EU50 waits for directional spark :: InvestMacro

• FXTM’s EU50 ↑ 10% since start of 2024

• EU data + ECB = big price swings?
  

• Over past year ECB decision triggered moves of ↑ 1.5% & ↓ 0.3%
  

• Index trading 3% away from YTD high at 5142.3

• Technical levels = 5010 & 4880
  

Watch out for fresh trading opportunities in the week ahead due to key data, corporate earnings, and the European Central Bank (ECB) meeting:

Monday, 15th July

• CN50: China GDP, retail sales, industrial production
• EU50: Eurozone industrial production
• US500: US Empire State Manufacturing, Fed Chair Jerome Powell speech
• US30: Goldman Sachs earnings

Tuesday, 16th July

• GER40: Germany ZEW survey expectations
• EU50: Eurozone ZEW survey expectations
• JP225: Japan tertiary industry index
• US500: US retail sales, Morgan Stanley, Bank of America earnings

Wednesday, 17th July

• EU50: Eurozone CPI
• SG20: Singapore trade
• UK100: UK CPI
• US500: US industrial production, Fed Beige book
• NETH25: ASML earnings

Thursday, 18th July

• AU200: Australia unemployment
• EU50: ECB rate decision
• UK100: UK jobless claims, unemployment
• US500: US initial jobless claims, Fed speech
• NAS100: Netflix earnings
• TWN: TSMC earnings

Friday, 19th July

• JP225: Japan CPI
• US500: New York Fed President Williams, Atlanta Fed President Bostic speech

Our spotlight shines on FXTM’s EU50 which has been trapped within a weekly range since mid-February 2024. Still, the index has gained 10% year-to-date and is 3% away from its 2024 high at 5142.3.

Note: FXTM’s EU50 tracks the underlying Euro Stoxx 50 index – which represents the performance of the 50 largest blue-chip companies operating within eurozone nations.

With all the above discussed, here are 3 forces that may rock the EU50 in the week ahead:

    1) Key EU data

Economic releases from Europe may impact bets around when the ECB cuts rates again in 2024.

Keep an eye on the latest Eurozone industrial production, the final print of June’s inflation reading along with the ZEW survey expectations from Germany – the largest economy in Europe. While the incoming data is unlikely to impact what decision the ECB makes this month, it could expectations for September and beyond.

• Should overall European data support the argument for lower rates, this could push the EU50 higher.

• A positive set of economic reports or an unexpected upward revision to the CPI print could pull the EU50 lower.  

Golden nugget: Over the past year, the Germany ZEW survey has triggered upside moves as much as 0.5% or declines of 0.5% in a 6-hour window post-release.

 

    2) ECB rate decision

Markets widely expect the ECB to leave interest rates unchanged on Thursday 18th July.

In June, the central bank cut interest rates for the first time since 2019 but adopted a cautious stance on future moves. Much focus will be on Lagarde’s press conference for additional clues on future policy moves, especially after the recent political drama in Europe.

Traders are currently pricing in an 82% probability of a 25-basis point ECB cut by September with a move fully priced in by October.

• The EU50 could receive a boost if the ECB signals that a September rate cut is on the cards.

• If the ECB sounds more hawkish than expected or offers little insight on future moves, the EU50 may dip.

Golden nugget: Over the past year, the ECB rate decision has triggered upside moves as much as 1.5% or declines of 0.3% in a 6-hour window post-release.

 

    3) Technical forces

Prices remain trapped within a wide range on the daily charts with the first layer of support at 4880 and resistance at 5010. The candlesticks are trading marginally below the 50 and 100-day SMA as of writing with the MACD below zero.

• A solid breakout above 5010, may open a path towards 5115 and 5142. Should bulls push beyond the 2024 high, this could trigger a move toward the next psychological point at 5150.

• Sustained weakness below 5010, could see bears challenge 4880 and 4835.