U.S. GDP and ECB Meeting Will Finalise the October Stock Market
The last week of October would contribute significantly to the picture of the global markets. So far we may say that fears felt at the beginning of October never came true. Quite the opposite, the Dow Jones index finished last week on new all-time highs at 35764.71 and S&P 500 broad market index which set its all-time highs at 4559.67 points.
However, there is plenty to think about as we received divergences to the August highs in the weekly timeframe charts. Divergences are clearly seen on the MACD indicator. And this is quite in line with a possible threat of the decline in the U.S. stock market. So, what could be the reasons this week for such a possible decline, or is there nothing to be afraid of?I would highlight two possible reasons for this. The U.S. Q3 GDP data and the outcome of the European Central bank’s (ECB) meeting, which will both be released this Thursday, October 28. U.S. GDP is expected to slow down to 2.8% from the previous 6.7% for the Q2. Even the U.S. economy may recover in the Q4 and weak data may cause some correction in the market.
As for ECB, during its last meeting in September it postponed the decision on bond-buying programs for December. However, recent inflation data that jumped to 3.4% in September, or to the 13-year record, promoted by high energy prices, was reminiscent of the Global financial crisis in 2008. We should not exclude the possibility that the ECB may make some comments on this towards changes in its monetary policy. EURUSD is on the upward move that started October 12. The support line of this fresh trend is at 1.1620. While the single European currency price is above this line and chances are that its strengthening will prevail. The nearest target for this is at 1.1686-1.1736. More long-term targets are located within 1.1800-1.1830.
However, there is plenty to think about as we received divergences to the August highs in the weekly timeframe charts. Divergences are clearly seen on the MACD indicator. And this is quite in line with a possible threat of the decline in the U.S. stock market. So, what could be the reasons this week for such a possible decline, or is there nothing to be afraid of?I would highlight two possible reasons for this. The U.S. Q3 GDP data and the outcome of the European Central bank’s (ECB) meeting, which will both be released this Thursday, October 28. U.S. GDP is expected to slow down to 2.8% from the previous 6.7% for the Q2. Even the U.S. economy may recover in the Q4 and weak data may cause some correction in the market.
As for ECB, during its last meeting in September it postponed the decision on bond-buying programs for December. However, recent inflation data that jumped to 3.4% in September, or to the 13-year record, promoted by high energy prices, was reminiscent of the Global financial crisis in 2008. We should not exclude the possibility that the ECB may make some comments on this towards changes in its monetary policy. EURUSD is on the upward move that started October 12. The support line of this fresh trend is at 1.1620. While the single European currency price is above this line and chances are that its strengthening will prevail. The nearest target for this is at 1.1686-1.1736. More long-term targets are located within 1.1800-1.1830.
