Market sentiment: RiskOn – 13 days
Recap of the past week:
The past week had one central theme: the monetary easing in China. This move was truly unexpected. While we’ve mentioned several times that some action from the PBoC was on the horizon, we didn’t anticipate such a bold step. The magnitude of this measure clearly highlights the depth of the issues China is grappling with. Only time will tell whether it will be sufficient to steer the ship in the right direction. It’s possible that this is merely a prelude to what’s to come after the U.S. presidential elections and the growing divide between the world’s largest economies. Market sentiment indicator remained in positive RiskOn territory:
Outlook for the following week:
Let’s have a look at the following week from the economic calendar perspective.
The coming week will focus heavily on the U.S. labor market.
Monday kicks off with data from China, including fresh PMI figures, and it will be fascinating to see how the market reacts to what will likely be weaker numbers. During the European session, attention will shift to the first estimates of inflation for September. In the U.S., all eyes will be on the Chicago Purchasing Managers’ Index (Sep) and the Dallas Fed Manufacturing Business Index (Sep). However, the most anticipated event will be Jerome Powell’s speech.
On Tuesday, we start in Asia with fresh manufacturing data from Australia and Japan. The European session will provide updated PMI numbers and inflation data for the entire EU. In the U.S., we’ll see the ISM Manufacturing Index and the first labor market data: JOLTS.
Wednesday brings more speeches from central bankers, and we’ll get another piece of the U.S. labor market puzzle with the ADP employment report.
On Thursday, we’ll receive global PMI updates for the services sector. During the U.S. session, more labor market data will arrive, including the weekly jobless claims and Challenger Job Cuts report, along with the ISM Services Index and Factory Orders for August.
Finally, Friday will be the main macro day of the week, with the highly important Non-Farm Payrolls (NFP) report. The market expects a modest figure of 145K (prev 142K). Should the data meet these expectations, it would reinforce the Fed’s stance on their first rate cut. However, if the numbers come in below 100K, we can anticipate selling pressure and a flood of questions directed at the Fed.
An interesting detail is that the Chinese market will remain closed throughout the week due to bank holidays, meaning the newly released liquidity will be absent. We can also expect further developments in Lebanon.
Long-term sentiment
The market’s Moodix sentiment has shifted into a sideways pattern (see more on waves statistics), and further growth will depend on fresh positive impulses. Since it’s an NFP week, the market will be primarily focused on Friday’s release. We’ll be cautious with long positions and will look for a dip to enter new long trades. If the U.S. labor market shows negative developments, we could be witnessing the end of the RiskOn wave and the beginning of a RiskOff trend.
Good luck! Team moodix!