brexit uncertainty and economic recovery have impacted the pound’s strength. Additionally, the pound has been sensitive to geopolitical tensions and global monetary policy developments.

The GBP/USD is extending a thin but determined recovery on Thursday, stretching into its third day of gains after halting short-term declines just north of the 200-day exponential moving average (EMA) at 1.2610. The pound headed towards the lower end after seeing a technical rejection from a supply zone valued above 1.2800, but demotivated bears have failed to trigger a significant drop towards the last major low in the 1.2300 area.

  1. Euro (EUR): The euro has shown weakness against the dollar due to political instability in the Eurozone and a more lenient monetary policy from the European Central Bank (ECB). Elections in France and economic uncertainty have pressured the euro, and the divergence in monetary policies between the ECB and the Fed has contributed to this trend.

Technically, the Relative Strength Index (RSI) indicator on the 4-hour chart rose above 70 on Friday. This development suggests that the EUR/USD is technically overbought. However, buyers might seek to maintain control of the price action while the support level at 1.0800, marked by the 100-day simple moving average (SMA) and the 200-day SMA, remains intact. On the upside, the 1.0840 level, corresponding to the 23.6% Fibonacci retracement of the latest uptrend, could act as an intermediate resistance before reaching 1.0900, a significant psychological and static level.

  1. Japanese Yen (JPY): The Japanese yen has been under pressure due to the Bank of Japan’s ultra-loose monetary policy. Although Tokyo inflation data will be crucial for assessing possible policy changes, the Bank of Japan is expected to maintain its accommodative stance to support the economy, which has weakened the yen compared to the dollar.

With the RSI now firmly overbought on the daily chart, a correction seems imminent. The first support at 160.32 would already be a key level. If this level breaks, a plummet would be inevitable, with the USD/JPY heading towards 157.03 (55-day simple moving average) or the 100-day SMA at 154.26.